Quarterly Report (10-q)

Date : 08/06/2019 @ 5:08PM
Source : Edgar (US Regulatory)
Stock : Ryman Hospitality Properties Inc (RHP)
Quote : 89.63  0.0 (0.00%) @ 12:00AM

Quarterly Report (10-q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM  10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-13079

RYMAN HOSPITALITY PROPERTIES, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware

    

73-0664379

(State or Other Jurisdiction of

(I.R.S. Employer

Incorporation or Organization)

Identification No.)

One Gaylord Drive

Nashville, Tennessee 37214

(Address of Principal Executive Offices)

(Zip Code)

( 615 ) 316-6000

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Name of Each Exchange on

Title of Each Class

Trading Symbol(s)

Which Registered

Common stock, par

RHP

New York Stock Exchange

value $.01

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  Accelerated filer  Non-accelerated filer  Smaller reporting company  Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class

    

Outstanding as of July 31, 2019

Common Stock, par value $.01

51,443,449 shares

RYMAN HOSPITALITY PROPERTIES, INC.

FORM 10-Q

For the Quarter Ended June 30, 2019

INDEX

    

Page

Part I - Financial Information

3

Item 1. Financial Statements.

3

Condensed Consolidated Balance Sheets (Unaudited) – June 30, 2019 and December 31, 2018

3

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) - For the Three Months and Six Months Ended June 30, 2019 and 2018

4

Condensed Consolidated Statements of Cash Flows (Unaudited) - For the Six Months Ended June 30, 2019 and 2018

5

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) - For the Three Months and Six Months Ended June 30, 2019 and 2018

6

Notes to Condensed Consolidated Financial Statements (Unaudited)

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

26

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

49

Item 4. Controls and Procedures.

49

Part II - Other Information

50

Item 1. Legal Proceedings.

50

Item 1A. Risk Factors.

50

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

50

Item 3. Defaults Upon Senior Securities.

50

Item 4. Mine Safety Disclosures.

50

Item 5. Other Information.

50

Item 6. Exhibits.

50

SIGNATURES

52

2

Part I – FINANCIAL INFORMATION

Item 1. – FINANCIAL STATEMENTS.

RYMAN HOSPITALITY PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

    

June 30, 

    

December 31, 

2019

2018

ASSETS:

 

  

 

  

Property and equipment, net of accumulated depreciation (including $997,000 and $1,018,499 from VIEs, respectively)

$

3,134,206

$

3,149,095

Cash and cash equivalents - unrestricted (including $32,455 and $11,648 from VIEs, respectively)

 

103,842

 

103,437

Cash and cash equivalents - restricted (including $20,770 and $5 from VIEs, respectively)

 

65,252

 

45,652

Notes receivable

 

113,275

 

122,209

Trade receivables, less allowance of $753 and $763, respectively (including $17,229 and $2,019 from VIEs, respectively)

 

90,532

 

67,923

Deferred income tax assets, net

 

32,372

 

40,557

Prepaid expenses and other assets (including $19,780 and $20,419 from VIEs, respectively)

 

85,310

 

78,240

Intangible assets (including $222,367 and $241,973 from VIEs, respectively)

227,128

246,770

Total assets

$

3,851,917

$

3,853,883

LIABILITIES AND EQUITY:

 

  

 

  

Debt and finance lease obligations (including $541,197 and $494,578 from VIEs, respectively)

$

2,494,103

$

2,441,895

Accounts payable and accrued liabilities (including $50,442 and $70,215 from VIEs, respectively)

 

244,418

 

274,890

Dividends payable

 

47,207

 

45,019

Deferred management rights proceeds

 

176,879

 

174,026

Operating lease liabilities

 

104,718

 

Other liabilities

 

61,850

 

161,043

Commitments and contingencies

 

 

  

Noncontrolling interest in consolidated joint venture

287,718

287,433

Stockholders' equity:

Preferred stock, $.01 par value, 100,000 shares authorized, no shares issued or outstanding

 

 

Common stock, $.01 par value, 400,000 shares authorized, 51,443 and 51,336 shares issued and outstanding, respectively

 

514

 

513

Additional paid-in capital

 

901,129

 

900,795

Treasury stock of 599 and 592 shares, at cost

 

(15,687)

 

(15,183)

Accumulated deficit

 

(420,408)

 

(388,524)

Accumulated other comprehensive loss

 

(30,524)

 

(28,024)

Total stockholders' equity

 

435,024

 

469,577

Total liabilities and stockholders' equity

$

3,851,917

$

3,853,883

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

RYMAN HOSPITALITY PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(Unaudited)

(In thousands, except per share data)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2019

    

2018

    

2019

    

2018

    

Revenues:

 

  

 

  

 

  

 

  

 

Rooms

$

144,704

$

121,745

$

276,916

$

229,309

Food and beverage

 

173,030

 

141,053

 

344,173

 

273,992

Other hotel revenue

 

39,395

 

28,958

 

73,550

 

53,566

Entertainment

 

50,590

 

42,178

 

83,855

 

