Ryman Hospitality Properties, Inc. (RHP) Q3 2014 Earnings Report, Transcript and Summary

Welcome to Ryman Hospitality Properties' Third Quarter 2014 Earnings Conference Call. Hosting the call today from Ryman Hospitality Properties are Mr. Colin Reed, Chairman and Chief Executive Officer; Mr. Mark Fioravanti, Executive Vice President and Chief Financial Officer; Mr. Patrick Chaffin, Senior Vice President of Asset Management; and Mr. Scott Lynn, Senior Vice President and General Counsel. This call will be available for digital replay. The number is (800) 585-8367, and the conference ID number is 15447366. [Operator Instructions] It is now my pleasure to turn the floor over to Mr. Scott Lynn. Sir, you may begin.

Good morning. Thank you for joining us today. This call may contain forward-looking statements as defined in the Private Securities Litigation Reform Act, including statements about the company's expected financial performance. Any statements we make today that are not statements of historical fact may be deemed to be forward-looking statements. Words such as believes, expects or similar ones are intended to identify these statements, which may be affected by many factors, including those listed in SEC filings and in today's release. As a result, actual results may differ materially from the results we discuss or project today. We will not update any forward-looking statements, whether as a result of new information [Audio Gap] materially from the results [Audio Gap] or other reason. We will also discuss non-GAAP financial measures which we reconcile to the most comparable GAAP financial measure in an exhibit to today's release. I will now turn the call over to the company's Chief Executive Officer, President and Chairman, Colin Reed.

