Ryman Hospitality Properties Inc (RHP) 2004 Q1 法說會逐字稿

Good morning and welcome to the Gaylord Entertainment's first quarter earnings conference call. Hosting the call today from Gaylord Entertainment is Mr. Colin Reed, President and Chief Executive Officer, along with David Kloeppel, Chief Financial Officer. This call will be available for digital replay. The number is 877-519-4471 and the pin number is 4660431. At this times all participants have been placed on a listen-only mode and the floor will be open for questions following the presentation.

It is now my pleasure to turn the floor over to Carter Todd, General Counsel of Gaylord Entertainment.

Good morning. My name is Carter Todd and I'm the General Counsel and Senior Vice President for Gaylord Entertainment Company. Thank you for joining us today on our first quarter 2004 earnings call. You should be aware that this conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including statements, among others, regarding Gaylord Entertainment's expected future financial performance. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as believes, anticipates, plans, expects, and similar expressions are intended to identify forward-looking statements. You're hereby cautioned that these statements may be affected by the important factors among others set forth in Gaylord Entertainment's filings with the Securities and Exchange Commission and in its first quarter 2004 earnings release. Consequently, actual operations and results may differ materially from the results discussed or projected in the forward-looking statements. Gaylord Entertainment undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events, or otherwise.

I would also like to remind you that in our call today we will discuss certain non-GAAP financial measures, and a reconciliation of those non-GAAp financial measures to the most directly comparable GAAP financial measures has been provided as an exhibit to our earnings release and is also available on our website under the Investor Relations section.

At this time I would like to turn the call over to our Chief Executive Officer, Colin Reed.

Thanks Carter. Good morning, everyone. I'd like to welcome back all of you who know us and acknowledge those investors joining us for the first time. We have taken several important steps as a corporation since our last conference call that merit additional comments this morning.

First, I'll review the opening of our newest world-class resort, the Texan. I will then update developments at ResortQuest and we'll also discuss key recent corporate activities including changes within our Board of Directors, a share offering, and the strong favorable reaction we receive from existing and new investors alike.

Dave Kloeppel, our Chief Financial Officer, will then discuss the operating and financial performance of the Company and will provide guidance for the coming quarter and full year 2004. I'll offer a brief closing statement and then open up the call for questions.

We opened the doors to the Gaylord Texan nearly one month ago on April 2nd, with the grand opening of this beautiful property scheduled for this Friday, May 7th. If you haven't been there yet, you all must come and see it for yourself. The Texan is a spectacular property and we're very, very excited and pleased with the initial response from both customers and meeting planners, and things are really looking great.

Back in early 2002, after shutting the Texan project down for interior redesign and rebid, we set out a new schedule and I'm pleased to say we opened the Texan on-time, and as promised, on budget. In addition to the strong pace of group bookings, thus far it appears that the Texan is quickly becoming a destination for local customers. The volume of business at our restaurants is well above our expectations. And we're looking forward to formally marking the resort's grand opening this coming Friday. As I said earlier, it is a superb property to which we have successfully applied the lessons we have learned at the Palms and Opryland. We believe that it's close proximity to Dallas-Fort Worth International Airport will make it a destination for the thousands of conventions that this project is exclusively designed for. And incidentally, this weekend we have over 400 of the nation's top meeting planners at our grand opening festivities.

As many of you know, we recently completed a significant second offering of shares. Just to be clear, neither the Company nor management sold any stock. This event gave management the opportunity to spend several days in one-on-ones and in group meetings communicating the strategy of the Company. At the end of the process, the offering was substantially oversubscribed and we're very pleased with the fact that the investment community understands our strategy and appears to have faith in our management. The sale was a direct result of the sad passing last year of the Company's founder, Mr. Eal (ph) Gaylord and the desire of the trustees and certain of the family foundations, and certain members of the family to diversify their holdings. Post-offering, the Gaylord family continues to own approximate 3.6 million shares of common stock. To the extent that the underwriters overallotment option is exercised, the Gaylord family holdings will be further reduced by up to an additional one million shares.

Concurrent with the offering, two members of the Gaylord family, Cristy Gaylord Everest (ph) and Martin Dickinson, retired from our Board. We appreciate their services to the Company and wish them well. It should be noted that Ed Gaylord, who remains on our Board of Directors, did not sell any of his shares in this offering.