65,437

Total revenues

 

407,719

 

333,934

 

778,494

 

622,304

Operating expenses:

 

  

 

  

 

  

 

  

Rooms

 

36,099

 

30,059

 

71,068

 

58,987

Food and beverage

 

90,680

 

72,394

 

182,039

 

144,372

Other hotel expenses

 

90,527

 

76,733

 

181,466

 

152,615

Management fees, net

 

10,399

 

8,635

 

20,155

 

15,765

Total hotel operating expenses

 

227,705

 

187,821

 

454,728

 

371,739

Entertainment

 

33,059

 

30,254

 

58,700

 

49,620

Corporate

 

8,110

 

7,640

 

17,114

 

15,969

Preopening costs

 

(24)

 

1,525

 

2,110

 

3,672

Depreciation and amortization

 

53,553

 

29,995

 

106,562

 

58,661

Total operating expenses

 

322,403

 

257,235

 

639,214

 

499,661

Operating income

 

85,316

 

76,699

 

139,280

 

122,643

Interest expense

 

(33,492)

 

(19,625)

 

(65,579)

 

(36,354)

Interest income

 

2,970

 

2,766

 

5,878

 

5,519

Income (loss) from joint ventures

 

(167)

 

1,346

 

(167)

 

(1,242)

Other gains and (losses), net

 

(111)

 

36

 

(252)

 

204

Income before income taxes

 

54,516

 

61,222

 

79,160

 

90,770

Provision for income taxes

 

(8,232)

 

(5,676)

 

(10,206)

 

(7,885)

Net income

46,284

55,546

68,954

82,885

Net loss attributable to noncontrolling interest in consolidated joint venture

3,099

9,837

Net income available to common stockholders

$

49,383

$

55,546

$

78,791

$

82,885

Basic income per share available to common stockholders

$

0.96

$

1.08

$

1.53

$

1.62

Diluted income per share available to common stockholders

$

0.95

$

1.08

$

1.52

$

1.61

Dividends declared per common share

$

0.90

$

0.85

$

1.80

$

1.70

Comprehensive income, net of taxes

$

46,382

$

55,630

$

69,161

$

83,047

Comprehensive loss, net of taxes, attributable to noncontrolling interest

3,099

9,837

Comprehensive income, net of taxes, available to common stockholders

$

49,481

$

55,630

$

78,998

$

83,047

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

RYMAN HOSPITALITY PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

Six Months Ended

June 30, 

    

2019

    

2018

    

Cash Flows from Operating Activities:

 

  

 

  

 

Net income

$

68,954

$

82,885

Amounts to reconcile net income to net cash flows provided by operating activities:

 

 

  

Provision for deferred income taxes

 

8,187

 

7,065

Depreciation and amortization

 

106,562

 

58,661

Amortization of deferred financing costs

 

3,866

 

2,841

Write-off of deferred financing costs

 

 

1,956

Loss from joint ventures

167

1,242

Stock-based compensation expense

 

3,961

 

3,929

Changes in:

 

 

  

Trade receivables

 

(22,609)

 

(22,074)

Accounts payable and accrued liabilities

 

(32,925)

 

(4,268)

Other assets and liabilities

 

2,461

 

(522)

Net cash flows provided by operating activities

 

138,624

 

131,715

Cash Flows from Investing Activities:

 

  

 

  

Purchases of property and equipment

 

(69,074)

 

(95,353)

Collection of notes receivable

10,446

Purchase of remaining interest in Opry City Stage, net of cash acquired

 

(3,948)

Other investing activities

 

(2,282)

 

(6,886)

Net cash flows used in investing activities

 

(60,910)

 

(106,187)

Cash Flows from Financing Activities:

 

  

 

  

Net borrowings under revolving credit facility

 

4,000

 

80,500

Repayments under term loan B

 

(1,250)

 

(1,250)

Borrowings under Gaylord Rockies construction and mezzanine loans

37,653

Deferred financing costs paid

 

(27)

 

(637)

Payment of dividends

 

(90,724)

 

(85,110)

Distribution from consolidated joint venture to noncontrolling interest partners

(10,591)

Payment of tax withholdings for share-based compensation

 

(3,876)

 

(3,771)

Other financing activities

 

7,106

 

(10)

Net cash flows used in financing activities

 

(57,709)

 

(10,278)

Net change in cash, cash equivalents, and restricted cash

 

20,005

 

15,250

Cash, cash equivalents, and restricted cash, beginning of period

 

149,089

 

78,710

Cash, cash equivalents, and restricted cash, end of period

$

169,094

$

93,960

Reconciliation of cash, cash equivalents, and restricted cash to balance sheet:

Cash and cash equivalents - unrestricted

$

103,842

$

61,779

Cash and cash equivalents - restricted

65,252

 

32,181

Cash, cash equivalents, and restricted cash, end of period

$

169,094

$

93,960

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

RYMAN HOSPITALITY PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands)

    

    

    

    

    

Accumulated

    

    

Additional

Other

Total

Common

Paid-in

Treasury

Accumulated

Comprehensive

Stockholders'

