GAYLORD ENTERTAINMENT COMPANY - FORM 10-Q
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
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| þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2005
or
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| o |
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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)
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| Delaware
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73-0664379 |
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|
(State or other jurisdiction of
incorporation or organization)
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|
(I.R.S. Employer
Identification No.) |
One Gaylord Drive
Nashville, Tennessee 37214
(Address of principal executive offices)
(Zip Code)
(615) 316-6000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act).
Yes þ No o
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes
o No þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of
the latest practicable date.
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| Class |
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Outstanding as of October 31, 2005 |
| Common Stock, $.01 par value
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|
40,301,778 shares |
GAYLORD ENTERTAINMENT COMPANY
FORM 10-Q
For the Quarter Ended September 30, 2005
INDEX
1
Part I — Financial Information
Item 1. — Financial Statements
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 2005 and 2004
(Unaudited)
(In thousands, except per share data)
| |
|
|
|
|
|
|
|
|
| |
|
2005 |
|
|
2004 |
|
Revenues |
|
$ |
208,501 |
|
|
$ |
191,011 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Operating costs |
|
|
137,637 |
|
|
|
127,070 |
|
Selling, general and administrative |
|
|
48,491 |
|
|
|
42,535 |
|
Preopening costs |
|
|
1,213 |
|
|
|
223 |
|
Depreciation |
|
|
18,294 |
|
|
|
17,914 |
|
Amortization |
|
|
2,611 |
|
|
|
2,318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
255 |
|
|
|
951 |
|
|
|
|
|
|
|
|
|
|
Interest expense, net of amounts capitalized |
|
|
(18,474 |
) |
|
|
(14,850 |
) |
Interest income |
|
|
662 |
|
|
|
366 |
|
Unrealized gain (loss) on Viacom stock |
|
|
10,828 |
|
|
|
(23,766 |
) |
Unrealized (loss) gain on derivatives |
|
|
(10,753 |
) |
|
|
26,317 |
|
Income from unconsolidated companies |
|
|
2,098 |
|
|
|
1,587 |
|
Other gains and (losses), net |
|
|
1,102 |
|
|
|
753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before benefit for income taxes |
|
|
(14,282 |
) |
|
|
(8,642 |
) |
|
|
|
|
|
|
|
|
|
Benefit for income taxes |
|
|
(4,769 |
) |
|
|
(4,657 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
|
(9,513 |
) |
|
|
(3,985 |
) |
|
|
|
|
|
|
|
|
|
(Loss) gain from discontinued operations, net of income taxes |
|
|
(2,104 |
) |
|
|
793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(11,617 |
) |
|
$ |
(3,192 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) income per share: |
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
$ |
(0.24 |
) |
|
$ |
(0.10 |
) |
(Loss) gain
from discontinued operations, net of income taxes |
|
|
(0.05 |
) |
|
|
0.02 |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(0.29 |
) |
|
$ |
(0.08 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully diluted (loss) income per share: |
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
$ |
(0.24 |
) |
|
$ |
(0.10 |
) |
(Loss) gain
from discontinued operations, net of income taxes |
|
|
(0.05 |
) |
|
|
0.02 |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(0.29 |
) |
|
$ |
(0.08 |
) |
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 2005 and 2004
(Unaudited)
(In thousands, except per share data)
| |
|
|
|
|
|
|
|
|
| |
|
2005 |
|
|
2004 |
|
Revenues |
|
$ |
647,352 |
|
|
$ |
542,182 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Operating costs |
|
|
408,489 |
|
|
|
344,670 |
|
Selling, general and administrative |
|
|
148,254 |
|
|
|
135,527 |
|
Preopening costs |
|
|
3,329 |
|
|
|
14,239 |
|
Impairment and other charges |
|
|
— |
|
|
|
1,212 |
|
Restructuring charges |
|
|
— |
|
|
|
78 |
|
Depreciation |
|
|
54,042 |
|
|
|
51,013 |
|
Amortization |
|
|
8,001 |
|
|
|
6,519 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
25,237 |
|
|
|
(11,076 |
) |
|
|
|
|
|
|
|
|
|
Interest expense, net of amounts capitalized |
|
|
(54,449 |
) |
|
|
(39,011 |
) |
Interest income |
|
|
1,820 |
|
|
|
1,015 |
|
Unrealized loss on Viacom stock |
|
|
(37,070 |
) |
|
|
(119,052 |
) |
Unrealized gain on derivatives |
|
|
29,233 |
|
|
|
84,314 |
|
Income from unconsolidated companies |
|
|
1,980 |
|
|
|
3,383 |
|
Other gains and (losses), net |
|
|
6,022 |
|
|
|
2,390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before benefit for income taxes |
|
|
(27,227 |
) |
|
|
(78,037 |
) |
|
|
|
|
|
|
|
|
|
Benefit for income taxes |
|
|
(8,718 |
) |
|
|
(32,285 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
|
(18,509 |
) |
|
|
(45,752 |
) |
|
|
|
|
|
|
|
|
|
(Loss) gain from discontinued operations, net of income taxes |
|
|
(2,376 |
) |
|
|
1,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(20,885 |
) |
|
$ |
(44,738 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) income per share: |
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
$ |
(0.46 |
) |
|
$ |
(1.16 |
) |
(Loss) gain from discontinued operations, net of income taxes |
|
|
(0.06 |
) |
|
|
0.03 |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(0.52 |
) |
|
$ |
(1.13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully diluted (loss) income per share: |
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
$ |
(0.46 |
) |
|
$ |
(1.16 |
) |
(Loss) gain from discontinued operations, net of income taxes |
|
|
(0.06 |
) |
|
|
0.03 |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(0.52 |
) |
|
$ |
(1.13 |
) |
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2005 and December 31, 2004
(Unaudited)
(In thousands)
| |
|
|
|
|
|
|
|
|
| |
|
September 30, |
|
|
December 31, |
|
| |
|
2005 |
|
|
2004 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents — unrestricted |
|
$ |
27,853 |
|
|
$ |
44,212 |
|
Cash and cash equivalents — restricted |
|
|
38,842 |
|
|
|
42,963 |
|
Short term investments |
|
|
5,000 |
|
|
|
27,000 |
|
Trade receivables, less allowance of $2,158 and $1,755, respectively |
|
|
40,360 |
|
|
|
30,159 |
|
Deferred financing costs |
|
|
26,865 |
|
|
|
26,865 |
|
Deferred income taxes |
|
|
9,443 |
|
|
|
10,411 |
|
Other current assets |
|
|
34,050 |
|
|
|
21,066 |
|
Current assets of discontinued operations |
|
|
4,369 |
|
|
|
11,337 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
186,782 |
|
|
|
214,013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net of accumulated depreciation |
|
|
1,380,156 |
|
|
|
1,341,808 |
|
Intangible assets, net of accumulated amortization |
|
|
29,138 |
|
|
|
25,686 |
|
Goodwill |
|
|
176,700 |
|
|
|
162,792 |
|
Indefinite lived intangible assets |
|
|
40,315 |
|
|
|
40,591 |
|
Investments |
|
|
435,529 |
|
|
|
468,570 |
|
Estimated fair value of derivative assets |
|
|
213,565 |
|
|
|
187,383 |
|
Long-term deferred financing costs |
|
|
36,697 |
|
|
|
50,873 |
|
Other long-term assets |
|
|
21,459 |
|
|
|
24,088 |
|
Long-term assets of discontinued operations |
|
|
2,234 |
|
|
|
5,241 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
2,522,575 |
|
|
$ |
2,521,045 |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Current portion of long-term debt and capital lease obligations |
|
$ |
753 |
|
|
$ |
463 |
|
Accounts payable and accrued liabilities |
|
|
186,821 |
|
|
|
163,927 |
|
Current liabilities of discontinued operations |
|
|
3,476 |
|
|
|
5,794 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
191,050 |
|
|
|
170,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured forward exchange contract |
|
|
613,054 |
|
|
|
613,054 |
|
Long-term debt and capital lease obligations, net of current portion |
|
|
580,911 |
|
|
|
575,946 |
|
Deferred income taxes |
|
|
192,883 |
|
|
|
207,062 |
|
Estimated fair value of derivative liabilities |
|
|
646 |
|
|
|
4,514 |
|
Other long-term liabilities |
|
|
82,078 |
|
|
|
80,562 |
|
Long-term liabilities of discontinued operations |
|
|
125 |
|
|
|
122 |
|
Commitments and contingencies |
|
|
— |
|
|
|
— |
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Preferred stock, $.01 par value, 100,000 shares authorized, no shares
issued or outstanding |
|
|
— |
|
|
|
— |
|
Common stock, $.01 par value, 150,000 shares authorized,
40,285 and 39,930 shares issued and outstanding, respectively |
|
|
403 |
|
|
|
399 |
|
Additional paid-in capital |
|
|
668,611 |
|
|
|
655,110 |
|
Retained earnings |
|
|
211,385 |
|
|
|
232,270 |
|
Unearned compensation |
|
|
(1,665 |
) |
|
|
(1,337 |
) |
Accumulated other comprehensive loss |
|
|
(16,906 |
) |
|
|
(16,841 |
) |
|
|
|
|
|
|
|
Total stockholders’ equity |
|
|
861,828 |
|
|
|
869,601 |
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
|
$ |
2,522,575 |
|
|
$ |
2,521,045 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2005 and 2004
(Unaudited)
(In thousands)
| |
|
|
|
|
|
|
|
|
| |
|
2005 |
|
|
2004 |
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(20,885 |
) |
|
$ |
(44,738 |
) |
Amounts to reconcile net loss to net cash flows provided by
operating activities: |
|
|
|
|
|
|
|
|
Loss (income) from discontinued operations, net of taxes |
|
|
2,376 |
|
|
|
(1,014 |
) |
Income from unconsolidated companies |
|
|
(1,980 |
) |
|
|
(3,383 |
) |
Unrealized loss on Viacom stock and related derivatives |
|
|
7,837 |
|
|
|
34,738 |
|
Gain on sales of assets |
|
|
(2,619 |
) |
|
|
— |
|
Impairment and other charges |
|
|
— |
|
|
|
1,212 |
|
Depreciation and amortization |
|
|
62,043 |
|
|
|
57,532 |
|
Benefit for deferred income taxes |
|
|
(8,897 |
) |
|
|
(32,621 |
) |
Amortization of deferred financing costs |
|
|
22,143 |
|
|
|
22,121 |
|
Changes in (net of acquisitions and divestitures): |
|
|
|
|
|
|
|
|
Trade receivables |
|
|
(9,340 |
) |
|
|
(14,221 |
) |
Accounts payable and accrued liabilities |
|
|
8,098 |
|
|
|
3,240 |
|
Other assets and liabilities |
|
|
(6,290 |
) |
|
|
(3,772 |
) |
|
|
|
|
|
|
|
Net cash flows provided by operating activities — continuing operations |
|
|
52,486 |
|
|
|
19,094 |
|
Net cash flows provided by operating activities — discontinued operations |
|
|
3,880 |
|
|
|
5,508 |
|
|
|
|
|
|
|
|
Net cash flows provided by operating activities |
|
|
56,366 |
|
|
|
24,602 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(87,280 |
) |
|
|
(107,249 |
) |
Acquisition of businesses, net of cash acquired |
|
|
(20,223 |
) |
|
|
— |
|
Purchase of investment in RHAC Holdings, LLC |
|
|
(4,747 |
) |
|
|
— |
|
Proceeds from sales of assets |
|
|
10,386 |
|
|
|
— |
|
Purchases of short-term investments |
|
|
(15,000 |
) |
|
|
(110,850 |
) |
Proceeds from sale of short term investments |
|
|
37,000 |
|
|
|
153,850 |
|
Other investing activities |
|
|
(1,099 |
) |
|
|
(2,676 |
) |
|
|
|
|
|
|
|
Net cash flows used in investing activities — continuing operations |
|
|
(80,963 |
) |
|
|
(66,925 |
) |
Net cash flows used in investing activities — discontinued operations |
|
|
(211 |
) |
|
|
(261 |
) |
|
|
|
|
|
|
|
Net cash flows used in investing activities |
|
|
(81,174 |
) |
|
|
(67,186 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
Repayment of long-term debt |
|
|
— |
|
|
|
(6,003 |
) |
Deferred financing costs paid |
|
|
(8,451 |
) |
|
|
(909 |
) |
Decrease (increase) in restricted cash and cash equivalents |
|
|
8,832 |
|
|
|
(107 |
) |
Proceeds from exercise of stock option and purchase plans |
|
|
8,195 |
|
|
|
7,169 |
|
Other financing activities, net |
|
|
(509 |
) |
|
|
(525 |
) |
|
|
|
|
|
|
|
Net cash flows provided by (used in) financing activities — continuing operations |
|
|
8,067 |
|
|
|
(375 |
) |
Net cash flows provided by financing activities — discontinued operations |
|
|
382 |
|
|
|
782 |
|
|
|
|
|
|
|
|
Net cash flows provided by financing activities |
|
|
8,449 |
|
|
|
407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
|
(16,359 |
) |
|
|
(42,177 |
) |
Cash and cash equivalents — unrestricted, beginning of period |
|
|
44,212 |
|
|
|
58,945 |
|
|
|
|
|
|
|
|
Cash and cash equivalents — unrestricted, end of period |
|
$ |
27,853 |
|
|
$ |
16,768 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION:
The condensed consolidated financial statements include the accounts of Gaylord Entertainment
Company and subsidiaries (the “Company”) and have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission. 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 for the year ended December 31,
2004 filed with the Securities and Exchange Commission. In the opinion of management, all
adjustments necessary for a fair statement of the results of operations for the interim period 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.
