UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

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

Commission file number 1-13079

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o 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.

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

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 October 31, 2009
Common Stock, $.01 par value		46,985,118 shares

 

 

GAYLORD ENTERTAINMENT COMPANY

FORM 10-Q

For the Quarter Ended September 30, 2009
INDEX

		Page
Part I — Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Operations — For the Three Months and Nine Months Ended September 30, 2009 and 2008			3
Condensed Consolidated Balance Sheets — September 30, 2009 and December 31, 2008			4
Condensed Consolidated Statements of Cash Flows — For the Nine Months Ended September 30, 2009 and 2008			5
Notes to Condensed Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			40
Item 3. Quantitative and Qualitative Disclosures About Market Risk			66
Item 4. Controls and Procedures			67
Part II — Other Information
Item 1. Legal Proceedings			67
Item 1A. Risk Factors			68
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			69
Item 3. Defaults Upon Senior Securities			70
Item 4. Submission of Matters to a Vote of Security Holders			70
Item 5. Other Information			70
Item 6. Exhibits			70
SIGNATURES			71
EX-4.2
EX-4.3
EX-31.1
EX-31.2
EX-32.1

Part I — FINANCIAL INFORMATION

Item 1.	—	FINANCIAL STATEMENTS.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
Revenues		$	199,100			$	226,733			$	629,675			$	680,237
Operating expenses:
Operating costs			122,211				147,388				379,955				409,919
Selling, general and administrative			41,482				42,563				129,226				130,219
Preopening costs			—				369				—				19,190
Impairment and other charges			6,586				—				6,586				12,031
Depreciation and amortization			29,482				29,619				86,200				79,828
Operating (loss) income			(661	)			6,794				27,708				29,050
Interest expense, net of amounts capitalized			(18,676	)			(21,918	)			(55,505	)			(44,045	)
Interest income			3,382				4,486				11,411				8,583
Income (loss) income from unconsolidated companies			30				(75	)			147				(293	)
Gain on extinguishment of debt			—				—				24,726				—
Other gains and (losses), net			(84	)			904				3,420				954
(Loss) income before (benefit) provision for income taxes			(16,009	)			(9,809	)			11,907				(5,751	)
(Benefit) provision for income taxes			(2,954	)			(3,303	)			11,315				(945	)
(Loss) income from continuing operations			(13,055	)			(6,506	)			592				(4,806	)
Income (loss) from discontinued operations, net of income taxes			154				986				(15	)			767
Net (loss) income		$	(12,901	)		$	(5,520	)		$	577			$	(4,039	)
Basic (loss) income per share:
(Loss) income from continuing operations		$	(0.32	)		$	(0.16	)		$	0.01			$	(0.12	)
Income from discontinued operations, net of income taxes			0.01				0.02				—				0.02
Net (loss) income		$	(0.31	)		$	(0.14	)		$	0.01			$	(0.10	)
Fully diluted (loss) income per share:
(Loss) income from continuing operations		$	(0.32	)		$	(0.16	)		$	0.01			$	(0.12	)
Income from discontinued operations, net of income taxes			0.01				0.02				—				0.02
Net (loss) income		$	(0.31	)		$	(0.14	)		$	0.01			$	(0.10	)

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

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)

		September 30,				December 31,
		2009				2008
ASSETS
Current assets:
Cash and cash equivalents — unrestricted		$	468,445			$	1,043
Cash and cash equivalents — restricted			1,150				1,165
Trade receivables, less allowance of $711 and $2,016, respectively			52,612				49,114
Deferred income taxes			5,397				6,266
Other current assets			73,281				50,793
Current assets of discontinued operations			63				197
Total current assets			600,948				108,578
Property and equipment, net of accumulated depreciation			2,171,525				2,227,574
Notes receivable, net of current portion			138,278				146,866
Intangible assets, net of accumulated amortization			80				121
Goodwill			329				6,915
Indefinite lived intangible assets			1,480				1,480
Investments			281				1,131
Estimated fair value of derivative assets			—				6,235
Long-term deferred financing costs			22,457				18,888
Other long-term assets			43,130				42,591
Total assets		$	2,978,508			$	2,560,379
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and capital lease obligations		$	266,265			$	1,904
Accounts payable and accrued liabilities			161,430				168,155
Estimated fair value of derivative liabilities			395				1,606
Current liabilities of discontinued operations			849				1,329
Total current liabilities			428,939				172,994
Long-term debt and capital lease obligations, net of current portion			1,235,765				1,260,997
Deferred income taxes			85,273				62,656
Estimated fair value of derivative liabilities			27,543				28,489
Other long-term liabilities			131,259				131,578
Long-term liabilities of discontinued operations			442				446
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, 46,979 and 40,916 shares issued and outstanding, respectively			470				409
Additional paid-in capital			880,298				711,444
Treasury stock of 385 shares, at cost			(4,599	)			—
Retained earnings			235,328				234,751
Accumulated other comprehensive loss			(42,210	)			(43,385	)
Total stockholders’ equity			1,069,287				903,219
Total liabilities and stockholders’ equity		$	2,978,508			$	2,560,379

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2009 and 2008
(Unaudited)
(In thousands)

		2009				2008
Cash Flows from Operating Activities:
Net income (loss)		$	577			$	(4,039	)
Amounts to reconcile net income (loss) to net cash flows provided by operating activities:
Loss (income) from discontinued operations, net of taxes			15				(767	)
(Income) loss from unconsolidated companies			(147	)			293
Impairment and other charges			6,586				12,031
Provision for deferred income taxes			22,939				5,049
Depreciation and amortization			86,200				79,828
Amortization of deferred financing costs			3,400				3,204
Write-off of deferred financing costs			—				1,476
Stock-based compensation expense			8,636				8,990
Excess tax benefit from stock-based compensation			—				(842	)
Gain on extinguishment of debt			(24,726	)			—
Loss on sales of assets			274				276
Changes in (net of acquisitions and divestitures):
Trade receivables			(3,498	)			(29,244	)
Interest receivable			(11,217	)			—
Accounts payable and accrued liabilities			8,167				47,909
Other assets and liabilities			(20,619	)			(25,675	)
Net cash flows provided by operating activities — continuing operations			76,587				98,489
Net cash flows used in operating activities — discontinued operations			(341	)			(482	)
Net cash flows provided by operating activities			76,246				98,007
Cash Flows from Investing Activities:
Purchases of property and equipment			(41,237	)			(331,371	)
Collection of notes receivable			17,461				463
Other investing activities			(1,040	)			(17,149	)
Net cash flows used in investing activities — continuing operations			(24,816	)			(348,057	)
Net cash flows provided by investing activities — discontinued operations			—				756
Net cash flows used in investing activities			(24,816	)			(347,301	)
Cash Flows from Financing Activities:
Net borrowings under credit facility			38,000				302,000
Proceeds from the issuance of convertible notes, net of equity-related issuance costs of $1,881			358,119				—
Deferred financing costs paid			(8,077	)			(10,753	)
Purchase of convertible note hedge			(76,680	)			—
Repurchases of senior notes			(64,519	)			—
Proceeds from the termination of an interest rate swap on senior notes			5,000				—
Proceeds from the issuance of common stock, net of issuance costs of $5,499			125,301				—
Proceeds from the issuance of common stock warrants			43,740				—
Purchases of Company’s common stock			—				(19,999	)
Purchases of treasury stock			(4,599	)			—
Proceeds from exercise of stock option and purchase plans			361				1,632
Excess tax benefit from stock-based compensation			—				842
Decrease in restricted cash and cash equivalents			15				37
Other financing activities, net			(689	)			(1,016	)
Net cash flows provided by financing activities — continuing operations			415,972				272,743
Net cash flows used in financing activities — discontinued operations			—				—
Net cash flows provided by financing activities			415,972				272,743
Net change in cash and cash equivalents			467,402				23,449
Cash and cash equivalents — unrestricted, beginning of period			1,043				23,592
Cash and cash equivalents — unrestricted, end of period		$	468,445			$	47,041

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

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, 2008 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 because of seasonal and short-term variations.

2. NEWLY ISSUED ACCOUNTING STANDARDS:

In September 2006, the Financial Accounting Standards Board (“FASB”) modified Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures” (“Topic 820”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The Company adopted the provisions of this statement during the first quarter of 2008. In February 2008, the FASB modified Topic 820 to provide a one year deferral of the effective date of Topic 820 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 adopted the provisions of Topic 820 with respect to its non-financial assets and non-financial liabilities during the first quarter of 2009. The adoption of this statement with respect to non-financial assets and non-financial liabilities did not have a material impact on the Company’s consolidated results of operations and financial condition. See Note 16 for additional disclosures.