We are most pleased to be able to add Michael Rose, Chairman and CEO of the Money Group to our already outstanding Board. Michael was known to several members of our Board because he had previously served as a director of Promise Hotels. In his capacity as director, Michael provided significant experience and additional business acumen to the Board. We are delighted that he has agreed to serve on our Board, bringing those same insights to Gaylord.

Now, on to the first quarter. We feel very good about several achievements, particularly given the fact that we were up against some difficult year-over-year comparisons. This is a result of the advanced bookings from 1998 to '99 that really made the first quarter of 2003. The lack of big bookings in the past quarter was a direct reflection of the declining customer satisfaction levels at Gaylord Opryland in the 2000 to 2001 period. In other words, bookings for the first quarter of 2004 were a result of the unsatisfactory customer service and convention rotation schedules at the property back in the 2000 and 2001 period. The Palms, on the other hand, booked customers who had not visited Nashville. And therefore, our Florida properties bookings weren't affected by the service perceptions back in that 1999-2000 period in Nashville.

We ended the first quarter exceeding expectations from a RevPAR perspective due to an increase in our transient business and a pickup in attendance from the group's segment. RevPAR only declined 8.4 percent versus a decline of 10 to 12 percent that we had expected.

The Palms produced excellent results, delivering its best quarter ever. This reflects the improving economy and what we believe is growing awareness among travelers and convention goers of our award-winning resort near Orlando. The Palms is ranked by Smith Travel Research as the number one convention hotel in terms of RevPAR for the first quarter of 2004, generating 113 percent fair share premium against its competitors. I will leave the load of the financial details to Dave, and talk for a minute about our approach and strategy in the hospitality business.

As many of the know, we focus on the large groups that typically book their meetings two to four years in advance. We work very closely with meeting planners to understand their needs and to meet those needs through the design features and amenities of our hotels. We believe that it is one of the reasons why many of these groups come back year after year and take advantage of our two existing hotels, Opryland and Palms. Now they have a third to add to the rotation, the Texan. It is worth noting that the amount of rotational large group bookings can fluctuate substantially from quarter to quarter. So consistent with our approach to managing our business year-by-year rather than quarter-by-quarter, we view rotational bookings on a trailing 12-month basis. By that measure, we are pleased that over the past 12 months 40 percent of large group bookings have been rotational. We believe that the quality of our customer service, along with the unique combination of a high ration of superior meeting space and room availability, coupled with superior entertainment and intimate knowledge of each customers' wishes, brings these groups back to us time and again. Remember, our customers stay on average two to three days. This translates into more revenue opportunity. So total RevPAR is an important metric. For the first quarter, add total RevPAR only declined 5.4 percent, better than we expected due to strong food and beverage sales at both properties.

In the first quarter 2004, we booked approximately 262,000 group room nights for stays in future periods, a 40 percent increase over the same period in 2003. Moreover, add tentative and prospect inventory is on the rise at all three properties, a total of 3.2 million at the end of the first quarter, 14 percent larger than at the end of the first quarter in 2003. This gives us confidence that we will be able to achieve our annual target advanced group bookings of between 1.3 and 1.4 million room nights. When we add our usual annual transient room nights, we will be well positioned to achieve our target high single digit RevPAR growth annually in 2005, '06, and '07.

In addition to bookings, and we spend a lot of time focusing on another key metric that we track with intense focus -- customer satisfaction. Customer satisfaction is a critical measure because it helps predict our prospects for renewal bookings and allows us to measure our value to our customers in this competitive environment.

As for customer satisfaction, once again, employs at both the Palms and Gaylord Opryland earned a customer satisfaction bonus for the quarter. We are also receiving very positive feedback from the first month of operations of the Texan. In fact, the initial customer satisfactions we have received from the Texan's opening week have been even higher than the scores at the opening of the Palms two years ago. We are delivering on our promise of the highest possible service to our customers.

Before I move on to ResortQuest, let me give you an update on our project at National Harbor in Maryland that we seem to have been talking about for many a year. We continued to be very interested in developing this project in the important Washington D.C. market. We're working with the county to secure a certain amount of public incentives that would offset a portion of our construction costs. At this juncture, we're working diligently to secure these incentives in order to provide an adequate return on the capital that Gaylord will provide in the project. We are encouraged by the opportunity in this market, and while there is more work to be done on this front, we like this market and are optimist we will get to the point where the project is a go. More to follow in the next several months.