Noncontrolling

Stock 

Capital 

Stock

Deficit

Loss

Equity

Interest

BALANCE, December 31, 2017

$

512

$

896,759

$

(13,253)

$

(479,170)

$

(26,692)

$

378,156

$

Net income

 

 

 

 

27,339

 

 

27,339

 

Transition adjustment related to adoption of ASU 2014-09

(134)

(134)

Other comprehensive income, net of income taxes

 

 

 

 

 

78

 

78

 

Payment of dividends

 

 

167

 

(454)

 

(43,461)

 

 

(43,748)

 

Restricted stock units and stock options surrendered

 

1

 

(3,692)

 

 

 

 

(3,691)

 

Stock-based compensation expense

 

 

1,923

 

 

 

 

1,923

 

BALANCE, March 31, 2018

$

513

$

895,157

$

(13,707)

$

(495,426)

$

(26,614)

$

359,923

$

Net income

 

 

 

 

55,546

 

 

55,546

 

Other comprehensive income, net of income taxes

 

 

 

 

 

84

 

84

 

Payment of dividends

 

 

102

 

(488)

 

(43,399)

 

 

(43,785)

 

Restricted stock units and stock options surrendered

 

 

(80)

 

 

 

 

(80)

 

Stock-based compensation expense

 

 

2,006

 

 

 

 

2,006

 

BALANCE, June 30, 2018

$

513

$

897,185

$

(14,195)

$

(483,279)

$

(26,530)

$

373,694

$

BALANCE, December 31, 2018

$

513

$

900,795

$

(15,183)

$

(388,524)

$

(28,024)

$

469,577

$

287,433

Net income

 

 

 

 

29,408

 

 

29,408

 

(6,738)

Adjustment of noncontrolling interest to redemption value

(10,420)

(10,420)

10,420

Transition adjustment related to adoption of ASU 2018-02

2,707

(2,707)

Other comprehensive income, net of income taxes

 

 

 

 

 

109

 

109

 

Payment of dividends

 

 

168

(504)

(46,076)

 

 

(46,412)

 

Restricted stock units and stock options surrendered

 

1

(3,825)

 

 

 

 

(3,824)

 

Stock-based compensation expense

 

 

2,026

 

 

 

 

2,026

 

BALANCE, March 31, 2019

$

514

$

899,164

$

(15,687)

$

(412,905)

$

(30,622)

$

440,464

$

291,115

Net income

 

 

 

 

49,383

 

 

49,383

 

(3,099)

Adjustment of noncontrolling interest to redemption value

(10,293)

(10,293)

10,293

Other comprehensive income, net of income taxes

 

 

 

 

 

98

 

98

 

Payment of dividends

 

 

93

(46,593)

 

 

(46,500)

 

Distribution from consolidated joint venture to noncontrolling interest partners

(10,591)

Restricted stock units and stock options surrendered

 

(63)

 

 

 

 

(63)

 

Stock-based compensation expense

 

 

1,935

 

 

 

 

1,935

 

BALANCE, June 30, 2019

$

514

$

901,129

$

(15,687)

$

(420,408)

$

(30,524)

$

435,024

$

287,718

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

RYMAN HOSPITALITY PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. BASIS OF PRESENTATION:

On January 1, 2013, Ryman Hospitality Properties, Inc. (“Ryman”) and its subsidiaries (collectively with Ryman, the “Company”) began operating as a real estate investment trust (“REIT”) for federal income tax purposes, specializing in group-oriented, destination hotel assets in urban and resort markets. The Company’s owned assets include a network of upscale, meetings-focused resorts that are managed by Marriott International, Inc. (“Marriott”) under the Gaylord Hotels brand. These resorts, which the Company refers to as the 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”). The Company’s other owned hotel assets managed by Marriott include the Inn at Opryland, an overflow hotel adjacent to Gaylord Opryland, and the AC Hotel at National Harbor, Washington D.C. (“AC Hotel”), an overflow hotel adjacent to Gaylord National.

At June 30, 2019, the Company also owns a 61.2% interest in a joint venture (the “Gaylord Rockies joint venture”) that owns the Gaylord Rockies Resort & Convention Center near Denver, Colorado (“Gaylord Rockies”), which opened in December 2018 and is managed by Marriott. As further discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, management has concluded that the Company is the primary beneficiary of this variable interest entity. As such, the Company has consolidated the assets, liabilities and results of operations of the Gaylord Rockies joint venture in the accompanying condensed consolidated financial statements. The portion of the Gaylord Rockies joint venture that the Company does not own is recorded as noncontrolling interest in consolidated joint venture in the accompanying condensed consolidated balance sheet, and any adjustment necessary to reflect the noncontrolling interest at its redemption value is shown in the accompanying condensed consolidated statement of stockholders’ equity. Creditors of the Gaylord Rockies joint venture have no recourse to the general credit of the Company, except with respect to certain limited loan guarantees as discussed in Note 13, “Commitments and Contingencies” and Note 17, “Subsequent Events,” to the condensed consolidated financial statements included herein.