In December 2007, the FASB modified FASB ASC 805, “Business Combinations” (“Topic 805”). This revised guidance applies to all transactions and other events in which one entity obtains control over one or more other businesses. Topic 805 now 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. Topic 805 now requires acquirers to expense acquisition-related costs as incurred rather than allocating such costs to the assets acquired and liabilities assumed, as was previously required. Under this revised guidance, the requirements of FASB ASC 420, “Exit or Disposal Cost Obligations,” 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 FASB ASC 450, “Contingencies.” This statement is effective prospectively and the Company adopted the provisions of this statement in the first quarter of 2009. The adoption of this statement did not have a material impact on the Company’s consolidated financial statements.

In March 2008, the FASB modified FASB ASC 815, “Derivatives and Hedging” (“Topic 815”). This revised guidance is intended to improve financial reporting of 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. The Company adopted the provisions of this statement in the first quarter of 2009, and the adoption of Topic 815 did not have a material impact on the Company’s consolidated financial position or results of operations. See Note 10 for additional disclosures.

In November 2008, the Emerging Issues Task Force (“EITF”) reached a consensus related to FASB ASC 323, “Investments — Equity Method and Joint Ventures” (“Topic 323”). Topic 323 concludes that an equity method investment should be recognized by using a cost accumulation model. In addition, equity method investments as a whole should be assessed for other-than-temporary impairment. The Company adopted the provisions of this statement in the first quarter of 2009, and the adoption of Topic 323 did not have a material impact on the Company’s consolidated financial position or results of operations.

In April 2009, the FASB modified FASB ASC 825, “Financial Instruments”, which extends the disclosure requirements of the fair value of financial instruments to interim financial statements of publicly traded companies. The Company is now required to disclose, on a quarterly basis, fair value information for financial instruments that are not reflected in the condensed consolidated balance sheets at fair value. The Company adopted these changes in the second quarter of 2009, and this adoption did not have a material impact on the Company’s consolidated financial position or results of operations. See Note 16 for additional disclosures.

In May 2009, the FASB modified FASB ASC 855, “Subsequent Events” (“Topic 855”) in order to establish principles and requirements for reviewing and reporting subsequent events and requires disclosure of the date through which subsequent events are evaluated and whether the date corresponds with the time at which the financial statements were available for issue (as defined) or were issued. The Company adopted the modifications of Topic 855 during the second quarter of 2009, and this adoption did not have a material impact on the Company’s consolidated financial position or results of operations. See Note 20 for additional disclosures.

In June 2009, the FASB modified FASB ASC 810, “Consolidation” (“Topic 810”) to require ongoing assessments of whether an enterprise is the primary beneficiary of a variable interest entity. Before this modification, reconsideration of whether an enterprise is the primary beneficiary of a variable interest entity was required only when specific events occurred. This modification will be effective for the Company beginning January 1, 2010, and the Company is assessing the potential impact of this statement on its consolidated financial statements.

In June 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-01, Topic 105, “Generally Accepted Accounting Principles” to establish the ASC as the single source of authoritative nongovernmental U.S. generally accepted accounting principles (“GAAP”), superseding existing FASB, American Institute of Certified Public Accountants, EITF, and related accounting literature. This modification does not change the content of GAAP, but reorganizes the thousands of GAAP pronouncements into roughly 90 accounting topics and displays them using a consistent structure. Also included is relevant SEC guidance organized using the same topical structure in separate sections. This modification became effective for the Company on July 1, 2009. This had an impact on the footnotes to the Company’s financial statements, as all references to authoritative accounting literature are now references in accordance with this modification.

In August 2009, the FASB issued ASU No. 2009-05, Topic 820, “Measuring Liabilities at Fair Value,” which provides additional guidance to clarify the measurement of liabilities at fair value. When a quoted price in an active market for the identical liability is not available, this modification requires that the fair value of a liability be measured using one or more of the listed valuation techniques that should maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The modification also clarifies how the price of a traded debt security (i.e., an asset value) should be considered in estimating the fair value of the issuer’s

liability. This modification will be effective for the Company beginning in the fourth quarter of 2009, and the Company is assessing the potential impact of this statement on its consolidated financial statements.

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

		Three Months Ended September 30,								Nine Months Ended September 30,
(in thousands)		2009				2008				2009				2008
Weighted average shares outstanding			41,091				40,833				40,979				40,963
Effect of dilutive stock options			—				—				230				—
Weighted average shares outstanding — assuming dilution			41,091				40,833				41,209				40,963

For the three months ended September 30, 2009, and for the three months and nine months ended September 30, 2008, the effect of dilutive stock options was the equivalent of approximately 297,000, 443,000 and 473,000 shares, respectively, of common stock outstanding. Because the Company had a loss from continuing operations in the three months ended September 30, 2009 and for the three months and nine months ended September 30, 2008, these incremental shares were excluded from the computation of dilutive earnings per share for those periods as the effect of their inclusion would have been anti-dilutive.

The Company had stock-based compensation awards outstanding with respect to approximately 3,230,000 and 2,368,000 shares of common stock as of September 30, 2009 and 2008, respectively, that could potentially dilute earnings per share in the future but were excluded from the computation of diluted earnings per share for the three months ended September 30, 2009 and 2008, respectively, as the effect of their inclusion would have been anti-dilutive.

The Company had stock-based compensation awards outstanding with respect to approximately 3,940,000 and 2,385,000 shares of common stock as of September 30, 2009 and 2008, respectively, that could potentially dilute earnings per share in the future but were excluded from the computation of diluted earnings per share for the nine months ended September 30, 2009 and 2008, respectively, as the effect of their inclusion would have been anti-dilutive.

As discussed in Note 9, during September 2009, the Company issued 3.75% Convertible Senior Notes (the “Convertible Notes”) due 2014. In connection with the issuance of these notes, the Company entered into a warrant transaction with the note underwriters to sell common stock warrants. The initial strike price of these warrants is $32.70 per share of the Company’s common stock and the warrants cover an aggregate of 13.2 million shares of the Company’s common stock. If the closing stock price of the Company’s stock exceeds this strike price, these warrants will be dilutive. It is the Company’s intention to settle the face value of the Convertible Notes in cash upon conversion/maturity.

Comprehensive income (loss) is as follows for the respective periods:

		Three Months Ended
		September 30,
(in thousands)		2009				2008
Net loss		$	(12,901	)		$	(5,520	)
Unrealized gain (loss) on natural gas swaps, net of deferred income tax provision (benefit) of $144 and $(562)			230				(1,051	)
Unrealized loss on interest rate swaps, net of deferred income tax provision (benefit) of $(578) and $(2,647)			(949	)			(4,580	)
Other			44				—
Comprehensive loss		$	(13,576	)		$	(11,151	)

		Nine Months Ended
		September 30,
(in thousands)		2009				2008
Net income (loss)		$	577			$	(4,039	)
Unrealized gain (loss) on natural gas swaps, net of deferred income tax provision (benefit) of $380 and $(413)			607				(771	)
Unrealized gain (loss) on interest rate swaps, net of deferred income tax provision (benefit) of $356 and $(1,780)			590				(3,027	)
Other			(22	)			—
Comprehensive income (loss)		$	1,752			$	(7,837	)

A rollforward of the amounts included in comprehensive income (loss) related to the fair value of financial derivative instruments that qualify for hedge accounting, net of taxes, for the nine months ended September 30, 2009 is as follows (in thousands):

		Interest Rate				Natural Gas				Total
		Derivatives				Derivatives				Derivatives
Balance at December 31, 2008		$	(18,258	)		$	(867	)		$	(19,125	)
2009 changes in fair value			590				607				1,197
Reclassification to earnings			—				—				—
Balance at September 30, 2009		$	(17,668	)		$	(260	)		$	(17,928	)

5. PROPERTY AND EQUIPMENT:

Property and equipment of continuing operations at September 30, 2009 and December 31, 2008 is recorded at cost and summarized as follows:

		September 30,				December 31,
(in thousands)		2009				2008
Land and land improvements		$	210,387			$	198,169
Buildings			2,194,186				2,180,232
Furniture, fixtures and equipment			500,197				510,358
Construction in progress			41,754				47,234
			2,946,524				2,935,993
Accumulated depreciation			(774,999	)			(708,419	)
Property and equipment, net		$	2,171,525			$	2,227,574

Depreciation expense of continuing operations, including amortization of assets under capital lease obligations, was $27.5 million and $28.1 million for the three months ended September 30, 2009 and 2008, respectively, and was $80.9 million and $76.0 million for the nine months ended September 30, 2009 and 2008, respectively.

6. NOTES RECEIVABLE:

In connection with the development of the Gaylord National Resort and Convention Center (“Gaylord National”), Prince George’s County, Maryland (“the County”) issued three series of bonds. The first bond issuance, with a face value of $65 million, was issued by the County 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 interest rate on the Series A Bond and Series B Bond is 8.0% and 10.0%, respectively.

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 their effective interest rates of 8.04% and 11.42%, respectively, 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 its effective interest rate of 8.04% 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 is recording the amortization of discount on these notes receivable as interest income over the life of the notes.