Let me switch gears and discuss ResortQuest. We're very pleased to have Mark Fioravanti take on the role as President of ResortQuest. He was a member of the management team of Harris Entertainment and brings significant experience in strategic planning, finance, marketing and brand development. Mark did a great job for us in broadening our reach and appeal of the Gaylord brands as Senior Vice President of Marketing. We are confident that he and his new team will build ResortQuest into the dominant brand in the vacation property management category. So far the integration efforts are progressing on plan. Mark and his team have begun to improve the quality of our unit inventory, and the marketing plans that are now being put in place will help fuel future profit growth. As you may have seen from our release, we've produced a healthy 6.5 percent RevPAR growth in the quarter. This is the tip of the iceberg as we reinvest in this business and initiate an aggressive unit growth strategy.

Now at this time, I would like to turn the floor over to David to provide more details, operating results, and guidance for 2004. Dave?

Thanks, Colin. I will start with a brief overview of the company's consolidated operating performance, and then go into more detail of each business line, highlighting their operating drivers. Finally, I will provide guidance for the second quarter and full year 2004.

To begin, there's been notable change to the definition for adjusted EBITDA, and we have also added a new metric, consolidate cash flow. As part of the review of our registration statement on Form S-3, filed in connection with the recent stock offerings, the staff of the SEC asked us to include in the registration statements the information we released on April 20th, 2004 about our anticipated first-quarter results.

Because that information would then be filed with the SEC, we discussed with the SEC the most appropriate format for that information. As you probably know, there are different requirements for filing and for information furnished in the release. Following those discussions, we determined that adjusted EBITDA would be presented as essentially, operating income plus depreciate and amortization. In the press release, we're also presenting the calculation of consolidate cash flow as that term is defined in the indenture governing our 8 percent senior notes. Consolidate cash flow excludes the impact of preopening costs and the non cash portion of the naming rights, and the non cash portion of the (indiscernible) expense. It also adds or subtracts other gains or losses as the case may be.

Of note, the only difference between consolidate cash flow and our old definition of adjusted EBITDA is the inclusion of other gains and losses, which is predominantly the Viacom dividend we receiv of $650,000 per quarter.

The consolidate cash flow measure is one of the principal tools that we use in evaluating the operating performance of the company's business, and represents a method by which the indenture calculates whether or not the company can incur additional indebtedness. The calculation of these amounts, as well as the reconciliation of those amounts to net income or segment operating income, is included as part of the supplemental information contained in the press release. Just to be clear, there's no change to our business or our outlook in the business; just in how we describe the performance of the business.

Now, on to the results. Consolidated revenues from continuing operations for the first quarter was a $158.9 million, up 38.9 percent over last year's 114.4 million. Consolidate operating loss for the first quarter of 2004 was 10.3 million, compared to operating income of 5 million in the first quarter of 2003. The company had a consolidated net loss of 19.4 million, or $0.49 per diluted share, in the first quarter of '04, compared to a loss of 6.5 million, or $0.19 per diluted share in the first quarter of '03. Adjusted EBITDA was 6.4 million for the first quarter of '04, compared to 19.5 million in '03. Consolidate cash flow was 20 million in the first quarter, compared to 23.2 million in 2003.

And now, for the performance by business segment. The hospitality segment revenue was $95.3 million in the first quarter of 2004, a decline of 4.3 percent from last year's first quarter. This decrease was primarily a result of lower occupancy rates at the Opryland properties. Hospitality segment RevPAR and total revenue for available rooms were $104.09 and $228.03, respectively, in the first quarter of 2004, a decrease of 8.4 percent and 5.4 percent, respectively over the first quarter of '03. This RevPAR performance exceeds our guidance range of down 10 to 12 percent, as Colin previously discussed.

Hospitality segment operating income was $1.8 million in the first quarter of '04, compared to an operating income of 17 million a year ago. This decrease was due partially to the impact of lower occupancy, which was not fully offset by the increase in ADR and the increased profitability of the food and beverage operations.

Operating expenses in the hospitality segment reflect preopening expenses of $10.8 million for the first quarter of 2004, as compared to 1.6 million in 2003. Hospitality adjusted EBITDA was 13.3 million for the first quarter of '04, as compared to 28.7 million for the first quarter of '03. Consolidated cash flow for the segment was 25.8 million for the first quarter of '04, compared to 31.9 million for the first quarter of '03. Hospitality and consolidated cash flow margins decreased from 32 percent in the first quarter of '03 to 27 percent in the first quarter of '04.