During 2003 and prior years, the Company classified certain market auction rate debt securities as
cash and cash equivalents – unrestricted. During 2004, the Company determined that these
securities should be classified as short-term investments due to the fact that the original
maturity of these securities is greater than three months. As a result, the Company revised its
statement of cash flows for the nine months ended September 30, 2004 to present the purchases and
sales of these securities as investing activities. This reclassification had no impact on net
income for the three months and nine months ended September 30, 2004 or cash flows provided by
operating activities — continuing operations for the nine months ended September 30, 2004.
2. LOSS PER SHARE:
The weighted average number of common shares outstanding is calculated as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
|
Three
Months Ended
September 30, |
|
|
|
Nine
Months Ended
September 30, |
|
| |
|
|
2005 |
|
|
|
2004 |
|
|
|
2005 |
|
|
|
2004 |
|
Weighted average shares outstanding |
|
|
40,234 |
|
|
|
39,726 |
|
|
|
40,126 |
|
|
|
39,594 |
|
Effect of dilutive stock options |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding -
assuming dilution |
|
|
40,234 |
|
|
|
39,726 |
|
|
|
40,126 |
|
|
|
39,594 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months and nine months ended September 30, 2005, the effect of dilutive stock options
was the equivalent of approximately 1,231,000 and 1,131,000 shares of common stock outstanding,
respectively. For the three months and nine months ended September 30, 2004, the effect of
dilutive stock options was the equivalent of approximately 446,000 and 475,000 shares of common
stock
outstanding, respectively. Because the Company had a loss from continuing operations in the three
months and nine months ended September 30, 2005 and 2004, these incremental shares were excluded
6
from the computation of diluted earnings per share for those periods as the effect of their
inclusion would have been anti-dilutive.
3. COMPREHENSIVE LOSS:
Comprehensive loss is as follows for the three months and nine months of the respective periods:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
Three Months Ended |
|
|
Nine Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| |
|
2005 |
|
|
2004 |
|
|
2005 |
|
|
2004 |
|
Net loss |
|
$ |
(11,617 |
) |
|
$ |
(3,192 |
) |
|
$ |
(20,885 |
) |
|
$ |
(44,738 |
) |
Unrealized loss on interest rate hedges |
|
|
— |
|
|
|
(19 |
) |
|
|
(19 |
) |
|
|
(73 |
) |
Foreign currency translation |
|
|
1 |
|
|
|
11 |
|
|
|
(45 |
) |
|
|
97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
$ |
(11,616 |
) |
|
$ |
(3,200 |
) |
|
$ |
(20,949 |
) |
|
$ |
(44,714 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
4. INVESTMENTS
On May 31, 2005, the Company, through a wholly-owned subsidiary named RHAC, LLC, entered into an
agreement to purchase the 716-room Aston Waikiki Beach Hotel and related assets located in
Honolulu, Hawaii (“the Waikiki Hotel”) for an aggregate purchase price of $107.0 million.
Simultaneously with this purchase, G.O. IB-SIV US, a private real estate fund managed by DB Real
Estate Opportunities Group (“IB-SIV”) acquired an 80.1% ownership interest in the parent company of
RHAC, LLC, RHAC Holdings, LLC, in exchange for its capital contribution of $19.1 million to RHAC
Holdings, LLC. As a part of this transaction, the Company entered into a joint venture arrangement
with IB-SIV and retained a 19.9% ownership interest in RHAC Holdings, LLC in exchange for its $4.7
million capital contribution to RHAC Holdings, LLC. Both the Company and IB-SIV will contribute
additional funds as needed for their pro-rata share of specified construction costs associated with
the redevelopment of 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 loan secured by the Waikiki Hotel and a
$16.25 million mezzanine loan secured by the ownership interest of RHAC, LLC (collectively, the
“Waikiki Hotel Loans”). IB-SIV is the managing member of RHAC Holdings, LLC, but certain actions
initiated by IB-SIV require the approval of the Company. In addition, under the joint venture
arrangement, the Company’s ResortQuest subsidiary secured a 20-year hotel management agreement from
RHAC, LLC. Pursuant to the terms of the hotel management agreement, ResortQuest will be responsible
for the day-to-day operations of the Waikiki Hotel in accordance with RHAC, LLC’s business plan.
The Company will account for its investment in RHAC Holdings, LLC under the equity method of
accounting in accordance with Emerging Issues Task Force (“EITF”) Issue No. 03-16, Accounting for
Investments in Limited Liability Companies, American Institute of Certified Public Accountants
Statement of Position 78-9, Accounting for Investments in Real Estate Ventures, and EITF Abstracts
Topic No. D-46, Accounting for Limited Partnership Investment.
In the second quarter of 2005, Bass Pro Shops, L.P. (“Bass Pro”) restated its previously issued
historical financial statements to reflect certain non-cash changes, which resulted primarily from
a change in the
manner in which Bass Pro accounts for its long term leases. This restatement resulted in a
cumulative reduction in Bass Pro’s net income of $8.6 million through December 31, 2004, which
resulted in a pro-rata cumulative reduction in the Company’s income from unconsolidated companies
of $1.7 million. The Company determined that the impact of the adjustments recorded by Bass Pro is
immaterial to the Company’s consolidated financial statements in all prior periods. Therefore, the
Company reflected its
7
$1.7 million share of the re-statement adjustments as a one-time adjustment
to income from unconsolidated companies during the second quarter of 2005.
5. DISCONTINUED OPERATIONS:
The Company has reflected the following businesses as discontinued operations, consistent with the
provisions of Statement of Financial Accounting Standards
(“SFAS”) No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets and Accounting
Principles Board (“APB”) Opinion No. 30, Reporting
the Results of Operations—Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions. The results of operations, net of taxes, and the carrying value
of the assets and liabilities of these businesses have been reflected in the accompanying
consolidated financial statements as discontinued operations in accordance with SFAS No. 144 for
all periods presented. These required revisions to the prior year financial statements did not
impact cash flows from operating, investing or financing activities.
ResortQuest Markets
During the third quarter of 2005, the Company committed to a plan of disposal of certain markets of
its ResortQuest business that were considered to be inconsistent with the Company’s long term
growth strategy. The Company plans to sell the assets used in the operations of these markets as
soon as practical. In connection with this plan of disposal, the Company recorded pre-tax
restructuring charges of $0.4 million for employee severance benefits related to the discontinued
markets. Based on its decision to dispose of these markets, the Company also recorded pre-tax
impairment charges of $2.8 million during the third quarter of 2005. Included in this charge are
the impairment of goodwill of $2.3 million, the impairment of fixed assets of $0.4 million, and the
impairment of intangible assets of $0.1 million.
WSM-FM and WWTN(FM)
During the first quarter of 2003, the Company committed to a plan of disposal of WSM-FM and
WWTN(FM) (the “Radio Operations’). Subsequent to committing to a plan of disposal during the first
quarter of 2003, the Company, through a wholly-owned subsidiary, entered into an agreement to sell
the assets primarily used in the operations of the Radio Operations to Cumulus Broadcasting, Inc.
(“Cumulus”) in exchange for approximately $62.5 million in cash. On July 22, 2003, the Company
finalized the sale of the Radio Operations for approximately $62.5 million, at which time, net
proceeds of approximately $50 million were placed in an escrow account for completion of the
Gaylord Texan. Concurrently, the Company also entered into a joint sales agreement with Cumulus for
WSM-AM in exchange for $2.5 million in cash. The Company continues to own and operate WSM-AM, and
under the terms of the joint sales agreement with Cumulus, Cumulus is responsible for all sales of
commercial advertising on WSM-AM and provides certain sales promotion, billing and collection
services relating to WSM-AM, all for a specified commission. The joint sales agreement has a term
of five years.
During the third quarter of 2005, due to the expiration and resolution of certain claims and
indemnifications in the sales contract, a previously established indemnification reserve of $0.1
million was reversed and is included in income from discontinued operations in the condensed
consolidated statement of operations.
