FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

(Mark One)

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

For the quarterly period ended June 30, 2008

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

GAYLORD ENTERTAINMENT COMPANY

(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)

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 þ No o

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

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer   o (Do not check if a smaller reporting company)		Smaller Reporting Company o

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

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 August 1, 2008
Common Stock, $.01 par value		40,854,593 shares

 

 

GAYLORD ENTERTAINMENT COMPANY

		Page
Part I — Financial Information
Item 1. Financial Statements.
Condensed Consolidated Statements of Operations - For the Three Months Ended June 30, 2008 and 2007			3
Condensed Consolidated Statements of Operations - For the Six Months Ended June 30, 2008 and 2007			4
Condensed Consolidated Balance Sheets - June 30, 2008 and December 31, 2007			5
Condensed Consolidated Statements of Cash Flows - For the Six Months Ended June 30, 2008 and 2007			6
Notes to Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.			35
Item 3. Quantitative and Qualitative Disclosures About Market Risk.			63
Item 4. Controls and Procedures.			65
Part II — Other Information
Item 1. Legal Proceedings.			65
Item 1A. Risk Factors.			65
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.			65
Item 3. Defaults Upon Senior Securities.			66
Item 4. Submission of Matters to a Vote of Security Holders.			66
Item 5. Other Information.			66
Item 6. Exhibits.			66
SIGNATURES			67
EX-31.1 Section 302 Certification of the CEO
EX-31.2 Section 302 Certification of the CFO
EX-32.1 Section 906 Certification of the CEO & CFO

Part I – FINANCIAL INFORMATION

GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES

		2008				2007
Revenues		$	258,269			$	189,381
Operating expenses:
Operating costs			149,043				108,771
Selling, general and administrative			48,114				38,691
Preopening costs			3,246				3,230
Depreciation			27,692				18,336
Amortization			1,306				967
Operating income			28,868				19,386
Interest expense, net of amounts capitalized			(18,548	)			(13,611	)
Interest income			3,773				1,630
Unrealized gain on Viacom stock and CBS stock			—				9,147
Unrealized loss on derivatives			—				(6,448	)
(Loss) income from unconsolidated companies			(454	)			2,931
Other gains and (losses), net			(9	)			140,212
Income before provision for income taxes			13,630				153,247
Provision for income taxes			5,082				59,631
Income from continuing operations			8,548				93,616
Income from discontinued operations, net of income taxes			239				13,226
Net income		$	8,787			$	106,842
Basic income per share:
Income from continuing operations		$	0.21			$	2.29
Income from discontinued operations, net of income taxes			0.01				0.32
Net income		$	0.22			$	2.61
Fully diluted income per share:
Income from continuing operations		$	0.21			$	2.21
Income from discontinued operations, net of income taxes			—				0.31
Net income		$	0.21			$	2.52

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

GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES

		2008				2007
Revenues		$	453,504			$	371,739
Operating expenses:
Operating costs			262,531				217,324
Selling, general and administrative			87,656				79,491
Preopening costs			18,821				6,175
Impairment and other charges			12,031				—
Depreciation			47,885				36,885
Amortization			2,324				1,878
Operating income			22,256				29,986
Interest expense, net of amounts capitalized			(22,127	)			(32,388	)
Interest income			4,097				2,147
Unrealized gain on Viacom stock and CBS stock			—				6,358
Unrealized gain on derivatives			—				3,121
(Loss) income from unconsolidated companies			(218	)			1,013
Other gains and (losses), net			50				146,075
Income before provision for income taxes			4,058				156,312
Provision for income taxes			2,358				62,039
Income from continuing operations			1,700				94,273
(Loss) income from discontinued operations, net of income taxes			(219	)			16,033
Net income		$	1,481			$	110,306
Basic income per share:
Income from continuing operations		$	0.04			$	2.31
Income from discontinued operations, net of income taxes			—				0.39
Net income		$	0.04			$	2.70
Fully diluted income per share:
Income from continuing operations		$	0.04			$	2.23
Income from discontinued operations, net of income taxes			—				0.38
Net income		$	0.04			$	2.61

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

GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES

		June 30,				December 31,
		2008				2007
ASSETS
Current assets:
Cash and cash equivalents — unrestricted		$	32,046			$	23,592
Cash and cash equivalents — restricted			1,208				1,216
Trade receivables, less allowance of $1,667 and $468, respectively			71,494				31,371
Estimated fair value of derivative assets			528				—
Deferred income taxes			7,689				7,689
Other current assets			40,292				30,180
Current assets of discontinued operations			969				797
Total current assets			154,226				94,845
Property and equipment, net of accumulated depreciation			2,258,267				2,196,264
Notes receivable			150,441				—
Intangible assets, net of accumulated amortization			147				174
Goodwill			6,915				6,915
Indefinite lived intangible assets			1,480				1,480
Investments			3,956				4,143
Estimated fair value of derivative assets			2,870				2,043
Long-term deferred financing costs			12,470				14,621
Other long-term assets			24,604				16,382
Total assets		$	2,615,376			$	2,336,867
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and capital lease obligations		$	2,101			$	2,058
Accounts payable and accrued liabilities			266,212				240,827
Current liabilities of discontinued operations			2,550				2,760
Total current liabilities			270,863				245,645
Long-term debt and capital lease obligations, net of current portion			1,244,964				979,042
Deferred income taxes			72,039				73,662
Other long-term liabilities			98,342				96,484
Long-term liabilities of discontinued operations			519				542
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value, 100,000 shares authorized, no shares issued or outstanding			—				—
Common stock, $.01 par value, 150,000 shares authorized, 40,851 and 41,236 shares issued and outstanding, respectively			409				413
Additional paid-in capital			705,043				721,196
Retained earnings			232,239				230,758
Accumulated other comprehensive loss			(9,042	)			(10,875	)
Total stockholders’ equity			928,649				941,492
Total liabilities and stockholders’ equity		$	2,615,376			$	2,336,867

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

GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES

		2008				2007
Cash Flows from Operating Activities:
Net income		$	1,481			$	110,306
Amounts to reconcile net income to net cash flows provided by operating activities:
Loss (income) from discontinued operations, net of taxes			219				(16,033	)
Loss (income) from unconsolidated companies			218				(1,013	)
Impairment and other charges			12,031				—
Unrealized gain on Viacom stock and CBS stock and related derivatives, net			—				(9,479	)
Benefit for deferred income taxes			(1,712	)			(51,324	)
Depreciation and amortization			50,209				38,763
Amortization of deferred financing costs			1,993				12,253
Write-off of deferred financing costs			—				1,192
Stock-based compensation expense			6,120				5,066
Excess tax benefit from stock-based compensation			(832	)			(1,444	)
Gain on sale of investment in Bass Pro			—				(140,313	)
Loss (gain) on sales of assets			119				(4,272	)
Changes in (net of acquisitions and divestitures):
Trade receivables			(40,123	)			(12,356	)
Accounts payable and accrued liabilities			29,833				(13,493	)
Income taxes payable			(777	)			112,080
Other assets and liabilities			(10,755	)			(9,635	)
Net cash flows provided by operating activities — continuing operations			48,024				20,298
Net cash flows (used in) provided by operating activities — discontinued operations			(1,518	)			21,613
Net cash flows provided by operating activities			46,506				41,911
Cash Flows from Investing Activities:
Purchases of property and equipment			(277,114	)			(281,462	)
Investment in unconsolidated companies			(31	)			(231	)
Proceeds from sale of investment in Bass Pro			—				221,527
Proceeds from sales of assets			19				5,035
Other investing activities			(9,041	)			(708	)
Net cash flows used in investing activities — continuing operations			(286,167	)			(55,839	)
Net cash flows provided by investing activities — discontinued operations			792				115,284
Net cash flows (used in) provided by investing activities			(285,375	)			59,445
Cash Flows from Financing Activities:
Net borrowings (repayments) under credit facility			267,000				(60,000	)
Purchases of Company’s common stock			(19,999	)			—
Deferred financing costs paid			—				(3,883	)
Decrease in restricted cash and cash equivalents			8				54
Proceeds from exercise of stock option and purchase plans			157				7,967
Excess tax benefit from stock-based compensation			832				1,444
Other financing activities, net			(675	)			(592	)
Net cash flows provided by (used in) financing activities — continuing operations			247,323				(55,010	)
Net cash flows used in financing activities — discontinued operations			—				(19,365	)
Net cash flows provided by (used in) financing activities			247,323				(74,375	)
Net change in cash and cash equivalents			8,454				26,981
Cash and cash equivalents — unrestricted, beginning of period			23,592				35,356
Cash and cash equivalents — unrestricted, end of period		$	32,046			$	62,337

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

GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. BASIS OF PRESENTATION:

The condensed consolidated financial statements include the accounts of Gaylord Entertainment Company and its subsidiaries (the “Company”) 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 pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the financial information presented not misleading. 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 as of and for the year ended December 31, 2007 filed with the SEC. 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.