The first quarter is a good example of how occupancy drives the results at our hotels. Both hotels held rate constant year-over-year, but experienced significant changes in occupancy. One up, and one down. Both properties experienced increases in outside-the-room spending for occupied room, but occupancy levels drove total RevPAR. As Colin mentioned, the first-quarter metrics for Gaylord Opryland properties had a particularly challenging comparison due to the timing of bookings this year compared to last. The property postedn an ADR of $134.70, occupancy of 60.4 percent, and RevPAR of $81.37 for the quarter, down from $105.26 a year ago. Despite an approximate 4 percent increase in outside-the-room spend for occupied rooms, total revenue per available room was 167.87 for the first quarter, down 20.9 percent from the prior-year period as a result of the lower occupancy.

Gaylord Palms generated RevPAR of 163.72 in the quarter, a 13.6 percent increase from the 144.14 in the same period of 2003. This was driven by a significantly improved occupancy rate during the quarter of 87 percent, up from 76.4 percent last year. With a flat ADR of 188.23 compared to the prior year. Outside-the-room spend for occupied rooms increased approximately 2 percent, driving total revenue for available romm at Gaylord Palms to $389.03 in the quarter, a 14.8 percent increase versus last year's first quarter. This increase was the result of strong food and beverage revenues driven by higher group occupancy.

As we've commented in the past, our food and beverage operations at both resorts are helping to produce significant benefits for the segment. Part of our drive to differentiate our product through superior service offerings is to provide an outstanding dining experience. We have put a lot of hard work and resources into building an efficient operation, managed by an extremely knowledgeable and dynamic team. Our restaurant-quality food and our banquets area and unique (indiscernible) concepts are a big reason we continue to grow our outside-the-room revenues. As Colin mentioned earlier, our first month of operations at the Texan appears to be further validating that approach.

As Colin mentioned, the Gaylord Texan opened in April. We are in the process of closing out the construction contract and expect to spend an additional $50 million to complete the hotel construction.

Moving on to ResortQuest. For the first quarter of 2004, revenues were $51 million, and operating income was 1.9 million. ResortQuest adjusted EBITDA, as well as consolidate cash flow for the period, was 4.4 million. We are encouraged by the results of the ResortQuest segment as it indicates recovery in the business. ResortQuest's first quarter 2004 occupancy increased 2.5 percentage points to 59 percent, and ADR rose to $129.12, up from $126.63 in the first quarter of '03. This resulted in RevPAR of 76.12 for the first quarter of '04, a 6.5 percent increase over the same period last year. These increases were driven by strong performances in the beach and Hawaiian regions.

Total units under management decreased to 17,559 for the quarter, down from 18,277 in the previous year's first quarter. The decline in unit count is primarily attributable to the company's strategy to upgrade its overall inventory quality. In the coming months, we'll aggressively pursue unit growth to expand the top line and bottom line results at ResortQuest.

And now for the operating attractions segment. In the operating attractions segment, revenues were up $12.6 million the first quarter '04, a decrease of 2.2 million in the first quarter of '03. Operating loss in the segment was 2.6 million, compared to 1.6 million in the first quarter of '03. And adjusted EBITDA for this segment, as well as consolidate cash flow, decreased to a loss of 1.3 million in the first quarter versus a loss of .2 million in the quarter a year ago.

Revenues for this segment were down year-over-year, primarily due to the timing of events of the Ryman Auditorium and Corporate Magic, and also due to decreased occupancy at Gaylord Opryland. We expect these trends to reverse in the coming quarters. Corporate and other operating loss totaled 11.4 million for the quarter, compared to an operating loss of 10.5 million for the first quarter of 2003. These expenses included 1.6 million and $1.8 million of non-cash and nonrecurring charges for the first quarters of '04 and '03 respectively. These charges account for items such as depreciation, amortization, and the non-cash fortune of the Gaylord Entertained Center and (indiscernible) expense.

Total long-term debt outstanding at the end of the first quarter was $551.4 million. The company also had an unrestricted cash balance of 80.8 million and a restricted cash balance of 36.6 million at the end of the quarter. We also still have our 100 million revolving line of credit, which is completely undrawn.

On to other guidance for the second quarter and for the full year. The Company does not expect to update guidance until next quarter's earnings release. However, the Company may update its full business outlook or any portion thereof at any time during the (indiscernible). The company expects total consolidated revenues for the second quarter of 2004 to be in the $190 million range, or consolidate cash flow to be in the 27 million range.

Hospitality segment RevPAR is expected to increase 7 to 9 percent in the second quarter of '04, over the prior year period, and to increase 0 to to 2 percent for the year. 2004 consolidate cash flow for ResortQuest is expected to be in the $20 million range. And finally, capital expenditures are expected to be approximately 130 to 135 million for the full year of 2004.