Acuff-Rose Music Publishing
During the third quarter of 2002, the Company finalized the sale of the Acuff-Rose Music Publishing
entity to Sony/ ATV Music Publishing for approximately $157.0 million in cash. The Company
recognized a pretax gain of $130.6 million during the third quarter of 2002 related to the sale.
During the third quarter of 2004, due to the expiration of certain indemnification periods as
specified in
8
the sales contract, a previously established indemnification reserve of $1.0 million
was reversed and is included in income from discontinued operations in the consolidated statement
of operations.
The following table reflects the results of operations of businesses accounted for as discontinued
operations for the three months and nine months ended September 30, 2005 and 2004:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
Three Months Ended |
|
|
Nine Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| |
|
2005 |
|
|
2004 |
|
|
2005 |
|
|
2004 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ResortQuest Markets |
|
$ |
4,130 |
|
|
$ |
4,913 |
|
|
$ |
13,351 |
|
|
$ |
14,696 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ResortQuest Markets |
|
$ |
(163 |
) |
|
$ |
302 |
|
|
$ |
(572 |
) |
|
$ |
658 |
|
Impairment charges |
|
|
(2,749 |
) |
|
|
— |
|
|
|
(2,749 |
) |
|
|
— |
|
Restructuring charges |
|
|
(434 |
) |
|
|
— |
|
|
|
(434 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating (loss) income |
|
|
(3,346 |
) |
|
|
302 |
|
|
|
(3,755 |
) |
|
|
658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
7 |
|
|
|
5 |
|
|
|
22 |
|
|
|
16 |
|
Other gains and (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ResortQuest Markets |
|
|
(14 |
) |
|
|
— |
|
|
|
(12 |
) |
|
|
— |
|
Radio Operations |
|
|
136 |
|
|
|
— |
|
|
|
136 |
|
|
|
— |
|
Acuff-Rose Music Publishing |
|
|
— |
|
|
|
1,015 |
|
|
|
— |
|
|
|
1,015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other gains and (losses) |
|
|
122 |
|
|
|
1,015 |
|
|
|
124 |
|
|
|
1,015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before (benefit) provision for income taxes |
|
|
(3,217 |
) |
|
|
1,322 |
|
|
|
(3,609 |
) |
|
|
1,689 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Benefit) provision for income taxes |
|
|
(1,113 |
) |
|
|
529 |
|
|
|
(1,233 |
) |
|
|
675 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) gain from discontinued operations |
|
$ |
(2,104 |
) |
|
$ |
793 |
|
|
$ |
(2,376 |
) |
|
$ |
1,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other gains and (losses) in 2005 and 2004 are primarily comprised of the reversal of certain
previously established indemnification reserves and miscellaneous income and expenses.
9
The assets and liabilities of the discontinued operations presented in the accompanying condensed
consolidated balance sheets are comprised of:
| |
|
|
|
|
|
|
|
|
| (in thousands) |
|
September 30, |
|
|
December 31, |
|
| |
|
2005 |
|
|
2004 |
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents — unrestricted |
|
$ |
1,659 |
|
|
$ |
1,280 |
|
Cash and cash equivalents — restricted |
|
|
1,804 |
|
|
|
2,186 |
|
Trade receivables, net |
|
|
524 |
|
|
|
169 |
|
Prepaid expenses |
|
|
165 |
|
|
|
169 |
|
Other current assets |
|
|
217 |
|
|
|
7,533 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
4,369 |
|
|
|
11,337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net of accumulated depreciation |
|
|
999 |
|
|
|
1,443 |
|
Intangible assets, net of accumulated amortization |
|
|
225 |
|
|
|
278 |
|
Goodwill |
|
|
1,006 |
|
|
|
3,276 |
|
Other long-term assets |
|
|
4 |
|
|
|
244 |
|
|
|
|
|
|
|
|
Total long-term assets |
|
|
2,234 |
|
|
|
5,241 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
6,603 |
|
|
$ |
16,578 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
$ |
3,476 |
|
|
$ |
5,794 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
3,476 |
|
|
|
5,794 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
125 |
|
|
|
122 |
|
|
|
|
|
|
|
|
Total long-term liabilities |
|
|
125 |
|
|
|
122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
3,601 |
|
|
$ |
5,916 |
|
|
|
|
|
|
|
|
10
6. ACQUISITIONS:
Whistler Lodging Company, Ltd.
On February 1, 2005, the Company acquired 100% of the outstanding common shares of Whistler Lodging
Company, Ltd. (“Whistler”) from O’Neill Hotels and
Resorts Whistler, Ltd. for an
aggregate purchase price of $0.1 million in cash plus the assumption of Whistler’s liabilities as
of February 1, 2005 of $4.9 million. Whistler manages approximately 600 vacation rental units
located in Whistler, British Columbia. The results of operations of Whistler have been included in
the Company’s financial results beginning February 1, 2005.
The total cash purchase price of the Whistler acquisition was as follows (in thousands):
| |
|
|
|
|
Cash received from Whistler |
|
$ |
(45 |
) |
Direct merger costs incurred by the Company |
|
|
194 |
|
|
|
|
|
Total |
|
$ |
149 |
|
|
|
|
|
The purchase price allocation as of February 1, 2005 was as follows (in thousands):
| |
|
|
|
|
Tangible assets acquired |
|
$ |
1,771 |
|
Amortizable intangible assets |
|
|
212 |
|
Goodwill |
|
|
3,024 |
|
|
|
|
|
Total assets acquired |
|
|
5,007 |
|
|
|
|
|
|
Liabilities assumed |
|
|
(4,858 |
) |
|
|
|
|
Net assets acquired |
|
$ |
149 |
|
|
|
|
|
Tangible assets acquired totaled $1.8 million, which included $0.7 million of restricted cash, $0.6
million of net trade receivables and $0.2 million of property and equipment.
Approximately $0.2 million was allocated to amortizable intangible assets consisting of existing
property management contracts. Property management contracts represent existing contracts with
property owners, homeowner associations and other direct ancillary service contracts. Property
management contracts are amortized on a straight-line basis over the remaining useful life of the
contracts, which is estimated to be seven years from acquisition.
As of September 30, 2005 and February 1, 2005, goodwill related to the Whistler acquisition totaled
$3.4 million and $3.0 million, respectively. During the eight months ended September 30, 2005, the
Company made adjustments to accrued liabilities associated with the Whistler acquisition as a
result of obtaining additional information. These adjustments resulted in a net increase in
goodwill of $0.4 million.
East West Resorts
On January 1, 2005, the Company acquired 100% of the outstanding membership interests of East West
Resorts at Summit County, LLC, Aspen Lodging Company, LLC, Great Beach Vacations, LLC, East West
Realty Aspen, LLC, and Sand Dollar Management Investors, LLC (collectively, “East West
11
Resorts”)
from East West Resorts, LLC for an aggregate purchase price of $20.7 million in cash plus the
assumption of East West Resort’s liabilities as of January 1, 2005 of $7.8 million. East West
Resorts manages approximately 2,000 vacation rental units located in Colorado ski destinations and
South Carolina beach destinations. The results of operations of East West Resorts have been
included in the Company’s financial results beginning January 1, 2005.
The total cash purchase price of the East West Resorts acquisition was as follows (in
thousands):
| |
|
|
|
|
Cash paid to East West Resorts, LLC |
|
$ |
20,650 |
|
Direct merger costs incurred by the Company |
|
|
97 |
|
|
|
|
|
Total |
|
$ |
20,747 |
|
|
|
|
|
The purchase price allocation as of January 1, 2005 was as follows (in thousands):
| |
|
|
|
|
Tangible assets acquired |
|
$ |
9,714 |
|
Amortizable intangible assets |
|
|
6,955 |
|
Goodwill |
|
|
11,893 |
|
|
|
|
|
Total assets acquired |
|
|
28,562 |
|
|
|
|
|
|
Liabilities assumed |
|
|
(7,815 |
) |
|
|
|
|
Net assets acquired |
|
$ |
20,747 |
|
|
|
|
|
Tangible assets acquired totaled $9.7 million, which included $4.0 million of restricted cash, $0.3
million of net trade receivables and $4.2 million of property and equipment.
Approximately $7.0 million was allocated to amortizable intangible assets consisting of existing
property management contracts and non-competition agreements. Property management contracts are
amortized on a straight-line basis over the remaining useful life of the contracts, which is
estimated to be seven years from acquisition. Non-competition agreements represent contracts with
certain former owners and managers of East West Resorts, LLC that prohibit them from competing with
the acquired companies for a period of five years. Non-competition agreements are amortized on a
straight-line basis over the five year life of the agreements.
As of September 30, 2005 and January 1, 2005, goodwill related to the East West Resorts acquisition
totaled $11.6 million and $11.9 million, respectively. During the nine months ended September 30,
2005, the Company made adjustments to the final purchase price of ($0.6 million) and accrued
liabilities associated with the East West Resorts acquisition of $0.3 million as a result of
obtaining additional information. These adjustments resulted in a net decrease in goodwill of $0.3
million.
ResortQuest International, Inc.
On November 20, 2003, pursuant to the Agreement and Plan of Merger dated as of August 4, 2003, the
Company acquired 100% of the outstanding common shares of ResortQuest International, Inc. in a
tax-free, stock-for-stock merger. Under the terms of the agreement, ResortQuest stockholders
received 0.275 shares of the Company’s common stock for each outstanding share of ResortQuest
common stock, and the ResortQuest option holders received 0.275 options to purchase the Company’s
common stock for each outstanding option to purchase one share of ResortQuest common stock. Based
on the number of shares
12
of ResortQuest common stock outstanding as of November 20, 2003
(19,339,502) and the exchange ratio (0.275 of the Company common share for each ResortQuest common
share), the Company issued 5,318,363 shares of the Company’s common stock. In addition, based on
the total number of ResortQuest options outstanding at November 20, 2003, the Company exchanged
ResortQuest options for options to purchase 573,863 shares of the Company’s common stock. Based on
the average market price of the Company’s common stock ($19.81, which was based on an average of
the closing prices for two days before, the day of, and two days after the date of the definitive
agreement, August 4, 2003), together with the direct merger costs, this resulted in an aggregate
purchase price of approximately $114.7 million plus the assumption of ResortQuest’s outstanding
indebtedness as of November 20, 2003, which totaled $85.1 million. The Company has accounted for
the ResortQuest acquisition under the purchase method of accounting.
As of September 30, 2005 and December 31, 2004, goodwill related to the ResortQuest acquisition in
continuing operations totaled $154.8 million and $155.9 million, respectively. During the nine
months ended September 30, 2005, the Company made adjustments to deferred taxes associated with the
ResortQuest acquisition as a result of obtaining additional information. These adjustments
resulted in a net decrease in goodwill of $1.1 million.
