ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Ryman Hospitality Properties, Inc. (Ryman) is a Delaware corporation that conducts its operations so as to qualify
as a real estate investment trust (REIT) for federal income tax purposes. The Company conducts its business through an umbrella partnership REIT, in which substantially all of its assets are held by, and operations are conducted through,
RHP Hotel Properties, LP, a subsidiary operating partnership (the Operating Partnership). RHP Finance Corporation, a Delaware corporation (Finco) was formed as a wholly-owned subsidiary of the Operating Partnership for the
sole purpose of being an issuer of debt securities with the Operating Partnership. Neither Ryman nor Finco has any material assets, other than Rymans investment in the Operating Partnership and its 100%-owned subsidiaries. As 100%-owned
subsidiaries of Ryman, neither the Operating Partnership nor Finco has any business, operations, financial results or other material information, other than the business, operations, financial results and other material information described in this
Quarterly Report on Form 10-Q and Rymans other reports filed with the Securities and Exchange Commission (the SEC) pursuant to the Securities Exchange Act of 1934, as amended (the Exchange Act). In this report, we use
the terms, the Company, we or our to refer to Ryman Hospitality Properties, Inc. and its subsidiaries unless the context indicates otherwise.
The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere
in this report and our audited consolidated financial statements and related notes for the year ended December 31, 2015, appearing in our Annual Report on Form 10-K that was filed with the SEC on February 26, 2016.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements intended to qualify for the safe harbor from liability established by the
Private Securities Litigation Reform Act of 1995. These forward-looking statements concern our goals, beliefs, expectations, strategies, objectives, plans, future operating results and underlying assumptions, and other statements that are not
necessarily based on historical facts. Without limitation, you can identify these statements by the fact that they do not relate strictly to historical or current facts, and these statements may contain words such as may,
will, could, should, might, projects, expects, believes, anticipates, intends, plans, continue, estimate,
or pursue, or the negative or other variations thereof or comparable terms. In particular, they include statements relating to, among other things, future actions, strategies, future performance, the outcome of contingencies such as
legal proceedings and future financial results. These also include statements regarding (i) the effect of our election to be taxed as a REIT for federal income tax purposes; (ii) the holding of our non-qualifying REIT assets in one or more taxable
REIT subsidiaries; (iii) our announced dividend policy, including the frequency and amount of any dividend we may pay; (iv) potential growth opportunities, including future expansion of the geographic diversity of our existing asset portfolio
through acquisitions and our investment in the Gaylord Rockies project; (v) Marriotts ability to effectively manage our hotels and other properties; (vi) our anticipated capital expenditures; (vii) the potential operating and financial
restrictions imposed on our activities under existing and future financing agreements and other contractual arrangements with third parties, including management agreements with Marriott; and (viii) any other business or operational matters. We have
based these forward-looking statements on our current expectations and projections about future events.
We caution the reader that forward-looking
statements involve risks and uncertainties that cannot be predicted or quantified, and, consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Important factors that could cause actual
results to differ materially from those in the forward-looking statements include, among other things, the risks and uncertainties associated with economic conditions affecting the hospitality business generally, the geographic concentration of our
hotel properties, business levels at our hotels, the effect of our election to be taxed as a REIT for federal income tax purposes commencing with the year ended December 31, 2013, our ability to remain qualified as a REIT, our ability to
22
execute our strategic goals as a REIT, our ability to generate cash flows to support dividends, future board determinations regarding the timing and amount of dividends and changes to the
dividend policy, our ability to borrow funds pursuant to our credit agreements and to refinance indebtedness, and those factors described in our Annual Report on Form 10-K for the year ended December 31, 2015 or described from time to time in our
other reports filed with the SEC.
Any forward-looking statement made in this Quarterly Report on Form 10-Q speaks only as of the date on which the
statement is made. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. We have no duty to, and do not intend to, update or revise the forward-looking statements we make
in this Quarterly Report on Form 10-Q, except as may be required by law.
Overview
On January 1, 2013, we began operating as a REIT for federal income tax purposes, specializing in group-oriented, destination hotel assets in urban and resort
markets. Our owned assets include a network of four upscale, meetings-focused resorts totaling 7,795 rooms that are managed by Marriott International, Inc. (Marriott) under the Gaylord Hotels brand. These four resorts, which we refer to
as our Gaylord Hotels properties, consist of the Gaylord Opryland Resort & Convention Center in Nashville, Tennessee (Gaylord Opryland), the Gaylord Palms Resort & Convention Center near Orlando, Florida (Gaylord
Palms), the Gaylord Texan Resort & Convention Center near Dallas, Texas (Gaylord Texan) and the Gaylord National Resort & Convention Center near Washington D.C. (Gaylord National). Our other owned
assets managed by Marriott include Gaylord Springs Golf Links (Gaylord Springs), the Wildhorse Saloon, the General Jackson Showboat (General Jackson), the Inn at Opryland, a 303-room overflow hotel adjacent to Gaylord
Opryland, and the AC Hotel at National Harbor, Washington D.C. (AC Hotel), a 192-room overflow hotel adjacent to Gaylord National that opened in April 2015. We also own and operate a number of media and entertainment assets including the
Grand Ole Opry, the legendary weekly showcase of country musics finest performers for over 90 years; the Ryman Auditorium, the storied live music venue and former home of the Grand Ole Opry located in downtown Nashville; and WSM-AM, the
Oprys radio home.
Each of our award-winning Gaylord Hotels properties incorporates not only high quality lodging, but also at least 400,000 square
feet of meeting, convention and exhibition space, superb food and beverage options and retail and spa facilities within a single self-contained property. As a result, our Gaylord Hotels properties provide a convenient and entertaining environment
for convention guests. Our Gaylord Hotels properties focus on the large group meetings market in the United States.
In 2012, we completed restructuring
transactions to facilitate our qualification as a REIT for federal income tax purposes. Our goal is to become the nations premier hospitality REIT for group-oriented, destination hotel assets located in urban and resort markets.
Marriott manages the day-to-day operations of our Gaylord Hotels properties, the Inn at Opryland, the AC Hotel, and certain of our Nashville attractions. As a
result, we rely upon Marriott to generate occupancy and revenue levels at our hotel properties.
See Cautionary Note Regarding Forward-Looking
Statements in this Item 2 and Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2015 for important information regarding forward-looking statements made in this report and risks and
uncertainties we face.
Dividend Policy and Share Repurchase Program
Pursuant to our current dividend policy, we plan to pay a quarterly cash dividend to shareholders in an amount equal to an annualized payment of at least 50%
of adjusted funds from operations (as defined by us) less maintenance capital expenditures or 100% of REIT taxable income, whichever is greater. On February 26, 2016,
23
our board of directors declared our first quarter 2016 cash dividend in the amount of $0.75 per share of common stock, or an aggregate of approximately $38.2 million in cash, which was paid on
April 15, 2016 to stockholders of record as of the close of business on March 31, 2016. We currently plan to pay a quarterly cash dividend of $0.75 per share of common stock in July 2016, October 2016 and January 2017. The declaration,
timing and amount of dividends will be determined by action of our board of directors. Our dividend policy may be altered at any time by our board of directors.
On August 20, 2015, we announced that our board of directors authorized a share repurchase program for up to $100 million of our common stock using cash on
hand and borrowings under our revolving credit line. The repurchases are intended to be implemented through open market transactions on U.S. exchanges or in privately negotiated transactions, in accordance with applicable securities laws, and any
market purchases will be made during open trading window periods or pursuant to any applicable Rule 10b5-1 trading plans. The authorization extends until December 31, 2016. The timing, prices, and sizes of repurchases will depend upon prevailing
market prices, general economic and market conditions and other considerations. The repurchase program does not obligate us to acquire any particular amount of stock.
During the three months ended March 31, 2016, we repurchased 0.5 million shares of our common stock for an aggregate purchase price of $24.8 million, which we
funded using cash on hand and borrowings under our revolving credit facility. The repurchased stock was cancelled and has been reflected as a reduction of retained earnings in the accompanying condensed consolidated financial statements.
Gaylord Rockies Resort & Convention Center
As
further discussed in Note 11 to the condensed consolidated financial statements included herein, in March 2016, certain subsidiaries of the Company entered into a series of agreements with affiliates of RIDA Development Corporation
(RIDA) and Ares Management, L.P. (Ares) with respect to an equity investment in the Gaylord Rockies Resort & Convention Center in Aurora, Colorado (Gaylord Rockies), which is currently being developed by RIDA
and Ares. The hotel will be managed by an affiliate of Marriott pursuant to a long-term management contract and is expected to consist of a 1,500-room resort hotel with over 485,000 square feet of exhibition, meeting, pre-function and outdoor space.
The hotel is expected to be completed in late 2018 and has a total estimated project cost of approximately $800 million.