Thanks, Scott, and thanks to everyone for being on the call with us today. Well, this was another solid quarter for our business, and we're pleased with how our hotel properties performed as well as the continued growth in our Attractions business. I will walk you through the quarterly results as well as some of the driving factors behind those results before discussing the overall state of the group sector as we see it today. We will also talk about some of the capital market actions that we took in the third quarter. I will then close by touching on how we are thinking about the fourth quarter and the closing out of the year. So first, our hotel business. This quarter, our hotel operating metrics were up across the board as compared to the third quarter of '13, some by double digits. Starting with the top line, we reported a RevPAR increase of 10.2%, driven by a 3-percentage-point increase in occupancy and a 5.7 percentage lift in ADR. We also saw total RevPAR growth of nearly 10%. A key factor in these strong results was the increase in overall group room nights this quarter with approximately 31,000 more group room nights than in the prior year third quarter. Now this uptick in overall group room nights also positively impacted outside-of-the-room spending, which is evidenced by a nearly 10-percentage-point growth in total RevPAR. The other piece of the story is the transient side of our business, which, as you know, has been consistently up since we integrated Marriott's reward program and them as manager of our hotels. Now in contrast to previous quarters, transient room nights were marginally down for the quarter. Now this is simply a function of there being less availability to book into, given that our group business was performing like it was this quarter, as well as having almost 10,000 room nights out of service due to the room renovation project at the Gaylord Texan property, which I'm pleased to say is now complete. However, there is good news. Despite the modest drop in overall transient room nights this quarter, transient ADR was up nearly 15% -- sorry, $15 or 9.2%. This illustrates the strength of the yield management processes within our business as well as the attractiveness and strength of the markets that our hotels are situated in. Turning to the bottom line. Our Hospitality adjusted EBITDA increased by 12.2% with a 50-basis-point increase in margin. Now what we witnessed this quarter was that the growth in Hospitality adjusted EBITDA outpaced the growth in Hospitality revenue, which is indicative of the operational leverage our hotels are capable of achieving. The improvement in adjusted EBITDA is in spite of some onetime items that distort true year-over-year comparisons, such as a refund for medical expenses, nonrecurring rebates in utilities and property taxes, as well as a bonus accrual adjustment received in the third quarter of 2013. Furthermore, during the third quarter of '14, we had a onetime $600,000 charge related to an SEC settlement at Gaylord Opryland that some of you may have read about. So removing the noise, the flow-through of incremental revenue in the hotels would have been approximately 50%, which is what we expect. This is the third consecutive quarter in a row that we've seen strong hotel results and solid profitability. Now as you know, we have worked extremely hard with our manager, Marriott, to ensure that we have continuously improving margin performance and doing everything we can to maximize efficiency and profitability at the hotel level while maintaining the highest levels of guest satisfaction. While we are certainly pleased with how far we have come in our hotel operating results, we believe there is still room for improvement, and we will continue to work with our manager to achieve our high expectations for these one-of-a-kind assets. Now to preempt the perennial question of how group is performing, here are some additional facts. We continue to see a decline of in-the-year, for-the-year cancellations, which were down nearly 2,000 room nights or just under 20% compared to the third quarter of last year. Attrition levels also continued to decline, decreasing by more than 20% to 9.7% of contracted room blocks for groups that travel during the third quarter. Now I'll talk about group bookings in a minute and our ability to price to the consumer. But suffice to say, things in the group segment appeared to be improving right across the board. Now turning to Washington. This was another solid quarter for the Gaylord National, further supporting our cautiously optimistic view, that while the market and frankly anything tied to the government will remain challenging and have an inherent degree of unpredictability, we're confident in our market position there. This is particularly true given the continued evolution of the National Harbor development, which we believe is growing into a significant economic driver for the entire region and will benefit not only the Gaylord National, but the new 190-room hotel we announced last quarter that we will acquire. This hotel today is operated as an Aloft. We recently reached an agreement for this hotel to join the Marriott family under its new AC brand, and the deal is still on track to be closed by the end of December. From a synergist perspective, this is an important development as it makes the property a natural overflow destination for the Gaylord National as these 2 properties will be overseen by the same management team. Now we expect to shutter the hotel shortly after acquisition is complete, which will be in the early part of next year, and do some renovations to reposition the hotel to deliver great service. Now we'll have more details on what we expect the financial performance of this hotel will be during the fourth quarter of '14 -- 2014's earnings call, which we will be doing in early February, and so that time that we will be outlining our complete guidance for 2015. Now turning to the sales production. Our room night performance this quarter was very much in line with our expectations. While our gross group room nights were moderately down 14% from the same quarter last year, our net room nights were actually slightly up, a function of the decline that we saw in attrition and cancellations. Now let me point out some things relative to our bookings production this quarter and why we're very satisfied with this. As many of you know, our bookings patterns are cyclical. The second and fourth quarters are typically our strongest quarters. And while last year was a bit of an aberration due to some of the transition-related issues, we have seen a normalization this year, and here is the good news. During the second quarter, you may remember that we booked