As of November 20, 2003, the Company recorded approximately $4.0 million of reserves and
adjustments related to the Company’s plans to consolidate certain support functions, to adjust for
employee benefits and to account for outstanding legal claims filed against ResortQuest as an
adjustment to the purchase price allocation. The following table summarizes the activity related
to these reserves for the nine months ended September 30, 2005 (amounts in thousands):
| |
|
|
|
|
|
|
|
|
|
|
| Balance at |
|
Charges and |
|
|
|
|
|
Balance at |
| December 31, 2004 |
|
Adjustments |
|
Payments |
|
September 30, 2005 |
$2,950
|
|
$—
|
|
$ |
2,145 |
|
|
$ |
805 |
|
The Company has accounted for these acquisitions under the purchase method of accounting. Under the
purchase method of accounting, the total purchase price of each
acquisition was allocated to the net
tangible and identifiable intangible assets based upon their estimated fair value as of the date of
completion of each of the acquisitions. The Company determined these fair values with the assistance of a
third party valuation expert. The excesses of the purchases prices over the fair values of the net
tangible and identifiable intangible assets were recorded as goodwill. Goodwill will not be
amortized and will be tested for impairment on an annual basis and whenever events or circumstances
occur indicating that the goodwill may be impaired. The final allocations of the purchase prices
are subject to adjustments for a period not to exceed one year from the consummation date (the
allocation period of each acquisition) in accordance with SFAS No. 141 “Business Combinations” and EITF Issue 95-3
“Recognition of Liabilities in Connection with a Purchase Business Combination.” The allocation
period is intended to differentiate between amounts that are determined as a result of the
identification and valuation process required by SFAS No. 141 for all assets acquired and
liabilities assumed and amounts that are determined because information that was not previously
obtainable becomes obtainable.
13
7. DEBT:
Senior Loan and Mezzanine Loan
In 2001, the Company, through wholly owned subsidiaries, entered into two loan agreements, a $275.0
million senior loan (the “Senior Loan”) and a $100.0 million mezzanine loan (the “Mezzanine Loan”)
(collectively, the “Nashville Hotel Loans”) with affiliates of Merrill Lynch & Company acting as
principal. The Senior and Mezzanine Loan borrower and its member were subsidiaries formed for the
purposes of owning and operating the Gaylord Opryland and entering into the loan transaction and
were special-purpose entities whose activities were strictly limited. The Company fully
consolidates these entities in its consolidated financial statements. The Senior Loan was secured
by a first mortgage lien on the assets of Gaylord Opryland. In March 2004, the Company exercised
the first of two one-year extension options to extend the maturity of the Senior Loan to March
2005. Amounts outstanding under the Senior Loan bore interest at one-month LIBOR plus 1.20%. The
Mezzanine Loan was secured by the equity interest in the wholly-owned subsidiary that owns Gaylord
Opryland, was due in April 2004 and bore interest at one-month LIBOR plus 6.0%.
During November 2003, the Company used the proceeds of the 8% Senior Notes, as discussed below, to
repay in full $66.0 million outstanding under the Mezzanine Loan portion of the Nashville Hotel
Loans. During November 2004, the Company used the proceeds of the 6.75% Senior Notes, as discussed
below, to repay in full $192.5 million outstanding under the Senior Loan portion of the Nashville
Hotel Loans. The Nashville Hotel Loans were terminated in connection with their repayment.
8% Senior Notes
On November 12, 2003, the Company completed its offering of $350 million in aggregate principal
amount of senior notes due 2013 (the “8% Senior Notes”) in an institutional private placement. In
January 2004, the Company filed an exchange offer registration statement on Form S-4 with the
Securities and Exchange Commission (the “SEC”) with respect to the 8% Senior Notes and exchanged
the existing senior notes for publicly registered senior notes with the same terms after the
registration statement was declared effective in April 2004. The interest rate on these notes is
8%, although the Company has entered into fixed to variable interest rate swaps with respect to
$125 million principal amount of the 8% Senior Notes, which swaps result in an effective interest
rate of LIBOR plus 2.95% with respect to that portion of the 8% Senior Notes. The 8% Senior Notes,
which mature on November 15, 2013, bear interest semi-annually in arrears on May 15 and November 15 of each year, starting on May 15, 2004. The 8% Senior
Notes are redeemable, in whole or in part, at any time on or after November 15, 2008 at a
designated redemption amount, plus accrued and unpaid interest. In addition, the Company may redeem
up to 35% of the 8% Senior Notes before November 15, 2006 with the net cash proceeds from certain
equity offerings. The 8% Senior Notes rank equally in right of payment with the Company’s other
unsecured unsubordinated debt, but are effectively subordinated to all the Company’s secured debt
to the extent of the assets securing such debt. The 8% Senior Notes are fully and unconditionally
guaranteed, jointly and severally, on a senior unsecured basis by generally all of the Company’s
active domestic subsidiaries including the subsidiaries owning the assets of Gaylord Opryland. In
connection with the offering and subsequent registration of the 8% Senior Notes, the Company paid
approximately $10.1 million in deferred financing costs. The net proceeds from the offering of the
8% Senior Notes, together with $22.5 million of the Company’s cash on hand, were used as follows:
| |
• |
|
$275.5 million was used to repay the $150 million senior term loan portion and the $50
million subordinated term loan portion of a senior secured credit facility secured by the
Company’s |
14
| |
|
|
Florida and Texas hotel properties, as well as the remaining $66 million of the
Company’s $100 million Mezzanine Loan and to pay certain fees and expenses related to the
ResortQuest acquisition; and |
| |
| |
• |
|
$79.2 million was placed in escrow pending consummation of the ResortQuest acquisition.
As of November 20, 2003, the $79.2 million together with $8.2 million of the available
cash, was used to repay (i) ResortQuest’s senior notes and its credit facility, the
principal amount of which aggregated $85.1 million at closing, and (ii) a related
prepayment penalty. |
The 8% Senior Notes indenture contains certain covenants which, among other things, limit the
incurrence of additional indebtedness, investments, dividends, transactions with affiliates, asset
sales, capital expenditures, mergers and consolidations, liens and encumbrances and other matters
customarily restricted in such agreements. The 8% Senior Notes are cross-defaulted to the
Company’s other indebtedness.
6.75% Senior Notes
On November 30, 2004, the Company completed its offering of $225 million in aggregate principal
amount of senior notes due 2014 (the “6.75% Senior Notes”) in an institutional private placement.
The interest rate of these notes is 6.75%. The 6.75% Senior Notes, which mature on November 15,
2014, bear interest semi-annually in cash in arrears on May 15 and November 15 of each year,
starting on May 15, 2005. The 6.75% Senior Notes are redeemable, in whole or in part, at any time
on or after November 15, 2009 at a designated redemption amount, plus accrued and unpaid interest.
In addition, the Company may redeem up to 35% of the 6.75% Senior Notes before November 15, 2007
with the net cash proceeds from certain equity offerings. The 6.75% Senior Notes rank equally in
right of payment with the Company’s other unsecured unsubordinated debt, but are effectively
subordinated to all of the Company’s secured debt to the extent of the assets securing such debt.
The 6.75% Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior
unsecured basis by generally all of the Company’s active domestic subsidiaries including, following
repayment of the Senior Loan arrangements discussed above, the subsidiaries owning the assets of
Gaylord Opryland. In connection with the offering of the 6.75% Senior Notes, the Company paid
approximately $4.2 million in deferred financing costs. The net proceeds from the offering of the
6.75% Senior Notes, together with cash on hand, were used to repay the Senior Loan and to provide
capital for growth of the Company’s other businesses and other general corporate purposes. In
addition, the 6.75% Senior Notes indenture contains certain covenants which, among other things,
limit the incurrence of additional indebtedness, investments, dividends, transactions with
affiliates, asset sales, capital expenditures, mergers and consolidations, liens and encumbrances
and other matters customarily restricted in such agreements. The 6.75% Senior Notes are
cross-defaulted to the Company’s other indebtedness.
In April 2005, the Company filed an exchange offer registration statement on Form S-4 with the SEC
with respect to the 6.75% Senior Notes and exchanged the existing senior notes for publicly
registered senior notes with the same terms after the registration statement was declared effective
in May 2005.
New $600.0 Million Credit Facility
On March 10, 2005, the Company entered into a new $600.0 million credit facility with Bank of
America, N.A. acting as the administrative agent. The Company’s new credit facility, which replaced
the 2003 $100.0 million revolving credit facility, consists of the following components: (a) a
$300.0 million senior secured revolving credit facility, which includes a $50.0 million letter of
credit sublimit, and (b) a $300.0 million senior secured delayed draw term loan facility, which may
be drawn on in one or more
15
advances during its term. The credit facility also includes an accordion
feature that will allow the Company, on a one-time basis, to increase the credit facilities by a
total of up to $300.0 million, subject to securing additional commitments from existing lenders or
new lending institutions. The revolving loan, letters of credit and term loan mature on March 9,
2010. At the Company’s election, the revolving loans and the term loans may have an interest rate
of LIBOR plus 2% or the lending banks’ base rate plus 1%, subject to adjustments based on the
Company’s financial performance. Interest on the Company’s borrowings 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 is required to pay a commitment fee
ranging from 0.25% to 0.50% per year of the average unused portion of the credit facility.
The purpose of the new credit facility is for working capital and capital expenditures and the
financing of the costs and expenses related to the construction of the Gaylord National hotel.
Construction of the Gaylord National hotel is required to be substantially completed by September
30, 2008 (subject to customary force majeure provisions).
The new 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 (to be constructed) 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 as well as ResortQuest International, Inc. Advances are
subject to a 60% borrowing base, based on the appraisal values of the hotel properties (reducing to
50% in the event a hotel property is sold). The Company’s 2003 revolving credit facility has been
paid in full and the related mortgages and liens have been released.
In addition, the $600.0 million credit facility contains certain covenants which, among other
things, limit the incurrence of additional indebtedness, investments, dividends, transactions with
affiliates, asset sales, acquisitions, mergers and consolidations, liens and encumbrances and other
matters customarily restricted in such agreements. The material financial covenants, ratios or
tests contained in the new credit facility are as follows:
| |
• |
|
the Company must maintain a consolidated leverage ratio of not greater than (i) 7.00 to
1.00 for calendar quarters ending during calendar year 2007, and (ii) 6.25 to 1.00 for all
other calendar quarters ending during the term of the credit facility, which levels are
subject to increase to 7.25 to 1.00 and 7.00 to 1.00, respectively, for three (3)
consecutive quarters at the Company’s option if the Company makes a leverage ratio
election. |
| |
| |
• |
|
the Company must maintain a consolidated tangible net worth of not less than the sum of
$550.0 million, increased on a cumulative basis as of the end of each calendar quarter,
commencing with the calendar quarter ending March 31, 2005, by an amount equal to (i) 75%
of consolidated net income (to the extent positive) for the calendar quarter then ended,
plus (ii) 75% of the proceeds received by the Company or any of its subsidiaries in
connection with any equity issuance. |
| |
| |
• |
|
the Company must maintain a minimum consolidated fixed charge coverage ratio of not less
than (i) 1.50 to 1.00 for any reporting calendar quarter during which the leverage ratio
election is effective; and (ii) 2.00 to 1.00 for all other calendar quarters during the
term hereof. |
| |
| |
• |
|
the Company must maintain an implied debt service coverage ratio (the ratio of adjusted
net operating income to monthly principal and interest that would be required if the
outstanding |
16
| |
|
|
balance were amortized over 25 years at an interest rate equal to the then
current seven year Treasury Note plus 0.25%) of not less than 1.60 to 1.00. |
| |
| |
• |
|
the Company’s investments in entities which are not wholly-owned subsidiaries may not
exceed an amount equal to ten percent (10.0%) of the Company’s consolidated total assets. |
As of September 30, 2005, the Company was in compliance with all covenants. As of September 30,
2005, no borrowings were outstanding under the $600.0 million credit facility, but the lending
banks had issued $13.5 million of letters of credit under the credit facility for the Company. The
credit facility is cross-defaulted to the Company’s other indebtedness.
