Business Context and Reporting Period
This filing is a Form 10-Q for Gaylord Entertainment Company and its subsidiaries, not Ryman Hospitality Properties, Inc. It covers the quarter and six months ended June 30, 2011. Continuing operations consisted primarily of Hospitality, Opry and Attractions, and Corporate and Other segments. The filing was signed August 5, 2011.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2011 | Six Months Ended June 30, 2011 |
|---|---|---|
| Revenue | $236.8 million | $457.5 million |
| Operating income | $31.2 million | $45.9 million |
| Operating margin | 13.2% | 10.0% |
| Net income | $8.6 million | $6.7 million |
| Net margin | 3.6% | 1.5% |
| Fully diluted EPS | $0.17 | $0.13 |
| Operating cash flow | Not separately provided for the quarter | $39.6 million |
| Capital expenditures | Not separately provided for the quarter | $61.4 million |
- Hospitality generated $218.2 million of second-quarter revenue and $427.5 million for the six-month period. Hospitality operating income was $41.7 million and $71.2 million, respectively.
- Second-quarter Hospitality occupancy was 73.3%, ADR was $173.60, RevPAR was $127.20, and Total RevPAR was $298.84. Six-month occupancy was 71.5%, ADR was $169.18, RevPAR was $120.89, and Total RevPAR was $295.76.
- Cash and cash equivalents were $112.5 million, including $111.4 million unrestricted, at June 30, 2011, versus $125.5 million, including $124.4 million unrestricted, at December 31, 2010.
- Total debt and capital lease obligations were $1.165 billion at June 30, 2011, consisting principally of $700.0 million under the credit facility, $312.8 million carrying value of convertible notes, and $152.2 million of senior notes.
- The company reported compliance with all debt covenants at June 30, 2011. Working-capital liquidity was positive, with current assets of $215.0 million and current liabilities of $147.4 million.
Material Changes Versus the Prior Comparable Period
- Revenue increased 28.8% in the quarter and 14.8% for the six months versus 2010. Operating income improved from a $20.7 million loss to $31.2 million of income in the quarter and from a $5.7 million loss to $45.9 million of income for the six months.
- Net income improved from a $22.7 million loss to $8.6 million of income in the quarter and from a $24.6 million loss to $6.7 million of income for the six months.
- The comparison benefited substantially from the Nashville Flood in 2010. Gaylord Opryland was closed for part of the 2010 periods, while 2010 included $31.3 million of net casualty loss and $6.2 million of preopening costs. The 2011 periods included only $0.5 million of casualty loss and $0.04 million of preopening costs.
- Gaylord Opryland revenue increased $52.1 million in the quarter and $57.7 million for the six months, primarily because the hotel was operating during the comparable 2011 periods. Excluding Gaylord Opryland, other hotel revenue declined $6.8 million in both periods.
- Gaylord National weakened materially: revenue declined 10.3% in the quarter and 9.7% for the six months, with occupancy down 7.3 and 6.8 percentage points, respectively. Management attributed the decline primarily to fewer association and governmental groups, budget uncertainty, and lower federal per diem rates.
- Net cash from operating activities declined to $39.6 million from $47.0 million, while capital expenditures increased to $61.4 million from $19.9 million, primarily reflecting flood-related projects, the Gaylord Texan pool, and other property investments.
Outlook, Risks, Contingencies, and Unusual Items
- Management reported improving group travel, occupancy, outside-the-room spending, future bookings, and lower attrition and cancellation levels, but continued near-term rate pressure and dependence on a sustained economic recovery. The filing does not provide formal quantitative earnings or revenue guidance.
- Nashville Flood remediation and rebuilding costs were expected to be at the low end of $215 million to $225 million, with preopening costs below the previously projected $57 million to $62 million range. Management estimated the net cash impact for 2010 and 2011 at approximately $150 million after tax refunds, insurance proceeds, and excluded pre-flood projects.
- The company planned approximately $17 million of flood-protection enhancements at Gaylord Opryland and the Grand Ole Opry House, expected to be completed in mid-to-late 2012.
- The company announced a proposed approximately $800 million Aurora, Colorado, resort and convention hotel with 1,500 rooms and 400,000 square feet of meeting and exhibition space. The project remained subject to approvals, incentives, board approval, financing, and potential joint-venture participation; no material financial commitments had been made.
- On August 1, 2011, after quarter-end, the company refinanced its $1.0 billion credit facility with a $925 million senior secured facility maturing August 1, 2015. At closing, $600 million was outstanding, $8 million of letters of credit had been issued, and $317 million remained available, subject to applicable tests.
- The company had potential contribution exposure of up to $23.8 million related to guarantees of joint-venture debt and a separate historical NHL guarantee with a maximum potential amount of $15.0 million. No related liabilities were recorded.
- Key risks include hospitality demand and group-convention volatility, geographic concentration, labor and benefit costs, flood-related effects, development and construction risks, interest-rate exposure, refinancing risk, and availability of financing for new projects.
Investor Verification Checklist
- Confirm that the intended issuer is Gaylord Entertainment Company rather than Ryman Hospitality Properties, Inc.
- Assess the extent to which 2011 improvements reflect recovery from the Nashville Flood shutdown and unusually low 2010 comparables.
- Review Gaylord National’s continuing occupancy and revenue deterioration and the effect of government and association demand.
- Reconcile operating cash flow with capital expenditures and the decline in unrestricted cash.
- Review the terms, borrowing base, covenants, availability, and refinancing consequences of the post-quarter-end $925 million credit facility.
- Evaluate remaining flood remediation, flood-protection spending, insurance recoveries, and potential unrecorded guarantee exposures.
- Monitor the Aurora and Mesa development proposals for approvals, incentives, financing commitments, cost changes, and construction timing.