2. INCOME PER SHARE:

The weighted average number of common shares outstanding is calculated as follows:

		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)		2008				2007				2008				2007
Weighted average shares outstanding			40,812				40,961				41,029				40,882
Effect of dilutive stock options			371				1,383				486				1,403
Weighted average shares outstanding - assuming dilution			41,183				42,344				41,515				42,285

3. COMPREHENSIVE INCOME:

Comprehensive income is as follows for the three months and six months of the respective periods:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(in thousands)		2008				2007				2008				2007
Net income		$	8,787			$	106,842			$	1,481			$	110,306
Minimum pension liability, net of deferred income taxes			—				(14	)			—				(95	)
Unrealized (loss) gain on natural gas swaps, net of deferred income taxes			(238	)			(312	)			280				175
Unrealized gain on interest rate swaps, net of deferred income taxes			4,309				—				1,553				—
Comprehensive income		$	12,858			$	106,516			$	3,314			$	110,386

4. NOTES RECEIVABLE:

In connection with the development of Gaylord National, Prince George’s County, Maryland issued three series of bonds. The first bond issuance, with a face value of $65 million, was issued by Prince George’s County, Maryland in April 2005 to support the cost of infrastructure being constructed by the project developer, such as roads, water and sewer lines. The second bond issuance, with a face value of $95 million (“Series A Bond”),

was issued by the County in April 2005 and placed into escrow until substantial completion of the convention center and 1,500 rooms within the hotel. The Series A Bond and the third bond issuance, with a face value of $50 million (“Series B Bond”), were delivered to the Company upon substantial completion and opening of the Gaylord National on April 2, 2008.

The Company is currently holding the Series A Bond and Series B Bond and receiving the debt service thereon, which is payable from tax increments, hotel taxes and special hotel rental taxes generated from the development. Accordingly, during the second quarter of 2008, the Company calculated the present value of the future debt service payments from the Series A Bond and Series B Bond based on prevailing market interest rates at the time the bonds were delivered to the Company and recorded a note receivable and offset to property and equipment in the amounts of $93.8 million and $38.3 million, respectively, in the accompanying condensed consolidated balance sheet. The Company also calculated the present value of the interest that had accrued on the Series A Bond between its date of issuance and delivery to the Company based on prevailing market interest rates at the time the bond was delivered to the Company and recorded a note receivable and offset to property and equipment in the amount of $18.3 million in the accompanying condensed consolidated balance sheet. The Company will record the amortization of discount on these notes receivable as interest income over the life of the notes.

During the three months and six months ended June 30, 2008, the Company recorded interest income of $3.4 million on these bonds, which included $3.0 million of interest that accrued on the bonds subsequent to their delivery to the Company and $0.4 million related to amortization of the discount on the bonds.

5. IMPAIRMENT AND OTHER CHARGES:

The Company entered into an Agreement of Purchase and Sale dated as of November 19, 2007 (the “Purchase Agreement”) with LCWW Partners, a Texas joint venture, and La Cantera Development Company, a Delaware corporation (collectively, “Sellers”), to acquire the assets related to the Westin La Cantera Resort, located in San Antonio, Texas (the “La Cantera Resort”). The Purchase Agreement also provided for the Company’s purchase of approximately 90 acres of undeveloped land adjacent to the resort property.

On January 21, 2008, the Company entered into an amendment (the “Amendment”) with Sellers to the Purchase Agreement. The Amendment extended the closing date under the Purchase Agreement to April 30, 2008 (prior to the Amendment, the closing date was scheduled to occur no later than January 31, 2008). The Amendment also provided that the $10.0 million deposit (the “Deposit”) previously paid by the Company to an escrow agent under the Purchase Agreement, which was recorded in property and equipment in the accompanying consolidated balance sheet as of December 31, 2007, would be released to Sellers, and that the Deposit would be non-refundable to the Company except in connection with the voluntary and intentional default by Sellers in their obligations to be performed on the closing date.

The Amendment conditioned the closing of the transactions under the Purchase Agreement on the Company arranging financing satisfactory to the Company in its sole discretion in order to fund the transaction. On April 15, 2008, as permitted by the Amendment, the Company terminated the Purchase Agreement on the basis that it did not obtain satisfactory financing. Pursuant to the terms of the Purchase Agreement and the Amendment, the Company forfeited the $10.0 million deposit previously paid to Sellers. As a result, the Company recorded an impairment charge of $12.0 million during the six months ended June 30, 2008 to write off the deposit, as well as certain transaction-related expenses that were also capitalized in connection with the potential acquisition.

6. DISCONTINUED OPERATIONS:

The Company has reflected the following business as discontinued operations, consistent with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS 144”) and Accounting Principles Board (“APB”) Opinion No. 30, Reporting the Results of Operations – Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, and Unusual and Infrequently Occurring Events and Transactions (“APB 30”). The results of operations, net of taxes, and the carrying value of the assets and liabilities of these businesses have been reflected in the accompanying condensed consolidated financial statements as discontinued operations in accordance with SFAS 144 for all periods presented.

ResortQuest

During the second quarter of 2007, the Company committed to a plan of disposal of its ResortQuest business. On May 31, 2007, the Company completed the sale of its ResortQuest Hawaii operations through the transfer of all of its equity interests in its ResortQuest Hawaii subsidiaries (“ResortQuest Hawaii”) to Vacation Holdings Hawaii, Inc., an affiliated company of Interval International, for $109.1 million in cash, prior to giving effect to a purchase price adjustment based on the working capital of ResortQuest Hawaii as of the closing. The Company retained its 19.9% ownership interest in RHAC Holdings, LLC and its 18.1% ownership interest in Waipouli Holdings LLC, which ownership interests were excluded from this transaction. The Company recognized a pretax gain of $50.0 million related to the sale of ResortQuest Hawaii during 2007.

On June 1, 2007, the Company completed the sale of the remainder of the operations of its ResortQuest subsidiary through the transfer of all of its capital stock in its ResortQuest Mainland subsidiary (“ResortQuest Mainland”) to BEI-RZT Corporation, a subsidiary of Leucadia National Corporation, for $35.0 million, prior to giving effect to certain purchase price adjustments, including a purchase price adjustment based on the working capital of ResortQuest Mainland as of the closing. The Company recognized a pretax loss of $59.5 million related to the sale of ResortQuest Mainland in 2007. In connection with the sale of ResortQuest Mainland, the Company recorded pre-tax restructuring charges for employee severance benefits of $0.1 million and $0.3 million for the three months and six months ended June 30, 2008, respectively.

The following table reflects the results of operations of businesses accounted for as discontinued operations for the three months and six months ended June 30, 2008 and 2007:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(in thousands)		2008				2007				2008				2007
Revenues:
ResortQuest		$	—			$	33,745			$	—			$	91,228
Operating loss:
ResortQuest		$	(446	)		$	(3,756	)		$	(933	)		$	(2,022	)
Restructuring charges			(84	)			(72	)			(262	)			(72	)
Total operating loss			(530	)			(3,828	)			(1,195	)			(2,094	)
Interest expense			—				(7	)			—				(8	)
Interest income			—				163				—				309
Other gains and (losses):
ResortQuest			915				(6,586	)			792				(6,769	)
Other			—				—				50				—
Income (loss) before benefit for income taxes			385				(10,258	)			(353	)			(8,562	)
Provision (benefit) for income taxes			146				(23,484	)			(134	)			(24,595	)
Income (loss) from discontinued operations		$	239			$	13,226			$	(219	)		$	16,033

The assets and liabilities of the discontinued operations presented in the accompanying condensed consolidated balance sheets are comprised of:

		June 30,				December 31,
(in thousands)		2008				2007
Current assets:
Other receivables		$	965			$	—
Prepaid expenses			4				106
Other current assets			—				691
Total current assets			969				797
Total long-term assets			—				—
Total assets		$	969			$	797
Current liabilities:
Accounts payable and accrued liabilities		$	2,550			$	2,760
Total current liabilities			2,550				2,760
Other long-term liabilities			519				542
Total long-term liabilities			519				542
Total liabilities		$	3,069			$	3,302

7. DEBT:

8% Senior Notes

On November 12, 2003, the Company completed its offering of $350 million in aggregate principal amount of senior notes due 2013 (the “8% Senior Notes”) in an institutional private placement. The Company filed an exchange offer registration statement on Form S-4 with the SEC with respect to the 8% Senior Notes and subsequently exchanged the existing senior notes for publicly registered senior notes with the same terms after the registration statement was declared effective in April 2004. The interest rate on these notes is 8%, although the Company has entered into fixed to variable interest rate swaps with respect to $125 million principal amount of the 8% Senior Notes, which swaps result in an effective interest rate of LIBOR plus 2.95% with respect to that portion of the 8% Senior Notes. The 8% Senior Notes, which mature on November 15, 2013, bear interest semi-annually in arrears on May 15 and November 15 of each year, starting on May 15, 2004. The 8% Senior Notes are redeemable, in whole or in part by the Company, at any time on or after November 15, 2008 at a designated redemption amount, plus accrued and unpaid interest. The 8% Senior Notes rank equally in right of payment with the Company’s other unsecured unsubordinated debt, but are effectively subordinated to all of the Company’s secured debt to the extent of the assets securing such debt. The 8% Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by generally all of the Company’s active domestic subsidiaries.