And now I would like to turn the call back over to Colin.

Thanks, Dave. I'd like to conclude our remarks by saying that our first-quarter results were a solid start to the new year, and signal that our company has made significant strides across many levels. We strengthened our management team, furthered our rotational strategy with the Texan, and we have continued our progress on ResortQuest. There are more shares in our float, our balance sheet is in good shape, and the future is very, very promising. I would like to thank you all very much for taking the time to join us this morning. And Lisa, I'd like now to open the lines for questions.

Nap Overton, Morgan Keegan & Co.

Good morning. A couple of things. First, on ResortQuest, you mentioned in the press release developed a strong strategic plan for ResortQuest -- is there anything more definite that you can speak of there in terms of turning around the unit growth decline that ResortQuest has experienced in the past year or so? And specifically, with regards to negotiating contracts to manage newly-developed units with additional developers with ResortQuest has been quite successful at doing in the year previous to your acquisition of it.

Nap, thank you, this is Colin. Let me give a shot at that. In terms of the strategic plan, there's a lot of things we have done, one of which is in the whole area of growth. We have, as a company, been somewhat inundated with requests from developers to work with them on particular developments that they are doing all across the country, sort of randomly across the country. And what we have been hard at work doing over the last two, two-and-a-half months is really establishing the relative economics of each market in the U.S. Obviously, the operating business is up in the mountains, and operating the businesses at the beach are different, their growth characteristics are different, the cost of operations are different, the fees at which you get from the owners are different. And so, what we have been trying to understand is where do the big fish reside? Where should we be fishing? And we have pretty much established the markets that we really want to focus in on and concentrate our efforts on. And that will allow us, now, to engage aggressively with the developers of both the low-rise and high-rise second homes that are being built all across this country.

In that respect, we have geared up and brought in a new head of development for ResortQuest and a new management team to support that new head of development for ResortQuest, who in fact, will start with us, I believe, next Monday. And we also have additional internal resources that we put at this process to aggressively grow the units. We are confident. The key to this business is not just to aggressively grow the units, but also to make sure that we have a strong solid pipeline of new customers that are coming into the ResortQuest business. Because what we don't want to do is double the unit count and half our occupancy. We got to obviously double our unit count, and at the same time, grow our occupancy. And that's the real incredible opportunity for growth in this business. So, the marketing strategies that we have been embodying, we have, over the course of the last six weeks, put new direct mail out, the first time I think this business has done that. We put over half a million pieces of direct mail right across the key feeder markets to the beach that we expect to have a positive impact on the summer months, and we're starting to see that. That direct-mail show up. We are in the middle of a major edger technology review, from a strategic perspective, that will allow us to refine and accelerate the technology program for RCT. We think it is an extraordinarily important aspect to this. There are certain things that we've discovered from all of the research that I think you're aware that we have been up to over the last two to there months that have really made us emphasize the technology, push on this, because we know that approximately 90 percent of the people that by product, these homes either in the beach, mountain, or desert, at some point browse through the Internet. These tend to be higher theoretical worth individual, and so, we're really gearing that side up.

So there are so many things we are doing on the strategy side, and we are pretty optimistic, I think, for the second, third quarters of this year. Particularly the third quarter of the year that all of this new strategy on direct-mail and the growth strategy that we have put into place will start to materialize. And I think as an analyst and the shareholders that are on this call, you will start seeing this show up over the months to come.

Thank you. And then operationally, with regards to ResortQuest, you mentioned good results at the beach and Hawaii locations in the first quarter, and really, it has been my understanding that ski season drives first-quarter results there. Could you comment on that? And also on any forward-looking trends at ResortQuest for the important summer season coming up over the next few month?

Sure thing, Nap, this is Dave. The ski season was strong for ResortQuest everywhere except in the in the Whistler (ph) market. And I think (indiscernible) probably has already described the Whistler markets, because they have a strong presence in that marketplace. Generally speaking, Whistler was down substantially. The rest of the ski markets were up. And they kind of balance each other out. So we had a relatively kind of flat season on the ski market. The Southwest Florida beach market did very, very well for us. And Hawaii did very well as the Asian travelers began to get back on airplanes and visit Waikiki and Maui and Kawi (ph), and some other great places like that.