nearly 640,000 gross room nights, which was the best second quarter production that we've ever had on record. Obviously, when you have a blowout quarter like that, the pipeline is not going to be as robust the next quarter. However, rate continues to lift nicely for our future year bookings, and we're seeing the light of what has been a very long tunnel here when it comes to pricing, and that is something that will have a significant benefit for us moving forward. Going into the fourth quarter, the funnel of tentative and prospect bookings are looking particularly healthy. I don't want to get ahead of ourselves here, but we are confident in saying that it looks like the fourth quarter is going to follow the traditional pattern I just mentioned of being a strong bookings quarter for us. As we stated last quarter, we also believe that we will continue to see our bookings performance improve as we have continued to work with Marriott to optimize production at the regional sales offices. I'm pleased to report we now have a structure mapped out that we feel confident will yield the production that hits our historical averages. Now I'd like to just take a moment and just highlight the performance of Gaylord Opryland this last quarter. As you all know, this is our last -- our largest property and the largest hotel of its kind outside of Las Vegas, and its performance has been consistently strong for quite some time now. Now over the last couple of years, we've been inundated with continued questions regarding the potential impact of the National Convention Center and the new downtown Omni Hotel, and maybe, it's having an impact on our businesses here in Nashville. So here's the answer to the continued question. In the third quarter, Opryland was firing on all cylinders. In fact, this property is on pace to have its very best year ever in revenue and profitability in its roughly 40 years' history. Occupancy was at nearly 80% in the quarter, exactly where we aim our properties to be in an ideal scenario. Revenue was up 15% over last year, boosted by a lift in occupancy, rate and outside-of-the-room spend as we saw a shift towards more premium higher-rated groups. In addition, the property delivered a 33% margin performance in spite of some onetime costs negatively impacted the bottom line that I referenced earlier. Lead volume is also very good, and our expectations for bookings in the fourth quarter for all future years is very high. Now keeping the focus on Nashville. As you all know, we believe that our Nashville entertainment assets are somewhat underappreciated and may be misunderstood amongst several of the sell side community. This quarter, our Attractions business produced a record quarterly revenue of $25.9 million, up over 18% from the prior year quarter. Let me repeat that, up over 18% from the last -- from the prior year quarter. Adjusted EBITDA was also very strong, coming in at $9.5 million, our strongest third quarter and second-highest overall quarter ever. And by the way, that was a 43% year over -- quarter-over-quarter growth in profitability -- in adjusted EBITDA. The extraordinary authentic music industry here in Nashville is literally being discovered every day by folks from all across the planet, and the tourists base here in this unique city continues to grow. Now some of you have been asking, "What are our plans for these assets?" and questioning if we are considering any strategic actions that could expand the brand's presence and further capitalize on the strong performance. Now what we would say to you at this point is that we continue to work with our legal, tax and financial advisers to find ways to grow this business and unlock its value for our shareholders. Whatever decisions we come to, note that we'll need to take into account both the singular nature of these assets as well as our historical tax basis. We've made progress in this endeavor, and we'll provide an update when we have reached our conclusions. Regardless, it's so exciting to see what's going on here in Nashville and particularly with our businesses. Now switching subjects. Mark will go in some more detail on this shortly, but I wanted to highlight several balance sheet developments from this quarter. As most of you are aware, our 3.75% convertible notes matured on October 1. Over the last few quarters, we've been buying in these converts for cash when they became available. We settled the remaining $232.2 million of our convertible notes through cash on hand and borrowings under our revolving credit facility. In addition, during the third quarter, we cashed several 2.4 million warrants associated with these convertible notes for $57.9 million, which was also funded through cash on hand and draws under our revolving credit facility. We are pleased with the current strength of our balance sheet and confident it gives us the right amount of flexibility moving forward, particularly in light of our operating performance and commitment to pay our shareholders a very good dividend. Now turning to guidance. As you may have seen in our earnings release this morning, we've tightened our guidance range for the year. Based on year-to-date performance and the outlook for the remainder of the year, which is always the hardest quarter to predict given the business mix that occurs in the fourth quarter, we are narrowing our guidance range for the full year 2014 RevPAR growth to 6% to 7% and total RevPAR growth to 7% to 8% over 2013. We're also tightening our full year 2014 adjusted EBITDA guidance for the Hospitality segment to $278 million to $284 million. Now given the consistent outperformance by our Attractions businesses, we are adjusting the top and bottom range of guidance for this segment to $25 million to $27 million. As such, our updated guidance for 2014 adjusted EBITDA on a consolidated basis is now $280 million to $290 million, with Corporate and Other loss of $23 million to $21 million remaining unchanged even though it includes some unbudgeted consulting and legal expenses associated with the work we're undertaking with our Attractions business. Our adjusted FFO guidance range for the full year is now $188 million to $198 million. In closing, this was again a very solid quarter for our business, and/we are pleased with the momentum we have as we enter the fourth quarter. We feel that with the conversion issues behind us, our assets are operating like they are capable of, and the group sector environment appears to be strengthening. We are also remaining very focused on constantly evaluating how we can best return value to you, our shareholders, and prudently manage our balance sheet. And with that, let me hand over to Mark to walk you through the financials. Mark?