The 8% Senior Notes indenture contains certain covenants which, among other things, limit the incurrence of additional indebtedness (including additional indebtedness under the term loan portion of the Company’s senior secured credit facility), investments, dividends, transactions with affiliates, asset sales, capital expenditures, mergers and consolidations, liens and encumbrances and other matters customarily restricted in such agreements. As of June 30, 2008, the Company was in compliance with each of these covenants. There can be no assurance that the Company will be in compliance with the above-mentioned covenants in the future. The 8% Senior Notes are cross-defaulted to the Company’s other indebtedness.

6.75% Senior Notes

On November 30, 2004, the Company completed its offering of $225 million in aggregate principal amount of senior notes due 2014 (the “6.75% Senior Notes”) in an institutional private placement. In April 2005, the Company filed an exchange offer registration statement on Form S-4 with the SEC with respect to the 6.75% Senior Notes and subsequently exchanged the existing senior notes for publicly registered senior notes with the same terms after the registration statement was declared effective in May 2005. The interest rate of these notes is 6.75%. The 6.75% Senior Notes, which mature on November 15, 2014, bear interest semi-annually in cash in arrears on May 15 and November 15 of each year, starting on May 15, 2005. The 6.75% Senior Notes are redeemable, in whole or in part by the Company, at any time on or after November 15, 2009 at a designated redemption amount, plus accrued and unpaid interest. The 6.75% Senior Notes rank equally in right of payment with the Company’s other unsecured unsubordinated debt, but are effectively subordinated to all of the Company’s secured debt to the extent of the assets securing such debt. The 6.75% Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by generally all of the Company’s active domestic subsidiaries. In addition, the 6.75% Senior Notes indenture contains certain covenants which, among other things, limit the incurrence of additional indebtedness (including additional indebtedness under the term loan portion of the Company’s senior secured credit facility), investments, dividends, transactions with affiliates, asset sales, capital expenditures, mergers and consolidations, liens and encumbrances and other matters customarily restricted in such agreements. As of June 30, 2008, the Company was in compliance with each of these covenants. There can be no assurance that the Company will be in compliance with the above-mentioned covenants in the future. The 6.75% Senior Notes are cross-defaulted to the Company’s other indebtedness.

$600.0 Million Credit Facility

On March 10, 2005, the Company entered into a $600.0 million credit facility with Bank of America, N.A. acting as the administrative agent. This credit facility, which replaced a $100.0 million revolving credit facility, consisted of the following components: (a) a $300.0 million senior secured revolving credit facility, which included a $50.0 million letter of credit sublimit, and (b) a $300.0 million senior secured delayed draw term loan facility, which could be drawn in one or more advances during its term. The credit facility also included an accordion feature that allowed the Company, on a one-time basis, to increase the credit facilities by a total of up to $300.0 million, subject to securing additional commitments from existing lenders or new lending institutions. At the Company’s election, the revolving loans and the term loans had an interest rate of LIBOR plus 2% or the lending banks’ base rate plus 1%, subject to adjustments based on the Company’s financial performance. Interest on the Company’s borrowings was payable quarterly, in arrears, for base rate loans and at the end of each interest rate period for LIBOR rate-based loans. Principal was payable in full at maturity. The Company was required to pay a commitment fee ranging from 0.25% to 0.50% per year of the average unused portion of the credit facility.

As a result of the refinancing of the $600.0 million credit facility, which is discussed below, the Company wrote off $1.2 million in deferred financing costs during the first quarter of 2007, which is included in interest expense in the accompanying condensed consolidated statement of operations for the six months ended June 30, 2007.

$1.0 Billion Credit Facility

As of June 30, 2008, the Company had in place an Amended and Restated Credit Agreement by and among the Company, certain subsidiaries of the Company party thereto, as guarantors, the lenders party thereto and Bank of America, N.A., as administrative agent. The $1.0 billion amended and restated credit facility (the “$1.0 Billion Credit Facility”) was effective March 23, 2007 and represented an increase of the Company’s previous $600.0 million credit facility, which is discussed above.

The $1.0 Billion Credit Facility consisted of the following components: (a) a $300.0 million senior secured revolving credit facility, which included a $50.0 million letter of credit sublimit and a $30.0 million sublimit for swingline loans, and (b) a $700.0 million senior secured delayed draw term loan facility, which could be drawn on in one or more advances during its term. The $1.0 Billion Credit Facility also included an accordion feature that allowed the Company to increase the $1.0 Billion Credit Facility by a total of up to $100.0 million, subject to securing additional commitments from existing lenders or new lending institutions. The revolving loan, letters of credit and term loan were set to mature on March 9, 2010. At the Company’s election, the revolving loans and the term loans bore interest at an annual rate of LIBOR plus an applicable margin ranging from 1.25% to 1.75% or the lending banks’ base rate plus an applicable margin ranging from 0.00% to 0.50%, subject to adjustments based on the Company’s borrowing base leverage. As further discussed in Note 9, the Company entered into interest rate swaps with respect to $403.0 million aggregate principal amount of borrowings under the delayed draw term loan facility to convert the variable rate on those borrowings to a fixed weighted average interest rate of 2.98% plus the applicable margin on these borrowings during the term of the swap agreements. As discussed in Note 20, these interest rate swaps were terminated by the Company in July 2008 in connection with the Company’s refinancing of the $1.0 Billion Credit Facility. Interest on the Company’s borrowings was payable quarterly, in arrears, for base rate loans and at the end of each interest rate period for LIBOR rate-based loans. Principal was payable in full at maturity. The Company was required to pay a commitment fee ranging from 0.125% to 0.35% per year of the average unused portion of the $1.0 Billion Credit Facility.

The purpose of the $1.0 Billion Credit Facility was for working capital, capital expenditures and the financing of the costs and expenses related to the construction of the Gaylord National hotel. Construction of the Gaylord National hotel was substantially completed in April 2008.

The $1.0 Billion Credit Facility was (i) secured by a first mortgage and lien on the real property and related personal and intellectual property of the Company’s Gaylord Opryland hotel, Gaylord Texan hotel, Gaylord Palms hotel, Gaylord National hotel and pledges of equity interests in the entities that own such properties and (ii) guaranteed by each of the four wholly owned subsidiaries that own the four hotels. Advances were subject to a 60% borrowing base, based on the appraisal value of the hotel properties (reduced to 50% in the event a hotel property was sold).

In addition, the $1.0 Billion Credit Facility contained certain covenants which, among other things, limited 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 $1.0 Billion Credit Facility were as follows:

	•		The Company must maintain a consolidated funded indebtedness to total asset value ratio as of the end of each calendar quarter (i) following the closing date of the $1.0 Billion Credit Facility through the calendar quarter ending immediately prior to the first full quarter during which the Gaylord National hotel is substantially completed, of not more than 70% and (ii) for all calendar quarters thereafter, of not more than 65%.
	•		The Company must maintain a consolidated tangible net worth of not less than the sum of $550.0 million, increased on a cumulative basis as of the end of each calendar quarter, commencing with the calendar quarter ending March 31, 2005, by an amount equal to (i) 75% of consolidated net income (to the extent positive) for the calendar quarter then ended, plus (ii) 75% of the proceeds received by the Company or any of the Company’s subsidiaries in connection with any equity issuance.
	•		The Company must maintain a minimum consolidated fixed charge coverage ratio of not less than 2.00 to 1.00 for all calendar quarters during the term of the credit facility.
	•		The Company 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 interest rate equal to the then current seven year Treasury Note plus 0.25%) of not less than 1.60 to 1.00.

As of June 30, 2008, the Company was in compliance with all covenants. As of June 30, 2008, $665.0 million of borrowings were outstanding under the $1.0 Billion Credit Facility, and the lending banks had issued $10.7 million of letters of credit under the facility for the Company, which left $324.3 million of availability under the credit facility (subject to the satisfaction of debt incurrence tests under the indentures governing our senior notes). The $1.0 Billion Credit Facility was cross-defaulted to our other indebtedness. On July 25, 2008, the $1.0 Billion Credit Facility was refinanced as described in Note 20.

8. SECURED FORWARD EXCHANGE CONTRACT:

During May 2000, the Company entered into a seven-year secured forward exchange contract (“SFEC”) with an affiliate of Credit Suisse First Boston with respect to 10,937,900 shares of Viacom, Inc. Class B common stock. Effective January 3, 2006, Viacom, Inc. completed a transaction to separate Viacom, Inc. into two publicly traded companies named Viacom, Inc. and CBS Corporation by converting (i) each outstanding share of Viacom, Inc. Class A common stock into 0.5 shares of Viacom, Inc. Class A common stock and 0.5 shares of CBS Corporation Class A common stock and (ii) each outstanding share of Viacom Class B common stock into 0.5 shares of Viacom, Inc. Class B common stock and 0.5 shares of CBS Corporation Class B common stock. As a result of this transaction, the Company exchanged its 10,937,900 shares of Viacom, Inc. Class B common

stock for 5,468,950 shares of Viacom, Inc. Class B common stock (“Viacom Stock”) and 5,468,950 shares of CBS Corporation Class B common stock (“CBS Stock”) effective January 3, 2006.