In terms of the advanced bookings, as Colin mentioned, we have dropped about 300,000 pieces of direct-mail in the past few months. And we are starting to see some positive reactions to that business. We think we should have a nice summer season. We are not putting any particular guidance out there for the summer season right now, but the direct-mail that we have dropped is certainly starting to have a little bit of an impact.

We said two things, Dave. I said 500, you said 300. Fioravanti told me in the last week, week and a half, we dropped another 200,000. So it is 500,000.

Thank you.

Okay. And then just one other thing, and then I will let somebody else ask some questions. And that is that there was this large occupancy gap at the Nashville hotel, which you described the reasons for well in your prepared remarks, in terms of the poor customer satisfaction rates of a couple or three years ago. Are there any other occupancy gaps lingering in the next several quarters to come that investors should be aware?

No, there aren't any occupancy gaps that people should be aware of. But what people should be aware of, and we talk about frequently, is this business that is difficult to compare on a quarter-by-quarter, asset-by-asset basis. And a good example of that is, you know, Nashville in the first quarter is down 20-plus percent, Palms was up 14 percent approximately. We've given guidance for the second quarter of 7 to 9 percent RevPAR, but that is comprised of a 15 to 17 percent up RevPAR increase in Nashville and a 5 to 7 percent decrease in Orlando. And the nature of these big groups and the different type of mix you may get into the business in a particular quarter can drive the RevPAR results and drive the EBITDA results in a quarterly comparison. So we would encourage you and the rest of the investors on the call to always look at our business on a forward 12 months and a trailing 12 month basis rather than a quarter-by-quarter basis.

Thank you.

(OPERATOR INSTRUCTIONS). Will Marks, JMP Securities.

Thank you. Good morning Colin and Dave. I have a few quick questions. One is on the number of shares owned by the family now, and I guess taking into account that there's still this shoe from the offering.

Will, there is still a million shares in the shoe that have not been, exercise. Before the shoe is exercised, the family, broadly defined, owns about 3.5 million shares. And that is held through Apubco (ph), through a foundation, and through individual ownership of a couple of the Gaylord siblings.

Okay, so that I'm clear, that could drop to 2.5? Or --

Yes, that is correct.

Okay. You gave the RevPAR index -- correct me if I am wrong -- but the 113 percent for the Palms during the quarter?

Yes.

And did you give a number for Nashville?

No, we did not. It's about 78 percent.

78 percent, okay. Can you touch on that? Why it was what it was?

Yes, we compare ourselves and our competitive set to the big convention hotels in New Orleans and Atlanta. There is no competition in Nashville for a 3000-room convention hotel. So, we mark ourselves against those hotels. As we've described coming into the quarter, we knew we had a significant occupancy gap, and I think for the reasons that Colin described in the prepared remarks for why we had the occupancy gap really drive, why we had a negative variance in RevPAR. (multiple speakers) issues back in the late '90s that just drove people away from the hotel.

Okay. Great. And then, just lastly, any update on Bass? It looks like from their website, they have 20 stores operating now and 8 under construction. One, can you tell me when you think those eight will be completed? Maybe you don't have that information, but are you still offering the same sort of guidance for Bass? And when do you think there is a -- what is your exit strategy, as a change?

The store openings really aren't something that we have really keyed in on here in terms of when and how, because frankly, we are a minority investor in this business. We have no really control over it. What I will try to do is extract that information from the Bass guys, and we will put out disclosure on it.

In terms of the exit strategy of Bass, our position today is no different to our position a year ago, which is that we really like this business, we like the growth characteristics of the business, we certainly like the multiples of that this industry attracts. And we obviously are doing everything we can to help the founder of this business grow this business. And at some point, we believe that will accrue to the benefit of our shareholders by us exiting, but we don't believe that will be, certainly, in the next 12 to 18 months. We are just going to have to leave it at that at this moment, because we're not in the driver's seat here.

Great. Okay. Thank you both.

Grant Jordan, Wachovia Securities.

Good morning. A couple of housekeeping questions, first. If you could give is the amount spent on CapEx, capitalized interest, and any cash tax refunds or payments in the quarter?

Well, there was not any cash tax refunds in the quarter. The CapEx total for the quarter was about $50 million, and that includes capitalized interest. And capitalized interest was about 5 million.

Great. And then, in addition to the question about Bass Pro Shops and what your exit strategy there is, are there any other large cash inflows or outflows outside of the normal course of business that we should be looking for in the next 10 or 12 to 18 months?

The only inflows, Dave, would be the settlement of our dispute with the Predators and payments from -- in accordance with the put rights that we have in our business. That would be an $18 million positive inflow. And if we dispose of the real estate on Briley Parkway, that could be anywhere from 25 to $30 million of inflow as well.