Thank you, Colin. Good morning, everyone. Driven by continued strength across the company, third quarter Ryman Hospitality consolidated total revenue increased 10.8% to $245 million compared to the prior year quarter. Consolidated adjusted EBITDA during the third quarter of 2014 grew 14% to $65.4 million, representing an 80-basis-point improvement in margin. During the quarter, the company generated net income of $15.1 million or $0.25 per fully diluted share and $42.1 million in adjusted funds from operations or AFFO for fully diluted share of $0.69. Both net income and AFFO were down on a comparative basis year-over-year due to a $12 million tax benefit the company received in 2013. It's important to remember that the GAAP fully diluted share calculations do not consider the anti-dilutive effects of the company's purchased call options associated with our convertible notes which remained outstanding at the end of the second quarter. I'll speak more about this in a moment when I discuss the balance sheet activity during the quarter. Turning to the Hospitality segment results. Driven by continued strength in both the group and transient segments, RevPAR during the quarter increased 10.2% to $123.99. Strong occupancy growth and an increase in corporate room nights, particularly at Opryland, drove a 9.9% increase in total RevPAR to $294.09 compared to the second quarter of last year. As Colin mentioned during his opening remarks, we continue to see encouraging trends in the group cancellation and attrition rates during the quarter. Gaylord Hotels in-the-year, for-the-year cancellations totaled 7,300 or -- excuse me, 7,837 room nights, down 19.9% compared to the third quarter of 2013. Attrition rates continue to decline, falling 250 basis points to 9.7%. Attrition and cancellation fees collected during the quarter totaled $1.4 million, down $600,000 from the same period last year. For the quarter, Hospitality segment adjusted EBITDA increased 12.2% to $61.5 million, representing a 60-basis-point improvement in margin. The Opry and Attractions segment revenue rose 18.4% to $25.9 million in the quarter, and segment adjusted EBITDA increased 43% to $9.5 million, representing a 630-basis-point improvement in margin. The Corporate and Other segment adjusted EBITDA totaled a loss of $5.6 million. The increase in Corporate expenses compared to the prior year quarter is largely due to an increase in employee incentive cost associated with improved company performance and consulting and advisory fees incurred during the quarter. Moving onto the balance sheet. Pursuant to an agreement made in June with one of the note hedge counterparties to our convertible notes, the company cash settled 2.4 million warrants in August for $57.6 million. This cash settlement was funded by cash on hand and draws under the company's revolving credit facility. As part of this transaction, the company recorded a $1.6 million loss on the change in fair value of warrants between June 30 and the settlement date, which is included with the other gains and losses in the company's financial statements. After the settlement of this transaction, the remaining warrants cover approximately 7.2 million shares with an adjusted strike price of $25.01 per share. As you are aware, the remaining $232.2 million in convertible notes matured on October 1, 2014. Subsequent to the end of the quarter, the company settled its obligations upon conversion of each $1,000 principal amount of the convertible notes in cash and the remainder of the conversion settlement amount in shares of common stock. Concurrently, with the settlement of the convertible notes, the company received and canceled an equal amount of shares of its common stock pursuant to its rights under the convertible note hedge transactions with respect to its common stock. The net impact resulted in no dilution to our outstanding common shares. As a reminder, the dilution mechanics for the remaining outstanding warrants is available in the Investor Toolkit section of our website and has been updated with all the activities I just outlined. As of September 30, 2014, the company had total debt outstanding of $1,508,700,000, which includes the $232.2 million of outstanding convertible notes, and had unrestricted cash of $279.5 million, resulting in a net debt balance of $2.229 billion of debt. As of September 30, 2014, $926 million of borrowing were drawn under the company's credit facility, including the Term Loan B, and the lending banks had issued $2.7 million in letters of credit, which left $470.3 million of availability for borrowing under the credit facility. During the quarter, the company paid its third quarter cash dividend of $0.55 per share of common stock on October 15. It is the company's current plan to distribute total annual dividends of approximately $2.20 per share in cash in equal quarterly payments with the remaining quarterly payments in January of 2015 subject to our board's future determinations and timing thereof. And with that, I'll turn the call back over to Colin for any closing remarks.