We acquired a 35% interest in
the project for a capital contribution expected to total $86.1 million. We have funded $21.5 million of our capital contribution and expect to fund the remainder of our capital contribution during the remainder of 2016 and the first half of 2017.
Our capital contributions will be funded from available cash on hand and borrowings under our revolving credit facility.
The terms of our investment
provide that we will have the ability to approve certain major decisions affecting the hotel, including, but not limited to, operating budgets, major capital expenditures, material transactions involving the hotel, and approval of designated hotel
senior management. We also have a right of first offer to acquire the remainder of the project and designated rights to participate in any sales process with respect to the project after exercise of our first offer rights.
A subsidiary of the Company will provide designated asset management services on behalf of the hotel during the pre-construction period in exchange for a flat
fee and after opening of the hotel in exchange for a fee based on the hotels gross revenues on an annual basis.
In connection with the agreements,
we agreed to provide certain guarantees of the hotels construction loan and mezzanine debt. See Note 11 to the condensed consolidated financial statements included herein for additional discussion of these guarantees.
24
Our Strategic Plan
Our goal is to become the nations premier hospitality REIT for group-oriented meeting hotel assets in urban and resort markets.
Existing Hotel Property Design
. Our hotel properties focus on the large group meetings market in the United States and incorporate meeting and
exhibition space, signature guest rooms, food and beverage offerings, fitness and spa facilities and other attractions within a large hotel property so attendees needs are met in one location. This strategy creates a better experience for both
meeting planners and guests, and has led to our current hotel properties claiming a place among the leading convention hotels in the country.
Expansion of Hotel Asset Portfolio
. While our short-term capital allocation strategy has focused on returning capital to stockholders, part of our
long-term growth strategy includes acquisitions of other hotels, particularly in the group meetings sector of the hospitality industry, either alone or through joint ventures or alliances with one or more third parties. We intend to pursue
attractive investment opportunities which meet our acquisition parameters, specifically, group-oriented large hotels and overflow hotels with existing or potential leisure appeal. We are interested in highly accessible upper-upscale assets with over
400 hotel rooms in urban and resort group destination markets. We also consider assets that possess or are located near convention centers that present a repositioning opportunity and/or would significantly benefit from capital investment in
additional rooms or meeting space. We plan to expand the geographic diversity of our existing asset portfolio through acquisitions. As a REIT, we no longer view independent, large-scale development of resort and convention hotels as part of our
long-term growth strategy.
Leverage Brand Name Awareness
. We believe the Grand Ole Opry is one of the most recognized entertainment brands in the
United States. We promote the Grand Ole Opry name through various media, including our WSM-AM radio station, the Internet and television, and through performances by the Grand Ole Oprys members, many of whom are renowned country music artists.
As such, we have alliances in place with multiple distribution partners in an effort to foster brand extension. We are continuously exploring additional products, such as television specials and retail products, through which we can capitalize on
our brand affinity and awareness. We believe that licensing our brand for products may provide an opportunity to increase revenues and cash flow with relatively little capital investment.
Our Current Operations
Our ongoing operations are
organized into three principal business segments:
|
|
|
Hospitality, consisting of Gaylord Opryland, Gaylord Palms, Gaylord Texan, Gaylord National, the Inn at Opryland, the AC Hotel, and our investment in the Gaylord Rockies joint venture.
|
|
|
|
Entertainment, consisting of the Grand Ole Opry, the Ryman Auditorium, WSM-AM and our Nashville attractions, which are owned in TRSs.
|
|
|
|
Corporate and Other, consisting of our corporate expenses.
|
25
For the three months ended March 31, 2016 and 2015, our total revenues were divided among these business segments
as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
Segment
|
|
2016
|
|
|
2015
|
|
|
|
|
Hospitality
|
|
|
93
|
%
|
|
|
93
|
%
|
Entertainment
|
|
|
7
|
%
|
|
|
7
|
%
|
Corporate and Other
|
|
|
0
|
%
|
|
|
0
|
%
|
Key Performance Indicators
The operating results of our Hospitality segment are highly dependent on the volume of customers at our hotels and the quality of the customer mix at our
hotels, which are managed by Marriott. These factors impact the price that Marriott can charge for our hotel rooms and other amenities, such as food and beverage and meeting space. The following key performance indicators are commonly used in the
hospitality REIT industry:
|
|
hotel occupancy a volume indicator;
|
|
|
average daily rate (ADR) a price indicator calculated by dividing room revenue by the number of rooms sold;
|
|
|
Revenue per Available Room (RevPAR) a summary measure of hotel results calculated by dividing room revenue by room nights available to guests for the period;
|
|
|
Total Revenue per Available Room (Total RevPAR) a summary measure of hotel results calculated by dividing the sum of room, food and beverage and other ancillary service revenue by room nights
available to guests for the period; and
|
|
|
Net Definite Group Room Nights Booked a volume indicator which represents, on an aggregate basis, the total number of definite group bookings for future room nights at our hotel properties confirmed during the
applicable period, net of cancellations.
|
Hospitality segment revenue from our occupied hotel rooms is recognized as earned on the close of
business each day and from concessions and food and beverage sales at the time of sale. Cancellation fees, as well as attrition fees that are charged to groups when they do not fulfill the minimum number of room nights or minimum food and beverage
spending requirements originally contracted for, are recognized as revenue in the period they are collected. Almost all of our Hospitality segment revenues are either cash-based or, for meeting and convention groups meeting credit criteria, billed
and collected on a short-term receivables basis. The hospitality industry is capital intensive, and we rely on the ability of our hotels to generate operating cash flow to repay debt financing and fund maintenance capital expenditures.
The results of operations of our Hospitality segment are affected by the number and type of group meetings and conventions scheduled to attend our hotels in a
given period. A variety of factors can affect the results of any interim period, including the nature and quality of the group meetings and conventions attending our hotels during such period, which meetings and conventions have often been
contracted for several years in advance, the level of attrition our hotels experience, and the level of transient business at our hotels during such period. We rely on Marriott, as the manager of our hotels, to manage these factors and to offset any
identified shortfalls in occupancy.
26
Selected Financial Information
The following table contains our unaudited selected summary financial data for the three months ended March 31, 2016 and 2015. The table also shows the
percentage relationships to total revenues and, in the case of segment operating income, its relationship to segment revenues (in thousands, except percentages).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2016
|
|
|
%
|
|
|
2015
|
|
|
%
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms
|
|
$
|
96,969
|
|
|
|
37.1
|
%
|
|
$
|
94,721
|
|
|
|
37.4
|
%
|
Food and beverage
|
|
|
122,233
|
|
|
|
46.7
|
%
|
|
|
118,331
|
|
|
|
46.7
|
%
|
Other hotel revenue
|
|
|
24,989
|
|
|
|
9.6
|
%
|
|
|
23,402
|
|
|
|
9.2
|
%
|
Entertainment
|
|
|
17,306
|
|
|
|
6.6
|
%
|
|
|
16,694
|
|
|
|
6.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
261,497
|
|
|
|
100.0
|
%
|
|
|
253,148
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms
|
|
|
25,981
|
|
|
|
9.9
|
%
|
|
|
26,067
|
|
|
|
10.3
|
%
|
Food and beverage
|
|
|
68,257
|
|
|
|
26.1
|
%
|
|
|
65,075
|
|
|
|
25.7
|
%
|
Other hotel expenses
|
|
|
72,688
|
|
|
|
27.8
|
%
|
|
|
70,296
|
|
|
|
27.8
|
%
|
Management fees
|
|
|
5,337
|
|
|
|
2.0
|
%
|
|
|
3,512
|
|
|
|
1.4
|
%
|
Entertainment
|
|
|
14,696
|
|
|
|
5.6
|
%
|
|
|
13,162
|
|
|
|
5.2
|
%
|
Corporate
|
|
|
6,971
|
|
|
|
2.7
|
%
|
|
|
7,094
|
|
|
|
2.8
|
%
|
Preopening costs
|
|
|
|
|
|
|
0.0
|
%
|
|
|
592
|
|
|
|
0.2
|
%
|
Impairment and other charges
|
|
|
|
|
|
|
0.0
|
%
|
|
|
2,890
|
|
|
|
1.1
|
%
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hospitality
|
|
|
26,469
|
|
|
|
10.1
|
%
|
|
|
26,443
|
|
|
|
10.4
|
%
|
Entertainment
|
|
|
1,647
|
|
|
|
0.6
|
%
|
|
|
1,412
|
|
|
|
0.6
|
%
|
Corporate and Other
|
|
|
657
|
|
|
|
0.3
|
%
|
|
|
715
|
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation and amortization
|
|
|
28,773
|
|
|
|
11.0
|
%
|
|
|
28,570
|
|
|
|
11.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
222,703
|
|
|
|
85.2
|
%
|
|
|
217,258
|
|
|
|
85.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hospitality
|
|
|
45,459
|
|
|
|
18.6
|
%
|
|
|
45,061
|
|
|
|
19.1
|
%
|
Entertainment
|
|
|
963
|
|
|
|
5.6
|
%
|
|
|
2,120
|
|
|
|
12.7
|
%
|
Corporate and Other
|
|
|
(7,628
|
)
|
|
|
|
(A)
|
|
|
(7,809
|
)
|
|
|
|
(A)
|
Preopening costs
|
|
|
|
|
|
|
|
(A)
|
|
|
(592
|
)
|
|
|
|
(A)
|
Impairment and other charges
|
|
|
|
|
|
|
|
(A)
|
|
|
(2,890
|
)
|
|
|
|
(A)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income
|
|
|
38,794
|
|
|
|
14.8
|
%
|
|
|
35,890
|
|
|
|
14.2
|
%
|
Interest expense
|
|
|
(16,039
|
)
|
|
|
|
(A)
|
|
|
(13,813
|
)
|
|
|
|
(A)
|
Interest income
|
|
|
3,143
|
|
|
|
|
(A)
|
|
|
3,008
|
|
|
|
|
(A)
|
Loss from joint ventures
|
|
|
(390
|
)
|
|
|
|
(A)
|
|
|
|
|
|
|
|
(A)
|
Other gains and (losses), net
|
|
|
(47
|
)
|
|
|
|
(A)
|
|
|
(20,232
|
)
|
|
|
|
(A)
|
Benefit (provision) for income taxes
|
|
|
885
|
|
|
|
|
(A)
|
|
|
(321
|
)
|
|
|
|
(A)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$
|
26,346
|
|
|
|
|
(A)
|
|
$
|
4,532
|
|
|
|
|
(A)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
These amounts have not been shown as a percentage of revenue because they have no relationship to revenue.