The Company also owns a number of media and entertainment assets, including the Grand Ole Opry, the legendary weekly showcase of country music’s finest performers; the Ryman Auditorium, the storied live music venue and former home of the Grand Ole Opry; WSM-AM, the Opry’s radio home; Ole Red, a brand of Blake Shelton-themed bar, music venue and event spaces, with a flagship location in Nashville that opened in May 2018; and three Nashville-based assets managed by Marriott – Gaylord Springs Golf Links, the Wildhorse Saloon, and the General Jackson Showboat.

The condensed consolidated financial statements include the accounts of Ryman and its subsidiaries and have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from this report pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. In the opinion of management, all adjustments necessary for a fair statement of the results of operations for the interim periods have been included. All adjustments are of a normal, recurring nature. The results of operations for such interim periods are not necessarily indicative of the results for the full year because of seasonal and short-term variations.

The Company principally operates, through its subsidiaries and its property managers, as applicable, in the following business segments: Hospitality, Entertainment, and Corporate and Other.

Newly Issued Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “ Leases ,” that requires lessees to record most leases on their balance sheet but recognize expenses on their

7

income statements in a manner similar to previous accounting. The ASU also eliminates the required use of bright-line tests for determining lease classification. The Company adopted this standard as of January 1, 2019 using the modified retrospective approach. Existing leases were recorded at the adoption date and comparative periods were not restated and are presented based on previously existing guidance. The Company also adopted several practical expedients, which allowed the Company to avoid reassessing (i) whether an expired or existing contract meets the definition of a lease; (ii) the lease classification at the adoption date for existing leases; and (iii) whether costs previously capitalized as initial direct costs would continue to be amortized. In addition, the Company elected to adopt a practical expedient that allows the Company to avoid reassessing existing or expired land easements that were not previously accounted for as a lease, as well as a practical expedient that allows the Company to avoid separating nonlease components from lease components and instead to account for each separate lease component and related nonlease component as a single lease component. As permitted, the Company has elected to not apply the recognition requirements of this ASU to short-term leases. Adoption of the new standard resulted in the recording of right-of-use assets and lease liabilities of $100.9 million as of January 1, 2019. However, after consideration of the Company’s previous straight-line lease liability of $100.1 million, as discussed more fully in the Company’s 2018 Annual Report on Form 10-K, the Company recorded $0.8 million in net right-of-use assets related to its operating leases as of January 1, 2019, which are recorded in prepaid expenses and other assets in the accompanying condensed consolidated financial statements. See Note 5, “Property and Equipment,” and Note 9, “Leases,” to the condensed consolidated financial statements included herein for additional disclosures regarding the Company’s leases.

In June 2016, the FASB issued ASU No. 2016-13, “ Financial Instruments – Credit Losses – Measurement of Credit Losses on Financial Instruments ,” which will change how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The ASU will replace the current “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowances for losses. An entity will apply these amendments with a modified-retrospective approach, with a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. For debt securities for which an other-than-temporary impairment has been previously recognized, a prospective transition approach is required. The ASU is effective for the Company in the first quarter of 2020. The Company is currently evaluating the effects of this ASU on its financial statements, and such effects have not yet been determined.

In February 2018, the FASB issued ASU No. 2018-02, “ Income Statement – Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ,” which gives entities the option to reclassify to retained earnings tax effects related to items that have been stranded in accumulated other comprehensive income as a result of the Tax Cuts and Jobs Act (“TCJA”). An entity that elects to reclassify these amounts must reclassify stranded tax effects related to the TCJA’s change in US federal tax rate for all items accounted for in other comprehensive income. These entities can also elect to reclassify other stranded effects that relate to the TCJA but do not directly relate to the change in the federal tax rate. The Company adopted this ASU in the first quarter of 2019, and the Company recorded a transition adjustment of $2.7 million, which is reflected as a reclassification from accumulated other comprehensive loss to accumulated deficit in the accompanying condensed consolidated financial statements.

2. REVENUES:

Revenues from occupied hotel rooms are recognized over time as the daily hotel stay is provided to hotel groups and guests. Revenues from concessions, food and beverage sales, and group meeting services are recognized over the period or at the point in time those goods or services are delivered to the hotel group or guest. Revenues from ancillary services at the Company’s hotels, such as spa, parking, and transportation services, are generally recognized at the time the goods or services are provided. Cancellation fees and attrition fees, which 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 generally recognized as revenue in the period the Company determines it is probable that a significant reversal in the amount of revenue recognized will not occur, which is typically the period these fees are collected. The Company generally recognizes revenues from the Entertainment segment at the point in time that services are provided or goods are delivered or shipped to the customer, as applicable. Almost all of the Company’s revenues are either cash-based or, for meeting and convention groups who meet the Company’s credit criteria, billed and collected on a short-term receivables basis. The Company is required to collect certain taxes from customers on behalf of government agencies

8

and remit these to the applicable governmental entity on a periodic basis. These taxes are collected from customers at the time of purchase but are not included in revenue. The Company records a liability upon collection of such taxes from the customer and relieves the liability when payments are remitted to the applicable governmental agency.