Thanks, Mark. Let's -- Laurie, let's open the phone lines up for questions if anyone has any questions.

[Operator Instructions] Your first question comes from the line of Chris Woronka with Deutsche Bank.

I want to ask you know we -- I think we heard from Marriott last week that, going forward, they were going to raise some of the out-of-room minimum spending requirements, and I think their comment pertained more to the flagship Marriott brand. But I was hoping could comment on maybe whether that's something they're working with you guys on as well.

No, we -- that hasn't -- that -- I don't think Patrick, that has risen -- that discussion has risen to the size of hotels that we own. The -- as you know, we put contracts in place with our group customers, there is outside-of-the-room minimum spends. Outside-of-the-room spend as a company our total RevPAR per room is either the highest or the equal highest in Hospitality REIT land. So I don't think that this strategy would apply to these battleships that we own.

Okay. Understood. And then just secondly, as we kind of think about group business continuing to accelerate kind of on an industry-wide basis, it seems that you guys should kind of benefit a little bit more just from the standpoint that some of the smaller boxes, I think, are actually yielding out some of their group businesses as the transient moves on. And can you talk about whether you think we see a big jump up in that 2015? Or is that more of, for you guys, more of a multiyear process out into '16 and beyond?

Well, let me give you sort of a 60,000-foot answer and then maybe Patrick and Mark can dive in here. Our hotels are running right now, if we look at the sort of midpoint of where you analysts have us in occupancy, we're running -- at least 4 hotels, running at 73-ish, Mark or Patrick? 73.5%, something like that. And so what we're seeing is we're seeing group demand grow across the board in most sectors, putting government aside. And as we signaled in our release, we saw really decent rate growth in our group bookings in the third quarter, mid- to high single-digit. And this is very exciting times, because for us, we've been working with Marriott for the last 2 years to perfect the whole sales process as it relates to these big boxes, with our Sales/Seal Team 6 [ph], these are the groups that are -- the salespeople that are looking for these and sourcing these very large groups, the regional sales office refinements that we have done, and we believe we're hitting our stride now. We believe the sales process is where they need to be, and we're seeing lead volumes increase. And so the opportunity, when you start seeing room night compression in the business, the opportunity is rate growth, both in terms of group and also then as it relates to leisure. We took a little bit more of a bolder move this year in terms of pricing our leisure side, and we're seeing that. We're seeing that show up in our business, and this is the reason why we've got a 10% RevPAR growth and a 10% total RevPAR growth for the quarter. So we don't want to get ahead of ourselves yet for '15. We're in the middle of our budgeting season with Marriott, but frankly, I expect a good level of performance, and I think our management does a very good level of performance for these hotels in 2015. And the economy stays with this 2.5%, 3% growth in GDP '15, '16, Chris, we don't have new supply affecting the hotels that we own. And so this should be -- this should translate into a good '15 and a good '16 for our business. The other thing is just FYI, we're pacing ahead. We're pacing ahead right now for '15, and we're pacing ahead right now for '16. And so with the tees and pees [ph] we're looking at -- lead volumes we're looking at, with a $5.1 million room nights on the books in contract form for all future years, providing there's no geopolitical disconnect here, the next 2 to 3 years are going to be pretty good.

Great. That's great color, Colin. Just one final one for me. The performance within the Attractions segment is -- was terrific, and it's interesting, some of your comments and I would agree with you that we probably don't have a full appreciation of the business. But I want to ask you, when you think longer term and you've talked about maybe some different options for the business, but I mean, where do you think Nashville is in its evolutionary cycle? And is this something where you guys are kind of seeing infrastructure and other changes within the city that could really drive some outsized longer-term growth in the segment?

Well, you see -- I think this again sounds silly when we own almost 10% of the room supply in this town and me advocating more hotel rooms to be built, sort of seems silly, but this is not supply and just demand. What's happening is to Nashville, which is quite unlike any other city in the United States and probably in the world, is this town has an extraordinary music base, not just country as the way it used to be thought about 10, 15 years ago, multigenre; it's extraordinary. Tomorrow night, we have the CMAs here on TV. It's going to be mayhem in this town. Ticket prices are being scalped hundreds and hundreds of dollars to people who are wanting to get to this thing. And so what is happening is people all across America, all across the globe, are discovering the -- what we have in Nashville, Tennessee. And the demand is just extraordinary, and it's continuing. The thing that this town has got a focus on, and we're active with the political leadership, is how do you deal with infrastructure, how do you deal with airlift, how do you deal with more hotel rooms, how do you deal with transportation to get workers to downtown? And these are -- this is the 5-year, 10-year challenge that the city of Nashville has. It's not like any other city which the challenge is how do you stimulate demand? Demand is here. What we've got to do is fulfill it. And the thing is that we own Main & Main [ph]. When I own say Main & Main, the backbone of the country music industry, the large part of it is in our hands, and so that's what we are constantly trying to figure out. How do we expand these entertainment assets to make the experience to this ever-growing consumer base more appealing? And we've been squawking about this for 3 or 4 years because we've been seeing this coming, and I think the financial results of our business shows it's underway. But I think we're in the very early innings of this, providing our political leadership, state leadership, is able to deal with the growing pains of too much demand.

[Operator Instructions] Your next question comes from the line of Patrick Scholes of SunTrust.

Two questions for you here. I wonder if could give us a little color, if possible, on the pricing on -- forward pricing on your bookings for outside-of-the-room or ancillary spend. You noted in your press release about the average daily rate on the room night is up high single digits. How should we also think about the outside-of-the-room pricing that you're doing? That's the first question.

So I'll remind you that when we put room nights on the books for the future, we set them up with a minimum as far as spend, and then as we get 90 days out or so, we really start communicating with the group to set their individual menus, et cetera. So what we're really look at this point is not so much the minimums, which we maintain a very stringent restriction on what the minimums have to be by group size, but we look at the rate, and we know that as rate grows and we get premium groups in-house with better rates, we stand to benefit outside the room. And so we are confident that as we continue to move forward, the rate increases we're seeing on the books, as they're getting back towards prior peak levels back in '08 as far as what's on the books for group, will benefit us in outside-the-room spend as well. From a mix perspective, that's further supported by the fact that this year, we've seen Corporate leads increase year-to-date, about 14%. We're booking more corporate room nights than we have in the past. There's a lot more demand coming in there. So we believe that you put all these factors together and it stands to reason that we should see good benefit outside the room as we move into '15 and beyond.