Prior to its maturity in May 2007, the seven-year SFEC had a notional amount of $613.1 million and required contract payments based upon a stated 5% rate. The Company’s obligation under the SFEC was collateralized by a security interest in the Company’s Viacom Stock and CBS Stock. The SFEC protected the Company against decreases in the combined fair market value of the Viacom Stock and CBS Stock below $56.05 per share by way of a put option; the SFEC also provided for participation in the increases in the combined fair market value of the Viacom Stock and CBS Stock in that the Company received 100% of the appreciation between $56.05 and $64.45 per share and, by way of a call option, 25.93% of the appreciation above $64.45 per share, as of March 31, 2007. The Company realized cash proceeds from the SFEC of $506.5 million, net of discounted prepaid contract payments and prepaid interest related to the first 3.25 years of the contract and transaction costs totaling $106.6 million. In October 2000, the Company prepaid the remaining 3.75 years of contract interest payments required by the SFEC of $83.2 million. As a result of the prepayment, the Company was not required to make any further contract interest payments during the seven-year term of the SFEC. Additionally, as a result of the prepayment, the Company was released from certain covenants of the SFEC, which related to sales of assets, additional indebtedness and liens. The Company recognized the prepaid contract payments and deferred financing charges associated with the SFEC as interest expense over the seven-year contract period using the effective interest method, which resulted in non-cash interest expense of $3.8 million and $10.5 million for the three months and six months ended June 30, 2007, respectively.

During May 2007, the SFEC matured and the Company delivered all of the Viacom Stock and CBS Stock to Credit Suisse First Boston in full satisfaction of the $613.1 million debt obligation under the SFEC. As a result, the debt obligation, Viacom Stock, CBS Stock, put option, call option, and deferred financing costs related to the SFEC were removed from the consolidated balance sheet.

In accordance with the provisions of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”) as amended, certain components of the secured forward exchange contract are considered derivatives, as discussed in Note 9.

9. DERIVATIVE FINANCIAL INSTRUMENTS:

The Company utilizes derivative financial instruments to manage risk exposure to changes in the variable interest rate on portions of its variable rate debt, changes in the value of portions of its fixed rate debt, and changes in the prices at which the Company purchases natural gas. Prior to May 2007, the Company also used derivative financial instruments to manage risk exposure to changes in the value of its Viacom Stock and CBS Stock.

Variable Rate Debt

On February 26, 2008, the Company entered into a series of forward-starting interest rate swaps with a combined notional amount of $403.0 million to convert the variable rate on $403.0 million aggregate principal amount of borrowings under the delayed draw term loan portion of the Company’s $1.0 Billion Credit Facility to a fixed rate to manage the Company’s exposure to changes in interest rates on these borrowings. As discussed in Note 20, these interest rate swaps were terminated by the Company in July 2008 in connection with the Company’s refinancing of the $1.0 Billion Credit Facility. Under these swap agreements, which were scheduled to expire on various dates through March 9, 2010, the Company received a variable rate equal to 3-month LIBOR and paid a weighted average fixed rate of 2.98% during the term of the swap agreements. The critical terms of the swap agreements matched the critical terms of the borrowings under the delayed draw term loan portion of the Company’s $1.0 Billion Credit Facility. The Company designated these interest rate swaps as cash flow hedges. As of June 30, 2008, the Company determined that, based upon dealer quotes, the fair value of the interest rate swap agreements was a $2.4 million asset. The Company recorded a derivative asset of

$2.4 million and accumulated other comprehensive income, net of tax, of $1.6 million. The Company recorded no ineffectiveness through operations related to these interest rate swaps during the three months or six months ended June 30, 2008.

Fixed Rate Debt

Upon issuance of the 8% Senior Notes, the Company entered into two interest rate swap agreements with a combined notional amount of $125.0 million to convert the fixed rate on $125.0 million of the 8% Senior Notes to a variable rate in order to access the lower borrowing costs that were available on floating-rate debt. Under these swap agreements, which mature on November 15, 2013, the Company receives a fixed rate of 8% and pays a variable rate, in arrears, equal to six-month LIBOR plus 2.95%. The terms of the swap agreement mirror the terms of the 8% Senior Notes, including semi-annual settlements on the 15^th of May and November each year. Under the provisions of SFAS 133, as amended, changes in the fair value of this interest rate swap agreement must be offset against the corresponding change in fair value of the 8% Senior Notes through earnings. The Company has determined that there will not be an ineffective portion of this fair value hedge and, therefore, no impact on earnings. As of June 30, 2008 and December 31, 2007, the Company determined that, based upon dealer quotes, the fair value of these interest rate swap agreements was $0.5 million and $2.0 million, respectively. The Company recorded a derivative asset and an offsetting increase in the balance of the 8% Senior Notes accordingly.

Natural Gas Risk Management

The Company uses variable to fixed natural gas price swap contracts to manage unanticipated changes in natural gas and electricity prices. The contracts are based on forecasted usage of natural gas measured in dekatherms.

The Company has designated the variable to fixed natural gas price swap contracts as cash flow hedges. The Company values the outstanding contracts based on pricing provided by a financial institution and reviewed by the Company, with the offset applied to other comprehensive income, net of applicable income taxes, and earnings for any hedge ineffectiveness. Any gain or loss is reclassified from other comprehensive income and recognized in operating costs in the same period or periods during which the hedged transaction affects earnings.

At June 30, 2008, the Company had one variable to fixed natural gas price swap contract that matures in July 2008 with an aggregate notional amount of approximately 94,000 dekatherms. The fair value of this swap contract was $0.5 million as of June 30, 2008. The Company recorded a derivative asset and an offsetting increase in accumulated other comprehensive income, net of applicable income taxes, accordingly. At December 31, 2007, the Company had variable to fixed natural gas price swap contracts that matured from January 2008 to July 2008 with an aggregate notional amount of approximately 601,000 dekatherms. The fair value of these contracts was $45,000. The Company recorded a derivative asset and an offsetting increase in accumulated other comprehensive income, net of applicable income taxes, accordingly.

The ineffective portion of the derivative is recognized in other gains and losses within the accompanying condensed consolidated statements of operations and was not significant for the periods reported. The amount that the Company anticipates that will be reclassified out of accumulated other comprehensive loss and into earnings in the next twelve months is a gain of approximately $0.5 million.

Viacom Stock and CBS Stock

Upon adoption of SFAS 133, the Company valued the SFEC based on pricing provided by a financial institution and reviewed by the Company. The financial institution’s market prices are prepared on a mid-market basis by reference to proprietary models and do not reflect any bid/offer spread. As further discussed in Note 8, the

SFEC matured in May 2007. For the three months and six months ended June 30, 2007, the Company recorded net pretax (losses) gains in the Company’s condensed consolidated statement of operations of ($6.4) million and $3.1 million, respectively, related to the (decrease) increase in the fair value of the derivatives associated with the SFEC.

10. SUPPLEMENTAL CASH FLOW DISCLOSURES:

Cash paid for interest related to continuing operations for the three months and six months ended June 30, 2008 and 2007 was comprised of:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(in thousands)		2008				2007				2008				2007
Debt interest paid		$	30,057			$	28,497			$	38,445			$	35,373
Deferred financing costs paid			—				202				—				3,883
Capitalized interest			(373	)			(8,566	)			(15,610	)			(14,294	)
Cash interest paid, net of capitalized interest		$	29,684			$	20,133			$	22,835			$	24,962

Income taxes paid were $1.5 million and $0.7 million for the six months ended June 30, 2008 and 2007, respectively.

As further discussed in Note 4, the Company received two bonds from Prince George’s County, Maryland during the second quarter of 2008 in connection with the development of Gaylord National. The receipt of these bonds is reflected as an increase in notes receivable and decrease in property and equipment of $150.4 million in the accompanying condensed consolidated statement of cash flows.

11. GOODWILL AND INTANGIBLES:

The carrying amount of goodwill in continuing operations was $6.9 million at June 30, 2008 and December 31, 2007. The carrying amount of indefinite-lived intangible assets not subject to amortization in continuing operations was $1.5 million at June 30, 2008 and December 31, 2007. The gross carrying amount of amortized intangible assets in continuing operations was $1.1 million at June 30, 2008 and December 31, 2007. The related accumulated amortization of amortized intangible assets in continuing operations was $0.9 million at June 30, 2008 and December 31, 2007. The amortization expense related to intangible assets from continuing operations during the three months ended June 30, 2008 and 2007 was $15,000 and $13,000, respectively. The amortization expense related to intangible assets from continuing operations during the six months ended June 30, 2008 and 2007 was $27,000 and $26,000, respectively. The estimated amounts of amortization expense for the next five years are as follows (in thousands):

Year 1		$	60
Year 2			49
Year 3			32
Year 4			3
Year 5			3
Total		$	147

12. STOCK PLANS:

The Company has adopted, and the Company’s shareholders have approved, the 2006 Omnibus Incentive Plan (the “2006 Plan”) to replace the Company’s 1997 Omnibus Stock Option and Incentive Plan (the “1997 Plan”). The 2006 Plan permits the grant of stock options, restricted stock, and restricted stock units to its directors and employees for up to 2,690,000 shares of common stock, which includes approximately 2,000,000 newly authorized shares and 690,000 shares that were authorized and available for grant under the 1997 Plan. The 2006 Plan also provides that no more than 1,350,000 of those shares may be granted for awards other than options or stock appreciation rights. The Company believes that awards under the 2006 Plan better align the interests of its directors and employees with those of its shareholders. Stock option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant and generally expire ten years after the date of grant. Generally, stock options granted to non-employee directors are exercisable after one year from the date of grant, while options granted to employees are exercisable one to four years from the date of grant. The Company records compensation expense equal to the fair value of each stock option award granted on a straight line basis over the option’s vesting period. The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing formula. At June 30, 2008 and December 31, 2007, there were 3,890,881 and 3,668,728 shares, respectively, of the Company’s common stock reserved for future issuance pursuant to the exercise of outstanding stock options under the 2006 Plan and the 1997 Plan.