The Company’s revenues disaggregated by major source are as follows (in thousands):

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2019

    

2018

    

2019

    

2018

Hotel group rooms

$

106,068

$

89,329

$

208,760

$

172,546

Hotel transient rooms

 

38,636

 

32,416

 

68,156

 

 

56,763

Hotel food and beverage - banquets

 

123,521

 

101,719

 

249,717

 

 

197,987

Hotel food and beverage - outlets

 

49,509

 

39,334

 

94,456

 

 

76,005

Hotel other

 

39,395

 

28,958

 

73,550

 

 

53,566

Entertainment admissions/ticketing

 

21,960

 

21,207

 

35,583

 

 

32,067

Entertainment food and beverage

 

17,848

 

11,813

 

29,887

 

 

18,394

Entertainment retail and other

 

10,782

 

9,158

 

18,385

 

 

14,976

Total revenues

$

407,719

$

333,934

 

$

778,494

 

$

622,304

The Company’s Hospitality segment revenues disaggregated by location are as follows (in thousands):

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2019

    

2018

    

2019

    

2018

Gaylord Opryland

 

$

98,987

$

94,915

 

$

187,945

$

177,660

Gaylord Palms

 

47,357

 

50,274

 

107,273

 

108,170

Gaylord Texan

 

69,326

 

58,611

 

141,365

 

116,968

Gaylord National

 

78,128

 

79,687

 

143,758

 

140,443

Gaylord Rockies

55,436

100,679

AC Hotel

 

3,314

 

3,511

 

5,749

 

5,882

Inn at Opryland and other

 

4,581

 

4,758

 

7,870

 

7,744

Total Hospitality segment revenues

$

357,129

$

291,756

$

694,639

$

556,867

Almost all of the Company’s Entertainment segment revenues are concentrated in Nashville, Tennessee.

The Company records deferred revenues when cash payments are received in advance of its performance obligations, primarily related to advanced deposits on hotel rooms in its Hospitality segment and advanced ticketing in its Entertainment segment. At June 30, 2019 and December 31, 2018, the Company had $77.1 million and $69.3 million, respectively, in deferred revenues, which are included in accounts payable and accrued liabilities in the accompanying condensed consolidated balance sheets. Of the amount outstanding at December 31, 2018, approximately $47.6 million was recognized in revenue during the six months ended June 30, 2019.

3. INCOME PER SHARE:

The weighted average number of common shares outstanding is calculated as follows (in thousands):

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2019

    

2018

    

2019

    

2018

Weighted average shares outstanding - basic

51,440

51,303

51,395

51,259

Effect of dilutive stock-based compensation

118

173

167

200

Effect of dilutive put rights

 

268

 

 

268

 

Weighted average shares outstanding - diluted

 

51,826

 

51,476

 

51,830

 

51,459

As more fully discussed in Note 13, “Commitments and Contingencies,” to the condensed consolidated financial statements included herein, certain affiliates of Ares Management, L.P. (“Ares”) have a put right to require the Company

9

to purchase their joint venture interests in the Gaylord Rockies joint venture in consideration of cash or operating partnership units (“OP Units”) of RHP Hotel Properties, LP (the “Operating Partnership”). Any OP Units issued by the Operating Partnership to the certain affiliates of Ares will be redeemable at the option of the holders thereof for shares of the Company’s common stock on a one-for-one basis, subject to certain adjustments.

4. ACCUMULATED OTHER COMPREHENSIVE LOSS:

The Company’s balance in accumulated other comprehensive loss is comprised of amounts related to the Company’s minimum pension liability and amounts related to an other-than-temporary impairment of a held-to-maturity investment with respect to the notes receivable discussed in Note 6, “Notes Receivable,” to the condensed consolidated financial statements included herein, and Note 3, “Notes Receivable,” to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. Changes in accumulated other comprehensive loss by component for the six months ended June 30, 2019 and 2018 consisted of the following (in thousands):

Other-Than-

Minimum

Temporary

Pension

Impairment of

    

Liability

    

Investment

    

Total

Balance, December 31, 2018

$

(21,814)

$

(6,210)

$

(28,024)

Amounts reclassified from accumulated other comprehensive loss

39

 

166

 

205

Income tax benefit

2

 

 

2

Net other comprehensive income

 

41

 

166

 

207

Transition adjustment related to adoption of ASU 2018-02 (see Note 1)

(2,707)

(2,707)

Balance, June 30, 2019

$

(24,480)

$

(6,044)

$

(30,524)

Other-Than-

Minimum

Temporary

Pension

Impairment of

    

Liability

    

Investment

    

Total

Balance, December 31, 2017

$

(20,149)

$

(6,543)

$

(26,692)

Amounts reclassified from accumulated other comprehensive loss

 

(9)

 

166

 

157

Income tax benefit

 

5

 

 

5

Net other comprehensive income (loss)

 

(4)

 

166

 