8. SECURED FORWARD EXCHANGE CONTRACT:
During May 2000, the Company entered into a seven-year secured forward exchange contract (“SFEC”)
with an affiliate of Credit Suisse First Boston with respect to 10,937,900 shares of Viacom, Inc.
Class B common stock (“Viacom Stock”). The seven-year SFEC has a notional amount of $613.1 million
and required contract payments based upon a stated 5% rate. The SFEC protects the Company against
decreases in the fair market value of the Viacom Stock while providing for participation in
increases in the fair market value, as discussed below. The Company realized cash proceeds from the
SFEC of $506.5 million, net of discounted prepaid contract payments and prepaid interest related to
the first 3.25 years of the contract and transaction costs totaling $106.6 million. In October
2000, the Company prepaid the remaining 3.75 years of contract interest payments required by the
SFEC of $83.2 million. As a result of the prepayment, the Company is not required to make any
further contract interest payments during the seven-year term of the SFEC. Additionally, as a
result of the prepayment, the Company was released from certain covenants of the SFEC, which
related to sales of assets, additional indebtedness and liens. The unamortized balances of the
prepaid contract interest are classified as current assets of $26.9 million as of September 30,
2005 and December 31, 2004 and long-term assets of $17.3 million and $37.4 million as of September
30, 2005 and December 31, 2004, respectively, in the accompanying condensed consolidated balance
sheets. The Company is recognizing the prepaid contract payments and deferred financing charges
associated with the SFEC as interest expense over the seven-year contract period using the
effective interest method, which resulted in non-cash interest expense of $6.8 million for the
three months ended September 30, 2005 and 2004, and $20.1 million and $20.2 million for the nine
months ended September 30, 2005 and 2004, respectively. The Company utilized $394.1 million of the
net proceeds from the SFEC to repay all outstanding indebtedness under a 1997 revolving credit
facility, and the 1997 revolving credit facility was terminated.
The Company’s obligation under the SFEC is collateralized by a security interest in the Company’s
Viacom Stock. At the end of the seven-year contract term, the Company may, at its option, elect to
pay in cash rather than by delivery of all or a portion of the Viacom Stock. The SFEC protects the
Company against decreases in the fair market value of the Viacom Stock below $56.05 per share by
way of a put option; the SFEC also provides for participation in the increases in the fair market
value of the Viacom Stock in that the Company receives 100% of the appreciation between $56.05 and
$64.45 per share and, by way of a call option, 25.93% of the appreciation above $64.45 per share,
as of September 30, 2005. The call option strike price decreased from $67.97 as of December 31,
2004 to $64.45 as of September 30, 2005 due to the Company receiving dividend distributions from
Viacom. The Company elected not to retain the dividend distribution declared by Viacom during the
third quarter of 2005 and expects to remit any future dividend distributions declared by Viacom to
Credit Suisse First Boston.
In accordance with the provisions of SFAS No. 133, as amended, certain components of the secured
forward exchange contract are considered derivatives, as discussed in Note 9.
17
9. DERIVATIVE FINANCIAL INSTRUMENTS:
The Company utilizes derivative financial instruments to reduce certain of its interest rate risks
and to manage risk exposure to changes in the value of its Viacom Stock.
Upon adoption of SFAS No. 133, the Company valued the SFEC based on pricing provided by a financial
institution and reviewed by the Company. The financial institution’s market prices are prepared for
each quarter close period on a mid-market basis by reference to proprietary models and do not
reflect any bid/offer spread. For the three months and
nine months ended September 30, 2005, the Company recorded a net pretax (loss) gain in the
Company’s condensed consolidated statement of operations of $(10.8) million and $29.2 million,
respectively, related to the (decrease) increase in the fair value of the derivatives associated
with the SFEC. For the three months and nine months ended September 30, 2004, the Company recorded
net pretax gains in the Company’s condensed consolidated statement of operations of $26.3 million
and $84.3 million, respectively, related to the increase in the fair value of the derivatives
associated with the SFEC.
Upon issuance of the 8% Senior Notes, the Company entered into two interest rate swap agreements
with a notional amount of $125.0 million to convert the fixed rate on $125.0 million of the 8%
Senior Notes to a variable rate in order to access the lower borrowing costs that were available on
floating-rate debt. Under these swap agreements, which mature on November 15, 2013, the Company
receives a fixed rate of 8% and pays a variable rate, in arrears, equal to six-month LIBOR plus
2.95%. The terms of the swap agreement mirror the terms of the 8% Senior Notes, including
semi-annual settlements on the 15th of May and November each year. Under the provisions
of SFAS No. 133, as amended, changes in the fair value of this interest rate swap agreement must be
offset against the corresponding change in fair value of the 8% Senior Notes through earnings. The
Company has determined that there will not be an ineffective portion of this hedge and therefore,
no impact on earnings. As of September 30, 2005, the Company determined that, based upon dealer
quotes, the fair value of these interest rate swap agreements was $(0.1) million. The Company has
recorded a derivative liability and an offsetting decrease in the balance of the 8% Senior Notes
accordingly. As of December 31, 2004, the Company determined that, based upon dealer quotes, the
fair value of these interest rate swap agreements was $0.5 million. The Company recorded a
derivative asset and an offsetting increase in the balance of the 8% Senior Notes accordingly.
10. SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest related to continuing operations for the three months and nine months ended
September 30, 2005 and 2004 was comprised of:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Nine Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| (in thousands) |
|
2005 |
|
|
2004 |
|
|
2005 |
|
|
2004 |
|
Debt interest paid |
|
$ |
818 |
|
|
$ |
1,579 |
|
|
$ |
21,271 |
|
|
$ |
16,207 |
|
Deferred financing costs paid |
|
|
— |
|
|
|
— |
|
|
|
8,451 |
|
|
|
909 |
|
Capitalized interest |
|
|
(668 |
) |
|
|
(79 |
) |
|
|
(1,764 |
) |
|
|
(5,323 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash interest paid, net of capitalized interest |
|
$ |
150 |
|
|
$ |
1,500 |
|
|
$ |
27,958 |
|
|
$ |
11,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes received (paid) were $0.4 million and $(0.7) million for the nine months ended
September 30, 2005 and 2004, respectively.
18
Certain transactions have been reflected as non-cash activities in the accompanying condensed
consolidated statement of cash flows for the nine months ended September 30, 2005, as further
discussed below.
In March 2005, the Company donated 65,100 shares of Viacom stock with a market value of $2.3
million to a charitable foundation established by the Company, which was recorded as selling,
general and administrative expense in the accompanying condensed consolidated statement of
operations. This donation is reflected as an increase in net loss and a corresponding decrease in
other assets and liabilities in the accompanying condensed consolidated statement of cash flows.
In connection with the settlement of litigation with the Nashville Hockey Club Limited Partnership
(“NHC”) on February 22, 2005, as further discussed in Note 15, the Company issued to NHC a 5-year,
$5 million promissory note. Because the Company continued to accrue expense under the naming
rights agreement throughout the course of this litigation, the issuance of this promissory note
resulted in an increase in long term debt and capital lease obligations and a decrease in accounts
payable and accrued liabilities in the accompanying condensed consolidated balance sheet and
statement of cash flows.
11. GOODWILL AND INTANGIBLES:
The changes in the carrying amounts of goodwill by business segment for the nine months ended
September 30, 2005 are as follows (amounts in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase |
|
|
| |
|
Balance as of |
|
Impairment |
|
|
|
|
|
Accounting |
|
Balance as of |
| |
|
December 31, 2004 |
|
Losses |
|
Acquisitions |
|
Adjustments |
|
September 30, 2005 |
Hospitality |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Opry and Attractions |
|
|
6,915 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,915 |
|
ResortQuest |
|
|
155,877 |
|
|
|
— |
|
|
|
14,917 |
|
|
|
(1,009 |
) |
|
|
169,785 |
|
Corporate and Other |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
Total |
|
$ |
162,792 |
|
|
$ |
— |
|
|
$ |
14,917 |
|
|
$ |
(1,009 |
) |
|
$ |
176,700 |
|
| |
|
|
During the nine months ended September 30, 2005, the Company recorded goodwill of $3.0 million
and $11.9 million related to the acquisitions of Whistler and East West Resorts, respectively, as
previously discussed in Note 6. During the nine months ended September 30, 2005, the Company made
adjustments to accrued liabilities associated with the Whistler acquisition, the final purchase
price and accrued liabilities associated with the East West Resorts acquisition, and deferred taxes
associated with the ResortQuest acquisition as a result of obtaining additional information. These
adjustments resulted in a net decrease in goodwill of $1.0 million.
The carrying amount of indefinite-lived intangible assets not subject to amortization was $40.3
million and $40.6 million at September 30, 2005 and December 31, 2004, respectively. The gross
carrying amount of amortized intangible assets in continuing operations was $37.9 million and $30.1
million at September 30, 2005 and December 31, 2004, respectively. The significant increase in
amortized intangible assets during the nine months ended September 30, 2005 is due to the
acquisitions of Whistler and East West Resorts, as discussed in Note 6. The related accumulated
amortization of amortized intangible assets in continuing operations
was $8.7 million and $4.5
million at September 30, 2005 and December 31, 2004, respectively. The amortization expense related
to intangible assets from continuing operations during the three months and nine months ended
September 30, 2005 was $1.4 million and $4.0 million, respectively. The amortization expense
related to intangible assets from continuing operations during the three months and nine months
ended September 30, 2004 was $1.0 million and $3.0 million,
19
respectively. The estimated amounts of
amortization expense for the next five years are as follows (in thousands):
| |
|
|
|
|
Year 1 |
|
$ |
5,005 |
|
Year 2 |
|
|
4,822 |
|
Year 3 |
|
|
4,822 |
|
Year 4 |
|
|
4,822 |
|
Year 5 |
|
|
4,681 |
|
|
|
|
|
Total |
|
$ |
24,152 |
|
|
|
|
|
12. STOCK PLANS:
SFAS No. 123, “Accounting for Stock-Based Compensation”, encourages, but does not require,
companies to record compensation cost for stock-based employee compensation plans at fair value.