The 2006 Plan also provides for the award of restricted stock and restricted stock units (“Restricted Stock Awards”). Restricted Stock Awards granted to non-employee directors generally vest one year from the date of grant, with certain restrictions on transfer. Restricted Stock Awards granted to employees generally vest one to four years from the date of grant. The fair value of Restricted Stock Awards is determined based on the market price of the Company’s stock at the date of grant. The Company records compensation expense equal to the fair value of each Restricted Stock Award granted over the vesting period. At June 30, 2008 and December 31, 2007, Restricted Stock Awards of 140,826 and 95,630 shares, respectively, were outstanding.

Under its Performance Accelerated Restricted Stock Unit Program (“PARSUP”) pursuant to the 2006 Plan, the Company granted selected executives and other key employees restricted stock units, the vesting of which occurred upon the earlier of February 2008 or the achievement of various company-wide performance goals. The fair value of PARSUP awards was determined based on the market price of the Company’s stock at the date of grant. The Company recorded compensation expense equal to the fair value of each PARSUP award granted on a straight line basis over a period beginning on the grant date and ending February 2008. All PARSUP awards vested in February 2008, but certain recipients elected to defer receipt of their vested PARSUP awards. At June 30, 2008 and December 31, 2007, PARSUP awards of 178,000 and 521,000 shares were outstanding.

Under its long term incentive plan for key executives (“LTIP”) pursuant to the 2006 Plan, in February 2008 the Company granted selected executives and other key employees 449,500 restricted stock units (“LTIP Restricted Stock Units”) and 650,000 stock options (“LTIP Stock Options”), which will replace annual grants of stock based compensation awards to these employees over the next three years. The LTIP Restricted Stock Units cliff vest at the end of their four-year term. The number of LTIP Restricted Stock Units that vest will be determined at the end of their term based on the achievement of various company-wide performance goals. The Company expects that the performance goals will be achieved and all of the LTIP Restricted Stock Units granted will vest at the end of their term. The Company is recording compensation expense equal to the fair value of all LTIP Restricted Stock Units granted on a straight-line basis over the vesting period. Should any of the performance goals not be achieved, the Company will reduce compensation expense accordingly. The fair value of the LTIP Restricted Stock Units was determined based on the market price of the Company’s stock at the date of grant. The LTIP Stock Options, which vest two to four years from the date of grant and have a term of ten years, were granted with an exercise price of $38.00, while the market price of the Company’s common stock on the grant date was $31.02. As a result of this market condition, the Company is recording compensation expense equal to the

fair value of each LTIP Stock Option granted on a straight-line basis over the requisite service period for each separately vesting portion of the award. At June 30, 2008 LTIP Restricted Stock Units and LTIP Stock Options of 449,500 and 650,000 shares, respectively, were outstanding.

The compensation cost that has been charged against pre-tax income for all of the Company’s stock-based compensation plans was $3.2 million and $2.6 million for the three months ended June 30, 2008 and 2007, respectively, and $6.1 million and $5.0 million for the six months ended June 30, 2008 and 2007, respectively.

The Company also has an employee stock purchase plan whereby substantially all employees are eligible to participate in the purchase of designated shares of the Company’s common stock. Participants in the plan purchase these shares at a price equal to 95% of the closing price at the end of each quarterly stock purchase period. The Company issued 4,473 and 2,331 shares of common stock at an average price per share of $22.76 and $50.96 pursuant to this plan during the three months ended June 30, 2008 and 2007, respectively.

13. RETIREMENT AND POSTRETIREMENT BENEFITS OTHER THAN PENSION PLANS:

Net periodic pension expense reflected in the accompanying condensed consolidated statements of operations included the following components for the three months and six months ended June 30 (in thousands):

		Three months ended								Six months ended
		June 30,								June 30,
		2008				2007				2008				2007
Service cost		$	64			$	60			$	128			$	120
Interest cost			1,306				1,220				2,612				2,440
Expected return on plan assets			(1,204	)			(1,094	)			(2,408	)			(2,188	)
Amortization of net actuarial loss			296				564				592				1,128
Amortization of prior service cost			1				1				2				2
Total net periodic pension expense		$	463			$	751			$	926			$	1,502

Net postretirement benefit expense reflected in the accompanying condensed consolidated statements of operations included the following components for the three months and six months ended June 30 (in thousands):

		Three months ended								Six months ended
		June 30,								June 30,
		2008				2007				2008				2007
Service cost		$	22			$	27			$	44			$	54
Interest cost			300				284				600				568
Amortization of net actuarial loss			—				10				—				20
Amortization of net prior service cost			—				(24	)			—				(48	)
Amortization of curtailment gain			(61	)			(61	)			(122	)			(122	)
Total net postretirement benefit expense		$	261			$	236			$	522			$	472

14. INCOME TAXES:

As of June 30, 2008 and December 31, 2007, the Company had $15.4 million and $15.1 million of unrecognized tax benefits, respectively, of which $7.5 million would affect the Company’s effective tax rate if recognized. These liabilities are recorded in other long-term liabilities in the accompanying condensed consolidated balance sheets. It is expected that the unrecognized tax benefits will change in the next twelve

months; however, the Company does not expect the change to have a significant impact on the results of operations or the financial position of the Company.

15. NEWLY ISSUED ACCOUNTING STANDARDS:

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No 87, 88, 106, and 132(R)” (“SFAS 158”). SFAS 158 requires plan sponsors of defined benefit pension and other postretirement benefit plans (collectively, “postretirement benefit plans”) to recognize the funded status of their postretirement benefit plans in the statement of financial position, measure the fair value of plan assets and benefit obligations as of the date of the fiscal year-end statement of financial position, and provide additional disclosures. On December 31, 2006, we adopted the recognition and disclosure provisions of SFAS 158. The effect of adopting SFAS 158 on the Company’s financial condition at December 31, 2006 has been included in the accompanying consolidated financial statements. SFAS 158’s provisions regarding the change in the measurement date of postretirement benefit plans is effective for fiscal years ending after December 15, 2008. The Company will adopt the measurement date provision in the fiscal year ending December 31, 2008. The Company does not expect the adoption of SFAS 158 to have a material impact on its consolidated financial position and results of operations.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51” (“SFAS 160”). This statement establishes accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 clarifies that a non-controlling interest in a subsidiary, which is sometimes referred to as minority interest, is an ownership interest in the consolidated entity that should be reported as a component of equity in the consolidated financial statements. Among other requirements, SFAS 160 requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the non-controlling interest. It also requires disclosure, on the face of the consolidated income statement, of the amounts of consolidated net income attributable to the parent and to the non-controlling interest. This statement is effective prospectively, except for certain retrospective disclosure requirements, for fiscal years beginning after December 15, 2008. The Company will adopt the provisions of this statement in the first quarter of 2009. The Company is assessing the potential impact of this statement on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS 141(R)”). SFAS 141(R) replaces SFAS No. 141, “Business Combinations” (“SFAS 141”), and applies to all transactions and other events in which one entity obtains control over one or more other businesses. SFAS 141(R) requires an acquirer, upon initially obtaining control of another entity, to recognize the assets, liabilities and any non-controlling interest in the acquiree at fair value as of the acquisition date. Contingent consideration is required to be recognized and measured at fair value on the date of acquisition rather than at a later date when the amount of that consideration may be determinable beyond a reasonable doubt. SFAS 141(R) requires acquirers to expense acquisition-related costs as incurred rather than allocating such costs to the assets acquired and liabilities assumed, as was previously the case under SFAS 141. Under SFAS 141(R), the requirements of SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” would have to be met in order to accrue for a restructuring plan in purchase accounting. Pre-acquisition contingencies are to be recognized at fair value, unless it is a non-contractual contingency that is not likely to materialize, in which case, no amounts should be recognized in purchase accounting and, instead, that contingency would be subject to the probable and estimable recognition criteria of SFAS No. 5, “Accounting for Contingencies.” This statement is effective prospectively, except for certain retrospective adjustments to deferred tax balances, for fiscal years beginning after December 15, 2008. The Company will adopt the provisions of this statement in the first quarter of 2009. The Company is assessing the potential impact of this statement on its consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161 is intended to improve

financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for fiscal years beginning after November 15, 2008. The Company will adopt the provisions of this statement in the first quarter of 2009. The Company is currently assessing the impact that the adoption of SFAS 161 may have on the financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The Company adopted the provisions of SFAS 157 during the first quarter of 2008. In February 2008, the FASB issued FASB Staff Position No. FAS 157-2, Effective Date of FASB Statement No. 157,” which provides a one year deferral of the effective date of SFAS 157 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed in the financial statements at fair value at least annually. Therefore, the Company has adopted the provisions of SFAS 157 with respect to its financial assets and liabilities only. The adoption of this statement did not have a material impact on the Company’s consolidated results of operations and financial condition. See Note 17 for additional disclosures.

