Ryman Hospitality Properties Inc (RHP) 2012 Q2 法說會逐字稿

Welcome to the Gaylord Entertainment Company's second-quarter 2012 earnings conference call. Hosting the call today from Gaylord Entertainment are Mr. Colin Reed, Chairman and Chief Executive Officer, and Mr. Mark Fioravanti, Executive Vice President and Chief Financial Officer.

This call will be available for digital replay. The number is 800-585-8367, and the conference ID number is 98754906. At this time, all participants have been placed on listen-only mode.

It is now my pleasure to turn the floor over to Mr. Mark Fioravanti. Sir, you may begin.

Thank you. Good morning, everyone. My name is Mark Fioravanti, and I am the Executive Vice President and Chief Financial Officer for Gaylord Entertainment Company. Thank you for joining us on the call today for our second-quarter 2012 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 are 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 our second-quarter 2012 earnings release, and 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 the 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 with the most directly comparable GAAP financial measures has been provided an 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 and Chairman, Colin Reed.

Thank you, Mark. Good morning, everyone, and thank you for joining us today. I will start with a brief description of the stock repurchase transaction that took place yesterday between the Company and TRT Holdings and the TRT Holdings proposed secondary offering of the Company's common stock announced earlier today. I will then move to some highlights from our second-quarter performance and then provide an update on our REIT conversion process that we announced earlier this quarter.

I will also discuss our outlook for the rest of the year. Then Mark will provide additional detail on our financials from the second quarter.

Now, in contrast to previous quarters, given the fact that Mark and I will be out meeting investors over the next few days, we will not be taking questions at the end of this call.

This morning we issued a press release in respect of the stock repurchase transaction that took place yesterday between the Company and TRT Holdings. Under the terms of the repurchase agreement, the Company repurchased 5 million shares of its common stock from TRT Holdings at a price of $37 per share, which represents approximately 47% of the Company's shares held by them prior to the stock repurchase. The repurchase agreement was filed this morning on a Form 8-K.

In addition, as we announced earlier today, TRT Holdings has commenced an underwritten offering of its remaining shares of our common stock. Additional information about the offering is available in the registration statement filed by the Company in connection with the proposed offering by TRT Holdings, which is available on the SEC's website.

Now let me turn back and discuss with you the details of our performance during the second quarter. We previously provided a preview of some of our quarterly results. So you should already have a decent understanding of how well we performed.

Now let me start by saying that we were very pleased with our results this past quarter, especially our strong bookings numbers. We booked over 486,000 net room nights in the second quarter, an increase of approximately 215,000 room nights or roughly 79% over the same period last year. This performance reaffirms our belief that the group segment is strengthening, and that while not every quarter will see quite the same leap in bookings as we saw this quarter, we will continue to benefit as positive momentum builds.

The rest of our business also performed well this quarter as revenue across our hotels increased by 6.8%. Occupancy was to be part of this growth as our hotels posted a 79% occupied rooms in the second quarter as group rooms increased by over 40,000 room nights and drove a 7.5% increase in RevPAR.

We also saw guest spending continue to trend upwards this quarter, contributing to our total RevPAR increase of approximately 6.7%. These positive occupancy and outside-the-room spending patterns are further indicators that both group and transient guests are traveling and spending at healthy levels, which are encouraging signs for our business.

From a bottom-line perspective, we continued focus on managing costs and operational efficiencies, which contributed to Gaylord Hotel CCF increase of approximately 8.3% and a CCF margin increase of 40 basis points, which is even more significant when you consider that Gaylord Opryland, aided by an abnormally high level of corporate group room nights, delivered its best profitability performance on record during the second quarter of 2011, creating a difficult comparison for the second quarter of 2012.

Now I'll take a moment to just briefly touch on each of our properties. Gaylord National had a strong quarter, posting double-digit increases in revenue, occupancy, RevPAR and total RevPAR, powered by an over 17% increase in group rooms and surprisingly much stronger government attendance than in 2011. The combination of these results and the success of the cost management initiatives we have implemented at this property drove a 600 basis point increase in CCF margin and delivered the best quarterly CCF performance on record for this property. Now while rate remains an opportunity in the market, these results overall are very encouraging and further evidence that the property continues to gain positive momentum.