During the three months and nine months ended September 30, 2009, the Company recorded interest income of $3.4 million and $11.2 million, respectively, on these bonds, which included $3.2 million and $9.4 million, respectively, of interest that accrued on the bonds subsequent to their delivery to the Company and $0.2 million and $1.8 million, respectively, related to amortization of the discount on the bonds. The Company received payments of $17.1 million during the nine months ended September 30, 2009 relating to this note receivable.

During the three months and nine months ended September 30, 2008, the Company recorded interest income of $4.1 million and $7.5 million, respectively, on these bonds, which included $3.2 million and $6.2 million, respectively, of interest that accrued on the bonds subsequent to their delivery to the Company and $0.9 million and $1.3 million, respectively, related to amortization of the discount on the bonds.

7. IMPAIRMENT AND OTHER CHARGES:

The Company performs an annual review of goodwill for impairment, and during interim periods if there are triggering events, by comparing the carrying value of the applicable reporting unit to the fair value of the reporting unit. If the fair value is less than the carrying value, then the Company measures potential impairment by allocating the fair value of the reporting unit to the tangible assets and liabilities of the reporting unit in a manner similar to a business combination purchase price allocation. The remaining fair value of the reporting unit after assigning fair values to all of the reporting unit’s assets and liabilities represents the implied fair value of goodwill of the reporting unit. The impairment is measured by the difference between the carrying value of goodwill and the implied fair value of goodwill. In connection with the preparation of the Company’s financial statements for the third quarter of 2009, as a result of significant adverse changes in the business climate of a reporting unit within its Opry and Attractions segment, the Company determined that the goodwill of this reporting unit may be impaired and performed an interim impairment review on this goodwill, as described above. As a result, the Company recorded an impairment charge of $6.6 million during the three months and nine months ended September 30, 2009, to write down the carrying value of goodwill at the impaired reporting

unit to its implied fair value of $0.3 million. The Company estimated the fair value of the reporting unit by using a discounted cash flow analysis that utilized comprehensive cash flow projections, as well as assumptions based on market data to the extent available. The discount rate utilized in this analysis was 16%, which reflected market-based estimates of capital costs and discount rates adjusted for management’s assessment of a market participant’s view of risks associated with the projected cash flows of the reporting unit.

On April 15, 2008, the Company terminated the 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, on the basis that it did not obtain satisfactory financing. Pursuant to the terms of the Purchase Agreement and a subsequent amendment, the Company forfeited a $10.0 million deposit previously paid to Sellers. As a result, the Company recorded an impairment charge of $12.0 million during the nine months ended September 30, 2008 to write off the deposit, as well as certain transaction-related expenses that were also capitalized in connection with the potential acquisition.

8. DISCONTINUED OPERATIONS:

The Company has reflected the following business as discontinued operations. The results of operations, net of taxes, and the carrying value of the assets and liabilities of this business has been reflected in the accompanying condensed consolidated financial statements as discontinued operations for all periods presented.

ResortQuest

During the second quarter of 2007, in a continued effort to focus on its Gaylord Hotel and Opry and Attractions businesses, 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.

The following table reflects the results of operations of businesses accounted for as discontinued operations for the respective periods:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(in thousands)		2009				2008				2009				2008
Operating income (loss):
ResortQuest		$	180			$	717			$	(147	)		$	(216	)
Other			(6	)			—				10				—
Restructuring charges			—				—				—				(262	)
Total operating income (loss)			174				717				(137	)			(478	)
Interest expense			—				—				(1	)			—
Other gains and (losses):
ResortQuest			24				(43	)			24				749
Other			50				—				95				50
Income (loss) before provision (benefit) for income taxes			248				674				(19	)			321
Provision (benefit) for income taxes			94				(312	)			(4	)			(446	)
Income (loss) from discontinued operations		$	154			$	986			$	(15	)		$	767

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

		September 30,				December 31,
(in thousands)		2009				2008
Current assets:
Other current assets		$	63			$	197
Total current assets			63				197
Total assets		$	63			$	197
Current liabilities:
Accounts payable and accrued liabilities		$	849			$	1,329
Total current liabilities			849				1,329
Other long-term liabilities			442				446
Total long-term liabilities			442				446
Total liabilities		$	1,291			$	1,775

9. DEBT:

Long-term debt and capitalized lease obligations at September 30, 2009 and December 31, 2008 consisted of the following:

		September 30,				December 31,
(in thousands)		2009				2008
$1.0 Billion Credit Facility, interest and maturity as described below		$	760,500			$	722,500
Convertible Senior Notes, interest and maturity as described below, net of debt discount of $67,938			292,062				—
Senior Notes, interest at 8.00%, maturing November 15, 2013			259,810				321,459
Senior Notes, interest at 6.75%, maturing November 15, 2014			180,700				207,700
Nashville Predators Promissory Note, interest at 6.00%, maturing October 5, 2010			2,000				2,000
Capital lease obligations			2,316				3,007
Fair value hedge effective for 8.00% Senior Notes			—				6,235
Deferred gain on terminated fair value hedge			4,642				—
Total debt			1,502,030				1,262,901
Less amounts due within one year			(266,265	)			(1,904	)
Total long-term debt		$	1,235,765			$	1,260,997

$1.0 Billion Credit Facility

The Company entered into an Amended and Restated Credit Agreement effective March 23, 2007, 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 Credit Facility”). Prior to its refinancing on July 25, 2008, 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 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. 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. The Company terminated these swaps in connection with its 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.

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 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 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%. As further discussed in Note 10, the Company entered into interest rate swaps with respect to $500.0 million aggregate principal amount of borrowings under the term loan portion to convert the variable rate on those borrowings to a fixed weighted average interest rate of 3.94% plus the applicable margin on these borrowings during the term of the swap agreements. 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 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).

As of September 30, 2009, the Company was in compliance with all of its covenants related to its debt. As of September 30, 2009, $760.5 million of borrowings were outstanding under the New $1.0 Billion Credit Facility, and the lending banks had issued $9.9 million of letters of credit under the facility for the Company, which left $229.6 million of availability under the credit facility (subject to the satisfaction of debt incurrence tests under the indentures governing the Company’s senior notes).

Convertible Senior Notes

During September 2009, the Company issued $360 million, including the exercise of an overallotment option, of 3.75% Convertible Senior Notes (the “Convertible Notes”). The Convertible Notes have a maturity date of October 1, 2014, and interest is payable semiannually in cash in arrears on April 1 and October 1, beginning April 1, 2010. The Notes are convertible, under certain circumstances as described below, at the holder’s option, into shares of the Company’s common stock, at an initial conversion rate of 36.6972 shares of common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $27.25 per share. The Company may elect, at its option, to deliver shares of its common stock, cash or a combination of cash and shares of its common stock in satisfaction of its obligations upon conversion of the Convertible Notes.

The Convertible Notes are convertible under any of the following circumstances: (1) during any calendar quarter ending after September 30, 2009 (and only during such calendar quarter), if the closing price of the Company’s common stock for at least 20 trading days during the 30 consecutive trading day period ending on the last trading day of the immediately preceding calendar quarter exceeds 120% of the applicable conversion price per share of common stock on the last trading day of such preceding calendar quarter; (2) during the ten business day period after any five consecutive trading day period in which the Trading Price (as defined in the Indenture) per $1,000 principal amount of Convertible Notes, as determined following a request by a Convertible Note holder, for each day in such five consecutive trading day period was less than 98% of the product of the last reported sale price of the Company’s common stock and the applicable conversion rate, subject to certain procedures; (3) if specified corporate transactions or events occur; or (4) at any time on or after July 1, 2014, until the second scheduled trading day immediately preceding October 1, 2014. As of September 30, 2009, none of the conditions permitting conversion had been satisfied.

The Convertible Notes are general unsecured and unsubordinated obligations of the Company and rank equal in right of payment with all of the Company’s existing and future senior unsecured indebtedness, including the

Company’s 8% Senior Notes due 2013 and 6.75% Senior Notes due 2014, and senior in right of payment to all of the Company’s future subordinated indebtedness, if any. The Convertible Notes will be effectively subordinated to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness.

The Convertible Notes are guaranteed, jointly and severally, on an unsecured unsubordinated basis by generally all of the Company’s active domestic subsidiaries. Each guarantee will rank equally in right of payment with such subsidiary guarantor’s existing and future senior unsecured indebtedness and senior in right of payment to all future subordinated indebtedness, if any, of such subsidiary guarantor. The Convertible Notes will be effectively subordinated to any secured indebtedness and effectively subordinated to all indebtedness and other obligations of the Company’s subsidiaries that do not guarantee the Convertible Notes.

Upon a Fundamental Change (as defined), holders may require the Company to repurchase all or a portion of their Convertible Notes at a purchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus any accrued and unpaid interest, if any, thereon to (but excluding) the Fundamental Change Repurchase Date (as defined). The Convertible Notes are not redeemable at the Company’s option prior to maturity.