16. COMMITMENTS AND CONTINGENCIES:

On February 23, 2005, the Company acquired approximately 42 acres of land and related land improvements in Prince George’s County, Maryland for approximately $29 million on which the Company has developed the Gaylord National Resort & Convention Center (“Gaylord National”). Gaylord National was substantially completed and opened in April 2008. Approximately $17 million of the cost of the land was paid in the first quarter of 2005, and an additional $2 million was paid upon substantial completion of Gaylord National in April 2008. The remaining $10 million of the cost of the land, which is subject to downward adjustment based on the completion of certain development milestones, is expected to be paid within the next nine to twelve months. The project was originally planned to include a 1,500 room hotel, but the Company expanded the planned hotel to a total of 2,000 rooms. In connection with this expansion, the Company paid an additional $8 million in April 2008 for land improvements related to the expanded facility. The Company has entered into commitments for various expenditures in connection with our Gaylord National development, including for the purchase of land, furniture, fixtures, and equipment, and procuring services in connection with the development. The Company has entered into several agreements with a general contractor and other suppliers for the provision of certain construction services at the site. Construction costs to date have exceeded the Company’s initial estimates from 2004. These increased costs are attributable to: (a) construction materials price escalation that has occurred over the past four years; (b) increased cost of construction labor in the Washington, D.C. marketplace due to historically low unemployment and a high degree of construction activity; (c) the Company’s 500-room expansion and related additional meeting space, and the acceleration of its construction so that the expansion opened concurrently with the original project; and (d) enhancements to the project design. As of June 30, 2008, the Company has spent approximately $936.9 million (excluding $66.1 million of capitalized interest and $48.6 million in preopening costs) on this project and has accrued an additional $97.1 million in the accompanying condensed consolidated balance sheet. The Company anticipates it may receive additional billings as well as proposed change orders from the general contractor for additional costs. The Company intends to vigorously negotiate any such proposed changes with the general contractor to minimize any cost increases.

On July 25, 2006, the Unified Port of San Diego Board of Commissioners and the City of Chula Vista approved a non-binding letter of intent with the Company, outlining the general terms of our development of a 1,500 to 2,000 room convention hotel in Chula Vista, California. The parties recently extended the termination date for the non-binding letter of intent to December 31, 2008, and the parties continue to discuss the terms under which the Company would develop and operate the convention hotel project. If the parties can reach a final agreement, such agreement would be subject to a number of closing conditions and approvals, including but not limited to approval by the California Coastal Commission. At this time, the Company is unable to predict whether such approvals would be forthcoming.

The Company is considering other potential hotel sites throughout the country. The timing and extent of any of these development projects is uncertain, and the Company has not made any commitments, received any government approvals or made any financing plans in connection with these development projects.

On June 20, 2006, the Company entered into a joint venture arrangement with RREEF Global Opportunities Fund II, LLC, a private real estate fund managed by DB Real Estate Opportunities Group (“RREEF”), and acquired a 19.9% ownership interest in the joint venture, Waipouli Holdings, LLC, in exchange for the Company’s capital contribution of $3.8 million to Waipouli Holdings, LLC. On June 20, 2006, through a wholly-owned subsidiary named Waipouli Owner, LLC, Waipouli Holdings, LLC acquired the 311-room ResortQuest Kauai Beach at Makaiwa Hotel and related assets located in Kapaa, Hawaii (“the Kauai Hotel”) for an aggregate purchase price of $70.8 million. Waipouli Owner, LLC financed the purchase of the Kauai Hotel by entering into a series of loan transactions with Morgan Stanley Mortgage Capital, Inc. (the “Kauai Hotel Lender”) consisting of a $52.0 million senior loan secured by the Kauai Hotel, an $8.2 million senior mezzanine loan secured by the ownership interest of Waipouli Owner, LLC, and an $8.2 million junior mezzanine loan secured by the ownership interest of Waipouli Owner, LLC (collectively, the “Kauai Hotel Loans”). In October 2006, Waipouli Owner, LLC requested RREEF and the Company to make an additional capital contribution of $1.7 million to Waipouli Holdings, LLC to fund the purchase of the land on which the Kauai Hotel is built. The Company elected not to make the requested capital contribution, which diluted its ownership interest in Waipouli Holdings, LLC from 19.9% to 18.1% as of June 30, 2008. In connection with Waipouli Owner, LLC’s execution of the Kauai Hotel Loans, RREEF entered into three separate Guaranties of Recourse Obligations with the Kauai Hotel Lender whereby it guaranteed Waipouli Owner, LLC’s obligations under the Kauai Hotel Loans for as long as those loans remain outstanding (i) in the event of certain types of fraud, breaches of environmental representations or warranties, or breaches of certain “special purpose entity” covenants by Waipouli Owner, LLC, or (ii) in the event of bankruptcy or reorganization proceedings of Waipouli Owner, LLC. As a part of the joint venture arrangement and simultaneously with the closing of the purchase of the Kauai Hotel, the Company entered into a Contribution Agreement with RREEF, whereby the Company agreed that, in the event that RREEF is required to make any payments pursuant to the terms of these guarantees, it will contribute to RREEF an amount equal to its pro rata share of any such guaranty payments. The Company estimates that the maximum potential amount that the Company could be liable for under this contribution agreement is $12.4 million, which represents 18.1% of the $68.4 million of total debt that Waipouli Owner, LLC owes to the Kauai Hotel Lender as of June 30, 2008. As of June 30, 2008, the Company had not recorded any liability in the condensed consolidated balance sheet associated with this guarantee. The Company retained its ownership interest in Waipouli Holdings, LLC after the sale of ResortQuest Hawaii.

On May 31, 2005, the Company, through a wholly-owned subsidiary named RHAC, LLC, entered into an agreement to purchase the 716-room Aston Waikiki Beach Hotel and related assets located in Honolulu, Hawaii (“the Waikiki Hotel”) for an aggregate purchase price of $107.0 million. Simultaneously with this purchase, G.O. IB-SIV US, a private real estate fund managed by DB Real Estate Opportunities Group (“IB-SIV”), acquired an 80.1% ownership interest in the parent company of RHAC, LLC, RHAC Holdings, LLC, in exchange for its capital contribution of $19.1 million to RHAC Holdings, LLC. As a part of this transaction, the Company entered into a joint venture arrangement with IB-SIV and retained a 19.9% ownership interest in RHAC Holdings, LLC in exchange for its $4.7 million capital contribution to RHAC Holdings, LLC. RHAC, LLC financed the purchase of the Waikiki Hotel by entering into a series of loan transactions with Greenwich Capital Financial Products, Inc. (the “Waikiki Hotel Lender”) consisting of a $70.0 million senior loan secured by the Waikiki Hotel and a $16.3 million mezzanine loan secured by the ownership interest of RHAC, LLC (collectively, the “Waikiki Hotel Loans”). On September 29, 2006, RHAC, LLC refinanced the Waikiki Hotel Loans with the Waikiki Hotel Lender, which resulted in the mezzanine loan increasing from $16.3 million to $34.9 million. In connection with RHAC, LLC’s execution of the Waikiki Hotel Loans, IB-SIV, entered into two separate Guaranties of Recourse Obligations with the Waikiki Hotel Lender whereby it guaranteed RHAC, LLC’s obligations under the Waikiki Hotel Loans for as long as those loans remain outstanding (i) in the event of certain types of fraud, breaches of environmental representations or warranties, or breaches of certain “special purpose entity” covenants by RHAC, LLC, or (ii) in the event of bankruptcy or reorganization

proceedings of RHAC, LLC. As a part of the joint venture arrangement and simultaneously with the closing of the purchase of the Waikiki Hotel, the Company entered into a Contribution Agreement with IB-SIV, whereby the Company agreed that, in the event that IB-SIV is required to make any payments pursuant to the terms of these guarantees, it will contribute to IB-SIV an amount equal to 19.9% of any such guaranty payments. The Company estimates that the maximum potential amount for which the Company could be liable under this contribution agreement is $20.9 million, which represents 19.9% of the $104.9 million of total debt that RHAC, LLC owes to the Waikiki Hotel Lender as of June 30, 2008. As of June 30, 2008, the Company had not recorded any liability in the condensed consolidated balance sheet associated with this guarantee. The Company retained its ownership interest in RHAC Holdings, LLC after the sale of ResortQuest Hawaii.

