- Consolidated Adjusted EBITDA Increase of 15.1 Percent to $81.6 Million –
- Second Quarter Net Income Increase of 70.9 Percent to $28.0 Million –
- Second Quarter Adjusted FFO Increase of 14.2 Percent to $58.8 Million –
- Second Quarter Gross Advanced Group Bookings of 640,000 Room Nights for All Future Years –
Ryman Hospitality Properties, Inc. (NYSE:RHP), a lodging real estate investment trust ("REIT") specializing in group-oriented, destination hotel assets in urban and resort markets, today announced its financial results for the second quarter ended June 30, 2014.
Colin Reed, chairman, chief executive officer and president of Ryman Hospitality Properties said, "Our Company performed very well in the second quarter of 2014 and drove record performances in profitability and future advanced group bookings. These performances signal that the transition-related issues our business endured in 2013 are now predominantly behind us. The Company produced consolidated Adjusted EBITDA of $81.6 million in the second quarter, which we attribute to Total RevPAR growth of 4.6 percent over the prior-year quarter and continued synergy-related margin improvement. Our hospitality business delivered these results despite the shift of the Easter holiday this year and 15,700 room nights out of service at Gaylord Texan due to the ongoing rooms renovation. We estimate that the combined effect of these two events reduced both RevPAR and Total RevPAR growth by approximately 200 basis points, respectively, for the quarter.
"In addition to record-breaking profitability, we reported record second quarter gross advanced group bookings for all future years of approximately 640,000 room nights and net advanced group bookings for all future years of approximately 476,000 room nights, which bodes well for our hotel business going forward."
Second Quarter Results (As Compared to Second Quarter 2013)
Total Revenue increased 5.2 percent to $257.9 million.
Hospitality Revenue increased 4.5 percent to $232.9 million.
Net Income in second quarter 2014 was $28.0 million compared to $16.4 million in second quarter 2013. Second quarter 2014 Net Income includes $6.6 million of losses related to repurchases of convertible notes and warrants. Second quarter 2013 Net Income included $5.4 million of costs related to the REIT conversion.
Adjusted EBITDA on a consolidated basis increased 15.1 percent to $81.6 million.
Hospitality Adjusted EBITDA increased 12.6 percent to $76.6 million.
Adjusted Funds from Operations, or Adjusted FFO, increased 20.6 percent to $58.8 million compared to $48.8 million in second quarter 2013. Excluding $2.7 million in second quarter 2013 tax-effected REIT conversion costs, Adjusted FFO increased 14.2 percent.
Hospitality Revenue Per Available Room, or RevPAR, increased 3.4 percent to $134.85. Excluding the combined impact of the Easter holiday shift and the 15,700 room nights out of service at Gaylord Texan due to the ongoing rooms renovation, we estimate that RevPAR would have increased by more than 5.0 percent.
Hospitality Total RevPAR increased 4.6 percent to $316.09. Excluding the combined impact of the Easter holiday shift and the 15,700 room nights out of service at Gaylord Texan due to the ongoing rooms renovation, we estimate that Total RevPAR would have increased by more than 6.5 percent.
Transient room nights decreased 6.2 percent to approximately 125,700 room nights, while transient Average Daily Rate, or ADR, increased 8.2 percent. An increase in group occupancy more than offset the decline in transient occupancy in our overall results.
Cancellations in-the-year, for-the-year decreased 57.2 percent to approximately 9,200 group rooms.
Attrition for groups that traveled in second quarter 2014 was 11.1 percent of contracted room block (compared to 12.9 percent), and attrition and cancellation fees collected during second quarter 2014 were $2.8 million (compared to $1.3 million).
Gross advanced group bookings for all future periods increased 84.5 percent to approximately 640,000 room nights; net advanced group bookings for all future periods increased 150.4 percent to approximately 476,000 room nights.
For the Company's definitions of RevPAR, Total RevPAR, Adjusted EBITDA, and Adjusted FFO, as well as a reconciliation of the non-GAAP financial measure Adjusted EBITDA to Net Income and a reconciliation of the non-GAAP financial measure Adjusted FFO to Net Income, see "Calculation of RevPAR and Total RevPAR," "Non-GAAP Financial Measures," "Supplemental Financial Results," and "Reconciliation of Forward-Looking Statements" below.