Okay.

But I don't -- in terms of extraordinary outflows, I am not aware of any.

Okay.

And forgive the pausing in the conversation, it's just that the brain is trying to work on that.

That's okay.

Right?

I agree with that.

And then, my final question -- in the press release, it says that you exercised the first of your two one-year extensions on your senior term loan. is there some point in time that you hope to have that refinanced with more permanent capital?

We have another one-year extension option on March 31st of next year. We are constantly reviewing that piece of financing in connection with where the financing markets are today. We certainly would hope to have that paper refinanced around this time next year at the outside. But we are constantly reviewing that to see what sort of effective rates of financing we can put in place.

Okay. Great. Thank you.

Follow-up coming from Nap Overton.

Yes, a couple of things. You talked about on the Washington D.C. property, attempting to secure some public financing or incentives to produce an adequate return on capital. Am I correct in recalling that an adequate return under your hurdle rate there in the hotel for that hotel would approximate 12 percent on on unleverer basis?

Yes, Nap, and on and off the tax basis, too. We're not talking about cash on cash; we're talking about an unlevered after-tax. That is the threshold that we have implemented internally in this company. We are not going to build projects that bring in hurdle rates south of that. And that's the way we're sticking to our guns on this one.

And does that project easily meet that minimum target? Or is it closer -- ?

I hate to sound flippant. We would not be considering it if we didn't think we could get it above that hurdle rate.

Okay. And then secondly, on Bass, I know you are a minority owner, but I think all of us analysts and the investment community are still working off of comments made, maybe a year ago or 6, 9 months ago, that Bass could generate 80 to 100 million in EBITDA in '04, and that is what we are using to capitalize or use a multiple on. Is that still a reasonable stab at what Bass's consolidated EBITDA might be in '04? Or run rate by the end of '04? Could you clarify that for us?

The hard problem that we have in this business, Nap, is the fact that they opened five stores at the end of late -- end of last year. Towards the end of last year, five stores opened. And as was correctly pointed out a little earlier, there are other stores that are in the pipelines to open this year, and it is the issue of timing. We, last week when we were out -- two weeks ago when we were out communicating -- we sort of indicated that we think the business in '04, on a calendar year '04, could be in or around the 70 mark. But it's real hard to project what the forward 12 months would look like at any point in time this year because of the timing of these new units that are opening through the country.

Understand. Okay, thanks very much.

But, you know, this business has -- in our opinion, this is a wonderful business. And it has a totally different profile to the recent IPO of Gander Mountain. This is a business that is, we believe, a category killer in the markets that it operates in. And I believe the ownership of the business, the primary owner, Mr. Morris, is very, very focused on really accelerating growth in this business in a very deliberate, controlled way, not just crazy growth, but just doing, running, growing this business out and building this into a dominant brand. We are working with him, helping him, supporting him on this. And I think at some point in time, that will absolutely bring real value to our shareholders. If we did not think that, we would be doing everything in our repertoire to get ourselves out of this.

Dave has just passed me a little note. He sort of would speculate that the pro forma for the openings in '04 would bring us somewhere in that $80 million range, but again, this has such a different profile to the Gander Mountain business that went out.

Okay. And could you -- now that the Texan property is open -- could you tell us what the total construction costs ended up being there? Identifying whether that includes or excludes preopening or capitalized interest?

Yes, Nap, the 480 estimate is a number we've used historically. That includes preopening costs and actual construction costs, design fees, and all the rest. We expect the final number to be on or about that number. We are in the process of closing out the construction contracts and negotiating with the general contractor about the final few issues. But, the 480 number is the number.

Okay. And that includes preopening, but excludes capitalized interest?

Correct.

Okay. And one final thing that I've had several inquiries about. This last quarter is a good example of how your business can be lumpy on a quarter-to-quarter basis, which is kind of the downside to the long booking window that you've got, in that you really have a limited amount of influence over what's going to happen in terms of bookings at your hotels for the remainder of '04, which is offset by the nice long window that the good look we've got in '05 and '06. Is that an accurate way to think about your business?

It is. What we try to do -- the problem that we -- I hate to sort of delve back into history, here. But one of the problems that we had when Dave and I showed up here in '01 was tgat the bookings, the long, big association bookings at this hotel was falling off a cliff. It was falling off a cliff because customer satisfaction levels were not very good back then. There was a lot of associations that were (indiscernible). What we have been attempting to do in 2001, 2002, was to fix the sort of 2003, 2004 problems by keying in and focusing in on the shorter lead-in time business, which, to a large extent, was the corporate business.