|
27
Summary Financial Results
Results
The following table summarizes our financial
results for the three months ended March 31, 2016 and 2015 (in thousands, except percentages and per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
%
Change
|
|
|
|
|
|
Total revenues
|
|
$
|
261,497
|
|
|
$
|
253,148
|
|
|
|
3.3
|
%
|
Total operating expenses
|
|
|
222,703
|
|
|
|
217,258
|
|
|
|
2.5
|
%
|
Operating income
|
|
|
38,794
|
|
|
|
35,890
|
|
|
|
8.1
|
%
|
Net income
|
|
|
26,346
|
|
|
|
4,532
|
|
|
|
481.3
|
%
|
Net income per share - fully diluted
|
|
|
0.51
|
|
|
|
0.09
|
|
|
|
466.7
|
%
|
Total Revenues
The
increase in our total revenues for the three months ended March 31, 2016, as compared to the same period in 2015, is attributable to increases in our Hospitality segment and Entertainment segment revenues for the 2016 period of $7.7 million and $0.6
million, respectively, as discussed more fully below. Total Hospitality revenues in the three months ended March 31, 2016 include $3.4 million in attrition and cancellation fee collections, an increase of $1.8 million from the 2015 period.
Total Operating Expenses
The increase in our total
operating expenses for the three months ended March 31, 2016, as compared to the same period in 2015, is primarily the result of increases in our Hospitality segment and Entertainment segment expenses of $7.3 million and $1.5 million, respectively,
partially offset by $2.9 million in impairment and other charges during 2015 that did not recur during 2016, as discussed more fully below.
Net Income
Our net income of $26.3 million for the three months ended March 31, 2016, as compared to net income of $4.5 million for the same period in 2015, was
due to the change in our revenues and operating expenses reflected above and the following factors, each as described more fully below:
|
|
|
A $20.2 million increase in other gains and (losses), net due primarily to the prior year including losses for the change in fair value of derivative liabilities associated with portions of the warrants related to our
previous 3.75% convertible notes.
|
|
|
|
A $2.2 million increase in interest expense, due primarily to interest expense associated with our $400.0 million 5% senior notes, which were issued in April 2015, partially offset by decreased interest expense under
our credit facility.
|
28
Factors and Trends Contributing to Performance
The most important factors and trends contributing to our performance during the three months ended March 31, 2016 described herein were:
|
|
|
Increased occupancy and outside-the-room spending at Gaylord Opryland (an increase of 6.4 points of occupancy and 10.3%, respectively, for the 2016 period, as compared to the 2015 period) primarily as a result of
increases in both group and transient business. In addition, during January and February 2015, Gaylord Opryland experienced a norovirus outbreak and a severe weather winter storm. These events contributed to the decreased occupancy and
outside-the-room spending in the 2015 period.
|
|
|
|
Increased outside-the-room spending at Gaylord Palms (an increase of 6.2% during the 2016 period, as compared to the 2015 period), primarily as a result of increased catering revenue.
|
|
|
|
Decreased occupancy at Gaylord National and Gaylord Texan (a decrease of 7.9 points of occupancy and 3.1 points of occupancy, respectively, for the 2016 period, as compared to the 2015 period), as a result of a decrease
in group room nights.
|
|
|
|
Increased net definite group room nights booked during the 2016 period (an increase of 21.3%), as compared to the 2015 period.
|
|
|
|
The 2015 period included losses of $20.2 million in other gains and losses, net, associated with losses on the change in the fair value of derivative liabilities associated with portions of the warrants related to our
previous 3.75% convertible notes.
|
29
Operating Results Detailed Segment Financial Information
Hospitality Segment
Total
Segment Results.
The following presents the financial results of our Hospitality segment for the three months ended March 31, 2016 and 2015 (in thousands, except percentages and performance metrics):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
% Change
|
|
Revenues (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms
|
|
$
|
96,969
|
|
|
$
|
94,721
|
|
|
|
2.4
|
%
|
Food and beverage
|
|
|
122,233
|
|
|
|
118,331
|
|
|
|
3.3
|
%
|
Other hotel revenue
|
|
|
24,989
|
|
|
|
23,402
|
|
|
|
6.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total hospitality revenue
|
|
|
244,191
|
|
|
|
236,454
|
|
|
|
3.3
|
%
|
Hospitality operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms
|
|
|
25,981
|
|
|
|
26,067
|
|
|
|
-0.3
|
%
|
Food and beverage
|
|
|
68,257
|
|
|
|
65,075
|
|
|
|
4.9
|
%
|
Other hotel expenses
|
|
|
72,688
|
|
|
|
70,296
|
|
|
|
3.4
|
%
|
Management fees
|
|
|
5,337
|
|
|
|
3,512
|
|
|
|
52.0
|
%
|
Depreciation and amortization
|
|
|
26,469
|
|
|
|
26,443
|
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Hospitality operating expenses
|
|
|
198,732
|
|
|
|
191,393
|
|
|
|
3.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hospitality operating income (2)
|
|
$
|
45,459
|
|
|
$
|
45,061
|
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hospitality performance metrics:
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
70.2
|
%
|
|
|
71.0
|
%
|
|
|
-1.1
|
%
|
ADR
|
|
$
|
183.21
|
|
|
$
|
183.13
|
|
|
|
0.0
|
%
|
RevPAR (3)
|
|
$
|
128.54
|
|
|
$
|
129.96
|
|
|
|
-1.1
|
%
|
Total RevPAR (4)
|
|
$
|
323.69
|
|
|
$
|
324.43
|
|
|
|
-0.2
|
%
|
Net Definite Group Room Nights Booked
|
|
|
319,015
|
|
|
|
263,055
|
|
|
|
21.3
|
%
|
Same-store Hospitality performance metrics (5):
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
70.7
|
%
|
|
|
71.0
|
%
|
|
|
-0.4
|
%
|
ADR
|
|
$
|
183.26
|
|
|
$
|
183.13
|
|
|
|
0.1
|
%
|
RevPAR (3)
|
|
$
|
129.50
|
|
|
$
|
129.96
|
|
|
|
-0.4
|
%
|
Total RevPAR (4)
|
|
$
|
328.91
|
|
|
$
|
324.43
|
|
|
|
1.4
|
%
|
Net Definite Group Room Nights Booked
|
|
|
315,331
|
|
|
|
259,116
|
|
|
|
21.7
|
%
|
(1)
|
Hospitality segment results and performance metrics include the results of our Gaylord Hotels and the Inn at Opryland for all periods presented. Results of the AC Hotel are included as of its opening in April 2015.
|
(2)
|
Hospitality segment operating income does not include $2.9 million of impairment charges and $0.6 million of preopening costs incurred during the three months ended March 31, 2015. See the discussion of these items set
forth below.
|
(3)
|
We calculate Hospitality RevPAR by dividing room revenue by room nights available to guests for the period. Hospitality RevPAR is not comparable to similarly titled measures such as revenues.
|
(4)
|
We calculate Hospitality Total RevPAR by dividing the sum of room, food and beverage, and other ancillary services revenue (which equals Hospitality segment revenue) by room nights available to guests for the period.