The Company has chosen to continue to account for employee stock-based compensation using the
intrinsic value method as prescribed in APB Opinion No. 25, “Accounting for Stock Issued to
Employees”, and related interpretations, under which no compensation cost related to employee stock
options has been recognized. In December 2002, the Financial Accounting Standards Board (“FASB”)
issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure, an
amendment of SFAS No. 123”. SFAS No. 148 amends SFAS No. 123 to provide two additional methods of
transition for a voluntary change to the fair value based method of accounting for stock-based
employee compensation. This statement also amends the disclosure requirements of SFAS No. 123 to
require certain disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method used on reported
results. The Company adopted the amended disclosure provisions of SFAS No. 148 on December 31,
2002, and the information contained in this report reflects the disclosure requirements of the new
pronouncement. The Company accounts for employee stock-based compensation in accordance with APB
Opinion No. 25.
If compensation cost for these plans had been determined consistent with the provisions of SFAS No.
123, the Company’s net loss and loss per share for the three months and nine months ended September
30, 2005 and 2004 would have been increased to the following pro forma amounts:
20
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Nine Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| (in thousands, except per share data) |
|
2005 |
|
|
2004 |
|
|
2005 |
|
|
2004 |
|
Net loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported |
|
$ |
(11,617 |
) |
|
$ |
(3,192 |
) |
|
$ |
(20,885 |
) |
|
$ |
(44,738 |
) |
Less: Stock-based employee compensation,
net of tax effect |
|
|
1,048 |
|
|
|
1,031 |
|
|
|
3,409 |
|
|
|
2,911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma |
|
$ |
(12,665 |
) |
|
$ |
(4,223 |
) |
|
$ |
(24,294 |
) |
|
$ |
(47,649 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported |
|
$ |
(0.29 |
) |
|
$ |
(0.08 |
) |
|
$ |
(0.52 |
) |
|
$ |
(1.13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma |
|
$ |
(0.31 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.61 |
) |
|
$ |
(1.20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share assuming dilution: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported |
|
$ |
(0.29 |
) |
|
$ |
(0.08 |
) |
|
$ |
(0.52 |
) |
|
$ |
(1.13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma |
|
$ |
(0.31 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.61 |
) |
|
$ |
(1.20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2005 and December 31, 2004, there were 3,798,299 and 3,586,551 shares,
respectively, of the Company’s common stock reserved for future issuance pursuant to the exercise
of outstanding stock options under its stock option and incentive plans. Under the terms of its
plans, stock options are granted with an exercise price equal to the fair market value at the date
of grant and generally expire ten years after the date of grant. Generally, stock options granted
to non-employee directors are exercisable on the first anniversary of the date of grant, while
options granted to employees are exercisable ratably over a period of four years beginning on the
first anniversary of the date of grant. The Company accounts for this plan under APB Opinion No. 25
and related interpretations, under which no compensation expense for employee and non-employee
director stock options has been recognized.
The plan also provides for the award of restricted stock and restricted stock units. At September
30, 2005 and December 31, 2004, awards of 82,542 and 93,805 shares, respectively, of restricted
common stock were outstanding. The market value at the date of grant of these restricted shares was
recorded as unearned compensation as a component of stockholders’ equity. Unearned compensation is
amortized and expensed over the vesting period of the restricted stock.
The Company has an employee stock purchase plan whereby substantially all employees are eligible to
participate in the purchase of designated shares of the Company’s common stock. Prior to January
1, 2005, participants in the plan purchased these shares at a price equal to 85% of the lower of
the closing price at the beginning or end of each quarterly stock purchase period. Effective
January 1, 2005, the plan was amended such that participants in the plan now purchase these shares
at a price equal to 95% of the closing price at the end of each quarterly stock purchase period.
The Company issued 2,257 and 2,487 shares of common stock at an average price per share of $45.27
and $26.35 pursuant to this plan during the three months ended September 30, 2005 and 2004,
respectively.
Included in compensation expense for the three months ended September 30, 2005 and 2004 is $0.7
million and $0.7 million, respectively, related to the grant of 606,000 units and 604,000 units,
respectively, under the Company’s Performance Accelerated Restricted Stock Unit Program. Included
in
21
compensation expense for the nine months ended September 30, 2005 and 2004 is $2.1 million and
$2.0 million related to the grant of these units.
13. RETIREMENT AND POSTRETIREMENT BENEFITS OTHER THAN PENSION PLANS:
Net periodic pension expense reflected in the accompanying condensed consolidated statements of
operations included the following components for the three and nine months ended September 30 (in
thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended |
|
Nine months ended |
| |
|
September 30, |
|
September 30, |
| |
|
2005 |
|
2004 |
|
2005 |
|
2004 |
Service cost |
|
$ |
109 |
|
|
$ |
150 |
|
|
$ |
327 |
|
|
$ |
451 |
|
Interest cost |
|
|
1,201 |
|
|
|
1,188 |
|
|
|
3,603 |
|
|
|
3,564 |
|
Expected return on plan assets |
|
|
(960 |
) |
|
|
(855 |
) |
|
|
(2,880 |
) |
|
|
(2,564 |
) |
Amortization of net actuarial loss |
|
|
648 |
|
|
|
668 |
|
|
|
1,944 |
|
|
|
2,003 |
|
Amortization of prior service cost |
|
|
1 |
|
|
|
1 |
|
|
|
3 |
|
|
|
3 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total net periodic pension expense |
|
$ |
999 |
|
|
$ |
1,152 |
|
|
$ |
2,997 |
|
|
$ |
3,457 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Net postretirement benefit expense reflected in the accompanying condensed consolidated statements
of operations included the following components for the three and nine months ended September 30
(in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended |
|
Nine months ended |
| |
|
September 30, |
|
September 30, |
| |
|
2005 |
|
2004 |
|
2005 |
|
2004 |
Service cost |
|
$ |
52 |
|
|
$ |
69 |
|
|
$ |
156 |
|
|
$ |
231 |
|
Interest cost |
|
|
198 |
|
|
|
207 |
|
|
|
594 |
|
|
|
730 |
|
Amortization of net actuarial gain |
|
|
(126 |
) |
|
|
(141 |
) |
|
|
(377 |
) |
|
|
(282 |
) |
Amortization of net prior service cost |
|
|
(250 |
) |
|
|
(250 |
) |
|
|
(750 |
) |
|
|
(750 |
) |
Amortization of curtailment gain |
|
|
(61 |
) |
|
|
(61 |
) |
|
|
(183 |
) |
|
|
(183 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Total net postretirement benefit expense |
|
$ |
(187 |
) |
|
$ |
(176 |
) |
|
$ |
(560 |
) |
|
$ |
(254 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
14. NEWLY ISSUED ACCOUNTING STANDARDS:
In December 2004, the FASB issued SFAS No. 123(R), Share Based Payment, which replaces SFAS No. 123
and supercedes APB 25. SFAS No. 123(R) requires the measurement of all share-based payments to
employees, including grants of employee stock options, using a fair-value based method and the
recording of such expense over the related vesting period. SFAS No. 123(R) also requires the
recognition of compensation expense for the fair value of any unvested stock option awards
outstanding at the date of adoption. The proforma disclosure previously permitted under SFAS No.
123 and SFAS No. 148 is no longer an alternative under SFAS No. 123(R). The effective date for
adopting SFAS 123(R) is the beginning of the first fiscal year beginning after June 15, 2005, which
will be January 1, 2006 for the Company. Early adoption is permitted but not required. The Company
plans to adopt the modified prospective method permitted under SFAS No. 123(R). Under this method,
companies are required to record compensation expense for new and modified awards over the related
vesting period of such awards prospectively and record compensation expense prospectively for the
unvested portion, at the date of
22
adoption, of previously issued and outstanding awards over the
remaining vesting period of such awards. No change to prior periods is permitted under the modified
prospective method. Based on the unvested stock option awards outstanding as of September 30, 2005
that are expected to remain unvested as of January 1, 2006, the Company expects to recognize
additional pre-tax compensation expense during 2006 of approximately $4.9 million beginning in the
first quarter of 2006 as a result of the adoption of SFAS No. 123(R). Future levels of compensation
expense recognized related to stock option awards (including the aforementioned) may be impacted by
new awards and/or modifications, repurchases and cancellations of existing awards before and after
the adoption of this standard.
In
December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets — An Amendment of
APB Opinion No. 29. The amendments made by SFAS No. 153 are based on the principle that exchanges
of non-monetary assets should be measured based on the fair value of the assets exchanged. Further,
the amendments eliminate the exception for non-monetary exchanges of similar productive assets and
replace it with a general exception for exchanges of non-monetary assets that do not have
commercial substance. SFAS No. 153 is to be applied prospectively for non-monetary exchanges
occurring in fiscal periods beginning after June 15, 2005. The Company does not expect the adoption
of SFAS No. 153 to have a material impact on the Company’s financial position or results of
operations.
In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections. SFAS No. 154
is a replacement of APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting
Changes in Interim Financial Statements. This statement applies to all voluntary changes in
accounting principle and changes the
accounting for and reporting of a change in accounting principle. SFAS No. 154 requires
retrospective application to prior periods’ financial statements of a voluntary change in
accounting principle unless it is impracticable to do so. APB Opinion No. 20 previously required
that most voluntary changes in accounting principle be recognized by including in net income of the
period of the change the cumulative effect of changing to the new accounting principle. SFAS No.
154 carries forward many provisions of APB Opinion 20 without change, including the provisions
related to the reporting of a change in accounting estimate, a change in the reporting entity, and
the correction of an error. SFAS No. 154 is effective for accounting changes and corrections of
errors made in fiscal years beginning after December 15, 2005. Earlier application is permitted
for accounting changes and corrections of errors made occurring in fiscal years beginning after
June 1, 2005. SFAS No. 154 does not change the transition provisions of any existing accounting
pronouncements, including those that are in a transition phase as of the effective date of the
statement. The Company does not expect the adoption of SFAS No. 154 to have a material impact on
the Company’s financial position or results of operations.
15. COMMITMENTS AND CONTINGENCIES:
On February 22, 2005, the Company concluded the settlement of litigation with NHC, which owns 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, with the first payment due on the first
anniversary of the resumption of NHL
23
Hockey in Nashville, Tennessee, which occurred on October 5,
2005. 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, if the Predators cease to be an NHL
team playing its home games in Nashville prior to the first payment under the note (October 5,
2006), then in addition to the note being cancelled, the Predators will pay the Company $4 million.