Now, the double problem that we had was that in 2001 and 2002, corporate America basically had retired. It was in a recession. And so, it was a much harder process for us. The bookings that turned out in the first quarter of 2003, I think David, we did nine of the top 10 conventions in 2003, were not in the first quarter of 2003. And so, that was a very, very, very unfavorable quarter when you compare it to 2004. Now, what we have been able to do in 2004 is -- because we started to really crank the bookings up in 2002 and 2003 -- a lot of those bookings that we saw in 2002 and 2003 were bookings that were coming in relatively shorter lead-in time bookings. And that is why we believe that the rest of 2004 will be pretty good in relationship to the remaining 3 periods of 2003. But as we get into 2005 in 2006, all of these big, big, big bookings that we did in -- I'm sorry, this is getting complicated -- but, in 2002 and 2003, start to show up in fairly healthy numbers. And that's why we believe our RevPAR growth for the 2005 year and the 2006 year will be high single digit growth.

So, there was a question asked earlier, by you I think, did we expect any other lumpy quarters this year? The answer is, when you aggregate the two big hotels, the answers no. But we will have ups and downs. But as we get in 2005, 2006, 2007, we won't have that same volatility because of these enormous amount of bookings that we have contacted in 2002, 2003, and we believe this year, will be materializing into these subsequent years.

Now the really, really exciting thing -- and I want to make sure that everybody on the phone really understand this -- was that the impediments in the business in the Nashville hotel that were inherited back in 2001, have absolutely been corrected by the wonderful workforce we have in the Nashville hotel. These folks over this hotel, who by-and-large were there back in the '98, '99 period of time, now are delivering the service that they did back in the late '90s, because they don't have poor leadership in that hotel. The leadership is great. Customer satisfaction levels are high. Customers are booking. We believe we're going to have a record number of bookings this year over 2003, which was an enormous booking year for the Nashville hotel. So I'm giving you a long-winded answer to your question. There will be ups and downs for the rest of this year, but overall, on a quarter-by-quarter basis, the rest of this year will be positive over 2003.

Thank you very much.

One more question, please.

Bret Faircloth (ph), Performance Capital.

Hi, guys. It's actually Brian Warner. At what point do you think you will have an opportunity to maybe refinance your big properties, kind of, on a stand-alone basis and pull out some capital for other corporate uses?

When you say "re-finance them on a stand-alone," is the implication effectively selling those hotels and taking back management contracts?

To the extent that you could do that, yes, sure, that would be the ideal.

Yes, well, Brian, again, we discussed that in many different forums over the last two weeks when we did this show. And the answer that we articulated at that point was, it's a function of the maturation of these business. As we believe -- we believe these business can grow to an aggregated occupancy of about 80 percent over the course of the next two, three years. We believe we can do that because of these advanced bookings. And so, when you take a hotel like the (indiscernible) Hotel in Orlando, as an example, that last year did just about $40 million of EBITDA, we believe the potential for that hotel in the not-too-distant future, in sort of a two to three-year time frame, is to have that business cranking a 55 million of EBITDA, if all things are equal. You know, we have a reasonably good economy, and we don't have any more silly or catastrophic events in the country. And the multiples of these big hotels, we believe, should be in the top end of the range. And so, the issue as to whether we do this is a function of when these hotels near maturation from an EBITDA perspective. Financing them on a stand-alone basis, Dave, do you want to address that issue?

Yes, in terms of just purely borrowing against them on a secured basis, you know, we could do that today. And we actually have our Nashville hotel secured by a historic piece of indebtedness, and our Florida hotel is the security for our revolving line of credit. We could start to move some of those pieces of paper around in the future. But it does limit your flexibility in being able to do things like Colin just described. So, we want to make sure that we maintain a reasonable amount of flexibility, because we think one of our most efficient sources of capital and one of the most efficient ways we can return capital to shareholders may be through strategies like Colin just described.

Thank you.

Thanks, Brian. Well, ladies and gentlemen, thank you very much indeed for joining us this morning. If you have any further questions, please feel free to contact either David, Jason Morgan, or me. Have a good one. And we will be talking with you soon. Thanks.

Thank you. Once again, this call will be available for a digital replay. The number is 877-519-4471 and the pin number is 4660431. This does conclude today's teleconference. Please disconnect your lines at this time and have a wonderful day.