Hospitality Total RevPAR is not comparable to similarly titled measures such as revenues.
|
(5)
|
Same-store Hospitality performance metrics do not include the AC Hotel, which opened in April 2015.
|
The
increase in total Hospitality segment revenue in the three months ended March 31, 2016, as compared to the same period in 2015, is primarily due to increases of $8.1 million and $2.4 million at Gaylord Opryland and
30
Gaylord Palms, respectively, as well as $1.8 million in revenue from the AC Hotel, which opened in April 2015. These increases were partially offset by decreases of $3.4 million and $1.6 million
at Gaylord National and Gaylord Texan, respectively, as discussed below.
The percentage of group versus transient business based on rooms sold for our
Hospitality segment for the periods presented was approximately as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
Group
|
|
|
78
|
%
|
|
|
80
|
%
|
Transient
|
|
|
22
|
%
|
|
|
20
|
%
|
Rooms operating expenses decreased slightly in the three months ended March 31, 2016, as compared to the same period in 2015,
due to decreases at Gaylord National and Gaylord Texan, partially offset by an increase at Gaylord Opryland, as described below.
The increase in food and
beverage operating expenses in the three months ended March 31, 2016, as compared to the same period in 2015, is primarily attributable to increases at Gaylord Opryland and Gaylord Palms, partially offset by a decrease at Gaylord National, as
described below.
Other hotel expenses for the three months ended March 31, 2016 and 2015 consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
% Change
|
|
Administrative employment costs
|
|
$
|
26,698
|
|
|
$
|
26,971
|
|
|
|
-1.0
|
%
|
Utilities
|
|
|
6,496
|
|
|
|
6,633
|
|
|
|
-2.1
|
%
|
Property taxes
|
|
|
7,601
|
|
|
|
7,976
|
|
|
|
-4.7
|
%
|
Other
|
|
|
31,893
|
|
|
|
28,716
|
|
|
|
11.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other hotel expenses
|
|
$
|
72,688
|
|
|
$
|
70,296
|
|
|
|
3.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative employment costs include salaries and benefits for hotel administrative functions, including, among others,
senior management, accounting, human resources, sales, conference services, engineering and security. Administrative employment costs decreased slightly during the three months ended March 31, 2016, as compared to the same period in 2015. Utility
costs decreased slightly during the three months ended March 31, 2016, as compared to the same period in 2015. Property taxes decreased during the three months ended March 31, 2016, as compared to the same period in 2015, primarily due to a decrease
at Gaylord Texan. Other expenses, which include supplies, advertising, maintenance costs and consulting costs, increased during the three months ended March 31, 2016, as compared to the same period in 2015, primarily as a result of various increases
at Gaylord Opryland, Gaylord Palms and Gaylord National.
As discussed above, each of our management agreements with Marriott requires us to pay Marriott
a base management fee of approximately 2% of gross revenues from the applicable property for each fiscal year or portion thereof. Additionally, an incentive management fee is based on the profitability of our Gaylord Hotels properties calculated on
a pooled basis. In the three months ended March 31, 2016 and 2015, we incurred $4.9 million and $4.0 million, respectively, related to base management fees for our Hospitality segment and $1.2 million and $0.3 million, respectively, related to
incentive management fees for our Hospitality segment.
31
Management fees are presented throughout this Quarterly Report on Form 10-Q net of the amortization of the deferred management rights proceeds discussed in Note 2 to the accompanying condensed
consolidated financial statements included herein.
Total Hospitality segment depreciation and amortization expense remained stable in the three months
ended March 31, 2016, as compared to the same period in 2015.
Property-Level Results.
The following presents the property-level financial results
of our Hospitality segment for the three months ended March 31, 2016 and 2015.
Gaylord Opryland Results.
The results of Gaylord
Opryland for the three months ended March 31, 2016 and 2015 are as follows (in thousands, except percentages and performance metrics):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
% Change
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms
|
|
$
|
31,101
|
|
|
$
|
27,626
|
|
|
|
12.6
|
%
|
Food and beverage
|
|
|
36,134
|
|
|
|
31,464
|
|
|
|
14.8
|
%
|
Other hotel revenue
|
|
|
8,405
|
|
|
|
8,457
|
|
|
|
-0.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
75,640
|
|
|
|
67,547
|
|
|
|
12.0
|
%
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms
|
|
|
7,811
|
|
|
|
7,269
|
|
|
|
7.5
|
%
|
Food and beverage
|
|
|
20,208
|
|
|
|
17,176
|
|
|
|
17.7
|
%
|
Other hotel expenses
|
|
|
21,661
|
|
|
|
20,361
|
|
|
|
6.4
|
%
|
Management fees
|
|
|
1,870
|
|
|
|
975
|
|
|
|
91.8
|
%
|
Depreciation and amortization
|
|
|
7,541
|
|
|
|
7,728
|
|
|
|
-2.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
59,091
|
|
|
|
53,509
|
|
|
|
10.4
|
%
|
Performance metrics:
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
71.5
|
%
|
|
|
65.1
|
%
|
|
|
9.8
|
%
|
ADR
|
|
$
|
165.88
|
|
|
$
|
163.59
|
|
|
|
1.4
|
%
|
RevPAR
|
|
$
|
118.59
|
|
|
$
|
106.51
|
|
|
|
11.3
|
%
|
Total RevPAR
|
|
$
|
288.41
|
|
|
$
|
260.42
|
|
|
|
10.7
|
%
|
Rooms revenue and RevPAR increased at Gaylord Opryland during the three months ended March 31, 2016, as compared to the same
period in 2015, as a result of an increase in occupancy, due to an increase in group and transient business. This increase is partially attributable to a norovirus outbreak that occurred in January and February 2015 at the property, as well as a
winter storm that occurred during February 2015. Rooms expenses increased during the three months ended March 31, 2016, as compared to the same period in 2015, primarily as a result of increased variable costs associated with the increase in
occupancy.
The increase in food and beverage revenue at Gaylord Opryland during the three months ended March 31, 2016, as compared to the same period in
2015, was primarily due to increased banquet revenues from corporate groups, as well as increased food and beverage outlet revenue. Food and beverage expenses increased in the three months ended March 3, 2016, as compared to the same period in 2015,
primarily as a result of an increase in variable costs associated with the increase in revenue.
Other revenue remained stable at Gaylord Opryland during
the three months ended March 31, 2016, as compared to the same period in 2015. Other hotel expenses increased in the three months ended March 31, 2016, as compared to the same period in 2015, primarily as a result of increases in credit card fees
and sales and marketing costs.
32
Depreciation and amortization decreased slightly at Gaylord Opryland during the three months ended March 31,
2016, as compared to the same period in 2015.
Gaylord Palms Results.
The results of Gaylord Palms for the three months ended March 31, 2016 and
2015 are as follows (in thousands, except percentages and performance metrics):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
% Change
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms
|
|
$
|
20,350
|
|
|
$
|
20,399
|
|
|
|
-0.2
|
%
|
Food and beverage
|
|
|
29,727
|
|
|
|
27,826
|
|
|
|
6.8
|
%
|
Other hotel revenue
|
|
|
5,682
|
|
|
|
5,155
|
|
|
|
10.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
55,759
|
|
|
|
53,380
|
|
|
|
4.5
|
%
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms
|
|
|
4,207
|
|
|
|
4,260
|
|
|
|
-1.2
|
%
|
Food and beverage
|
|
|
14,413
|
|
|
|
13,616
|
|
|
|
5.9
|
%
|
Other hotel expenses
|
|
|
16,390
|
|
|
|
15,930
|
|
|
|
2.9
|
%
|
Management fees
|
|
|
1,162
|
|
|
|
840
|
|
|
|
38.3
|
%
|
Depreciation and amortization
|
|
|
4,708
|
|
|
|
4,718
|
|
|
|
-0.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
40,880
|
|
|
|
39,364
|
|
|
|
3.9
|
%
|
Performance metrics:
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
81.8
|
%
|
|
|
82.9
|
%
|
|
|
-1.3
|
%
|
ADR
|
|
$
|
194.37
|
|
|
$
|
194.57
|
|
|
|
-0.1
|
%
|
RevPAR
|
|
$
|
159.05
|
|
|
$
|
161.20
|
|
|
|
-1.3
|
%
|
Total RevPAR
|
|
$
|
435.80
|
|
|
$
|
421.84
|
|
|
|
3.3
|
%
|
Rooms revenue and RevPAR decreased slightly at Gaylord Palms during the three months ended March 31, 2016, as compared to the
same period in 2015. Rooms expenses also decreased slightly during the three months ended March 31, 2016, as compared to the same period in 2015.
Food
and beverage revenue increased at Gaylord Palms during the three months ended March 31, 2016, as compared to the same period in 2015, due primarily to an increase in caterings. Food and beverage expenses increased in the three months ended March 31,
2016, as compared to the same period in 2015, primarily as a result of an increase in variable costs associated with the increase in revenue.
