Ryman Hospitality Properties, Inc. — 2017 Q2 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2017; filed August 8, 2017. Ryman operates as a REIT focused on group-oriented destination hotels, entertainment assets, and related investments. Its four Gaylord Hotels properties total 7,811 rooms and are managed by Marriott.
Financial highlights
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Total revenue | $298.8 million, up 0.9% | $574.8 million, up 3.1% |
| Operating income | $64.7 million, down 3.4% | $111.8 million, up 5.7% |
| Operating margin | 21.7%, versus 22.6% | 19.4%, versus 19.0% |
| Net income | $47.3 million, down 7.9% | $79.9 million, up 2.9% |
| Fully diluted EPS | $0.92, versus $1.00 | $1.56, versus $1.51 |
| Net cash from operations | Not separately provided for the quarter | $113.9 million, versus $126.9 million |
- Six-month revenue was led by hospitality revenue of $517.5 million, up 2.2%, and entertainment revenue of $57.3 million, up 11.9%.
- Hospitality operating income was $61.6 million in the quarter, down 2.2%, and $113.8 million for the six months, up 4.9%. Entertainment operating income increased 1.8% in the quarter and 19.3% year to date.
- At June 30, 2017, unrestricted cash was $49.6 million, restricted cash was $15.2 million, and total assets were $2.46 billion.
- Total debt and capital lease obligations were $1.56 billion, compared with $1.50 billion at December 31, 2016. Stockholders’ equity was $365.3 million.
- Capital expenditures were $79.5 million in the first six months, compared with $55.9 million in the prior-year period. The company also invested $16.3 million in the Gaylord Rockies joint venture.
Material changes versus the prior comparable period
- Second-quarter net income declined despite modest revenue growth because operating expenses increased 2.1%, other losses increased by $1.2 million, and interest expense increased by $1.1 million. The interest increase included a $0.9 million write-off of deferred financing costs related to the credit facility refinancing.
- Year-to-date net income increased 2.9%, supported by higher hospitality and entertainment revenue, partially offset by higher operating expenses, increased other losses, higher interest expense, and a $1.0 million increase in income taxes.
- Second-quarter hospitality occupancy declined to 76.7% from 78.0%, while ADR increased 1.1% to $191.00. RevPAR declined 0.7% to $146.42, but Total RevPAR increased 0.3% to $348.45.
- Year-to-date hospitality occupancy increased to 74.7% from 74.1%, ADR increased 2.4% to $190.68, and RevPAR increased 3.2% to $142.37.
- Gaylord National benefited from higher occupancy and increased group business, including inauguration-related banquet activity. Gaylord Palms produced higher ADR and RevPAR. Gaylord Texan experienced lower second-quarter occupancy, ADR, and revenue. Gaylord Opryland results were affected by a room renovation project.
- Net definite group room nights booked decreased 28.0% in the quarter and 6.9% year to date, primarily because one group canceled 17 meetings scheduled through 2025.
Liquidity, debt, outlook, and risks
- In May 2017, Ryman refinanced its credit facility. The amended facility includes a $700 million revolving facility maturing in May 2021, a $200 million Term Loan A maturing in May 2022, and a $500 million Term Loan B maturing in May 2024. The company reported $140.5 million drawn on the revolver, $2.1 million of letters of credit, and $557.4 million of revolver availability at June 30.
- Ryman was in compliance with all debt covenants. Variable-rate debt exposes the company to interest-rate risk; management estimated that a 100-basis-point LIBOR increase would increase annual interest expense by approximately $1.4 million on the revolver, $2.0 million on Term Loan A, and $5.0 million on Term Loan B.
- Management expected cash on hand and operating cash flow to fund normal operating expenses, interest, lease obligations, declared dividends, and short-term commitments. Planned 2017 capital expenditures were $120 million to $150 million.
- The company declared and paid a second-quarter dividend of $0.80 per share and stated that it planned to pay $0.80 per share in October 2017 and January 2018, subject to board approval and available resources.
- Ryman planned an approximately $90 million Gaylord Opryland luxury indoor/outdoor waterpark, expected to open in 2018. Gaylord Opryland room renovations were expected to be completed in September 2017.
- Gaylord Rockies, a 35%-owned joint venture with an approximately $800 million estimated project cost, was expected to open in late 2018. Ryman had invested approximately $86.5 million and provided construction-loan and mezzanine-debt guarantees; no related liability was recorded at June 30, 2017.
- Material risks include economic and hospitality-market conditions, geographic concentration, reliance on Marriott to manage properties and generate occupancy, group booking cancellations, capital requirements, refinancing and interest-rate exposure, REIT qualification, dividend capacity, debt covenants, and Gaylord Rockies completion and guarantee obligations.
- Management stated that ordinary-course litigation was not expected to materially affect results, financial condition, or liquidity, and reported no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Reconcile reported debt, revolver availability, debt maturities, interest-rate exposure, and compliance with financial covenants.
- Assess whether planned capital spending, the waterpark, Gaylord Rockies investment, and dividends can be funded from operating cash flow and available borrowing capacity.
- Monitor group booking trends, including the canceled long-term group contract, and Marriott-managed occupancy, ADR, RevPAR, and Total RevPAR.
- Evaluate the financial impact and timing of Gaylord Opryland renovations, the Gaylord National ballroom, and Gaylord Texan expansion projects.
- Review the scope and potential exposure of the uncapped or partially capped Gaylord Rockies completion, operating-expense, interest, and debt guarantees.
- Confirm the board’s future dividend declarations and the company’s compliance with REIT distribution and qualification requirements.