The net proceeds to the Company from the issuance of the Convertible Notes totaled approximately $317.1 million, after deducting discounts, commissions and offering expenses payable by the Company (including the net cost of the convertible note hedge transactions entered into in connection with the offering of the Convertible Notes, as described more fully below). The Convertible Notes are accounted for in accordance with generally accepted accounting principles, which require the Company to separately account for the liability (debt) and the equity (conversion option) components of the Convertible Notes in a manner that reflects the Company’s nonconvertible debt borrowing rate. Accordingly, the Company recorded a debt discount and corresponding increase to additional paid-in capital of approximately $68.0 million as of the date of issuance in the accompanying condensed consolidated balance sheet. The Company is amortizing the debt discount utilizing the effective interest method over the life of the Convertible Notes, which increases the effective interest rate of the Convertible Notes from its coupon rate of 3.75% to 8.46%. The Company incurred cash and non-cash interest expense of $0.1 million for the Convertible Notes in the three months and nine months ended September 30, 2009. As of September 30, 2009, the unamortized discount amount was approximately $67.9 million, resulting in a net carrying value of approximately $292.1 million for the liability component. Estimated transaction costs of approximately $10.0 million were proportionately allocated between the liability and equity components.

Concurrently with the offering of the Convertible Notes, the Company entered into convertible note hedge transactions with respect to its common stock (the “Purchased Options”) with counterparties affiliated with the initial purchasers of the Convertible Notes, for purposes of reducing the potential dilutive effect upon conversion of the Convertible Notes. The initial strike price of the Purchased Options is $27.25 per share of the Company’s common stock (the same as the initial conversion price of the Convertible Notes) and is subject to certain customary adjustments. The Purchased Options cover, subject to anti-dilution adjustments substantially similar to the Convertible Notes, approximately 13.2 million shares of common stock. The Company may settle the Purchased Options in shares, cash or a combination of cash and shares, at the Company’s option. The cost of the Purchased Options was approximately $76.7 million, which was recorded as a reduction to additional paid-in capital. The Purchased Options will expire on October 1, 2014.

Separately and concurrently with entering into the Purchased Options, the Company also entered into warrant transactions whereby it sold warrants to each of the hedge counterparties to acquire, subject to anti-dilution adjustments, up to approximately 13.2 million shares of common stock at an initial exercise price of $32.70 per share. The aggregate proceeds from the warrant transactions were approximately $43.7 million, which was recorded as an increase to additional paid-in capital.

Repurchase of Senior Notes

During the nine months ended September 30, 2009, the Company repurchased $88.6 million in aggregate principal amount of its outstanding senior notes ($61.6 million of 8% Senior Notes and $27.0 million of 6.75% Senior Notes) for $64.5 million. After adjusting for accrued interest, the write-off of $1.1 million in deferred financing costs, and other costs, the Company recorded a pretax gain of $24.7 million as a result of the repurchases, which is recorded as a gain on extinguishment of debt in the accompanying condensed consolidated statement of operations for the nine months ended September 30, 2009.

On September 23, 2009, the Company commenced a cash tender offer for its outstanding 8% Senior Notes and a solicitation of consents from holders of the 8% Senior Notes to effect certain proposed amendments to the indenture governing these notes. As a result of the Company’s tender offer on the 8% Senior Notes and the Company’s call for redemption of any remaining balance of these notes, the $259.8 million outstanding balance of 8% Senior Notes as of September 30, 2009 has been classified as a current portion of long-term debt in the accompanying condensed consolidated balance sheet. See Note 20 for further discussion.

10. DERIVATIVE FINANCIAL INSTRUMENTS:

The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed by using derivative instruments are interest rate risk and commodity price risk. Interest rate swaps are entered into to manage interest rate risk associated with portions of the Company’s fixed and variable rate borrowings. Natural gas price swaps are entered into to manage the price risk associated with forecasted purchases of natural gas and electricity used by the Company’s hotels. The Company designates certain interest rate swaps as cash flow hedges of variable rate borrowings, the remaining interest rate swaps as fair value hedges of fixed rate borrowings, and natural gas price swaps as cash flow hedges of forecasted purchases of natural gas and electricity. All of the Company’s derivatives are held for hedging purposes. Prior to July 2009, a portion of the Company’s natural gas price swap contracts were considered economic hedges and did not qualify for hedge accounting. The Company does not engage in speculative transactions, nor does it hold or issue financial instruments for trading purposes. All of the counterparties to the Company’s derivative agreements are financial institutions with at least investment grade credit ratings.

Cash Flow Hedging Strategy

For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income (“OCI”) and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings (e.g., in “interest expense” when the hedged transactions are interest cash flows associated with variable rate debt). The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, or ineffectiveness, if any, is recognized in the statement of operations during the current period.

The Company has entered into interest rate swap agreements to manage interest rate risk exposure. The interest rate swap agreement utilized by the Company effectively modifies the Company’s exposure to interest rate risk by converting $500.0 million, or 71%, of the Company’s variable rate debt outstanding under the term loan portion of the Company’s New $1.0 Billion Credit Facility to a weighted average fixed rate of 3.94% plus the applicable margin on these borrowings, thus reducing the impact of interest rate changes on future interest expense. This agreement involves the receipt of variable rate amounts in exchange for fixed rate interest payments through July 25, 2011, without an exchange of the underlying principal amount. The critical terms of the swap agreements match the critical terms of the borrowings under the term loan portion of the New $1.0 Billion Credit Facility. Therefore, the Company has designated these interest rate swap agreements as cash flow hedges. As the terms of these derivatives match the terms of the underlying hedged items, there should be no

gain (loss) recognized in income on derivatives unless there is a termination of the derivative or the forecasted transaction is determined to be unlikely to occur.

The Company has entered into natural gas price swap contracts to manage the price risk associated with a portion of the Company’s forecasted purchases of natural gas and electricity used by the Company’s hotels. The objective of the hedge is to reduce the variability of cash flows associated with the forecasted purchases of these commodities. At September 30, 2009, the Company had three variable to fixed natural gas price swap contracts that mature from October 2009 to December 2009 with an aggregate notional amount of approximately 290,000 dekatherms. The Company has designated these natural gas price swap contracts as cash flow hedges. The Company assesses the correlation of the terms of these derivatives with the terms of the underlying hedged items on a quarterly basis. As these terms are currently highly correlated, there should be no gain (loss) recognized in income on derivatives unless there is a termination of the derivative or the forecasted transaction is determined to be unlikely to occur.

Fair Value Hedging Strategy

For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, is recognized in the same line item associated with the hedged item in current earnings (e.g., in “interest expense” when the hedged item is fixed-rate debt).

The Company previously entered into two interest rate swap agreements to manage interest rate risk exposure. The interest rate swap agreement utilized by the Company effectively modified the Company’s exposure to interest rate risk by converting $125.0 million of the Company’s fixed rate debt outstanding under its 8% Senior Notes to a variable rate equal to six-month LIBOR plus 2.95%, thus reducing the impact of interest rate changes on the fair value of the underlying fixed rate debt. This agreement involved the receipt of fixed rate amounts in exchange for variable rate interest payments through November 15, 2013, without an exchange of the underlying principal amount. The critical terms of the swap agreement mirrored the terms of the 8% Senior Notes. Therefore, the Company designated these interest rate swap agreements as fair value hedges. The counterparties under these swap agreements notified the Company that, as permitted by the agreements, each was opting to terminate its portion of the $125.0 million swap agreement effective May 15, 2009. As stated in the agreement, the two counterparties each paid a $2.5 million termination fee, plus accrued interest, to the Company on May 15, 2009. Therefore, the Company determined that the fair value of the interest rate swap was $5.0 million as of the termination date. As a result of this termination, the Company is amortizing the gain on the swap agreement over the remaining term of the 8% Senior Notes using the effective interest method. Due to the Company commencing a cash tender offer for its outstanding 8% Senior Notes, discussed in Note 9 and Note 20, the amount that the Company anticipates will be reclassified out of the current portion of long-term debt and into earnings in the next twelve months is the total unamortized gain at September 30, 2009 of $4.6 million.