Other
revenue at Gaylord Palms increased during the three months ended March 31, 2016, as compared to the same period in 2015, primarily as a result of an increase in the collection of attrition and cancellation fees. Other hotel expenses increased in the
three months ended March 31, 2016, as compared to the same period in 2015, due primarily to an increase in bad debt expense.
Depreciation and
amortization remained stable at Gaylord Palms during the three months ended March 31, 2016, as compared to the same period in 2015.
33
Gaylord Texan Results.
The results of Gaylord Texan for the three months ended March 31, 2016 and 2015 are
as follows (in thousands, except percentages and performance metrics):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
% Change
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms
|
|
$
|
18,617
|
|
|
$
|
20,276
|
|
|
|
-8.2
|
%
|
Food and beverage
|
|
|
29,503
|
|
|
|
29,459
|
|
|
|
0.1
|
%
|
Other hotel revenue
|
|
|
5,551
|
|
|
|
5,580
|
|
|
|
-0.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
53,671
|
|
|
|
55,315
|
|
|
|
-3.0
|
%
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms
|
|
|
3,904
|
|
|
|
4,251
|
|
|
|
-8.2
|
%
|
Food and beverage
|
|
|
14,646
|
|
|
|
14,516
|
|
|
|
0.9
|
%
|
Other hotel expenses
|
|
|
14,494
|
|
|
|
14,833
|
|
|
|
-2.3
|
%
|
Management fees
|
|
|
1,274
|
|
|
|
835
|
|
|
|
52.6
|
%
|
Depreciation and amortization
|
|
|
5,004
|
|
|
|
5,041
|
|
|
|
-0.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
39,322
|
|
|
|
39,476
|
|
|
|
-0.4
|
%
|
Performance metrics:
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
73.0
|
%
|
|
|
76.1
|
%
|
|
|
-4.1
|
%
|
ADR
|
|
$
|
185.47
|
|
|
$
|
195.94
|
|
|
|
-5.3
|
%
|
RevPAR
|
|
$
|
135.39
|
|
|
$
|
149.10
|
|
|
|
-9.2
|
%
|
Total RevPAR
|
|
$
|
390.33
|
|
|
$
|
406.76
|
|
|
|
-4.0
|
%
|
Rooms revenue and RevPAR decreased at Gaylord Texan during the three months ended March 31, 2016, as compared to the same
period in 2015, due primarily to decreased occupancy due to a decrease in group rooms, as well as decreased ADR for both groups and transient. The decrease in ADR was partially attributed to a mix shift from higher-rated association business to
lower-rated corporate business. Rooms expenses decreased during the three months ended March 31, 2016, as compared to the same period in 2015, as a result of decreased variable expenses associated with the decrease in occupancy.
Food and beverage revenue and expense remained stable at Gaylord Texan during the three months ended March 31, 2016, as compared to the same period in 2015.
Other revenue at Gaylord Texan remained stable during the three months ended March 31, 2016, as compared to the same period in 2015. Other hotel expenses
decreased slightly in the three months ended March 31, 2016, as compared to the same period in 2015.
Depreciation and amortization remained stable at
Gaylord Texan during the three months ended March 31, 2016, as compared to the same period in 2015.
34
Gaylord National Results.
The results of Gaylord National for the three months ended March 31, 2016 and
2015 are as follows (in thousands, except percentages and performance metrics):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
% Change
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms
|
|
$
|
23,067
|
|
|
$
|
24,446
|
|
|
|
-5.6
|
%
|
Food and beverage
|
|
|
25,840
|
|
|
|
28,946
|
|
|
|
-10.7
|
%
|
Other hotel revenue
|
|
|
5,248
|
|
|
|
4,170
|
|
|
|
25.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
54,155
|
|
|
|
57,562
|
|
|
|
-5.9
|
%
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms
|
|
|
8,994
|
|
|
|
9,631
|
|
|
|
-6.6
|
%
|
Food and beverage
|
|
|
18,195
|
|
|
|
19,202
|
|
|
|
-5.2
|
%
|
Other hotel expenses
|
|
|
18,290
|
|
|
|
18,327
|
|
|
|
-0.2
|
%
|
Management fees
|
|
|
867
|
|
|
|
794
|
|
|
|
9.2
|
%
|
Depreciation and amortization
|
|
|
8,566
|
|
|
|
8,470
|
|
|
|
1.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
54,912
|
|
|
|
56,424
|
|
|
|
-2.7
|
%
|
Performance metrics:
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
60.5
|
%
|
|
|
68.4
|
%
|
|
|
-11.5
|
%
|
ADR
|
|
$
|
210.06
|
|
|
$
|
198.89
|
|
|
|
5.6
|
%
|
RevPAR
|
|
$
|
127.00
|
|
|
$
|
136.08
|
|
|
|
-6.7
|
%
|
Total RevPAR
|
|
$
|
298.15
|
|
|
$
|
320.43
|
|
|
|
-7.0
|
%
|
Rooms revenue and RevPAR decreased at Gaylord National during the three months ended March 31, 2016, as compared to the same
period in 2015, primarily as a result of a decrease in occupancy for groups, partially offset by an increase in ADR for groups. The decrease in group occupancy was partially attributed to a large winter storm and a shift of the Easter holiday into
the first quarter. Rooms expenses decreased at Gaylord National during the three months ended March 31, 2016, as compared to the same period in 2015, primarily due to decreased variable costs associated with the decrease in occupancy.
Food and beverage revenue decreased during the three months ended March 31, 2016, as compared to the same period in 2015, primarily as a result of a decrease
in banquets. Food and beverage expenses decreased in the three months ended March 31, 2016, as compared to the same period in 2015, primarily due to a decrease in variable costs associated with the decrease in revenue.
Other revenue increased during the three months ended March 31, 2016, as compared to the same period in 2015, primarily due to an increase in attrition and
cancellation fee collections. Other hotel expenses decreased slightly in the three months ended March 31, 2016, as compared to the same period in 2015.
Depreciation and amortization at Gaylord National increased modestly during the three months ended March 31, 2016, as compared to the same period in 2015.
35
Entertainment Segment
Total Segment Results.
The following presents the financial results of our Entertainment segment for the three months ended March 31,
2016 and 2015 (in thousands, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
% Change
|
|
|
|
|
|
Revenues
|
|
$
|
17,306
|
|
|
$
|
16,694
|
|
|
|
3.7
|
%
|
Operating expenses
|
|
|
14,696
|
|
|
|
13,162
|
|
|
|
11.7
|
%
|
Depreciation and amortization
|
|
|
1,647
|
|
|
|
1,412
|
|
|
|
16.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
963
|
|
|
$
|
2,120
|
|
|
|
-54.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entertainment segment revenue increased during the three months ended March 31, 2016, as compared to the same period in 2015,
primarily due to increased attendance and additional shows at the Grand Ole Opry, as well as increased ancillary business such as tours and retail at the Ryman Auditorium.
Entertainment operating expenses increased during the three months ended March 31, 2016, as compared to the same period in 2015, primarily as a result of
increased variable expenses related to the increase in shows and ancillary revenues, as well as increased compensation costs.
Entertainment depreciation
expense increased in the three months ended March 31, 2016, as compared to the same period in 2015, primarily as a result of our 2015 expansion of the Ryman Auditorium.
Corporate and Other Segment
Total Segment Results.
The following presents the financial results of our Corporate and Other segment for the three months ended March
31, 2016 and 2015 (in thousands, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
% Change
|
|
|
|
|
|
Operating expenses
|
|
$
|
6,971
|
|
|
$
|
7,094
|
|
|
|
-1.7
|
%
|
Depreciation and amortization
|
|
|
657
|
|
|
|
715
|
|
|
|
-8.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
$
|
(7,628
|
)
|
|
$
|
(7,809
|
)
|
|
|
-2.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and Other operating expenses, which consist primarily of costs associated with senior management salaries and
benefits, legal, human resources, accounting, pension, information technology and other administrative costs, decreased modestly in the three months ended March 31, 2016, as compared to the same period in 2015.
Corporate and Other depreciation and amortization expense decreased modestly in the three months ended March 31, 2016, as compared with the same period in
2015.
Operating Results Preopening Costs
During the three months ended March 31, 2015, we incurred $0.6 million in preopening costs related to the AC Hotel. The hotel opened in April 2015.
36
Operating Results Impairment and Other Charges
During the three months ended March 31, 2015, we incurred $2.9 million in impairment charges related to assets previously used in special events programming
that was discontinued.