On February 22, 2005, the Company concluded the settlement of litigation with Nashville Hockey Club Limited Partnership (“NHC”), which owned the Nashville Predators NHL hockey team, over (i) NHC’s obligation to redeem the Company’s ownership interest, and (ii) the Company’s obligations under the Nashville Arena Naming Rights Agreement dated November 24, 1999. Under the Naming Rights Agreement, which had a 20-year term through 2018, the Company was required to make annual payments to NHC, beginning at $2,050,000 in 1999 and with a 5% escalation each year thereafter, and to purchase a minimum number of tickets to Predators games each year. At the closing of the settlement, NHC redeemed all of the Company’s outstanding limited partnership units in the Predators pursuant to a Purchase Agreement dated February 22, 2005 effectively terminating the Company’s ownership interest in the Predators. In addition, the Naming Rights Agreement was cancelled pursuant to the Acknowledgment of Termination of Naming Rights Agreement. As a part of the settlement, the Company made a one-time cash payment to NHC of $4 million and issued to NHC a 5-year, $5 million promissory note bearing interest at 6% per annum. The note is payable at $1 million per year for 5 years, and the second payment was made on October 5, 2007. The Company’s obligation to pay the outstanding amount under the note shall terminate immediately if, at any time before the note is paid in full, the Predators cease to be an NHL team playing their home games in Nashville, Tennessee. In addition, pursuant to a Consent Agreement among the Company, the National Hockey League and owners of NHC, the Company’s guaranty described below has been limited as described below.

In connection with the Company’s execution of an Agreement of Limited Partnership with NHC on June 25, 1997, the Company, its subsidiary CCK, Inc., Craig Leipold, Helen Johnson-Leipold (Mr. Leipold’s wife) and Samuel C. Johnson (Mr. Leipold’s father-in-law) entered into a guaranty agreement executed in favor of the National Hockey League (NHL). This agreement provides for a continuing guarantee of the following obligations for as long as either of these obligations remains outstanding: (i) all obligations under the expansion agreement between NHC and the NHL; and (ii) all operating expenses of NHC. The maximum potential amount which the Company and CCK, collectively, could be liable under the guaranty agreement is $15.0 million, although the Company and CCK would have recourse against the other guarantors if required to make payments under the guarantee. In connection with the legal settlement with the Nashville Predators consummated on February 22, 2005, this guaranty has been limited so that the Company is not responsible for any debt, obligation or liability of NHC that arises from any act, omission or circumstance occurring after the date of the legal settlement. As of June 30, 2008, the Company had not recorded any liability in the condensed consolidated balance sheet associated with this guarantee.

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

17. FAIR VALUE MEASUREMENTS:

In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States of America, and expands disclosures about fair value measurements. The Company adopted the provisions of SFAS 157 during the first quarter of 2008. Although the adoption of

SFAS 157 did not materially impact its financial condition, results of operations, or cash flow, the Company is now required to provide additional disclosures as part of its financial statements.

SFAS 157 establishes 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.

As of June 30, 2008, the Company held certain assets and liabilities that are required to be measured at fair value on a recurring basis. These included the Company’s derivative instruments related to interest rates and natural gas prices.

The Company’s interest rate and natural gas derivative instruments consist of over-the-counter (“OTC”) swap contracts, which are not traded on a public exchange. See Note 9 for further information on the Company’s derivative instruments and hedging activities. The Company determines the fair values of these swap contracts based on quotes by counterparties to these contracts. Therefore, the Company has categorized these swap contracts as Level 2. The Company has consistently applied these valuation techniques in all periods presented and believes it has obtained the most accurate information available for the types of derivative contracts it holds.

The Company’s assets and liabilities measured at fair value on a recurring basis subject to the disclosure requirements of SFAS 157 at June 30, 2008, were as follows (in thousands):

						Quoted Prices				Signficant
						in Active				Other				Significant
						Markets for				Observable				Unobservable
		June 30,				Identical Assets				Inputs				Inputs
		2008				(Level 1)				(Level 2)				(Level 3)
Variable to fixed natural gas swaps		$	528			$	—			$	528			$	—
Fixed to variable interest rate swaps			450				—				450				—
Variable to fixed interest rate swaps			2,420				—				2,420				—
Total assets measured at fair value		$	3,398			$	—			$	3,398			$	—

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment to FASB Statement No. 115,” which permits entities to choose to measure eligible items at fair value at specified election dates. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings at each subsequent reporting date. The fair value option (i) may be applied instrument by instrument, with certain exceptions, (ii) is irrevocable (unless a new election date occurs) and (iii) is applied only to entire instruments and not to portions of instruments. The Company adopted the provisions of this statement in the first quarter of 2008. The Company has elected not to apply the fair value option to any of its financial instruments, so the adoption of this statement did not have a material impact on its consolidated financial position and results of operations.

18. STOCK REPURCHASE PROGRAM:

On February 7, 2008, the Company announced that its board of directors approved a stock repurchase program to repurchase up to $80 million of the Company’s common stock. This program is intended to be implemented through purchases made from time to time in the open market in accordance with applicable SEC requirements. The timing, prices and sizes of purchases will depend upon prevailing stock prices, general economic and market conditions and other considerations. The repurchase program does not obligate the Company to acquire any particular amount of common stock and the repurchase program may be suspended at any time at the Company’s discretion. During the three months and six months ended June 30, 2008, the Company repurchased 0 and 656,700 shares, respectively, of its common stock at a weighted average purchase price of $30.42 per share.

19. FINANCIAL REPORTING BY BUSINESS SEGMENTS:

The Company’s continuing operations are organized and managed based upon its products and services. The following information from continuing operations is derived directly from the segments’ internal financial reports used for corporate management purposes. As further discussed in Note 6, the Company disposed of its ResortQuest segment during the second quarter of 2007. The results of operations of the ResortQuest segment have been reflected as discontinued operations for all periods presented.

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(in thousands)		2008				2007				2008				2007
Revenues:
Hospitality		$	233,614			$	168,408			$	411,558			$	334,869
Opry and Attractions			24,474				20,922				41,590				36,764
Corporate and Other			181				51				356				106
Total		$	258,269			$	189,381			$	453,504			$	371,739
Depreciation and amortization:
Hospitality		$	25,985			$	16,262			$	44,246			$	32,687
Opry and Attractions			1,269				1,424				2,569				2,980
Corporate and Other			1,744				1,617				3,394				3,096
Total		$	28,998			$	19,303			$	50,209			$	38,763
Operating income (loss):
Hospitality		$	41,663			$	33,323			$	77,155			$	60,885
Opry and Attractions			3,247				3,144				2,203				2,138
Corporate and Other			(12,796	)			(13,851	)			(26,250	)			(26,862	)
Preopening costs			(3,246	)			(3,230	)			(18,821	)			(6,175	)
Impairment and other charges			—				—				(12,031	)			—
Total operating income			28,868				19,386				22,256				29,986
Interest expense, net of amounts capitalized			(18,548	)			(13,611	)			(22,127	)			(32,388	)
Interest income			3,773				1,630				4,097				2,147
Unrealized gain on Viacom stock and CBS stock			—				9,147				—				6,358
Unrealized (loss) gain on derivatives			—				(6,448	)			—				3,121
(Loss) income from unconsolidated companies			(454	)			2,931				(218	)			1,013
Other gains and (losses), net			(9	)			140,212				50				146,075
Income before provision for income taxes		$	13,630			$	153,247			$	4,058			$	156,312

20. SUBSEQUENT EVENTS

On July 25, 2008, the Company refinanced the $1.0 Billion Credit Facility by entering into a Second Amended and Restated Credit Agreement (the “New $1.0 Billion Credit Facility”) by and among the Company, certain subsidiaries of the Company party thereto, as guarantors, the lenders party thereto and Bank of America, N.A., as administrative agent. The New $1.0 Billion Credit Facility represents a refinancing of the Company’s $1.0 Billion Credit Facility.

The New $1.0 Billion Credit Facility consists of the following components: (a) $300.0 million senior secured revolving credit facility, which includes a $50.0 million letter of credit sublimit and a $30.0 million sublimit for swingline loans, and (b) a $700.0 million senior secured term loan facility. The term loan facility was fully funded at closing. The New $1.0 Billion Credit Facility also includes an accordion feature that will allow the Company to increase the New $1.0 Billion Credit Facility credit facility by a total of up to $400.0 million in no more than three occasions, subject to securing additional commitments from existing lenders or new lending institutions. The revolving loan, letters of credit, and term loan mature on July 25, 2012. At the Company’s election, the revolving loans and the term loans will bear interest at an annual rate of LIBOR plus 2.50% or a base rate (the higher of the lead bank’s prime rate and the federal funds rate) plus 0.50%. Interest on the Company’s borrowings is payable quarterly, in arrears, for base rate loans and at the end of each interest rate period for LIBOR rate-based loans. Principal is payable in full at maturity. The Company will be required to pay a commitment fee of 0.25% per year of the average unused portion of the New $1.0 Billion Credit Facility.

The purpose of the New $1.0 Billion Credit Facility is for working capital, capital expenditures, the financing of the remaining costs and expenses related to the construction of the Gaylord National hotel, and other corporate purposes.

The New $1.0 Billion Credit Facility is (i) secured by a first mortgage and lien on the real property and related personal and intellectual property of the Company’s Gaylord Opryland hotel, Gaylord Texan hotel, Gaylord Palms hotel and Gaylord National hotel, and pledges of equity interests in the entities that own such properties and (ii) guaranteed by each of the four wholly owned subsidiaries that own the four hotels. Advances are subject to a 55% borrowing base, based on the appraisal value of the hotel properties (reduced to 50% in the event a hotel property is sold).