The fair value of the Company’s derivative instruments based upon quotes, with appropriate adjustments for non-performance risk of the parties to the derivative contracts, at September 30, 2009 and December 31, 2008 is as follows:

		Asset Derivatives								Liability Derivatives
		September 30,				December 31,				September 30,				December 31,
(in thousands)		2009				2008				2009				2008
Derivatives designated as hedging instruments:
Interest rate swaps — fair value hedges		$	—			$	6,235			$	—			$	—
Interest rate swaps — cash flow hedges			—				—				27,543				28,489
Natural gas swaps			—				—				395				1,382
Total derivatives designated as hedging instruments		$	—			$	6,235			$	27,938			$	29,871
Derivatives not designated as hedging instruments:
Natural gas swaps		$	—			$	—			$	—			$	224
Total derivatives not designated as hedging instruments		$	—			$	—			$	—			$	224
Total derivatives		$	—			$	6,235			$	27,938			$	30,095

The effect of derivative instruments on the statement of operations for the respective periods is as follows (in thousands):

				Amount of Loss Recognized in Income on
				Derivative
Derivatives in Fair Value		Location of Loss Recognized in Income on		Three Months Ended				Nine Months Ended
Hedging Relationships		Derivative		September 30, 2009				September 30, 2009
Interest rate swaps		Interest expense, net of amounts capitalized		$		—		$	(1,235	)
				Amount of Gain Recognized in Income on
				Related Hedged Items
Hedged Items in Fair Value		Location of Gain Recognized in Income on		Three Months Ended				Nine Months Ended
Hedging Relationships		Related Hedged Item		September 30, 2009				September 30, 2009
Fixed Rate Debt		Interest expense, net of amounts capitalized		$		—		$	1,235

		Amount of (Loss) Gain
		Recognized in OCI on Derivative										Amount Reclassified from
		(Effective Portion)										Accumulated OCI into Income
Derivatives in		Three Months				Nine Months						Three Months				Nine Months
Cash Flow		Ended				Ended						Ended				Ended
Hedging		September 30,				September 30,				Location of Amount Reclassified from		September 30,				September 30,
Relationships		2009				2009				Accumulated OCI into Income		2009				2009
Interest rate swaps		$	(1,527	)		$	946			Interest expense, net of amounts capitalized		$	—			$	—
Natural gas swaps			374				987			Operating costs			—				—
Total		$	(1,153	)		$	1,933			Total		$	—			$	—

Amount of Loss Recognized in Income on

Derivative

Derivatives Not Designated as

Location of Loss Recognized

Three Months Ended

Nine Months Ended

Hedging Instruments

in Income on Derivative

September 30, 2009

September 30, 2009

Natural gas swaps

Other gains and (losses), net

$

—

$

(106

)

11. SUPPLEMENTAL CASH FLOW DISCLOSURES:

Cash paid for interest related to continuing operations for the respective periods was comprised of:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(in thousands)		2009				2008				2009				2008
Debt interest paid		$	9,690			$	3,443			$	48,072			$	41,888
Deferred financing costs paid			8,077				10,753				8,077				10,753
Capitalized interest			(448	)			(340	)			(1,275	)			(15,950	)
Cash interest paid, net of capitalized interest		$	17,319			$	13,856			$	54,874			$	36,691

Net income taxes refunded were $3.7 million and $5.9 million for the nine months ended September 30, 2009 and 2008, respectively.

As further discussed in Note 6, 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 a non-cash activity for an increase in notes receivable and decrease in property and equipment of $150.4 million in the accompanying condensed consolidated statement of cash flows for the nine months ended September 30, 2008.

12. STOCK PLANS:

The Company’s 2006 Omnibus Incentive Plan (the “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. The 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 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 unless the option award contains a market provision, in which case the Company records compensation expense equal to the fair value of each award on a straight line basis over the requisite service period for each separately vesting portion of the award. The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing formula. Including shares permitted under previous plans, at September 30, 2009 and December 31, 2008, there were 3,411,144 and 3,750,711 shares, respectively, of the Company’s common stock reserved for future issuance pursuant to the exercise of outstanding stock options.

The Plan also provides for the award of restricted stock and restricted stock units (“Restricted Stock Awards”). 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 September 30, 2009 and December 31, 2008, Restricted Stock Awards of 321,169 and 134,276 shares, respectively, were outstanding.

Under its long term incentive plan for key executives (“LTIP”) pursuant to the Plan, in February 2008, the Company granted selected executives and other key employees 449,500 restricted stock units (“LTIP Restricted Stock Units”), which 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. Based on current projections, the Company expects that portions of the performance goals will be achieved and only one-half of the LTIP Restricted Stock Units granted will vest at the end of their term. The Company is currently recording compensation expense equal to the fair value of one-half of the LTIP Restricted Stock Units granted on a straight-line basis over the vesting period. If there are changes in the expected achievement of the performance goals, the Company will adjust 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. At September 30, 2009 and December 31, 2008, LTIP Restricted Stock Units of 383,250 shares and 433,250 shares, respectively, were outstanding.

Under the LTIP, in February 2008, the Company also granted selected executives and other key employees 650,000 stock options (“LTIP Stock Options”), which vested two to four years from the date of grant and had a term of ten years. The LTIP Stock Options 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, prior to August 6, 2009, the Company was 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.

On August 6, 2009, the Company entered into Stock Option Cancellation Agreements with certain members of its management team, pursuant to which such individuals surrendered and cancelled 510,000 LTIP Stock Options with an exercise price of $38.00 per share, as well as 472,200 stock options with exercise prices ranging from $40.22 to $56.14 per share, to purchase shares of the Company’s common stock (the “Cancelled Stock Options”), in order to make additional shares available under the Company’s 2006 Omnibus Incentive Plan for future equity grants to Company personnel. Pursuant to the terms of the Stock Option Cancellation Agreements, these individuals and the Company acknowledged and agreed that the surrender and cancellation of the Cancelled Stock Options was without any expectation to receive, and was without any obligation on the Company to pay or grant, any cash payment, equity awards or other consideration presently or in the future in regard to the cancellation of the Cancelled Stock Options. The Company determined that because the Cancelled Stock Options were cancelled without a concurrent grant of a replacement award, the cancellation should be accounted for as a settlement for no consideration. Therefore, the Company recorded the previously unrecognized compensation cost related to the Cancelled Stock Options of $3.0 million during the three months ended September 30, 2009. As of September 30, 2009 and December 31, 2008, LTIP Stock Options of 84,916 shares and 633,250 shares, respectively, were outstanding.

Under its Performance Accelerated Restricted Stock Unit Program (“PARSUP”) pursuant to the 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.

The compensation cost that has been charged against pre-tax income for all of the Company’s stock-based compensation plans, including the previously unrecognized compensation cost related to the Cancelled Stock Options described above, was $4.7 million and $2.9 million for the three months ended September 30, 2009 and 2008, respectively, and $8.6 million and $9.0 million for the nine months ended September 30, 2009 and 2008, 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 respective periods (in thousands):

		Three months ended								Nine months ended
		September 30,								September 30,
		2009				2008				2009				2008
Service cost		$	—			$	64			$	—			$	192
Interest cost			1,254				1,306				3,763				3,918
Expected return on plan assets			(961	)			(1,204	)			(2,883	)			(3,612	)
Amortization of net actuarial loss			906				296				2,717				888
Amortization of prior service cost			1				1				3				3
Total net periodic pension expense		$	1,200			$	463			$	3,600			$	1,389

The Company has contributed $6.7 million to its defined benefit pension plan during the nine months ended September 30, 2009, and expects to contribute an additional $0.6 million during the remainder of 2009.

Net postretirement benefit expense reflected in the accompanying condensed consolidated statements of operations included the following components for the respective periods (in thousands):

		Three months ended								Nine months ended
		September 30,								September 30,
		2009				2008				2009				2008
Service cost		$	16			$	22			$	47			$	66
Interest cost			242				300				725				900
Amortization of curtailment gain			(106	)			(61	)			(320	)			(183	)
Total net postretirement benefit expense		$	152			$	261			$	452			$	783

14. INCOME TAXES:

The Company’s effective tax rate as applied to pre-tax loss was 18% and 34% for the three months ended September 30, 2009 and 2008, respectively. The Company’s decreased effective tax rate during the 2009 period was due primarily to the benefit on the pretax book loss for the 2009 period, partially offset by tax expense related to the goodwill impairment discussed in Note 7.

The Company’s effective tax rate as applied to pre-tax income (loss) was 95% and 16% for the nine months ended September 30, 2009 and 2008, respectively. The Company’s increased effective tax rate during the 2009 period was due primarily to tax expense related to the goodwill impairment discussed in Note 7, adjustments to valuation allowances for the Company during the 2009 period and an increase in uncertain tax positions. The Company’s decreased effective tax rate during the 2008 period was due primarily to a change in a statutory state tax rate in 2008, which resulted in the revaluing of the Company’s deferred tax assets and liabilities.

As of September 30, 2009 and December 31, 2008, the Company had $16.1 million and $13.1 million of unrecognized tax benefits, respectively, of which $9.1 million and $6.9 million, respectively, would affect the Company’s effective tax rate if recognized. The increase in the liability during 2009 is due primarily to a change in judgment related to a tax position taken in a prior year in addition to interest accrued in the current year. 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. As of September 30, 2009 and December 31, 2008, the Company had accrued $0.9 million and $0.7 million, respectively, of interest and $0 of penalties related to uncertain tax positions.