Property-level results and operating metrics for second quarter 2014 and 2013 are presented in greater detail below and under "Supplemental Financial Results."
Gaylord Opryland RevPAR increased 13.6 percent to $127.34 compared to second quarter 2013. Total RevPAR increased 9.3 percent to $273.42 compared to second quarter 2013. Occupancy increased 5.8 percentage points to 76.4 percent as a result of an increase in association room nights when compared to second quarter 2013. In addition, ADR increased 5.0 percent with transient ADR improving 15.2 percent year over year. Adjusted EBITDA improved 29.9 percent to $24.9 million in second quarter 2014 compared to second quarter 2013. Revenue growth along with cost management improvements, especially in food and beverage, drove a 5.5 percentage point improvement in Adjusted EBITDA margin to 34.7 percent compared to 29.2 percent in second quarter 2013.
Gaylord Palms RevPAR decreased 5.2 percent to $122.41 compared to second quarter 2013. Total RevPAR decreased 4.5 percent to $316.44 compared to second quarter 2013, driven by a decline in occupancy of 6.0 percentage points year over year, to 72.3 percent. The decline in occupancy was partially due to the shift of the Easter holiday into April this year as well as softness in weekend transient demand. Adjusted EBITDA decreased 10.3 percent to $10.6 million in second quarter 2014 compared to second quarter 2013, attributed to a lower mix of premium corporate business. Adjusted EBITDA margin decreased to 26.3 percent from 28.0 percent in second quarter 2013.
Gaylord Texan RevPAR decreased 7.7 percent to $120.03 in second quarter 2014 compared to second quarter 2013. Total RevPAR decreased 0.8 percent to $316.99 compared to second quarter 2013. There were approximately 15,700 room nights out of service during second quarter 2014 due to an ongoing rooms renovation project, which materially impacted group and transient occupancy. The rooms renovation program is expected to be completed by August 2014. ADR increased 4.0 percent to $184.35 compared to second quarter 2013. Despite the decline in occupancy, outside-the-room spending increased by 3.8 percent compared to second quarter 2013, driven by increases in banquet revenue. Adjusted EBITDA increased 18.7 percent to $13.7 million compared to second quarter 2013. Adjusted EBITDA margin improved to 31.5 percent from 26.3 percent in second quarter 2013.
Gaylord National RevPAR increased 4.6 percent to $172.91 in second quarter 2014 compared to second quarter 2013. The increase in RevPAR was driven by a 3.6 percentage point increase in occupancy to 79.5 percent resulting from an increase in corporate room nights. Total RevPAR increased 9.0 percent to $406.47 compared to second quarter 2013. Total revenue for the property increased 9.0 percent to $73.8 million compared to second quarter 2013. The increase in corporate room nights led to higher outside-the-room spending, specifically in banquets and outlets. Adjusted EBITDA improved 7.1 percent to $26.2 million in second quarter 2014 compared to second quarter 2013. Despite increased expenses in utilities and property taxes, Adjusted EBITDA margin for second quarter 2014 was 35.5 percent, which is relatively flat compared to second quarter 2013.
Reed continued, "We are pleased with the performance of our hospitality business in the second quarter of 2014. The cost synergies originally envisioned as part of the REIT transition are now consistently materializing in our margins. While we have made considerable progress, we believe there is still opportunity for additional margin improvement in our hotels and we will continue to work with Marriott to harvest these savings.
"We are encouraged by Gaylord National's second quarter performance, particularly given the challenges that have impacted the entire Washington, D.C. market. The National Harbor development as a whole has become a premier destination in that region and the introduction of gaming to National Harbor will only strengthen its appeal, which we believe will provide a significant boost for Gaylord National in the coming years."
Opry and Attractions
Revenue for the Opry and Attractions segment rose 11.8 percent to $25.0 million in second quarter 2014 from $22.4 million in second quarter 2013. Adjusted EBITDA increased 23.4 percent to $9.7 million in second quarter 2014 from $7.9 million in second quarter 2013.