Non-Operating Results Affecting Net Income
General
The following table summarizes the other factors
which affected our net income for the three months ended March 31, 2016 and 2015 (in thousands, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
% Change
|
|
|
|
|
|
Interest expense
|
|
$
|
(16,039
|
)
|
|
$
|
(13,813
|
)
|
|
|
16.1
|
%
|
Interest income
|
|
|
3,143
|
|
|
|
3,008
|
|
|
|
4.5
|
%
|
Loss from joint ventures
|
|
|
(390
|
)
|
|
|
|
|
|
|
-100.0
|
%
|
Other gains and (losses), net
|
|
|
(47
|
)
|
|
|
(20,232
|
)
|
|
|
-99.8
|
%
|
Benefit (provision) for income taxes
|
|
|
885
|
|
|
|
(321
|
)
|
|
|
375.7
|
%
|
Interest Expense
Interest expense increased $2.2 million during the three months ended March 31, 2016, as compared to the same period in 2015, due primarily to increased
interest expense associated with our $400 million 5% senior notes, which we issued in April 2015, partially offset by decreased interest expense associated with our credit facility due to lower interest terms associated with our 2015 refinancing of
the facility.
Cash interest expense increased $2.4 million to $14.9 million in the three months ended March 31, 2016, as compared to the same period
in 2015. Non-cash interest expense, which includes amortization of deferred financing costs and debt discounts, the write-off of deferred financing costs, and capitalized interest, decreased $0.2 million to $1.1 million in the three months ended
March 31, 2016, as compared to the same period in 2015.
Our weighted average interest rate on our borrowings was 4.3% and 3.9% for the three months ended
March 31, 2016 and 2015, respectively.
Interest Income
Interest income for the three months ended March 31, 2016 and 2015 primarily includes amounts earned on the bonds that were received in connection with the
development of Gaylord National, which we hold as notes receivable.
Loss from Joint Ventures
The loss from joint ventures for the three months ended March 31, 2016 primarily represents amounts related to a joint venture that we entered into related to
a restaurant concept in Times Square in New York City. The restaurant is anticipated to open in late 2016.
37
Other Gains and (Losses), net
Other gains and (losses), net for the three months ended March 31, 2015 primarily consists of $20.2 million in losses on the change in the fair value of
derivative liabilities associated with portions of the warrants associated with our previous 3.75% convertible notes.
Benefit (Provision) for Income
Taxes
As a REIT, we generally will not be subject to federal corporate income taxes on ordinary taxable income and capital gains income from real
estate investments that we distribute to our stockholders. We will, however, be subject to corporate income taxes on built-in gains (the excess of fair market value over tax basis at January 1, 2013) that result from gains on certain assets. In
addition, we will continue to be required to pay federal and state corporate income taxes on earnings of our TRSs.
For the three months ended March 31,
2016 and 2015, we recorded an income tax benefit (provision) of $0.9 million and $(0.3) million, respectively. These results differ from the statutory rate primarily due to the REIT dividends paid deduction and the change in valuation allowance
required at the TRSs. Included in the income tax benefit for the three months ended March 31, 2016 is a discrete benefit related to the adoption of ASU 2016-09, as described in Note 1 to the condensed consolidated financial statements included
herein.
Liquidity and Capital Resources
Cash Flows From Operating Activities
. Cash flow from operating activities is the principal source of cash used to fund our operating expenses, interest
payments on debt, maintenance capital expenditures, and dividends to stockholders. During the three months ended March 31, 2016, our net cash flows provided by operating activities were $53.3 million, primarily reflecting cash provided by our
income before depreciation expense, amortization expense and other non-cash charges of approximately $56.4 million, partially offset by unfavorable changes in working capital of approximately $3.1 million. The unfavorable changes in
working capital primarily resulted from an increase in trade receivables due to a seasonal change in the timing of payments received from corporate group customers at our Gaylord Hotels properties.
During the three months ended March 31, 2015, our net cash flows provided by operating activities were $7.5 million, reflecting primarily cash
provided by our income before depreciation expense, amortization expense, impairment and other charges, loss on repurchase of warrants and other non-cash charges of approximately $58.9 million, partially offset by unfavorable changes in working
capital of approximately $51.4 million. The unfavorable changes in working capital primarily resulted from an increase in trade receivables due to a seasonal change in the timing of payments received from corporate group customers at our
Gaylord Hotels properties and a decrease in accrued expenses primarily related to the payment of accrued compensation and accrued expenses associated with our hotel holiday programs.
Cash Flows From Investing Activities.
During the three months ended March 31, 2016, our primary uses of funds for investing activities were our
investment of $21.5 million in the Gaylord Rockies joint venture, purchases of property and equipment, which totaled $13.2 million, and an increase in restricted cash and cash equivalents associated with the furniture, fixtures and equipment
(FF&E) reserve we are obligated to maintain for future planned and emergency-related capital expenditures at the properties that Marriott manages for us. These uses of cash were partially offset by the receipt of $6.8 million in
proceeds related to the sale of our rights in a letter of intent which entitled us to a portion of an economic interest in the income from the land underlying the new MGM casino project in National Harbor, Maryland. Purchases of property, plant and
equipment consisted primarily of an expansion of the resort pool at Gaylord Texan, the renovation of a portion of the guest rooms at Gaylord Opryland, and ongoing maintenance capital expenditures for our existing properties.
38
During the three months ended March 31, 2015, our primary uses of funds for investing activities were
purchases of property and equipment, which totaled $18.7 million, partially offset by the receipt of $10.0 million in proceeds related to the sale of our rights in the letter of intent discussed above. Purchases of property, plant and equipment
consisted primarily of an expansion of the Ryman Auditorium and ongoing maintenance capital expenditures for our existing properties.
Cash Flows From
Financing Activities
. Our cash flows from financing activities reflect primarily the incurrence of debt and the repayment of long-term debt. During the three months ended March 31, 2016, our net cash flows used in financing activities were
approximately $15.3 million, primarily reflecting the payment of $36.4 million in cash dividends and the payment of $24.8 million to repurchase and retire 0.5 million shares of our common stock, partially offset by $55.0 million in net borrowings
under our credit facility.
During the three months ended March 31, 2015, our net cash flows used in financing activities were approximately $16.2
million, primarily reflecting $154.7 million to cash settle the remaining 4.7 million warrants associated with our 3.75% convertible notes and the payment of $28.8 million in cash dividends, partially offset by $171.0 million in net borrowings
under our credit facility.
Liquidity
At March 31,
2016, we had $57.2 million in unrestricted cash and $336.5 million available for borrowing under our credit facility. During the three months ended March 31, 2016, we net borrowed $55.0 million under our credit facility, paid cash dividends of $36.4
million, paid $24.8 million to repurchase 0.5 million shares of our common stock, invested $21.5 million in the Gaylord Rockies joint venture, and incurred capital expenditures of $13.2 million. These net outflows were offset by cash flows from
operating activities discussed above, resulting in the increase in our cash balance from December 31, 2015 to March 31, 2016.
We currently plan to pay a
quarterly cash dividend of $0.75 per share in July 2016, October 2016 and January 2017, subject to determinations as to the timing and amount by our board of directors. We anticipate investing in our operations during the remainder of 2016 by
spending between $115 million and $135 million in capital expenditures, which primarily includes ongoing maintenance capital of our current facilities, a freestanding event ballroom and expanded event space at Gaylord National, an expansion of the
guest rooms and convention space at Gaylord Texan, and a room renovation at Gaylord Opryland. We also expect to invest approximately $38 million in the Gaylord Rockies joint venture during the remainder of 2016.
We believe that our cash on hand and cash from operations will be adequate to fund our general short-term commitments, as well as: (i) normal operating
expenses, (ii) interest expense on long-term debt obligations, (iii) capital lease and operating lease obligations, and (iv) declared dividends. If our existing cash and cash from operations were inadequate to fund such items, we could
draw on our credit facility, subject to the satisfaction of covenants in the credit facility. We believe that drawing on this credit facility will not be necessary for general working capital purposes. We may, however, draw on our credit facility
for operational and capital needs, as well as our investment in Gaylord Rockies, in the future.
Our outstanding principal debt agreements, none of which
mature prior to 2019, are described below. Based on current projections for compliance under our financial covenants contained in these agreements, we do not foresee a maturity issue prior to their scheduled maturity date.
Principal Debt Agreements
At March 31, 2016, we were in
compliance with all covenants related to our outstanding debt.
Credit Facility
. On June 5, 2015, we entered into Amendment No. 2 (the
Amendment) among the Company, as a guarantor, the Operating Partnership, as borrower, certain other subsidiaries of the Company party thereto, as
39
guarantors, the lenders party thereto and Wells Fargo Bank, N.A., as administrative agent, to the Companys Fourth Amended and Restated Credit Agreement (the Credit Facility).