15. COMMITMENTS AND CONTINGENCIES:

On September 3, 2008, the Company announced it had entered into a land purchase agreement with DMB Mesa Proving Grounds LLC, an affiliate of DMB Associates, Inc. (“DMB”), to create a resort and convention hotel at the Mesa Proving Grounds in Mesa, Arizona, which is located approximately 30 miles from downtown Phoenix. The DMB development is planned to host an urban environment that features a Gaylord resort property, a retail development, a golf course, office space, residential offerings and significant other mixed-use components. The Company’s purchase agreement includes the purchase of 100 acres of real estate within the 3,200-acre Mesa Proving Grounds. The project is contingent on the finalization of entitlements and incentives, and final approval by the Company’s board of directors. The Company made an initial deposit of a portion of the land purchase price upon execution of the agreement with DMB, and additional deposit amounts are due upon the occurrence of various development milestones, including required governmental approvals of the entitlements and incentives. These deposits are refundable to the Company upon a termination of the agreement with DMB during a specified due diligence period, except in the event of a breach of the agreement by the Company. The timing of this development is uncertain, and the Company has not made any financing plans or, except as described above, made any commitments in connection with the proposed development.

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.

In August 2008, a union-affiliated pension fund filed a purported derivative and class action complaint in Tennessee state court alleging that the directors of the Company breached their fiduciary duties by adopting a shareholder rights plan, which is further described in Note 17. The Company and the plaintiffs in the action, together with their counsel, have agreed that the changes to the Company’s Board of Directors and amendments to the Original Rights Agreement (as defined below in Note 17) reflected in the Amended Rights Agreement (as defined below in Note 17) form the basis for settlement of the purported derivative and class action complaint. The settlement was approved by the court on September 14, 2009, and all claims were dismissed with prejudice.

Through a joint venture arrangement with RREEF Global Opportunities Fund II, LLC, a private real estate fund managed by DB Real Estate Opportunities Group (“RREEF”), the Company holds an 18.1% ownership interest in Waipouli Holdings, LLC, which it acquired in exchange for its initial capital contribution of $3.8 million to Waipouli Holdings, LLC in 2006. Through a wholly-owned subsidiary, Waipouli Owner, LLC, Waipouli Holdings, LLC owns the 311-room ResortQuest Kauai Beach at Makaiwa Hotel and related assets located in Kapaa, Hawaii (“the Kauai Hotel”). Waipouli Owner, LLC financed the purchase of the Kauai Hotel in 2006 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 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 guarantee of the $52.0 million senior loan was terminated in July 2009. The Company estimates that the maximum potential amount that the Company could be liable for under this contribution agreement is $3.0 million, which represents 18.1% of the $16.4 million of total debt that is subject to the guarantees. As of September 30, 2009, the Company had not recorded any liability in the condensed consolidated balance sheet associated with this guarantee.

Through a joint venture arrangement with G.O. IB-SIV US, a private real estate fund managed by DB Real Estate Opportunities Group (“IB-SIV”), the Company holds a 19.9% ownership interest in RHAC Holdings, LLC, which it acquired in exchange for its initial capital contribution of $4.7 million to RHAC Holdings, LLC in 2005. Through a wholly-owned subsidiary, RHAC, LLC, RHAC Holdings LLC owns the 716-room Aston Waikiki Beach Hotel and related assets located in Honolulu, Hawaii (“the Waikiki Hotel”). 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 September 30, 2009. As of September 30, 2009, the Company had not recorded any liability in the condensed consolidated balance sheet associated with this guarantee.

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 has an outstanding balance of $2.0 million as of September 30, 2009. 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 September 30, 2009, the Company had not recorded any liability in the condensed consolidated balance sheet associated with this guarantee.

The Company has purchased stop-loss coverage in order to limit its exposure to any significant levels of claims relating to workers’ compensation, employee medical benefits and general liability for which it is self-insured.

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

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.

16. FAIR VALUE MEASUREMENTS:

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

As of September 30, 2009, 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 and investments held in conjunction with the Company’s non-qualified contributory deferred compensation plan.

The Company’s interest rate and natural gas derivative instruments consist of over-the-counter swap contracts, which are not traded on a public exchange. See Note 10 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, with appropriate adjustments for any significant impact of non-performance risk of the parties to the swap 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 investments held by the Company in connection with its deferred compensation plan consist of mutual funds traded in an active market. The Company determined the fair value of these mutual funds based on the net asset value per unit of the funds or the portfolio, which is based upon quoted market prices in an active market. Therefore, the Company has categorized these investments as Level 1. The Company has consistently applied these valuation techniques in all periods presented and believes it has obtained the most accurate information available for the types of investments it holds.

The Company’s assets and liabilities measured at fair value on a recurring basis at September 30, 2009, were as follows (in thousands):

						Markets for				Observable				Unobservable
		September 30,				Identical Assets				Inputs				Inputs
		2009				(Level 1)				(Level 2)				(Level 3)
Deferred compensation plan investments		$	10,086			$	10,086			$	—			$		—
Total assets measured at fair value		$	10,086			$	10,086			$	—			$		—
Variable to fixed natural gas swaps		$	395			$	—			$	395			$		—
Variable to fixed interest rate swaps			27,543				—				27,543					—
Total liabilities measured at fair value		$	27,938			$	—			$	27,938			$		—

The remainder of the assets and liabilities held by the Company at September 30, 2009 are not required to be measured at fair value. The carrying value of certain of these assets and liabilities do not approximate fair value, as described below.

As further discussed in Note 6, in connection with the development of Gaylord National, the Company received two notes receivable from Prince George’s County, Maryland which had an aggregate carrying value of $132.5 million as of September 30, 2009. The aggregate fair value of these notes receivable, based upon current market interest rates of notes receivable with comparable market ratings and current expectations about the timing of debt service payments under the notes, was approximately $150 million as of September 30, 2009.

As more fully discussed in Note 9, the Company has $760.5 million in borrowings outstanding under the New $1.0 Billion Credit Facility that accrue interest at a rate of LIBOR plus 2.50%. Because the margin of 2.50% is fixed, the carrying value of borrowings outstanding do not approximate fair value. The fair value of the $760.5 million in borrowings outstanding under the New $1.0 Billion Credit Facility, based upon the present value of cash flows discounted at current market interest rates, was approximately $712 million as of September 30, 2009.

As more fully discussed in Note 9, the Company has outstanding $360.0 million in aggregate principal amount of Convertible Notes due 2014 that accrue interest at a fixed rate of 3.75%. The carrying value of these notes on September 30, 2009 was $292.1 million, net of discount. As the Company completed the offering of the Convertible Notes at the end of September 2009, as of September 30, 2009, the carrying value of the Convertible Notes approximates fair value.

As shown in Note 9, at September 30, 2009, the Company had outstanding $259.8 million in aggregate principal amount of Senior Notes due 2013 that accrue interest at a fixed rate of 8%. The fair value of this financial instrument, based upon quoted market prices, was $266.3 million as of September 30, 2009.

As shown in Note 9, the Company has outstanding $180.7 million in aggregate principal amount of Senior Notes due 2014 that accrue interest at a fixed rate of 6.75%. The fair value of this financial instrument, based upon quoted market prices, was $166.2 million as of September 30, 2009.

As more fully discussed in Note 7, in connection with the preparation of the Company’s financial statements for the third quarter of 2009, the Company performed an interim impairment review on the goodwill associated with a reporting unit within its Opry and Attractions segment and recorded an impairment charge of $6.6 million during the three months and nine months ended September 30, 2009. In estimating fair value of the reporting unit, the Company used an income approach, using a discounted cash flow analysis that utilized comprehensive cash flow projections, as well as assumptions based on market data to the extent available. The Company categorized this measurement of fair value as Level 3. The inputs included the comprehensive cash flow projections of the reporting unit, as well as management’s assessment of a market participant’s view of risks associated with the projected cash flows of the reporting unit.

The carrying amount of short-term financial instruments (cash, short-term investments, trade receivables, accounts payable and accrued liabilities) approximates fair value due to the short maturity of those instruments. The concentration of credit risk on trade receivables is minimized by the large and diverse nature of the Company’s customer base.

17. STOCKHOLDERS’ EQUITY:

Shareholder Rights Plan

On March 9, 2009, the Company entered into an Amended and Restated Rights Agreement (the “Amended Rights Agreement”) with Computershare Trust Company, N.A., as rights agent (“Computershare”), which amends and restates the terms of the Company’s shareholder rights plan, as set forth in the Rights Agreement dated as of August 12, 2008, by and between the Company and Computershare (the “Original Rights Agreement”).