In addition, the New $1.0 Billion 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 New $1.0 Billion Credit Facility are as follows:

	•		The Company must maintain a consolidated funded indebtedness to total asset value ratio as of the end of each calendar quarter of not more than 65%.
	•		The Company must maintain a consolidated tangible net worth of not less than the sum of $600.0 million, increased on a cumulative basis as of the end of each calendar quarter, commencing with the calendar quarter ending March 31, 2005, by an amount equal to (i) 75% of consolidated net income (to the extent positive) for the calendar quarter then ended, plus (ii) 75% of the proceeds received by the Company or any of the Company’s subsidiaries in connection with any equity issuance.
	•		The Company must maintain a minimum consolidated fixed charge coverage ratio, as defined in the agreement, of not less than 2.00 to 1.00.

•

The Company 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 New $1.0 Billion Credit Facility, the commitments under the New $1.0 Billion Credit Facility may be terminated and the principal amount outstanding under the New $1.0 Billion Credit Facility, together with all accrued unpaid interest and other amounts owing in respect thereof, may be declared immediately due and payable. The New $1.0 Billion Credit Facility is cross-defaulted to our other indebtedness.

In connection with refinancing the $1.0 Billion Credit Facility, the Company terminated the variable to fixed interest rate swaps on $403.0 million aggregate principal amount of borrowings under the delayed draw term loan portion of the $1.0 Billion Credit Facility in July 2008. Based upon dealer quotes, the fair value of these interest rate swaps was a $1.3 million asset as of the termination date. Accordingly, the Company received $1.3 million in cash from the termination of these swaps, which will be recorded as a reduction of interest expense, net of tax, during the third quarter of 2008.

Also in connection with the refinancing of the $1.0 Billion Credit Facility, the Company entered into a new series of forward-starting interest rate swaps with a combined notional amount of $500.0 million to effectively convert the variable rate on $500.0 million aggregate principal amount of borrowings under the term loan portion of the Company’s New $1.0 Billion Credit Facility to a fixed rate to manage the Company’s exposure to changes in interest rates on these borrowings. Under these swap agreements, which expire on various dates through July 25, 2011, the Company receives a variable rate equal to 3-month LIBOR and pays a weighted average fixed rate of 3.94% during the term of the swap agreements.

21. INFORMATION CONCERNING GUARANTOR AND NON-GUARANTOR SUBSIDIARIES:

Not all of the Company’s subsidiaries have guaranteed the 8% Senior Notes and 6.75% Senior Notes. The 8% Senior Notes and 6.75% Senior Notes are guaranteed on a senior unsecured basis by generally all of the Company’s active domestic subsidiaries (the “Guarantors”). The Company’s investment in joint ventures and certain discontinued operations and inactive subsidiaries (the “Non-Guarantors”) do not guarantee the 8% Senior Notes and 6.75% Senior Notes.

The condensed consolidating financial information includes certain allocations of revenues and expenses based on management’s best estimates, which are not necessarily indicative of financial position, results of operations and cash flows that these entities would have achieved on a stand alone basis.

GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES

Condensed Consolidating Statement of Operations

For the Three Months Ended June 30, 2008

										Non-
(in thousands)		Issuer				Guarantors				Guarantors				Eliminations				Consolidated
Revenues		$	3,113			$	258,537			$	—			$	(3,381	)		$	258,269
Operating expenses:
Operating costs			36				149,324				—				(317	)			149,043
Selling, general and administrative			3,839				44,360				—				(85	)			48,114
Management fees			—				2,979				—				(2,979	)			—
Preopening costs			—				3,246				—				—				3,246
Depreciation			870				26,822				—				—				27,692
Amortization			488				818				—				—				1,306
Operating (loss) income			(2,120	)			30,988				—				—				28,868
Interest expense, net of amounts capitalized			(18,918	)			(37,645	)			(109	)			38,124				(18,548	)
Interest income			7,741				29,612				4,544				(38,124	)			3,773
Loss from unconsolidated companies			—				(454	)			—				—				(454	)
Other gains and (losses), net			(5	)			(4	)			—				—				(9	)
(Loss) income before (benefit) provision for income taxes			(13,302	)			22,497				4,435				—				13,630
(Benefit) provision for income taxes			(6,825	)			10,035				1,872				—				5,082
Equity in subsidiaries’ earnings, net			(15,264	)			—				—				15,264				—
Income from continuing operations			8,787				12,462				2,563				(15,264	)			8,548
Income from discontinued operations, net of taxes			—				1				238				—				239
Net income		$	8,787			$	12,463			$	2,801			$	(15,264	)		$	8,787

GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES

Condensed Consolidating Statement of Operations

For the Three Months Ended June 30, 2007

										Non-
(in thousands)		Issuer				Guarantors				Guarantors				Eliminations				Consolidated
Revenues		$	5			$	189,376			$	—			$	—			$	189,381
Operating expenses:
Operating costs			—				108,771				—				—				108,771
Selling, general and administrative			5,341				33,350				—				—				38,691
Preopening costs			—				3,230				—				—				3,230
Depreciation			1,018				17,318				—				—				18,336
Amortization			501				466				—				—				967
Operating (loss) income			(6,855	)			26,241				—				—				19,386
Interest expense, net of amounts capitalized			(22,153	)			(23,846	)			(7,538	)			39,926				(13,611	)
Interest income			11,036				26,114				4,406				(39,926	)			1,630
Unrealized gain on Viacom stock and CBS stock			9,147				—				—				—				9,147
Unrealized loss on derivatives			(6,448	)			—				—				—				(6,448	)
Loss (income) from unconsolidated companies			—				(138	)			3,069				—				2,931
Other gains and (losses), net			(120	)			19				140,313				—				140,212
(Loss) income before (benefit) provision for income taxes			(15,393	)			28,390				140,250				—				153,247
(Benefit) provision for income taxes			(4,701	)			8,389				55,943				—				59,631
Equity in subsidiaries’ earnings, net			(117,534	)			—				—				117,534				—
Income from continuing operations			106,842				20,001				84,307				(117,534	)			93,616
Income from discontinued operations, net of taxes			—				—				13,226				—				13,226
Net income		$	106,842			$	20,001			$	97,533			$	(117,534	)		$	106,842

GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES

Condensed Consolidating Statement of Operations

For the Six Months Ended June 30, 2008

										Non-
(in thousands)		Issuer				Guarantors				Guarantors				Eliminations				Consolidated
Revenues		$	5,836			$	453,726			$	—			$	(6,058	)		$	453,504
Operating expenses:
Operating costs			36				262,838				—				(343	)			262,531
Selling, general and administrative			8,298				79,506				—				(148	)			87,656
Management fees			—				5,567				—				(5,567	)			—
Preopening costs			—				18,821				—				—				18,821
Impairment and other charges			12,031				—				—				—				12,031
Depreciation			1,756				46,129				—				—				47,885
Amortization			991				1,333				—				—				2,324
Operating (loss) income			(17,276	)			39,532				—				—				22,256
Interest expense, net of amounts capitalized			(37,605	)			(63,151	)			(239	)			78,868				(22,127	)
Interest income			13,722				59,425				9,818				(78,868	)			4,097
Loss from unconsolidated companies			—				(218	)			—				—				(218	)
Other gains and (losses), net			(5	)			55				—				—				50
(Loss) income before (benefit) provision for income taxes			(41,164	)			35,643				9,579				—				4,058
(Benefit) provision for income taxes			(17,503	)			16,081				3,780				—				2,358
Equity in subsidiaries’ (earnings) losses, net			(25,142	)			—				—				25,142				—
Income from continuing operations			1,481				19,562				5,799				(25,142	)			1,700
Income (loss) from discontinued operations, net of taxes			—				32				(251	)			—				(219	)
Net income		$	1,481			$	19,594			$	5,548			$	(25,142	)		$	1,481

GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES

Condensed Consolidating Statement of Operations

For the Six Months Ended June 30, 2007

										Non-
(in thousands)		Issuer				Guarantors				Guarantors				Eliminations				Consolidated
Revenues		$	11			$	371,803			$	—			$	(75	)		$	371,739
Operating expenses:
Operating costs			—				217,356				—				(32	)			217,324
Selling, general and administrative			10,167				69,367				—				(43	)			79,491
Preopening costs			—				6,175				—				—				6,175
Depreciation			2,000				34,885				—				—				36,885
Amortization			988				890				—				—				1,878
Operating (loss) income			(13,144	)			43,130				—				—				29,986
Interest expense, net of amounts capitalized			(46,625	)			(59,722	)			(13,966	)			87,925				(32,388	)
Interest income			17,766				63,650				8,656				(87,925	)			2,147
Unrealized gain on Viacom stock and CBS stock			6,358				—				—				—				6,358
Unrealized gain on derivatives			3,121				—				—				—				3,121
(Loss) income from unconsolidated companies			—				(681	)			1,694				—				1,013
Other gains and (losses), net			5,630				132				140,313				—				146,075
(Loss) income before (benefit) provision for income taxes			(26,894	)			46,509				136,697				—				156,312
(Benefit) provision for income taxes			(8,218	)			14,270				55,987				—				62,039
Equity in subsidiaries’ earnings, net			(128,982	)			—				—				128,982				—
Income from continuing operations			110,306				32,239				80,710				(128,982	)			94,273
Income from discontinued operations, net of taxes			—				—				16,033				—				16,033
Net income		$	110,306			$	32,239			$	96,743			$	(128,982	)		$	110,306