Ryman Hospitality Reports Q2 2014 Net Income Increase of 70.9% to $28 million
August 5, 2014 11:42am
- 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)
Property-level results and operating metrics for second quarter 2014 and 2013 are presented in greater detail below and under “Supplemental Financial Results.”
“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.
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:
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