Ryman Hospitality Properties, Inc. — FY2014 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2014; filed February 26, 2015. The filing presents annual results, with fourth-quarter information included in the quarterly financial data. Ryman operates as a self-advised REIT focused primarily on group-oriented destination hotels, with additional Opry and Attractions businesses. Marriott manages the principal hotels and several attractions.
Business Context
- Hospitality represented approximately 92% of 2014 revenue and included four Gaylord Hotels resorts, the Inn at Opryland and the newly acquired 192-room AC Hotel at National Harbor.
- Opry and Attractions represented approximately 8% of revenue and included the Grand Ole Opry, Ryman Auditorium, General Jackson Showboat, Wildhorse Saloon, Gaylord Springs and WSM-AM.
- The Company completed the AC Hotel acquisition in December 2014 for a total purchase price of approximately $21.8 million, including a $6.0 million note payable. The hotel was expected to open under Marriott management in March 2015.
Key Financial Metrics
| Metric | 2014 | 2013 | Change |
|---|---|---|---|
| Total revenue | $1,041.0 million | $954.6 million | +9.1% |
| Hospitality revenue | $954.2 million | $878.5 million | +8.6% |
| Opry and Attractions revenue | $86.8 million | $76.1 million | +14.2% |
| Operating income | $153.1 million | $76.2 million | +101.0% |
| Net income | $126.5 million | $118.4 million | +6.8% |
| Net income available to common stockholders | $121.0 million | $113.5 million | +6.7% |
| Diluted earnings per share | $2.17 | $1.81 | +19.9% |
| Operating margin | Approximately 14.7% | Approximately 8.0% | Improved |
| Cash flow from operating activities | $247.0 million | $137.7 million | +79.4% |
| Capital expenditures | $58.4 million | $37.0 million | +58.0% |
| Total debt | $1,341.6 million | $1,154.4 million | +$187.1 million |
| Unrestricted cash | $76.4 million | $61.6 million | +$14.8 million |
Operating Performance and Margins
- Hospitality occupancy increased to 73.3% from 70.7%; ADR increased to $177.27 from $170.89; RevPAR increased 7.5% to $129.98; and Total RevPAR increased 8.6% to $322.81.
- Net definite group room nights booked increased 14.0% to 1.814 million.
- Hospitality operating income increased 33.7% to $162.5 million, although hospitality operating expenses increased 4.6% to $791.6 million.
- Opry and Attractions operating income increased 53.6% to $21.8 million, primarily from higher attendance at the Grand Ole Opry House and Ryman Auditorium.
- Marriott base management fees totaled $19.6 million in 2014, compared with $18.1 million in 2013; incentive fees totaled $0.4 million versus $0.1 million.
Cash Flow, Debt and Liquidity
- Operating cash flow was $247.0 million, including $247.2 million from continuing operations. Working capital contributed approximately $17.0 million to continuing operating cash flow.
- Investing cash outflows totaled $59.5 million, including $58.4 million of property and equipment purchases and $21.2 million paid toward the AC Hotel acquisition, partially offset by $9.4 million received from the sale of rights related to the National Harbor MGM project.
- Financing cash outflows totaled $172.7 million. Major uses included $358.7 million for convertible-note repurchases and settlements, $177.4 million for warrant settlements, and $109.4 million of cash dividends. These uses were partly funded by $398.0 million of Term Loan B borrowings and $77.0 million of credit-facility borrowings.
- At year-end, $586.5 million was outstanding under the $1 billion senior secured credit facility, with $411.2 million of availability, subject to applicable covenants and borrowing limitations. The facility matures in April 2017 and bore interest at LIBOR plus 2.0% at year-end.
- The $400 million Term Loan B had $398.0 million outstanding, bore interest at LIBOR plus 3.0% at year-end and matures in January 2021. The Company also had $350.0 million of 5% senior notes due 2021 and a $6.0 million AC Hotel note payable.
- The Company stated that it was in compliance with all debt covenants at December 31, 2014 and believed existing cash and operating cash flow would fund normal expenses, interest, capital leases and declared dividends.
Material Changes Versus 2013
- Revenue growth reflected improved group demand, higher premium group business, increased outside-the-room spending and better hotel occupancy and room rates.
- Gaylord National occupancy increased 5.1 percentage points and Gaylord Opryland occupancy increased 3.4 percentage points.
- In-the-year, for-the-year cancellations decreased 52.4%, while group room nights booked increased 14.0%.
- Operating income benefited from revenue growth and the absence of $22.2 million of REIT conversion costs incurred in 2013.
- Net income growth was limited by the absence of the $92.7 million income-tax benefit recorded in 2013, which included a $64.8 million benefit related to the REIT conversion.
- 2014 included a $26.1 million gain from selling rights related to income from land underlying the new MGM casino project at National Harbor.
- Total debt increased primarily because of the new $400 million Term Loan B and additional credit-facility borrowings used to fund debt settlements, warrant settlements and other capital needs.
- Stockholders’ equity declined to $401.4 million from $757.7 million, primarily because of a $304.4 million reduction in additional paid-in capital associated with warrant modifications and related accounting treatment.
Guidance, Outlook and Unusual Items
- Management planned 2015 dividends totaling $2.60 per share, subject to board approval and debt-covenant restrictions.
- Management expected 2015 capital expenditures of approximately $80 million to $90 million, including ongoing maintenance capital, a Gaylord Opryland room renovation and a Ryman Auditorium expansion.
- The Company intended to cash settle the remaining 4.7 million warrants associated with the convertible notes in the first quarter of 2015. The total consideration was not determinable at December 31, 2014 and would depend on the settlement terms and share price.
- Interest-rate exposure is material: a 100-basis-point increase in LIBOR would have increased annual interest expense by approximately $5.9 million on the credit facility and $4.0 million on the Term Loan B, based on year-end balances.
- The Company’s primary risks include concentration in the U.S. group-convention lodging market, geographic concentration, reliance on Marriott, substantial secured leverage, refinancing requirements, variable-rate debt, capital expenditure needs, REIT qualification and distribution requirements, labor costs, weather and disaster exposure, and competition from other hotels and civic convention centers.
- Gaylord Opryland remains exposed to flood risk, although the Company reported enhanced levee protection and a $500 million per-occurrence flood insurance limit.
- Management stated that ordinary-course legal claims were adequately insured and were not expected to have a material adverse effect. The Company also reported no unresolved SEC staff comments and effective disclosure and internal financial controls.
Most Important Facts for Investors to Verify
- Whether improved group bookings, occupancy, ADR, RevPAR and outside-the-room spending are sustained after the 2014 recovery.
- The refinancing plan for the $586.5 million credit-facility balance maturing in April 2017 and the Company’s ability to manage its overall $1.34 billion debt load.
- The cash cost and final settlement of the remaining 4.7 million warrants, including potential sensitivity to Ryman’s share price.
- Whether 2015 capital spending of $80 million to $90 million and the AC Hotel opening remain on schedule and within budget.
- The coverage of planned dividends after maintenance capital expenditures, interest expense and required debt amortization.
- Marriott’s operating performance, management fees, contractual restrictions and continued ability to drive group demand and cost efficiencies.
- REIT qualification, required taxable-income distributions, TRS tax obligations and any limitations imposed by debt agreements.
- The status and collectability of the $149.6 million of notes receivable, including the lower fair value reported for the Series B bond.