Reed continued, "The growth we have seen in our Opry and Attractions business over the past few quarters has been tremendous, and this record second quarter profitability further confirms our belief that the country music genre, with Nashville as its epicenter, is still in the early stages of a meteoric rise to mainstream popularity around the world. We will continue to invest in this segment so that our Company is well positioned to capitalize on and create additional demand for our one-of-a-kind assets."
Corporate and Other Adjusted EBITDA totaled a loss of $4.7 million in second quarter 2014 compared to a loss of $5.0 million in second quarter 2013.
In June, the Company agreed to sell to an affiliate of The Peterson Companies (the developer of National Harbor, where the Gaylord National hotel is located) all of the Company's rights pursuant to a letter of intent between the Company and The Peterson Companies, which entitles the Company to a portion of The Peterson Companies' economic interest in the income from the land underlying the new MGM casino project at National Harbor. The Company will receive $26.1 million over three years in exchange for the sale of its contractual rights. The sale is expected to close in December 2014.
Also in June, the Company agreed to purchase from an affiliate of The Peterson Companies a 190-room hotel currently being operated as the Aloft Hotel at National Harbor for a purchase price of $21.8 million. The transaction is scheduled to close in December 2014 and requires that the property be transferred to the Company unencumbered by any existing hotel franchise or management agreements. The Company expects to re-brand the hotel and to contract with Marriott to operate the property in conjunction with Gaylord National. Simultaneously with the purchase of this hotel, the Company also agreed to acquire from an affiliate of The Peterson Companies a vacant one-half-acre parcel of land located in close proximity to Gaylord National suitable for development of a hotel or other permitted uses. The purchase of the land is expected to close in December 2014.
The Company paid its second quarter 2014 cash dividend of $0.55 per share of common stock on July 15, 2014 to stockholders of record on June 27, 2014. It is the Company's current plan to distribute total annual dividends of approximately $2.20 per share for 2014 in cash in equal quarterly payments, with remaining quarterly payments in October 2014 and January 2015, subject to the board's future determinations as to the amount of quarterly distributions and the timing thereof.
Convertible Notes and Warrants Update
In April 2014, the Company repurchased in private transactions approximately $56.3 million in aggregate principal amount of its 3.75% convertible senior notes due in 2014, which were subsequently canceled, for aggregate consideration of $120.2 million, which was funded by cash on hand and borrowings under the Company's revolving credit facility. In addition, during the second quarter, the Company settled approximately $15.3 million in aggregate principal amount of the convertible notes that were converted by holders for aggregate consideration of $33.4 million. As a result, the Company recorded a loss on extinguishment of debt of $2.1 million in second quarter 2014. In connection with the repurchase of notes, the Company proportionately adjusted the number of options underlying the bond hedge transaction related to the convertible notes. In addition, the number of warrants outstanding were reduced to approximately 11.8 million. In consideration for these adjustments, the counterparties to the call spread transactions paid the Company approximately $9.2 million. After these transactions, approximately $232.2 million in principal amount of the notes remain outstanding as of June 30, 2014.
In May 2014, the Company modified an agreement with one of the note hedge counterparties to cash settle 2.4 million warrants. In June 2014, the Company settled this repurchase for $50.8 million, funded by cash on hand and draws under the Company's revolving credit facility, and recorded a $2.5 million loss on the change in the fair value of the warrants between the modification date and the settlement date, which is included in other gains and losses, net in the Company's financial statements.
At June 30, 2014, the warrants covered approximately 9.6 million shares, with an adjusted strike price of $25.01 per share, which reflects the repurchases and conversions discussed above and the adjustments made in connection with the cash dividend paid by the Company to stockholders in July 2014.
Pursuant to a June 2014 agreement with one of the note hedge counterparties, in the third quarter of 2014, the Company will cash settle an additional 2.4 million warrants in the same manner as described above and recorded a similar $2.3 million loss on the change in the fair value of the warrants between the modification date and June 30, which is included in other gains and losses, net in the Company's financial statements. After the settlement of this transaction in the third quarter of 2014, the remaining warrants will cover approximately 7.2 million shares with an adjusted strike price of $25.01 per share. The Company estimates that this repurchase will settle for approximately $57.9 million, funded by cash on hand and draws under the Company's revolving credit facility.