If the Predators cease to be an NHL team playing its home games in Nashville after the first
payment but prior to the second payment under the note, then in addition to the note being
cancelled, the Predators will pay the Company $2 million. 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. The Company continued to recognize the expense
under the Naming Rights Agreement throughout the course of this litigation. As a result, the net
effect of the settlement resulted in the Company reversing $2.4 million of expense previously
accrued under the Naming Rights Agreement during the first quarter of 2005.
In connection with the Company’s execution of the Agreement of Limited Partnership of 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 any of these obligations remain
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, as described above, 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, 2005, the
Company had not recorded any liability in the condensed consolidated balance sheet associated with
this guarantee.
In connection with RHAC, LLC’s execution of the Waikiki Hotel Loans as described in Note 4, IB-SIV,
the parent company of the Company’s joint venture partner, 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, on the one hand, or (ii) in the event of
bankruptcy or reorganization proceedings of RHAC, LLC, on the other hand. 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 that the Company could be liable under this
contribution agreement is $17.2 million, which represents 19.9% of the $86.3 million of total debt
that RHAC, LLC owes to the Waikiki Hotel Lender as of September 30, 2005. As of September 30,
2005, the Company had not recorded any liability in the condensed consolidated balance sheet
associated with this guarantee.
Also in connection with RHAC, LLC’s execution of the Waikiki Hotel Loans described in Note 4,
IB-SIV and the Company were required to execute an irrevocable letter of credit in favor of the
Waikiki Hotel Lender with a total notional amount of $7.9 million in order to secure RHAC, LLC’s
obligation to perform certain capital upgrades on the Waikiki Hotel and to provide additional
security for payment of the Waikiki Hotel Loans. This letter of credit is required to remain
outstanding until all required capital
24
upgrades have been completed. However, the notional amount
of this letter of credit will be reduced by the amount of funds actually expended by RHAC, LLC on
the capital upgrades. Under the terms of the Waikiki Hotel Loans, the Waikiki Hotel Lender may
draw up to the notional amount of this letter of credit and apply the proceeds to the Waikiki Hotel
Loans upon the occurrence of an event of default. Pursuant to the Contribution Agreement described
above, the Company agreed to initially execute a letter of credit for the full $7.9 million
notional amount required by the Lender, and IB-SIV agreed that, in the event that any amounts are
drawn by Lender under the letter of credit, it will contribute an amount equal to 80.1% of any such
letter of credit draw to the Company. IB-SIV further agreed to execute a separate letter of credit
subsequent to closing with a notional amount of $6.3 million to allow the Company to reduce the
notional amount of its letter of credit to $1.6 million. During the third quarter of 2005, IB-SIV
executed this replacement letter of credit with a notional amount of $6.3 million, and the Company
reduced the notional amount of its letter of credit to $1.6 million. The maximum potential amount
which the Company could be liable under this obligation is $1.6 million as of September 30, 2005.
As of September 30, 2005, the Company had not recorded any liability in the condensed consolidated
balance sheet associated with this obligation.
Certain of the Company’s ResortQuest subsidiary’s property management agreements in Hawaii contain
provisions for guaranteed levels of returns to the owners. These agreements, which have remaining
terms of up to approximately 7 years, also contain force majeure clauses to protect the Company
from forces or occurrences beyond the control of management.
On February 24, 2005, the Company acquired approximately 42 acres of land and related land
improvements in Prince George’s County, Maryland (Washington D.C. area) for approximately $29
million on which the Company is developing a hotel to be known as the Gaylord National Resort &
Convention Center. Approximately $17 million of this was paid in the first quarter of 2005, with
the remainder payable upon completion of various phases of the project. The Company currently
expects to open the hotel in 2008. In connection with this project, Prince George’s County,
Maryland approved, in July 2004, two bond issues related to the development. The first bond
issuance, in the amount of $65 million, will support the cost of infrastructure being constructed
by the project developer, such as roads, water and sewer lines. The second bond issuance, in the
amount of $95 million, will be issued directly to the Company upon completion of the project. The
Company will initially hold the bonds and receive the debt service thereon which is payable from
tax increment, hotel tax and special hotel rental taxes generated from the development. On May 9,
2005, the Company entered into an agreement with a general contractor for the provision of certain
initial construction services at the site. The Company expects to enter into a construction
contract for the entire hotel project when the Company has determined the guaranteed maximum price
for the project. The Company is also considering other potential hotel sites throughout the
country. The timing and extent of any of these development projects is uncertain.
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.
25
16. FINANCIAL REPORTING BY BUSINESS SEGMENTS:
The Company’s continuing operations are organized and managed based upon its products and services.
The following information from continuing operations is derived directly from the segments’
internal financial reports used for corporate management purposes.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Nine Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| (in thousands) |
|
2005 |
|
|
2004 |
|
|
2005 |
|
|
2004 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hospitality |
|
$ |
122,623 |
|
|
$ |
113,725 |
|
|
$ |
412,802 |
|
|
$ |
337,008 |
|
Opry and Attractions |
|
|
19,727 |
|
|
|
18,352 |
|
|
|
51,272 |
|
|
|
47,749 |
|
ResortQuest |
|
|
66,014 |
|
|
|
58,817 |
|
|
|
182,866 |
|
|
|
157,182 |
|
Corporate and Other |
|
|
137 |
|
|
|
117 |
|
|
|
412 |
|
|
|
243 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
208,501 |
|
|
$ |
191,011 |
|
|
$ |
647,352 |
|
|
$ |
542,182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hospitality |
|
$ |
15,861 |
|
|
$ |
15,387 |
|
|
$ |
47,040 |
|
|
$ |
42,756 |
|
Opry and Attractions |
|
|
1,375 |
|
|
|
1,292 |
|
|
|
3,927 |
|
|
|
3,918 |
|
ResortQuest |
|
|
2,683 |
|
|
|
2,402 |
|
|
|
8,029 |
|
|
|
7,147 |
|
Corporate and Other |
|
|
986 |
|
|
|
1,151 |
|
|
|
3,047 |
|
|
|
3,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
20,905 |
|
|
$ |
20,232 |
|
|
$ |
62,043 |
|
|
$ |
57,532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hospitality |
|
$ |
4,123 |
|
|
$ |
2,215 |
|
|
$ |
50,060 |
|
|
$ |
27,740 |
|
Opry and Attractions |
|
|
1,577 |
|
|
|
967 |
|
|
|
1,574 |
|
|
|
(794 |
) |
ResortQuest |
|
|
4,795 |
|
|
|
7,441 |
|
|
|
5,870 |
|
|
|
9,940 |
|
Corporate and Other |
|
|
(9,027 |
) |
|
|
(9,449 |
) |
|
|
(28,938 |
) |
|
|
(32,433 |
) |
Preopening costs |
|
|
(1,213 |
) |
|
|
(223 |
) |
|
|
(3,329 |
) |
|
|
(14,239 |
) |
Impairment and other charges |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,212 |
) |
Restructuring charges |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(78 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income (loss) |
|
|
255 |
|
|
|
951 |
|
|
|
25,237 |
|
|
|
(11,076 |
) |
Interest expense, net of amounts capitalized |
|
|
(18,474 |
) |
|
|
(14,850 |
) |
|
|
(54,449 |
) |
|
|
(39,011 |
) |
Interest income |
|
|
662 |
|
|
|
366 |
|
|
|
1,820 |
|
|
|
1,015 |
|
Unrealized gain (loss) on Viacom stock |
|
|
10,828 |
|
|
|
(23,766 |
) |
|
|
(37,070 |
) |
|
|
(119,052 |
) |
Unrealized (loss) gain on derivatives |
|
|
(10,753 |
) |
|
|
26,317 |
|
|
|
29,233 |
|
|
|
84,314 |
|
Income from unconsolidated companies |
|
|
2,098 |
|
|
|
1,587 |
|
|
|
1,980 |
|
|
|
3,383 |
|
Other gains and (losses), net |
|
|
1,102 |
|
|
|
753 |
|
|
|
6,022 |
|
|
|
2,390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before benefit for income taxes
and discontinued operations |
|
$ |
(14,282 |
) |
|
$ |
(8,642 |
) |
|
$ |
(27,227 |
) |
|
$ |
(78,037 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
26
17. INFORMATION CONCERNING GUARANTOR AND NON-GUARANTOR SUBSIDIARIES:
Prior to the issuance of the 6.75% Senior Notes and repayment of the Senior Loan on November 30,
2004, as discussed in Note 7, not all of the Company’s subsidiaries guaranteed the 8% Senior Notes.
All of the Company’s subsidiaries that were borrowers under, or had guaranteed, the Company’s 2003
revolving credit facility or previously, the Company’s 2003 Florida/Texas senior secured credit
facility, were guarantors of the 8% Senior Notes (the “Former Guarantors”). Certain of the
Company’s subsidiaries, including those that incurred the Company’s Nashville Hotel Loan or owned
or managed the Nashville loan borrower (the “Former Non-Guarantors”), did not guarantee the 8%
Senior Notes. However, subsequent to the issuance of the 6.75% Senior Notes and repayment of the
Senior Loan on November 30, 2004, the 8% Senior Notes and 6.75% Senior Notes became guaranteed on a
senior unsecured basis by generally all of the Company’s active domestic subsidiaries (the
“Guarantors”). As a result, the Company has classified the balance sheet, results of operations,
and cash flows of the subsidiaries that incurred the Company’s Nashville Hotel Loan or owned or
managed the Nashville loan borrower as of September 30, 2005 and December 31, 2004 and for the
three months and nine months ended September 30, 2005 as guarantor subsidiaries in the
consolidating financial information presented below. The results of operations and cash flows of
these subsidiaries for the three months and nine months ended September 30, 2004 are classified as
non-guarantor subsidiaries in the consolidating financial information presented below. The
Company’s investment in Bass Pro and certain other discontinued operations remained non-guarantors
of the 8% Senior Notes and 6.75% Senior Notes after repayment of the Senior Loan, so the Company
has classified the balance sheet, results of operations and cash flows of these subsidiaries as of
September 30, 2005 and December 31, 2004 and for the three and nine months ended September 30, 2005
as non-guarantor subsidiaries (the “Non-Guarantors”) in the consolidating financial information
presented below. 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.