Prior to the Amendment, the Credit Facility consisted of a $700.0 million senior secured revolving credit facility (the revolving credit facility), a $300 million senior secured term loan (the term loan A), and a $400 million
senior secured term loan B (the term loan B). Following the Amendment, the Credit Facility consists of the revolving credit facility and the term loan B, which matures on January 15, 2021. We paid off the previously outstanding term loan
A during the second quarter of 2015 with a substantial portion of the proceeds from the Operating Partnerships and Fincos private placement of $400.0 million in aggregate principal amount of 5.00% senior notes due 2023 (the $400
Million 5% Senior Notes), and the term loan A was eliminated.
Pursuant to the Amendment, we extended the maturity date of the revolving credit
facility under the Credit Facility to June 5, 2019 and provided for two additional six-month extension options, at our election. In addition, the Amendment lowered the adjustable margin for determining the interest rate on revolving loans based on
our consolidated funded indebtedness to total asset value ratio (as defined in the Credit Facility). Interest on our borrowings under the revolving credit facility is payable quarterly, in arrears, for base rate-based loans and at the end of each
interest rate period for LIBOR-based loans. The effective interest rate at March 31, 2016 was LIBOR plus 1.60%. Principal is payable in full at maturity. Further, the unused commitment fee was reduced to 0.2% to 0.3% per year of the average unused
portion of the revolving credit facility.
The Credit Facility continues to be guaranteed by us, each of our four wholly-owned subsidiaries that own the
Gaylord Hotels properties, and certain other of our subsidiaries. The Credit Facility continues to be secured by (i) a first mortgage lien on the real property of each of our Gaylord Hotels properties, (ii) pledges of equity interests in our
subsidiaries that own the Gaylord Hotels properties, (iii) our personal property and the personal property of the Operating Partnership and our subsidiaries that guarantee the Credit Facility and (iv) all proceeds and products from our Gaylord
Hotels properties. Advances are subject to a 55% borrowing base, based on the appraisal value of the Gaylord Hotels properties (reduced to 50% in the event a hotel property is sold).
In addition, the Credit Facility contains certain covenants which, among other things, limit the incurrence of additional indebtedness, investments,
dividends, transactions with affiliates, asset sales, acquisitions, mergers and consolidations, liens and encumbrances and other matters customarily restricted in such agreements. The material financial covenants, ratios or tests contained in the
Credit Facility are as follows:
|
|
|
We must maintain a consolidated funded indebtedness to total asset value ratio as of the end of each calendar quarter of not more than .65 to 1.00.
|
|
|
|
We must maintain a consolidated tangible net worth (as defined in the Credit Facility) of not less than $175 million plus 75% of the proceeds received by us or any of our subsidiaries in connection with any equity
issuance.
|
|
|
|
We must maintain a consolidated fixed charge coverage ratio (as defined in the Credit Facility), of not less than 1.50 to 1.00.
|
|
|
|
We must maintain an implied debt service coverage ratio (the ratio of adjusted net operating income to monthly principal and interest that would be required if the outstanding balance were amortized over 25 years at an
assumed fixed rate) of not less than 1.60 to 1.00.
|
If an event of default shall occur and be continuing under the Credit Facility, the
commitments under the Credit Facility may be terminated and the principal amount outstanding under the Credit Facility, together with all accrued unpaid interest and other amounts owing in respect thereof, may be declared immediately due and
payable.
40
At March 31, 2016, $361.4 million of borrowings were outstanding under the Credit Facility, and the lending banks
had issued $2.1 million of letters of credit under the facility, which left $336.5 million of availability under the Credit Facility (subject to the satisfaction of debt incurrence tests under the indentures governing our $350 million in aggregate
principal amount of senior notes due 2021 (the $350 Million 5% Senior Notes) and $400 Million 5% Senior Notes.
$400 Million Term Loan
Facility.
On June 18, 2014, we amended the Credit Facility such that we added an additional senior secured term loan facility in the aggregate principal amount of up to $400.0 million to the Credit Facility. Proceeds from the term loan B were
used to repay revolving loans under the Credit Facility, to repay our previous 3.75% convertible notes and to settle a portion of the warrants associated with the convertible notes. The term loan B has a maturity date of January 15, 2021 and
borrowings bear interest at an annual rate of LIBOR plus an adjustable margin, subject to a LIBOR floor of 0.75%. At March 31, 2016, the interest rate on the term loan B was LIBOR plus 2.75% and $393.0 million remained outstanding. The term loan B
amortizes in equal quarterly installments in aggregate annual amounts equal to 1.0% of the original principal amount of $400.0 million, with the balance due at maturity. Amounts borrowed under the term loan B that are repaid or prepaid may not be
reborrowed. At closing, we drew down on the term loan B in full.
Consistent with our other loan under our Credit Facility, the term loan B is guaranteed
by the Company, each of our four wholly-owned subsidiaries that own the Gaylord Hotels-branded properties, and certain other of our subsidiaries. The term loan B is secured by (i) a first mortgage lien on the real property of each of our Gaylord
Hotels properties, (ii) pledges of equity interests in our subsidiaries that own the Gaylord Hotels properties, (iii) the personal property of the Company, the Operating Partnership and the guarantors and (iv) all proceeds and products from our
Gaylord Hotels properties. Amounts drawn on the term loan B are subject to a 55% borrowing base, based on the appraisal value of the Gaylord Hotels properties (reduced to 50% in the event a hotel property is sold).
The term loan B is subject to certain covenants contained in the Credit Facility, which, among other things, limit the incurrence of additional indebtedness,
investments, dividends, transactions with affiliates, asset sales, acquisitions, mergers and consolidations, liens and encumbrances and other matters customarily restricted in such agreements. The term loan B is subject to substantially all of the
events of default provided for the Credit Facility (other than the financial maintenance covenants). If an event of default shall occur and be continuing, the commitments under the term loan B may be terminated and the principal amount outstanding
under the term loan B, together with all accrued and unpaid interest and other amounts owing in respect thereof, may be declared immediately due and payable.
$350 Million 5% Senior Notes.
On April 3, 2013, the Operating Partnership and RHP Finance Corporation, a subsidiary of the Company, completed the
private placement of $350.0 million in aggregate principal amount of senior notes due 2021, which are guaranteed by the Company and its subsidiaries that guarantee the Credit Facility. The $350 Million 5% Senior Notes and guarantees were issued
pursuant to an indenture by and among the issuing subsidiaries and the guarantors and U.S. Bank National Association as trustee. The $350 Million 5% Senior Notes have a maturity date of April 15, 2021 and bear interest at 5% per annum, payable
semi-annually in cash in arrears on April 15 and October 15 of each year, beginning October 15, 2013. The $350 Million 5% Senior Notes are general unsecured and unsubordinated obligations of the issuing subsidiaries and rank equal in right
of payment with such subsidiaries existing and future senior unsecured indebtedness and senior in right of payment to future subordinated indebtedness, if any. The $350 Million 5% Senior Notes are effectively subordinated to the issuing
subsidiaries secured indebtedness to the extent of the value of the assets securing such indebtedness. The guarantees rank equally in right of payment with the applicable guarantors existing and future senior unsecured indebtedness and
senior in right of payment to any future subordinated indebtedness of such guarantor. The $350 Million 5% Senior Notes will be effectively subordinated to any secured indebtedness of any guarantor to the extent of the value of the assets securing
such indebtedness and structurally subordinated to all indebtedness and other obligations of the Operating Partnerships subsidiaries that do not guarantee the $350 Million 5% Senior Notes.
41
The issuing subsidiaries may redeem the $350 Million 5% Senior Notes on or before April 15, 2016, in whole or in
part, at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest, if any, up to, but excluding, the applicable redemption date plus a make-whole redemption premium. The $350 Million 5% Senior Notes will be
redeemable, in whole or in part, at any time on or after April 15, 2016 at a redemption price expressed as a percentage of the principal amount thereof, which percentage is 103.75%, 102.50%, 101.25%, and 100.00% beginning on April 15 of 2016,
2017, 2018, and 2019, respectively, plus accrued and unpaid interest thereon to, but not including, the redemption date.
In connection with the issuance
of the $350 Million 5% Senior Notes, we completed a registered offer to exchange the $350 Million 5% Senior Notes for registered notes with substantially identical terms as the $350 Million 5% Senior Notes in November 2013.
$400 Million 5% Senior Notes.