The Amended Rights Agreement amended the Original Rights Agreement to: (i) increase the triggering ownership percentage from 15% to 22% of the Company’s outstanding shares of common stock; and (ii) include provisions that define and establish procedures in the event that the Company receives a “Qualified Offer.” Under the Amended Rights Agreement, a “Qualified Offer” is a tender or exchange offer for all of the Company’s outstanding common stock in which the same consideration per share is offered for all shares of common stock that (i) is fully financed, (ii) has an offer price per share exceeding the greater of (the “Minimum Per Share Offer Price”): (x) an amount that is 25% higher than the 12-month moving average closing price of the Company’s common stock, and (y) an amount that is 25% higher than the closing price of the Company’s common stock on the day immediately preceding commencement of the offer, (iii) generally remains open until at least the earlier of (x) 106 business days following the commencement of the offer, or (y) the business day immediately following the date on which the results of the vote adopting any redemption resolution at any special meeting of stockholders (as described below) is certified, (iv) is conditioned on the offeror being tendered at least 51% of the Company’s common stock not held by the offeror, (v) assures a prompt second-step acquisition of shares not purchased in the initial offer at the same consideration as the initial offer, (vi) is only subject to customary closing conditions, and (vii) meets certain other requirements set forth in the Amended Rights Agreement.

The Amended Rights Agreement provides that, in the event that the Company receives a Qualified Offer, the Company’s Board of Directors may, but is not obligated to, call a special meeting of stockholders for the purpose of voting on a resolution to accept the Qualified Offer and to authorize the redemption of the outstanding rights issued pursuant to the provisions of the Amended Rights Agreement. Such an action by stockholders would require the affirmative vote of the holders of a majority of the shares of the Company’s common stock outstanding as of the record date for the special meeting (excluding for purposes of this calculation shares of the Company’s common stock owned by the person making the Qualified Offer). If either (i) such a special meeting is not held within 105 business days following commencement of the Qualified Offer or (ii) at such a special meeting the Company’s stockholders approve such action as set forth above, the Amended Rights Agreement provides that all of the outstanding rights will be redeemed.

Agreements with Stockholders

Agreement with TRT Holdings, Inc. On March 9, 2009, the Company entered into a settlement agreement (the “TRT Agreement”) with TRT Holdings, Inc., a Delaware corporation (“TRT”), which had previously submitted notice to the Company of its intention to nominate four individuals for election to the Company’s Board of Directors at the Company’s annual meeting of stockholders held on May 7, 2009 (the “Annual Meeting”) and to solicit proxies for the election of such nominees.

Prior to the execution of the TRT Agreement, the Company’s Board of Directors consisted of nine directors. The TRT Agreement provided that, prior to the Annual Meeting, the Board of Directors would increase the size of the Board from nine to eleven directors. Under the terms of the TRT Agreement, TRT is entitled to name two directors for nomination by the Board and inclusion in the Company’s proxy statement for the Annual Meeting and each of the annual meetings of stockholders in 2010 and 2011. The TRT nominees for the Annual Meeting were Robert B. Rowling and David W. Johnson. The TRT Agreement also required the Board of Directors to nominate seven incumbent directors and two additional independent directors identified by the Nominating and Corporate Governance Committee after consultation with the Company’s stockholders. The TRT Agreement provided that one TRT nominee will serve on each of the Executive Committee (which was increased in size to five directors), the Human Resources Committee and the Nominating and Corporate Governance Committee of the Board. In addition, the TRT Agreement provides that the Board will not increase the size of the Board to more than eleven directors prior to the Company’s 2012 annual meeting of stockholders.

By execution of the TRT Agreement, TRT withdrew its nominations to the Board that were set forth in TRT’s letter to the Company dated January 28, 2009 (subject to the Company’s compliance with certain terms of the TRT Agreement) and its demands for stockholder lists and certain books and records of the Company that were set forth in letters to the Company dated January 15, 2009, and January 23, 2009.

Pursuant to the terms of the TRT Agreement, the Company entered into the Amended Rights Agreement discussed above. Additionally, in accordance with the terms of the TRT Agreement, the Board adopted a resolution approving, for purposes of Section 203 of the Delaware General Corporation Law, the acquisition by TRT and its affiliates of additional shares of the Company’s common stock in excess of 15% of the outstanding stock of the Company and providing that TRT and its affiliates would not be an “interested stockholder” as defined by Section 203.

Under the terms of the TRT Agreement, TRT is obligated to vote its shares for the full slate of nominees recommended by the Board of Directors for election at the Annual Meeting and each of the 2010 and the 2011 annual meetings of stockholders of the Company. Additionally, TRT and its affiliates are required to vote their shares at the Annual Meeting, each of the annual meetings of stockholders in 2010 and 2011, and any other meeting of the Company’s stockholders prior to the termination date of the TRT Agreement (i) in accordance with the recommendation of the Board of Directors on any stockholder proposal that is put to a vote of stockholders, and (ii) in favor of any proposal made by the Company unless Mr. Rowling (or any other TRT nominee that is an affiliate of TRT) has voted against such proposal in his or her capacity as a member of the Board of Directors. These voting obligations will not, however, apply with respect to the voting of TRT’s shares in connection with an “extraordinary transaction” (as defined in the TRT Agreement).

The TRT Agreement includes a standstill provision restricting TRT from taking certain actions from the date of the TRT Agreement through the termination date of the agreement, including the following:

	•		acquiring beneficial ownership of any voting securities in an amount such that TRT would own 22% or more of the outstanding voting securities of the Company;
	•		participating in any solicitation of proxies or making public statements in an attempt to influence the voting of the Company’s securities in opposition to the recommendation of the Board of Directors, initiating any shareholder proposals, seeking representation on the Board of Directors (except as contemplated by the TRT Agreement) or effecting the removal of any member of the Board of Directors (provided, that TRT will not be restricted from making a public statement regarding how it intends to vote or soliciting proxies in connection with an extraordinary transaction not involving TRT); and
	•		acquiring any assets or indebtedness of the Company (other than bonds or publicly traded debt of the Company, subject to certain limitations set forth in the TRT Agreement).

The TRT Agreement includes certain exceptions to the standstill provision, including if (i) TRT has been invited by the Board of Directors to participate in a process initiated related to the possible sale of the Company, (ii) TRT makes a Qualified Offer (as defined in the Amended Rights Agreement), or (iii) a third party has made an offer to acquire the Company under certain circumstances set forth in the TRT Agreement. The TRT Agreement also provides that each of the Company and TRT will not disparage the other party, subject to certain exceptions set forth in the TRT Agreement. The Company agreed to reimburse TRT for one-half of its expenses incurred in connection with the TRT Agreement, up to a maximum aggregate reimbursement of $200,000.

The termination date under the TRT Agreement is the earliest to occur of (i) the consummation of a “Qualified Offer” as defined in the Amended Rights Agreement, (ii) May 15, 2011, (iii) the date of the last resignation of a TRT nominee from the Board of Directors in accordance with the requirement under the TRT Agreement that TRT will not be entitled to any representation on the Board of Directors if TRT owns less than 5% of the Company’s stock, or (iv) a material breach of the TRT Agreement by the Company that is not cured by the Company within 30 days of notice of such breach by TRT (or, if such material breach or lack of cure is disputed by the Company, upon the rendering of an arbitral award finding such material breach or lack of cure).

Agreement with GAMCO Asset Management. On March 9, 2009, the Company entered into a letter agreement (the “GAMCO Agreement”) with GAMCO Asset Management, Inc. (“GAMCO”), which had previously submitted notice to the Company of its intention to nominate four individuals for election to the Board of Directors at the Annual Meeting.

Under the terms of the GAMCO Agreement, GAMCO was entitled to name two directors for nomination by the Board of Directors and inclusion in the Company’s proxy statement for the Annual Meeting. The GAMCO nominees for the Annual Meeting were Glenn J. Angiolillo and Robert S. Prather, Jr. In addition, the GAMCO Agreement provides that as long as any GAMCO nominee is a member of the Board of Directors, the Company will appoint a GAMCO nominee to each committee of the Board of Directors. By execution of the GAMCO Agreement, GAMCO withdrew (i) its nominations to the Board of Directors (subject to the Company’s compliance with the GAMCO Agreement) that were set forth in GAMCO’s letters to the Company dated February 3 and 5, 2009, and (ii) its stockholder proposal, dated August 18, 2008, recommending the redemption of the rights issued pursuant to the Company’s rights agreement.

The foregoing descriptions of the TRT Agreement and the GAMCO Agreement are qualified in their entirety by reference to the full text of the agreements, copies of which the Company filed with the Securities and Exchange Commission as exhibits to a Current Report on Form 8-K filed on March 10, 2009.

Costs. During the nine months ended September 30, 2009, the Company incurred various costs in connection with preparing for a proxy contest, reaching agreements with the stockholders described above, and reimbursing certain expenses pursuant to the TRT Agreement as noted above of $1.0 million. In addition, the Company incurred costs of $0.9 million in connection with the settlement of the Company’s shareholder rights plan litigation, as described in the Company’s Current Report on 8-K filed with the SEC on March 10, 2009. These costs are included in selling, general and administrative expense in the accompanying condensed consolidated statement of operations.