162

Balance, June 30, 2018

$

(20,153)

$

(6,377)

$

(26,530)

5. PROPERTY AND EQUIPMENT:

Property and equipment, including right-of-use finance lease assets, at June 30, 2019 and December 31, 2018 is recorded at cost (except for right-of-use finance lease assets) and summarized as follows (in thousands):

June 30, 

December 31, 

    

2019

    

2018

Land and land improvements

$

347,834

$

347,654

Buildings

 

3,416,455

 

3,379,041

Furniture, fixtures and equipment

 

953,797

 

913,528

Right-of-use finance lease assets

1,551

Construction-in-progress

 

38,281

 

48,295

 

4,757,918

 

4,688,518

Accumulated depreciation and amortization

 

(1,623,712)

 

(1,539,423)

Property and equipment, net

$

3,134,206

$

3,149,095

10

6. NOTES RECEIVABLE:

As further discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, in connection with the development of Gaylord National, the Company is currently holding two issuances of governmental bonds with a total carrying value of $113.3 million and $111.0 million at June 30, 2019 and December 31, 2018, respectively. The Company receives debt service and principal payments thereon, payable from property tax increments, hotel taxes and special hotel rental taxes generated from Gaylord National through the maturity dates of July 1, 2034 and September 1, 2037, respectively. The Company records interest income over the life of the notes using the effective interest method.

During the three months ended June 30, 2019 and 2018, the Company recorded interest income of $2.6 million and $2.7 million, respectively, on these bonds. During the six months ended June 30, 2019 and 2018, the Company recorded interest income of $5.1 million and $5.3 million, respectively, on these bonds. The Company received payments of $3.0 million and $3.1 million during the six months ended June 30, 2019 and 2018, respectively, relating to these bonds.

As further discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, in connection with the development of certain infrastructure adjacent to Gaylord Rockies, at December 31, 2018, the Gaylord Rockies joint venture was holding two issuances of governmental bonds with a carrying value of $11.2 million, including interest. The debt service and principal payments on such bonds were payable from tax increments and special hotel rental taxes generated from the surrounding development through the maturity dates of December 1, 2030 and December 1, 2040, respectively. In April 2019, these bonds were redeemed by the issuer, and the joint venture received the outstanding principal and interest, which resulted in no impact to the Company’s condensed consolidated statement of operations for the six months ended June 30, 2019.

7. DEBT:

The Company’s debt and finance lease obligations at June 30, 2019 and December 31, 2018 consisted of (in thousands):

June 30, 

December 31, 

    

2019

    

2018

$700M Revolving Credit Facility, interest at LIBOR plus 1.80%, maturing May 23, 2021, less unamortized deferred financing costs of $5,245 and $6,542

$

523,755

$

518,458

$200M Term Loan A, interest at LIBOR plus 1.75%, maturing May 23, 2022, less unamortized deferred financing costs of $1,048 and $1,220

 

198,952

 

198,780

$500M Term Loan B, interest at LIBOR plus 2.00%, maturing May 11, 2024, less unamortized deferred financing costs of $4,867 and $5,307

 

485,133

 

485,943

$350M Senior Notes, interest at 5.0%, maturing April 15, 2021, less unamortized deferred financing costs of $1,882 and $2,385

 

348,118

 

347,615

$400M Senior Notes, interest at 5.0%, maturing April 15, 2023, less unamortized deferred financing costs of $3,660 and $4,097

 

396,340

 

395,903

$500M Construction Loan (Gaylord Rockies joint venture), interest at LIBOR plus 3.25%, maturing December 18, 2019, less unamortized deferred financing costs of $903 and $1,807

 

494,361

 

457,090

$39M Mezzanine Loan (Gaylord Rockies joint venture), interest at LIBOR plus 7.00%, maturing December 18, 2019, less unamortized deferred financing costs of $113 and $227

 

38,887

 

37,488

Finance lease obligations

1,337

618

Other

 

7,220

Total debt

$

2,494,103

$

2,441,895

The majority of amounts due within one year consist of the amortization payments for the $500 million term loan B of 1.0% of the original principal balance, as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. In July 2019, the Gaylord Rockies joint venture refinanced the $500 million construction loan and $39 million mezzanine loan, as discussed further in Note 17, “Subsequent Events.”

At June 30, 2019, the Company was in compliance with all of its covenants related to its outstanding debt.

11

8. DEFERRED MANAGEMENT RIGHTS PROCEEDS:

On October 1, 2012, the Company consummated its agreement to sell the Gaylord Hotels brand and rights to manage the Gaylord Hotels properties (the “Management Rights”) to Marriott for $210.0 million in cash. Effective October 1, 2012, Marriott assumed responsibility for managing the day-to-day operations of the Gaylord Hotels properties pursuant to a management agreement for each Gaylord Hotel property. The Company allocated $190.0 million of the purchase price to the Management Rights, based on the Company’s estimates of the fair values for the respective components. For financial accounting purposes, the amount related to the Management Rights was deferred and is amortized on a straight line basis over the 65-year term of the hotel management agreements, including extensions, as a reduction in management fee expense.

