Ryman Hospitality Properties, Inc. — 2016 Q2 Form 10-Q Summary
Business context and reporting period
Ryman is a REIT focused on group-oriented destination hotels and entertainment assets. Its portfolio includes four Gaylord Hotels resorts managed by Marriott, overflow hotels, Nashville attractions, the Grand Ole Opry, Ryman Auditorium and WSM-AM. This unaudited filing covers the three and six months ended June 30, 2016, compared with the corresponding 2015 periods.
Financial performance and key metrics
| Metric | Three months ended June 30, 2016 | Three months ended June 30, 2015 | Six months ended June 30, 2016 | Six months ended June 30, 2015 |
|---|---|---|---|---|
| Total revenue | $296.2 million | $274.0 million | $557.7 million | $527.2 million |
| Operating income | $66.9 million | $57.0 million | $105.7 million | $92.9 million |
| Net income | $51.3 million | $41.4 million | $77.7 million | $45.9 million |
| Diluted earnings per share | $1.00 | $0.80 | $1.51 | $0.89 |
| Operating margin | 22.6% | 20.8% | 19.0% | 17.6% |
| Net margin | 17.3% | 15.1% | 13.9% | 8.7% |
| Cash flow from operations | Not separately provided | Not separately provided | $126.9 million | $79.3 million |
Hospitality revenue increased 6.7% in the quarter and 5.0% year to date, while Hospitality operating income increased 16.7% and 9.5%, respectively. Entertainment revenue increased 20.2% in the quarter and 14.0% year to date, primarily from higher Grand Ole Opry attendance and additional shows, tours and retail activity at the Ryman Auditorium.
Hospitality occupancy was 78.0% in the quarter and 74.1% year to date. Quarterly ADR was $188.86, RevPAR was $147.40 and Total RevPAR was $347.32. Same-store net definite group room nights booked increased 7.3% in the quarter and 13.0% year to date.
At June 30, 2016, total assets were $2.36 billion, unrestricted cash was $50.7 million, restricted cash was $30.0 million and stockholders’ equity was $357.0 million. Total debt and capital lease obligations were $1.49 billion, compared with $1.43 billion at December 31, 2015.
Material changes versus the prior comparable period
- Revenue increased 8.1% in the quarter and 5.8% for the first six months.
- Operating income increased 17.4% in the quarter and 13.8% year to date, with operating margin expanding by approximately 180 basis points and 140 basis points, respectively.
- Net income increased 24.0% in the quarter and 69.2% year to date. The year-to-date comparison benefited substantially from the absence of a $20.2 million 2015 loss related to the fair value change and settlement of warrants associated with former convertible notes.
- 2015 also included $2.9 million of impairment charges and $0.8 million of preopening costs that did not recur in the first six months of 2016.
- Cash flow from operations increased by $47.6 million year over year, supported by higher earnings and more favorable working-capital changes.
- Net borrowings under the revolving credit facility were $67.5 million in the first six months of 2016, compared with $246.0 million of net repayments in the 2015 period.
- The Company repurchased and retired 0.5 million shares for $24.8 million during the first quarter of 2016. No shares were repurchased during the second quarter.
Cash flow, debt and liquidity
Year-to-date investing cash outflows were $90.5 million, including $55.9 million of property and equipment purchases, a $31.9 million investment in the Gaylord Rockies joint venture and $7.6 million transferred to restricted cash, partly offset by $6.8 million of proceeds from the sale of rights under a letter of intent.
Year-to-date financing cash outflows were $41.9 million, including $74.6 million of dividends, $24.8 million of share repurchases, $6.0 million to repay the AC Hotel note and $2.0 million of term-loan amortization, partly offset by $67.5 million of revolving-credit borrowings.
At June 30, 2016, the Company reported $324.0 million of availability under its $700 million revolving credit facility, after $373.9 million of borrowings and $2.1 million of letters of credit. Debt maturities were not scheduled to begin before 2019, and the Company was in compliance with all debt covenants.
Guidance, outlook, risks and unusual items
- Management planned to pay a $0.75-per-share quarterly dividend in October 2016 and January 2017, subject to board approval. The stated dividend policy targets at least 50% of adjusted funds from operations less maintenance capital expenditures or 100% of REIT taxable income, whichever is greater.
- Management projected $87 million to $107 million of capital expenditures during the remainder of 2016, including maintenance projects, Gaylord National event-space expansion, Gaylord Texan expansion and Gaylord Opryland room renovations.
- The Company expected to invest approximately $30 million more in Gaylord Rockies during the remainder of 2016.
- Gaylord Rockies is expected to open in late 2018 as a 1,500-room resort with more than 485,000 square feet of meeting and exhibition space. Ryman owns a 35% interest and expects total capital contributions of $86.1 million, of which $31.9 million had been funded by June 30, 2016.
- Ryman provided construction-loan and mezzanine-debt guarantees for Gaylord Rockies, including capped repayment guarantees and certain uncapped completion and pre-opening obligation guarantees. No liability had been recorded for these guarantees at June 30, 2016.
- Gaylord Opryland had approximately 8,630 room nights out of service for renovations; completion was expected in November 2016. Gaylord National’s year-to-date results were affected by a first-quarter 2016 winter storm.
- A 100-basis-point increase in LIBOR would increase estimated annual interest expense by approximately $3.7 million on the revolving facility and $3.9 million on the term loan B.
- Key risks include hospitality and economic conditions, geographic concentration, reliance on Marriott’s management performance, REIT qualification, access to financing, refinancing risk, dividend funding and the execution and guarantees associated with Gaylord Rockies.
Important facts for investors to verify
- Confirm the sustainability of improved occupancy, RevPAR, group bookings and Hospitality margins after the Gaylord Opryland renovation is completed.
- Assess leverage, variable-rate exposure, covenant headroom and the $324.0 million of reported revolving-credit availability.
- Monitor remaining Gaylord Rockies funding requirements and the potential exposure under its construction and mezzanine guarantees.
- Reconcile year-to-date earnings growth for the absence of 2015 warrant losses, impairment charges and preopening costs.
- Evaluate whether operating cash flow can support planned capital expenditures, dividends, share repurchases and Gaylord Rockies funding without additional borrowing.
- Review the Company’s reliance on Marriott, including management fees, operating performance and contractual debt limitations.