Gaylord Palms had its second consecutive strong quarter, highlighted by a RevPAR increase of 18.7% and total RevPAR increase of 24.1%, leading to a CCF margin increase of over 400 basis points. These results are despite the property having approximately 6800 rooms out of service for the renovation program. In its first full quarter in operation, our new sports bar has performed very well, which, along with our recently opened pool complexes at the property and the soon to be fully completed guestroom renovation, has us excited for how the Palms can perform in the future.

Despite the difficult comparison against a record-setting quarter in 2011, Gaylord Opryland posted occupancy RevPAR and total RevPAR increases this quarter. The property's revenue and CCF results were negatively impacted by a natural gas explosion on June 19. However, contrary to some of the initial early reports, the damage was relatively minor, and we were able to return to business as usual at the hotel rather quickly.

Most importantly, no one was injured in the incident, and our staff and management did an outstanding job of safely evacuating the hotel and accommodating our guests when this event occurred. And I might add, despite this event, the property still delivered a CCF margin above 31% in the quarter.

At Gaylord Texan, the property performed solidly, but was negatively impacted by a last-minute cancellation of a large 5000-group room night group. While the quarter's numbers at the hotel suffered as a result, it highlights why we have cancellation fees built into our group contracts, which offer us a degree of profitability protection from occurrences such as this.

Now let me turn to the news that I think distinguished our quarter. As you all know, on May 31 we announced an agreement to sell the Gaylord Hotels brand and the rights to manage our four resort and convention hotels to Marriott for $210 million in cash. Once the sale is completed, we will continue to own our hotel properties and other businesses such as the iconic Grand Ole Opry and our other attractions and will restructure our business operations to facilitate our election to be treated as a real estate investment trust or REIT effective January 1, 2013. This decision followed an extremely thorough months-long review of potential options, which looked at multiple scenarios, including the outright sale of the Company. At this stage, we are confident that given where the industry sits in the hospitality recovery cycle, the REIT structure represents the best pathway to realize the long-term value of our business and to position the Company for continued growth.

We are also excited to be partnering with Marriott, an organization that consistently receives the industry's highest praise among group customers and meeting planners and shares our commitment to provide a distinctive guest experience in creating a culture of excellence among employees. The opportunity to realize substantial cost savings and revenue enhancements due to Marriott's scale and reach in the global hospitality industry was also a critical factor in our decision as was our belief that Marriott will be able to drive additional transient demand to our properties through their expansive sales force and the attractiveness of their Marriott Rewards Loyalty Program that will build upon the programs that we already have in place on our side of the business such as our DreamWorks partnership and our expansive holiday offerings.

To provide an update on the conversion process, everything has been progressing according to schedule, and we are working very hard every day with Marriott and the teams from Marriott to finalize that organizational structure and put the right systems and personnel plans in place. We are still on target to transition management of the hotels to Marriott on October 1 of this year and are particularly concentrating to ensure that the IT systems, sales and marketing and employment functions are all finalized by that date.

Last week we filed a preliminary proxy statement prospectus with the SEC to be used in connection with our special meeting of stockholders to be held on September 19, and we hope to finalize the proxy statement prospectus over the next several days.

Once the Marriott sale and REIT conversion are complete, we believe our Company will emerge as a very attractive, low leverage, high FFO, high dividend paying company that has the resources to grow. Our focus on the group and meeting segment will also mean that we have a unique position and value proposition within the hospitality REIT space.

In time, we will also begin pursuing external acquisition opportunities that make sense for our new REIT, and we believe this represents an attractive return on capital opportunity. Once the conversion has been completed, we will be able to offer more insight into these pursuits, but as always, we will be cautious and not undertake any transaction that is not in the best interest of our shareholders.

Regarding our proposed development in Aurora, Colorado, as we have stated previously, when we made this announcement at the end of May, as a REIT, we will no longer view large scale development as a means for growth, and we will not be proceeding with the Colorado project in the form previously anticipated. We will use the coming months to examine how the project can be completed with minimum financial commitment by our Company through the development phase. We will discuss these plans more so once the conversion process is completed. But, suffice to say, that we will be prudent in these pursuits and not undertake any transactions that are not in the best interests of our shareholders.