9. LEASES:

The Company is a lessee of a 65.3 acre site in Osceola County, Florida on which Gaylord Palms is located, building or land leases for Ole Red Gatlinburg, Ole Red Orlando and Ole Red Tishomingo, various warehouse, general office and other equipment leases. The Gaylord Palms land lease has a term through 2074 , which may be extended through January 2101, at the Company’s discretion. The leases for Ole Red locations range from five to ten years , with renewal options ranging from one to forty years , at the Company’s discretion. Extension options are not included in the Company’s calculation of its right-of-use assets and lease liabilities.

The terms of the Gaylord Palms lease include variable lease payments based upon net revenues at Gaylord Palms and certain other of the Company’s leases include rental payments adjusted periodically for inflation. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As the discount rate implicit in the Company’s operating leases is not readily determinable, the Company applied judgments related to the determination of the discount rates used to calculate the lease liability as required by Accounting Standards Codification Topic 842, “ Leases ”. The Company calculated its incremental borrowing rates by utilizing judgments and estimates regarding the Company’s secured borrowing rates, market credit rating, comparable bond yield curve, and adjustments to market yield curves to determine a securitized rate.

The Company’s lease costs for the three months and six months ended June 30, 2019 are as follows (in thousands):

Three Months Ended

Six Months Ended

Operating lease cost

$

3,229

$

6,575

Finance lease cost:

Amortization of right-of-use assets

 

36

 

77

Interest on lease liabilities

 

14

 

31

Net lease cost

$

3,279

$

6,683

Lease expense for operating leases for the three months and six months ended June 30, 2018 was $3.4 million and $6.6 million, respectively.

12

Future minimum lease payments under non-cancelable leases at June 30, 2019 are as follows (in thousands):

    

Operating

    

Finance

Leases 

Leases 

Year 1

$

5,862

$

244

Year 2

 

6,029

 

244

Year 3

 

5,758

 

229

Year 4

 

5,746

 

218

Year 5

 

5,838

 

118

Years thereafter

 

577,002

 

606

Total future minimum lease payments

 

606,235

 

1,659

Less amount representing interest

 

(501,517)

(322)

Total present value of minimum payments

$

104,718

$

1,337

The remaining lease term and discount rate for the Company’s leases are as follows:

Weighted-average remaining lease term:

Operating leases

51.3

years

Finance leases

10.6

years

Weighted-average discount rate:

Operating leases

6.8

%

Finance leases

4.0

%

10. STOCK PLANS:

During the six months ended June 30, 2019, the Company granted 0.1 million restricted stock units with a weighted-average grant date fair value of $90.05 per unit. There were 0.3 million and 0.4 million restricted stock units outstanding at June 30, 2019 and December 31, 2018, respectively.

The compensation expense that has been charged against pre-tax income for all of the Company’s stock-based compensation plans was $1.9 million and $2.0 million for the three months ended June 30, 2019 and 2018, respectively, and $4.0 million and $3.9 million for the six months ended June 30, 2019 and 2018, respectively.

11. PENSION AND POSTRETIREMENT BENEFITS OTHER THAN PENSION PLANS:

Net periodic pension (income) expense reflected in other gains and (losses), net in the accompanying condensed consolidated statements of operations included the following components for the respective periods (in thousands):

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2019

    

2018

    

2019

    

2018

    

Interest cost

$

878

$

803

$

1,756

$

1,614

Expected return on plan assets

 

(943)

 

(1,070)

 

(1,887)

 

(2,172)

Amortization of net actuarial loss

 

286

 

264

 

573

 

519

Total net periodic pension (income) expense

$

221

$

(3)

$

442

$

(39)

13

Net postretirement benefit income reflected in other gains and (losses), net in the accompanying condensed consolidated statements of operations included the following components for the respective periods (in thousands):

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2019

    

2018

    

2019

    

2018

    

Interest cost

$

25

$

24

$

50

$

48

Amortization of net actuarial loss

 

62

 

65

 

123

 

129

Amortization of prior service credit

 

(329)

 

(329)

 

(657)

 

(657)

Total net postretirement benefit income

$

(242)

$

(240)

$

(484)

$

(480)

12. INCOME TAXES:

The Company has elected to be taxed as a REIT effective January 1, 2013, pursuant to the U.S. Internal Revenue Code of 1986, as amended. As a REIT, generally the Company will not be subject to federal corporate income taxes on ordinary taxable income and capital gains income from real estate investments that it distributes to its stockholders. The Company will continue to be required to pay federal and state corporate income taxes on earnings of its taxable REIT subsidiaries.

The Company recorded an income tax provision of $8.2 million and $5.7 million for the three months ended June 30, 2019 and 2018, respectively, and $10.2 million and $7.9 million for the six months ended June 30, 2019 and 2018, respectively. These results differ from the statutory rate primarily due to the REIT dividends paid deduction.

At June 30, 2019 and December 31, 2018, the Company had no unrecognized tax benefits.