Treasury Stock

On December 18, 2008, following approval by the Human Resources Committee and the Board of Directors, the Company and the Company’s Chairman of the Board of Directors and Chief Executive Officer (“Executive”) entered into an amendment to Executive’s employment agreement. The amendment provided Executive with the option of making an irrevocable election to invest his existing Supplemental Employee Retirement Plan (“SERP”) benefit in Company common stock, which election Executive subsequently made. The investment was made by a rabbi trust in which, during January 2009, the independent trustee of the rabbi trust purchased shares of Company common stock in the open market in compliance with applicable law. Executive is only entitled to a distribution of the Company common stock held by the rabbi trust in satisfaction of his SERP benefit. As such, the Company believes that the ownership of shares of common stock by the rabbi trust and the distribution of those shares to Executive in satisfaction of his SERP benefit meets the requirements necessary so that the Company will not recognize any increase or decrease in expense as a result of subsequent changes in the value of the Company common stock and the purchased shares are treated as treasury stock and the SERP benefit is included in additional paid-in capital in the Company’s accompanying condensed consolidated financial statements.

Common Stock Issuances

Concurrently with the offering and sale of the Convertible Notes discussed in Note 9, the Company also offered and sold 6.0 million shares of the Company’s common stock, par value $0.01 per share, at a price to the public of $21.80 per share. The net proceeds to the Company, after deducting discounts, commissions and expenses, were approximately $125.3 million, which was recorded as an increase in common stock and additional paid-in capital in the accompanying condensed consolidated balance sheet.

Stock Repurchases

During the nine months ended September 30, 2008, the Company repurchased 656,700 shares of its common stock at a weighted average purchase price of $30.42 per share.

18. EMPLOYEE SEVERANCE COSTS:

In the nine months ended September 30, 2009, as part of the Company’s cost containment initiative, the Company eliminated approximately 475 employee positions, which included positions in all segments of the organization. As a result, the Company recognized approximately $7.3 million in severance costs in the nine months ended September 30, 2009. These costs are comprised of operating costs and selling, general and administrative costs of $3.0 million and $4.3 million, respectively, for the nine months ended September 30, 2009, in the accompanying condensed consolidated statements of operations.

19. FINANCIAL REPORTING BY BUSINESS SEGMENTS:

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

•

Hospitality, which includes the Gaylord Opryland Resort and Convention Center, the Gaylord Palms Resort and Convention Center, the Gaylord Texan Resort and Convention Center, the Radisson Hotel at Opryland and, commencing in April 2008, the Gaylord National Resort and Convention Center, as well as the Company’s ownership interests in two joint ventures;

•

Opry and Attractions, which includes the Grand Ole Opry, WSM-AM, and the Company’s Nashville-based attractions; and

•

Corporate and Other, which includes the Company’s corporate expenses.

The following information from continuing operations is derived directly from the segments’ internal financial reports used for corporate management purposes.

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(in thousands)		2009				2008				2009				2008
Revenues:
Hospitality		$	182,021			$	203,834			$	583,173			$	615,392
Opry and Attractions			17,059				22,870				46,432				64,460
Corporate and Other			20				29				70				385
Total		$	199,100			$	226,733			$	629,675			$	680,237
Depreciation and amortization:
Hospitality		$	25,876			$	26,483			$	75,414			$	70,729
Opry and Attractions			1,127				1,160				3,510				3,729
Corporate and Other			2,479				1,976				7,276				5,370
Total		$	29,482			$	29,619			$	86,200			$	79,828
Operating income (loss):
Hospitality		$	18,823			$	18,012			$	77,851			$	95,167
Opry and Attractions			2,149				2,935				1,949				5,138
Corporate and Other			(15,047	)			(13,784	)			(45,506	)			(40,034	)
Preopening costs			—				(369	)			—				(19,190	)
Impairment and other charges			(6,586	)			—				(6,586	)			(12,031	)
Total operating (loss) income			(661	)			6,794				27,708				29,050
Interest expense, net of amounts capitalized			(18,676	)			(21,918	)			(55,505	)			(44,045	)
Interest income			3,382				4,486				11,411				8,583
Income (loss) from unconsolidated companies			30				(75	)			147				(293	)
Gain on extinguishment of debt			—				—				24,726				—
Other gains and (losses), net			(84	)			904				3,420				954
(Loss) income before (benefit) provision for income taxes		$	(16,009	)		$	(9,809	)		$	11,907			$	(5,751	)

20. SUBSEQUENT EVENTS:

The Company has evaluated all subsequent events through November 6, 2009, the date these financial statements were filed with the SEC.

As discussed in Note 9, on September 23, 2009, the Company commenced a cash tender offer for its 8% Senior Notes and a solicitation of consents from holders of the 8% Senior Notes to effect certain proposed amendments to the indenture governing these notes. On October 6, 2009, the Company received the requisite consents of holders representing at least a majority in principal amount of the 8% Senior Notes then outstanding, to enter into the Sixth Supplemental Indenture pursuant to the Company’s previously announced consent solicitation with respect to the 8% Senior Notes. Following the expiration of the tender offer on October 21, 2009, $223.6 million aggregate principal amount of the Company’s outstanding 8% Senior Notes had been validly tendered and were repurchased by the Company pursuant to the terms of the tender offer. The Company has also called for redemption at a price of 102.667% of the principal amount thereof, plus accrued interest, on November 15, 2009, all remaining outstanding 8% Senior Notes. As a result, the Company anticipates it will record a loss on the extinguishment of debt of approximately $6 million during the fourth quarter of 2009.

21. INFORMATION CONCERNING GUARANTOR AND NON-GUARANTOR SUBSIDIARIES:

Not all of the Company’s subsidiaries have guaranteed the Company’s 8% Senior Notes and 6.75% Senior Notes. The Company’s 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 Company’s 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 September 30, 2009

										Non-
(in thousands)		Issuer				Guarantors				Guarantors				Eliminations				Consolidated
Revenues		$	2,672			$	199,094			$	—			$	(2,666	)		$	199,100
Operating expenses:
Operating costs			—				122,211				—				—				122,211
Selling, general and administrative			6,071				35,411				—				—				41,482
Management fees			—				2,666				—				(2,666	)			—
Impairment and other charges			—				6,586				—				—				6,586
Depreciation and amortization			1,322				28,160				—				—				29,482
Operating (loss) income			(4,721	)			4,060				—				—				(661	)
Interest expense, net of amounts capitalized			(19,260	)			(29,528	)			—				30,112				(18,676	)
Interest income			5,476				24,395				3,623				(30,112	)			3,382
Income from unconsolidated companies			—				30				—				—				30
Other gains and (losses), net			(7	)			(77	)			—				—				(84	)
(Loss) income before (benefit) provision for income taxes			(18,512	)			(1,120	)			3,623				—				(16,009	)
(Benefit) provision for income taxes			(16,644	)			8,589				5,101				—				(2,954	)
Equity in subsidiaries’ losses, net			(11,033	)			—				—				11,033				—
Loss from continuing operations			(12,901	)			(9,709	)			(1,478	)			11,033				(13,055	)
Income from discontinued operations, net of taxes			—				29				125				—				154
Net loss		$	(12,901	)		$	(9,680	)		$	(1,353	)		$	11,033			$	(12,901	)

GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES

Condensed Consolidating Statement of Operations

For the Three Months Ended September 30, 2008

										Non-
(in thousands)		Issuer				Guarantors				Guarantors				Eliminations				Consolidated
Revenues		$	2,224			$	226,726			$	—			$	(2,217	)		$	226,733
Operating expenses:
Operating costs			—				147,362				—				26				147,388
Selling, general and administrative			5,239				37,350				—				(26	)			42,563
Management fees			—				2,217				—				(2,217	)			—
Preopening costs			—				369				—				—				369
Depreciation and amortization			1,388				28,231				—				—				29,619
Operating (loss) income			(4,403	)			11,197				—				—				6,794
Interest expense, net of amounts capitalized			(22,420	)			(37,851	)			(109	)			38,462				(21,918	)
Interest income			8,482				29,896				4,570				(38,462	)			4,486
Loss from unconsolidated companies			—				(75	)			—				—				(75	)
Other gains and (losses), net			1,136				(232	)			—				—				904
(Loss) income before (benefit) provision for income taxes			(17,205	)			2,935				4,461				—				(9,809	)
(Benefit) provision for income taxes			(166	)			(3,587	)			450				—				(3,303	)
Equity in subsidiaries’ earnings, net			11,519				—				—				(11,519	)			—
(Loss) income from continuing operations			(5,520	)			6,522				4,011				(11,519	)			(6,506	)
(Loss) income from discontinued operations, net of taxes			—				(1	)			987				—				986
Net (loss) income		$	(5,520	)		$	6,521			$	4,998			$	(11,519	)		$	(5,520	)