In closing, we are excited about what the future will hold for our Company once the conversion process is concluded. Right now we are focused on successfully completing this process in the fourth quarter, while continuing to deliver solid results at our existing hotels.

So while we will update our guidance to reflect the impacts of the transaction as we move closer to the anticipated completion date, for now we are reiterating our current 2012 guidance.

And, with that, I will turn the call over to Mark.

Thank you, Colin. On a consolidated basis, Gaylord Entertainment revenues for the second quarter grew 6.9% to $253.2 million. During the quarter, the Company generated income from continuing operations of $9 million or $0.17 per fully diluted share compared to income from continuing operations of $8.6 million or $0.17 per fully diluted share in the prior year quarter.

Companywide consolidated cash flow was $64 million for the quarter, a 2% increase from $62.8 million in the same period last year. CCF for the second-quarter 2012 includes $3.4 million in expenses related to the Company's process of exploring opportunities to unlock shareholder value.

Turning to the hotel segment, for the second quarter, RevPAR increased 7.5%, while total RevPAR increased 6.7%. Gaylord Hotels in the year for the year cancellations in the quarter totaled 14,997 room nights compared to 16,916 room nights in the second quarter of 2011. Attrition rates fell 3.6 percentage points from 10.3% in the second quarter last year to 6.7% in the second quarter this year.

During the quarter, we continued to benefit from attrition and cancellation fee collection, and for Gaylord Hotels, selections totaled $1.7 million compared to $2.9 million for the same period last year. Gaylord Hotels CCF increased 8.3% in the quarter to $74.4 million, while CCF margin increased 40 basis points year over year. These results include the impact of the explosion that Colin mentioned at Gaylord Opryland, which resulted in a profitability loss of $1.3 million, including approximately $455,000 of remediation expense incurred due to the accident.

The Company is pursuing an insurance and business interruption claim associated with this event.

The Opry and Attractions segment continued to perform well with revenue increasing 8.5% in the quarter to $20.2 million, driven by increased attendance and additional shows at the Grand Ole Opry. CCF for the Opry and Attractions segment increased 16.7% to $6.1 million for the quarter.

Moving on to the Corporate and Other segment, CCF in the quarter totaled a loss of $16.1 million compared to a loss of $10.7 million in the prior year quarter.

Moving on to the balance sheet, as of June 30, we had long-term debt outstanding of approximately $1.035 billion and unrestricted cash of $29.5 million. Additionally $370 million of borrowings remained undrawn under our credit facility, and the lending banks issued $8 million in letters of credit, leaving $362 million of availability under our credit facility.

And finally, turning to guidance, we are reiterating our consolidated 2012 full-year guidance. Our guidance for Gaylord Hotels RevPAR remains an increase of 3% to 6% and a total RevPAR increase of 3% to 6% year over year. We are reaffirming our Gaylord Hotels CCF guidance as a range of $274 million to $286 million.

It is important to note that this guidance does not include the potential impact on fourth-quarter results from Marriott's management fees, centralized/shared service fees, or revenue and expense synergies that may be actualized once Marriott begins managing the resort on October 1.

We are also reaffirming our expectations for the Opry and Attractions segment at a CCF range of $15 million to $17 million.

In the first quarter, we incurred approximately $3.1 million of expense as part of our efforts to explore opportunities to unlock shareholder value, and we have incurred an additional $3.4 million as the result of that process during the second quarter.

As we stated last quarter, we are not including the expense we incurred in the second quarter or the expenses we will incur in the second half of the year as a result of this process in our Corporate and Other CCF guidance. Therefore, we reaffirm our Corporate and Other CCF expectations as a loss of $51 million to $54 million.

On a consolidated basis, total Company CCF expectations remain as a range of $235 million to $252 million for full-year 2012.

And, with that, I'll turn the call back over to Colin for any closing remarks.

Mark, thank you very much. And, as I said at the outset, we are not going to be answering questions. We have got multiple meetings to do through the rest of the day with investors and prospective investors.

So I would like to thank you all for joining us, and if we don't end up talking to you individually in our schedule here over the next two to three days, you know how to get ahold of either Mark, Patrick Chaffin or myself, and, again, thank you very much, indeed.

Operator, that is the conclusion of the call.

Thank you. This concludes today's conference call. You may now disconnect.