Let me just add to this, Patrick, because one of the -- I think Patrick calls the implication of -- or the way you asked the question, sort of, you could imply do we price the state today for 4 years from now? Is that how we conduct business? And the answer is no. What we do is we -- write into the contract of food and beverage minimum, as Patrick Chaffin said, 3 months out, we're sitting with a customer, building the menus, how many breaks, are we going to have 2 breakfasts, 1 lunch, 2 dinners or vice versa? And then the client with us is constructing that menu, constructing the wine list. And so the pricing is being done -- the actual pricing is being done in a dynamic way whenever the client chooses to engage in those decisions. It's not something that's set at the time the contract is done for a group that's going to come 4 years from now.

Got it. Second question concerns the Gaylord National. They had a number of onetime, say, EBITDA interruptions in the third quarter, utility rates, Union-related expenses. Will those also flow through to the fourth quarter of this year and the first half of next year? Or were they specifically 3Q items?

So Patrick, one of the big items was a rebate that we from Pepco, up at the National in the third quarter of '13. So no, that won't be any kind of impact into the fourth quarter of this year or next year. The Union cost increases, that's just the nature of the beast with a Union hotel. So we'll continue to do see that, but we continue to work with the property and with Marriott to identify ways to offset those. And then some of the other costs that we saw increasing were CITY booking costs because we're booking more room nights. So that's a good problem for us to have, but then there were -- as we mentioned, there were some tax rebates, there were some medical rebates, et cetera, that are just onetime items.

In the previous year.

Yes, in previous year, that is exclusively to the third quarter.

Okay. And then on the Union-related expenses, is that associated with payroll and/or benefits? And how much -- what -- which part of that was driving the increase? Or was it something else?

No, it's predominantly with the benefit side of the house, and it's just what had been negotiated in by the Union to keep them on par with other Union hotels.

Our next question comes from the line of Howard Wireman [ph] of Pen [ph] Capital.

I'm just trying to simplify transient versus group. If we just simply look at the mix in the quarter, what percentage was from group? And what percentage was from transient? And how do we look at that relative to last year's third quarter in terms of a pie chart of the respective percentages?

Just hold on Howard, Patrick is getting out this data -- we don't want to be inaccurate.

I mean, we are about 75% group, 25% roughly transient, and that is a little bit higher than what we saw on the group side in the third quarter of last year. Just a couple of points difference. Again, we booked more groups into the third quarter of this year, and that -- as Colin mentioned earlier in the call, that blocked out some of the transient availability.

Okay. And if we just -- I realize you don't have 2015 guidance out there, but if you look at booked room nights going forward, how does that pie look -- got looking out to book business at this point?

Yes. So we are having a very good year in '14 from a group perspective. And if you look at '15 right now, about the only guidance that we'll give is that we have more group room nights on the books for '15 than we did at this point last year for '14. And we have a higher mix of corporate business going into '15.

And the other thing I would say, Howard, is that we have a higher bucket of leads than we did at this time last year. And I think, Patrick, about 8% of higher tees and pees right now for future years than we did at this time last year. So -- and the other part of it is the attrition rates are lower now than they were at this time last year, which will affect if they stay how groups performed next year.

Howard, in terms of how the pie looks for '15, right now, '15 is all group. It's 100% group because of the booking windows for transient are very short term. What I would tell you is our expectation is our mix next year between group in transient is going to be right around where we are today, which is kind of 75%, 25%, group versus transient.

Okay. And just a question regarding the balance sheet. So at the end of the day after the converts were taken care of, debt has actually dropped? Yes, I guess so because you've used up the cash. So we wind up with a smaller -- we wind up with $1.2 billion versus $1.5 billion. So debt has actually dropped, although net debt is probably about the same.

Yes, that's right, and that's the way to think about it. We would never keep $300 million had we not contemplated selling these converts. We would never $300 million in cash.

Yes, I mean, the mechanics of it, Howard, where we -- we had to draw the revolver a day or so prior to settling the converts, and of course, the converts settled on October 1. So when we closed the quarter, we had the cash on the balance sheet.

That does conclude the Q&A portion of today's call. I'll now turn it over to Colin Reed for any additional or closing remarks.

Well, thank you, everyone, for being on the call. I know some of us are on the way to Atlanta here in the next hour or so for the REIT World Love Fest [ph], and we'll see quite a few of the sell side there and look forward to engaging and talking more so about this performance. But we're happy with it, and we're happy about the way things are shaping for the fourth quarter and 2015. So with that, thank you very much, everyone, and see you soon.

Thank you. That does conclude the Ryman Hospitality Properties' Third Quarter 2014 Earnings Conference Call. You may now disconnect.