On April 14, 2015, the Operating Partnership and Finco completed the private placement of $400.0 million in
aggregate principal amount of senior notes due 2023. The $400 Million 5% Senior Notes are general unsecured senior obligations of the Companys issuing subsidiaries and are guaranteed by the Company and its subsidiaries that guarantee the
Credit Facility. The $400 Million 5% Senior Notes and guarantees were issued pursuant to an indenture by and among the issuing subsidiaries and the guarantors and U.S. Bank National Association as trustee. The $400 Million 5% Senior Notes have a
maturity date of April 15, 2023 and bear interest at 5% per annum, payable semi-annually in cash in arrears on April 15 and October 15 of each year, beginning October 15, 2015. The $400 Million 5% Senior Notes are general
unsecured and unsubordinated obligations of the issuing subsidiaries and rank equal in right of payment with such subsidiaries existing and future senior unsecured indebtedness, including the $350 Million 5% Senior Notes, and senior in right
of payment to future subordinated indebtedness, if any. The $400 Million 5% Senior Notes are effectively subordinated to the issuing subsidiaries secured indebtedness to the extent of the value of the assets securing such indebtedness. The
guarantees rank equally in right of payment with the applicable guarantors existing and future senior unsecured indebtedness and senior in right of payment to any future subordinated indebtedness of such guarantor. The $400 Million 5% Senior
Notes are effectively subordinated to any secured indebtedness of any guarantor to the extent of the value of the assets securing such indebtedness and structurally subordinated to all indebtedness and other obligations of the Operating
Partnerships subsidiaries that do not guarantee the $400 Million 5% Senior Notes.
The issuing subsidiaries may redeem the $400 Million 5% Senior
Notes before April 15, 2018, in whole or in part, at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest, if any, up to, but excluding, the applicable redemption date plus a make-whole redemption premium. The
$400 Million 5% Senior Notes will be redeemable, in whole or in part, at any time on or after April 15, 2018 at a redemption price expressed as a percentage of the principal amount thereof, which percentage is 103.75%, 102.50%, 101.25%, and 100.00%
beginning on April 15 of 2018, 2019, 2020, and 2021, respectively, plus accrued and unpaid interest thereon to, but not including, the redemption date.
In connection with the issuance of the $400 Million 5% Senior Notes, we completed a registered offer to exchange the $400 Million 5% Senior Notes for
registered notes with substantially identical terms as the $400 Million 5% Senior Notes in September 2015.
Additional Debt
Limitations
. Pursuant to the terms of the management agreements and pooling agreement with Marriott, we are subject to certain debt limitations described below.
The management agreements provide for the following limitations on indebtedness encumbering a hotel:
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The aggregate principal balance of all mortgage and mezzanine debt encumbering the hotel shall be no greater than 75% of the fair market value of the hotel; and
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The ratio of (a) aggregate Operating Profit (as defined in the management agreement) in the 12 months prior to the closing on the mortgage or mezzanine debt to (b) annual debt service for the hotel shall equal or exceed
1.2:1; but is subject to the pooling agreement described below.
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42
The pooled limitations on Secured Debt (as defined in the pooling agreement) are as follows:
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The aggregate principal balance of all mortgage and mezzanine debt on Pooled Hotels (as defined in the pooling agreement), shall be no more than 75% of the fair market value of Pooled Hotels.
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The ratio of (a) aggregate Operating Profit (as defined in the pooling agreement) of Pooled Hotels in the 12 months prior to closing on any mortgage or mezzanine debt to (b) annual debt service for the Pooled Hotels,
shall equal or exceed 1.2:1.
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Off-Balance Sheet Arrangements
As described in Note 11 to our condensed consolidated financial statements included herein, we have invested in a joint venture that will build and
subsequently own Gaylord Rockies and expect to fund an additional amount of approximately $64.6 million in 2016 and 2017. In connection with this investment, we agreed to provide guarantees of the hotels construction loan, including a
principal repayment guaranty of up to $21 million of the total $500 million principal amount of the construction loan previously obtained from a consortium of eight banks, with such amount reducing to $14 million and further reducing to $8.75
million upon the hotels satisfaction of designated debt service coverage requirements following completion and opening of the hotel. We have also provided a completion guarantee under the construction loan capped at our pro rata share of all
costs necessary to complete the project within the time specified in the senior loan documents. Further, we have agreed to a guaranty capped at our pro rata share of the joint ventures obligations under the construction loan prior to the
hotels opening related to interest accruing under the construction loan and the operating expenses of the property (estimated pro rata share of interest prior to the hotel opening is $9.8 million). In addition to guaranties related to the
construction loan, we agreed to provide a guaranty of the mezzanine debt related to the hotel including a payment guaranty capped at $8.75 million for which we are only liable in the event there is a casualty or condemnation event at the hotel and
the construction lenders elect to apply those proceeds to the construction loan balance and release the construction loan guaranties and liens. The guaranty related to the mezzanine debt also includes an uncapped completion guaranty and an uncapped
guaranty of the joint ventures obligations under the mezzanine loan prior to the hotels opening related to interest accruing under the mezzanine loan and the operating expenses of the property to the extent not already satisfied by the
parties under the guaranties related to the construction loan. As of March 31, 2016, we have not recorded any liability in the condensed consolidated balance sheet associated with these guarantees.
In addition, we enter into commitments under letters of credit, primarily for the purpose of securing our deductible obligations with our insurers, and
lending banks under our Credit Facility had issued $2.1 million of letters of credit at March 31, 2016. Except as set forth in these paragraphs, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current
or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
43
Commitments and Contractual Obligations
The following table summarizes our significant contractual obligations at March 31, 2016, including long-term debt and operating and capital lease commitments
(amounts in thousands):
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Payment due by Period
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Total amounts
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Less than
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More than
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Contractual obligations
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committed
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1 year
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1-3 years
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3-5 years
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5 years
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Long-term debt (1)
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$
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1,504,400
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$
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$
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$
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754,400
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$
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750,000
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Capital leases
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674
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19
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40
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44
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571
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Operating leases (2)
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621,521
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4,628
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8,633
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9,159
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599,101
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Construction commitments (3)
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28,808
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28,808
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Other commitments (4)
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64,605
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53,000
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11,605
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Total contractual obligations
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$
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2,220,008
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$
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86,455
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$
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20,278
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$
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763,603
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$
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1,349,672
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(1)
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Long-term debt commitments do not include approximately $316.7 million in interest payments projected to be due in future years (less than 1 year $58.5 million; 1-3 years $116.7 million; 3-5 years
$99.9 million; more than 5 years $41.6 million) based on the stated interest rates on our fixed-rate debt and the rates in effect at March 31, 2016 for our variable-rate debt. Variable rates, as well as outstanding principal balances, could
change in future periods. See Principal Debt Agreements above for a discussion of our outstanding long-term debt. See Supplemental Cash Flow Information in Note 1 to our Annual Report on Form 10-K for the year ended December
31, 2015 for a discussion of the interest we paid during 2015, 2014 and 2013.
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(2)
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Total operating lease commitments of $621.5 million includes the 75-year operating lease agreement we entered into during 1999 for 65.3 acres of land located in Osceola County, Florida where Gaylord Palms is located.
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(3)
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With respect to our properties that are operated under management agreements with Marriott, we are obligated to maintain an FF&E reserve account for future planned and emergency-related capital expenditures at these
properties. The amount funded into each of these reserve accounts is determined pursuant to the management agreements. For fiscal year 2016, the amount funded into the reserve accounts will be 5.0% of the respective propertys total annual
revenue. At March 31, 2016, $28.8 million was held in FF&E reserve accounts for future capital expenditures at our properties. According to the terms of each management agreement with Marriott, the reserve funds are to be held by Marriott in a
restricted cash account. Although it is not required that such funds be expended in a given year, each management agreement provides any excess funds will carry over for use in future years.
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(4)
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Other commitments represents our expected capital contribution in the Gaylord Rockies project. Our total capital contribution is expected to be $86.1 million, of which $21.5 million was paid in the three months ended
March 31, 2016. We expect to fund the remainder of our capital contribution during the remainder of 2016 and the first half of 2017. Our capital contributions will be funded from available cash on hand and borrowings under our revolving credit
facility.
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Due to the uncertainty with respect to the timing of future cash payments associated with our defined benefit pension plan, our
non-qualified retirement plan, our non-qualified contributory deferred compensation plan and our defined benefit postretirement health care and life insurance plan, we cannot make reasonably certain estimates of the period of cash settlement.
Therefore, these obligations have been excluded from the contractual obligations table above. See Note 7 and Note 8 to our Annual Report on Form 10-K for the year ended December 31, 2015 for further discussion related to these obligations.
44
Critical Accounting Policies and Estimates
We prepare our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States. Certain of our
accounting policies, including those related to revenue recognition, impairment of long-lived assets, stock-based compensation, depreciation and amortization, income taxes, retirement and postretirement benefits other than pension plans, and legal
contingencies, require that we apply significant judgment in defining the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. Our judgments are based on our
historical experience, our observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate. There can be no assurance that actual results will not differ from our
estimates. For a discussion of our critical accounting policies and estimates, please refer to Managements Discussion and Analysis of Financial Condition and Results of Operations and Notes to Consolidated Financial Statements presented in our
Annual Report on Form 10-K for the year ended December 31, 2015. There were no newly identified critical accounting policies in the first three months of 2016 nor were there any material changes to the critical accounting policies and estimates
discussed in our Annual Report on Form 10-K for the year ended December 31, 2015.