The adjustments to the options and warrants were considered modifications to the terms of the agreements, and the Company recognized a charge of $5.0 million in the second quarter, which reduced net income available to common shareholders and earnings per share available to common shareholders.
Upon maturity of the Convertible Notes on October 1, 2014, the Company will settle its obligations upon conversion of each $1,000 principal amount of Convertible Notes with a specified dollar amount of $1,000 and the remainder of the conversion settlement amount in shares of common stock. Concurrently with settlement of the Convertible Notes, the Company will receive and cancel shares of its common stock pursuant to its rights under the convertible note hedge transactions with respect to its common stock (the "Purchased Options") with counterparties affiliated with the initial purchasers of the Convertible Notes, for purposes of reducing the potential dilutive effect upon conversion of the Convertible Notes.
Balance Sheet/Liquidity Update
On June 18, 2014, the Company added an additional senior secured $400 million term loan, or Term Loan B, to its existing credit agreement. The Term Loan B matures in January 2021 and currently bears interest at a rate of LIBOR plus a 3.0 percent applicable margin, subject to a LIBOR floor of 0.75 percent.
As of June 30, 2014, the Company had total debt outstanding of $1,280.1 million and unrestricted cash of $77.8 million. As of June 30, 2014, $700.0 million of borrowings were drawn under the Company's credit facility including the new Term Loan B, which was fully drawn at close, and the lending banks had issued $2.7 million in letters of credit, which left $697.3 million of availability for borrowing under the credit facility.
The Company is maintaining its 2014 revised guidance provided on May 6, 2014 on a consolidated as well as on a segment basis. The following business performance outlook is based on current information as of August 5, 2014. The Company does not expect to update the guidance provided below before next quarter's earnings release. However, the Company may update its full business outlook or any portion thereof at any time for any reason.
1. Hospitality segment guidance assumes 33,400 room nights out of service in 2014 due to the renovation of rooms at Gaylord Texan. The out of service rooms do not impact total available room count for calculating hotel metrics (e.g., RevPAR and Total RevPAR).
2. Estimated interest income of $12.0 million from Gaylord National bonds reported in hospitality segment guidance in 2014 and historical results in 2013.
3. Adjusted FFO guidance includes a deduction for maintenance capital expenditures of $41.0 to $43.0 million.
For our definitions of RevPAR, Total RevPAR, Adjusted EBITDA and Adjusted FFO as well as a reconciliation of the non-GAAP financial measure Adjusted EBITDA to Net Income, and a reconciliation of the non-GAAP financial measure Adjusted FFO to Net Income, see "Calculation of RevPAR and Total RevPAR", "Non-GAAP Financial Measures," "Supplemental Financial Results" and "Reconciliation of Forward-Looking Statements" below.
To view all corresponding tables associated with this release please visit:
Ryman Hospitality Properties, Inc. (NYSE: RHP) is a REIT for federal income tax purposes, specializing in group-oriented, destination hotel assets in urban and resort markets. The Company's owned assets include a network of four upscale, meetings-focused resorts totaling 7,795 rooms that are managed by lodging operator Marriott International, Inc. under the Gaylord Hotels brand. Other owned assets managed by Marriott International, Inc. include Gaylord Springs Golf Links, the Wildhorse Saloon, the General Jackson Showboat and The Inn at Opryland, a 303-room overflow hotel adjacent to Gaylord Opryland. The Company also owns and operates a number of media and entertainment assets, including the Grand Ole Opry (opry.com), the legendary weekly showcase of country music's finest performers for nearly 90 years; the Ryman Auditorium, the storied former home of the Grand Ole Opry located in downtown Nashville; and 650 AM WSM, the Opry's radio home. For additional information about Ryman Hospitality Properties, visit www.rymanhp.com.
Contact: Mark Fioravanti, Executive Vice President and Chief Financial Officer