13. COMMITMENTS AND CONTINGENCIES:

Pursuant to the Gaylord Rockies joint venture agreements, certain affiliates of Ares have a put right to require the Company to purchase their joint venture interests at a defined appraised value during an annual window period, or under certain other circumstances, in consideration of cash or OP Units of the Operating Partnership. Such OP Units have economic terms that are substantially similar to shares of the Company’s common stock. Any OP Units issued by the Operating Partnership to the Ares affiliates will be redeemable at the option of the holders thereof for shares of the Company’s common stock on a one-for-one basis, subject to certain adjustments.

Affiliates of RIDA Development Corporation (“RIDA”) also have a put right at a defined appraised value for cash, which will become exercisable at the earlier of December 31, 2023 or the date on which a certain change of control of RIDA occurs.

In connection with its investment in the Gaylord Rockies joint venture, the Company provided a completion guarantee under each of the construction loan and mezzanine loan capped at its pro rata share of all costs necessary to complete the project within the time specified in the Gaylord Rockies joint venture’s loan documents. As of June 30, 2019, the Company had not recorded any liability in the condensed consolidated balance sheet associated with these guarantees. See Note 17, “Subsequent Events,” for further discussion regarding the refinancing completed in July 2019.

In April 2019, a subsidiary of the Company entered into a joint venture with Gray Television, Inc. to create and distribute a linear multicast and over-the-top channel dedicated to the country music lifestyle (“New Country Ventures”). The Company acquired a 50% equity interest in this joint venture for an initial capital contribution of $2.0 million. In addition, the joint venture agreement requires the Company to contribute up to an additional $13.0 million through December 31, 2021. The Company accounts for its investment in this joint venture under the equity method of accounting.

The Company has entered into employment agreements with certain officers, which provide for severance payments upon certain events, including certain terminations in connection with a change of control.

14

The Company, in the ordinary course of business, is involved in certain legal actions and claims on a variety of matters. It is the opinion of management that such contingencies will not have a material effect on the financial statements of the Company.

14. STOCKHOLDERS’ EQUITY:

On February 26, 2019, the Company’s board of directors declared the Company’s first quarter 2019 cash dividend in the amount of $0.90 per share of common stock, or an aggregate of approximately $46.3 million in cash, which was paid on April 15, 2019 to stockholders of record as of the close of business on March 29, 2019.

On June 18, 2019, the Company’s board of directors declared the Company’s second quarter 2019 cash dividend in the amount of $0.90 per share of common stock, or an aggregate of approximately $46.3 million in cash, which was paid on July 15, 2019 to stockholders of record as of the close of business on June 28, 2019.

15. FAIR VALUE MEASUREMENTS:

The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

At June 30, 2019 and December 31, 2018, the Company held certain assets that are required to be measured at fair value on a recurring basis. These included investments held in conjunction with the Company’s non-qualified contributory deferred compensation plan. These investments consist of mutual funds traded in an active market. The Company determined the fair value of these mutual funds based on the net asset value per unit of the funds or the portfolio, which is based upon quoted market prices in an active market. Therefore, the Company has categorized these investments as Level 1.

The Company has consistently applied the above valuation techniques in all periods presented and believes it has obtained the most accurate information available for each type of instrument.

The Company had no liabilities required to be measured at fair value at June 30, 2019 and December 31, 2018. The Company’s assets measured at fair value on a recurring basis at June 30, 2019 and December 31, 2018, were as follows (in thousands):

    

    

Markets for

    

Observable

    

Unobservable

June 30, 

Identical Assets

Inputs

Inputs

2019

(Level 1)

(Level 2)

(Level 3)

Deferred compensation plan investments

$

27,435

$

27,435

$

$

Total assets measured at fair value

$

27,435

$

27,435

$

$

    

    

Markets for

    

Observable

    

Unobservable

December 31, 

Identical Assets

Inputs

Inputs

2018

(Level 1)

(Level 2)

(Level 3)

Deferred compensation plan investments

$

24,687

$

24,687

$

$

Total assets measured at fair value

$

24,687

$

24,687

$

$

The remainder of the assets and liabilities held by the Company at June 30, 2019 are not required to be recorded at fair value, and the carrying value of these assets and liabilities approximate fair value.

15

16. FINANCIAL REPORTING BY BUSINESS SEGMENTS:

The Company’s operations are organized into three principal business segments:

Hospitality , which includes Gaylord Opryland, Gaylord Palms, Gaylord Texan, Gaylord National, the Inn at Opryland, the AC Hotel, and the Company’s investment in the Gaylord Rockies joint venture (which is consolidated below beginning January 1, 2019);
Entertainment , which includes the Grand Ole Opry, the Ryman Auditorium, WSM-AM, Ole Red, the Company’s equity investment in New Country Ventures, and the Company’s Nashville-based attractions; and
Corporate and Other , which includes the Company’s corporate expenses.

The following information is derived directly from the segments’ internal financial reports used for corporate management purposes (amounts in thousands):

Three Months Ended

Six Months Ended

June 30,