27
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
Condensed Consolidating Statement of Operations
For the Three Months Ended September 30, 2005
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
| |
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
| |
|
(In thousands) |
|
Revenues |
|
$ |
21,456 |
|
|
$ |
199,882 |
|
|
$ |
— |
|
|
$ |
(12,837 |
) |
|
$ |
208,501 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs |
|
|
5,915 |
|
|
|
135,304 |
|
|
|
— |
|
|
|
(3,582 |
) |
|
|
137,637 |
|
Selling, general and administrative |
|
|
8,926 |
|
|
|
39,565 |
|
|
|
— |
|
|
|
— |
|
|
|
48,491 |
|
Management fees |
|
|
— |
|
|
|
9,255 |
|
|
|
— |
|
|
|
(9,255 |
) |
|
|
— |
|
Preopening costs |
|
|
— |
|
|
|
1,213 |
|
|
|
— |
|
|
|
— |
|
|
|
1,213 |
|
Depreciation |
|
|
1,344 |
|
|
|
16,950 |
|
|
|
— |
|
|
|
— |
|
|
|
18,294 |
|
Amortization |
|
|
347 |
|
|
|
2,264 |
|
|
|
— |
|
|
|
— |
|
|
|
2,611 |
|
| |
|
|
Operating income (loss) |
|
|
4,924 |
|
|
|
(4,669 |
) |
|
|
— |
|
|
|
— |
|
|
|
255 |
|
Interest expense, net of amounts capitalized |
|
|
(19,614 |
) |
|
|
(14,138 |
) |
|
|
(1,333 |
) |
|
|
16,611 |
|
|
|
(18,474 |
) |
Interest income |
|
|
14,678 |
|
|
|
779 |
|
|
|
1,816 |
|
|
|
(16,611 |
) |
|
|
662 |
|
Unrealized gain on Viacom stock |
|
|
10,828 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10,828 |
|
Unrealized loss on derivatives |
|
|
(10,753 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(10,753 |
) |
Income from unconsolidated companies |
|
|
— |
|
|
|
124 |
|
|
|
1,974 |
|
|
|
— |
|
|
|
2,098 |
|
Other gains and (losses), net |
|
|
743 |
|
|
|
359 |
|
|
|
— |
|
|
|
— |
|
|
|
1,102 |
|
| |
|
|
Income (loss) before provision (benefit) for income taxes |
|
|
806 |
|
|
|
(17,545 |
) |
|
|
2,457 |
|
|
|
— |
|
|
|
(14,282 |
) |
(Benefit) provision for income taxes |
|
|
(145 |
) |
|
|
(5,583 |
) |
|
|
959 |
|
|
|
— |
|
|
|
(4,769 |
) |
Equity in subsidiaries’ (earnings) losses, net |
|
|
12,568 |
|
|
|
— |
|
|
|
— |
|
|
|
(12,568 |
) |
|
|
— |
|
| |
|
|
(Loss) income from continuing operations |
|
|
(11,617 |
) |
|
|
(11,962 |
) |
|
|
1,498 |
|
|
|
12,568 |
|
|
|
(9,513 |
) |
(Loss) gain from discontinued operations, net of taxes |
|
|
— |
|
|
|
(2,191 |
) |
|
|
87 |
|
|
|
— |
|
|
|
(2,104 |
) |
| |
|
|
Net (loss) income |
|
$ |
(11,617 |
) |
|
$ |
(14,153 |
) |
|
$ |
1,585 |
|
|
$ |
12,568 |
|
|
$ |
(11,617 |
) |
| |
|
|
28
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
Condensed Consolidating Statement of Operations
For the Three Months Ended September 30, 2004
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Former |
|
|
|
|
|
|
|
| |
|
|
|
|
|
Former |
|
|
Non- |
|
|
|
|
|
|
|
| |
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
| |
|
(In thousands) |
|
Revenues |
|
$ |
19,686 |
|
|
$ |
132,554 |
|
|
$ |
50,008 |
|
|
$ |
(11,237 |
) |
|
$ |
191,011 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs |
|
|
6,688 |
|
|
|
90,561 |
|
|
|
33,239 |
|
|
|
(3,418 |
) |
|
|
127,070 |
|
Selling, general and administrative |
|
|
8,733 |
|
|
|
26,364 |
|
|
|
7,312 |
|
|
|
126 |
|
|
|
42,535 |
|
Management fees |
|
|
— |
|
|
|
4,822 |
|
|
|
3,123 |
|
|
|
(7,945 |
) |
|
|
— |
|
Preopening costs |
|
|
— |
|
|
|
223 |
|
|
|
— |
|
|
|
— |
|
|
|
223 |
|
Impairment and other charges |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Restructuring charges, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Depreciation |
|
|
1,345 |
|
|
|
11,550 |
|
|
|
5,019 |
|
|
|
— |
|
|
|
17,914 |
|
Amortization |
|
|
499 |
|
|
|
1,586 |
|
|
|
233 |
|
|
|
— |
|
|
|
2,318 |
|
| |
|
|
Operating income (loss) |
|
|
2,421 |
|
|
|
(2,552 |
) |
|
|
1,082 |
|
|
|
— |
|
|
|
951 |
|
Interest expense, net of amounts capitalized |
|
|
(13,987 |
) |
|
|
(15,744 |
) |
|
|
(2,843 |
) |
|
|
17,724 |
|
|
|
(14,850 |
) |
Interest income |
|
|
15,671 |
|
|
|
380 |
|
|
|
2,039 |
|
|
|
(17,724 |
) |
|
|
366 |
|
Unrealized loss on Viacom stock |
|
|
(23,766 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(23,766 |
) |
Unrealized gain on derivatives |
|
|
26,317 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
26,317 |
|
Income from unconsolidated companies |
|
|
— |
|
|
|
— |
|
|
|
1,587 |
|
|
|
— |
|
|
|
1,587 |
|
Other gains and (losses) |
|
|
731 |
|
|
|
22 |
|
|
|
— |
|
|
|
— |
|
|
|
753 |
|
| |
|
|
Income (loss) before provision (benefit) for income taxes |
|
|
7,387 |
|
|
|
(17,894 |
) |
|
|
1,865 |
|
|
|
— |
|
|
|
(8,642 |
) |
Provision (benefit) for income taxes |
|
|
1,528 |
|
|
|
(6,644 |
) |
|
|
459 |
|
|
|
— |
|
|
|
(4,657 |
) |
Equity in subsidiaries’ (earnings) losses, net |
|
|
9,051 |
|
|
|
— |
|
|
|
— |
|
|
|
(9,051 |
) |
|
|
— |
|
| |
|
|
(Loss) income from continuing operations |
|
|
(3,192 |
) |
|
|
(11,250 |
) |
|
|
1,406 |
|
|
|
9,051 |
|
|
|
(3,985 |
) |
Gain from discontinued operations, net |
|
|
— |
|
|
|
174 |
|
|
|
619 |
|
|
|
— |
|
|
|
793 |
|
| |
|
|
Net income (loss) income |
|
$ |
(3,192 |
) |
|
$ |
(11,076 |
) |
|
$ |
2,025 |
|
|
$ |
9,051 |
|
|
$ |
(3,192 |
) |
| |
|
|
29
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
Condensed Consolidating Statement of Operations
For the Nine Months Ended September 30, 2005
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
| |
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
| |
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
58,352 |
|
|
$ |
623,951 |
|
|
$ |
— |
|
|
$ |
(34,951 |
) |
|
$ |
647,352 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs |
|
|
16,899 |
|
|
|
403,651 |
|
|
|
— |
|
|
|
(12,061 |
) |
|
|
408,489 |
|
Selling, general and administrative |
|
|
27,971 |
|
|
|
120,283 |
|
|
|
— |
|
|
|
— |
|
|
|
148,254 |
|
Management fees |
|
|
— |
|
|
|
22,890 |
|
|
|
— |
|
|
|
(22,890 |
) |
|
|
— |
|
Preopening costs |
|
|
— |
|
|
|
3,329 |
|
|
|
— |
|
|
|
— |
|
|
|
3,329 |
|
Depreciation |
|
|
4,089 |
|
|
|
49,953 |
|
|
|
— |
|
|
|
— |
|
|
|
54,042 |
|
Amortization |
|
|
1,039 |
|
|
|
6,962 |
|
|
|
— |
|
|
|
— |
|
|
|
8,001 |
|
| |
|
|
Operating income |
|
|
8,354 |
|
|
|
16,883 |
|
|
|
— |
|
|
|
— |
|
|
|
25,237 |
|
Interest expense, net of amounts capitalized |
|
|
(57,323 |
) |
|
|
(43,444 |
) |
|
|
(4,064 |
) |
|
|
50,382 |
|
|
|
(54,449 |
) |
Interest income |
|
|
45,066 |
|
|
|
1,615 |
|
|
|
5,521 |
|
|
|
(50,382 |
) |
|
|
1,820 |
|
Unrealized loss on Viacom stock |
|
|
(37,070 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(37,070 |
) |
Unrealized gain on derivatives |
|
|
29,233 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
29,233 |
|
Income from unconsolidated companies |
|
|
— |
|
|
|
231 |
|
|
|
1,749 |
|
|
|
— |
|
|
|
1,980 |
|
Other gains and (losses), net |
|
|
4,400 |
|
|
|
1,622 |
|
|
|
— |
|
|
|
— |
|
|
|
6,022 |
|
| |
|
|
(Loss) income before (benefit) provision for income taxes |
|
|
(7,340 |
) |
|
|
(23,093 |
) |
|
|
3,206 |
|
|
|
— |
|
|
|
(27,227 |
) |
(Benefit) provision for income taxes |
|
|
(3,867 |
) |
|
|
(6,161 |
) |
|
|
1,310 |
|
|
|
— |
|
|
|
(8,718 |
) |
Equity in subsidiaries’ (earnings) losses, net |
|
|
17,412 |
|
|
|
— |
|
|
|
— |
|
|
|
(17,412 |
) |
|
|
— |
|
| |
|
|
(Loss) income from continuing operations |
|
|
(20,885 |
) |
|
|
(16,932 |
) |
|
|
1,896 |
|
|
|
17,412 |
|
|
|
(18,509 |
) |
(Loss) gain from discontinued operations, net of taxes |
|
|
— |
|
|
|
(2,463 |
) |
|
|
87 |
|
|
|
— |
|
|
|
(2,376 |
) |
| |
|
|
Net (loss) income |
|
$ |
(20,885 |
) |
|
$ |
(19,395 |
) |
|
$ |
1,983 |
|
|
$ |
17,412 |
|
|
$ |
(20,885 |
) |
| |
|
|
30
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
Condensed Consolidating Statement of Operations
For the Nine months Ended September 30, 2004
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Former |
|
|
|
|
|
|
|
| |
|
|
|
|
|
Former |
|
|
Non- |
|
|
|
|
|
|
|
| |
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
| |
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
54,886 |
|
|
$ |
372,034 |
|
|
$ |
149,911 |
|
|
$ |
(34,649 |
) |
|
$ |
542,182 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs |
|
|
17,555 |
|
|
|
239,188 |
|
|
|
97,875 |
|
|
|
(9,948 |
) |
|
|
344,670 |
|
Selling, general and administrative |
|
|
28,689 |
|
|
|
84,170 |
|
|
|
22,668 |
|
|
|
— |
|
|
|
135,527 |
|
Management fees |
|
|
— |
|
|
|
14,549 |
|
|
|
10,152 |
|
|
|
(24,701 |
) |
|
|
— |
|
Preopening costs |
|
|
— |
|
|
|
14,239 |
|
|
|
— |
|
|
|
— |
|
|
|
14,239 |
|
Impairment and other charges |
|
|
— |
|
|
|
1,212 |
|
|
|
— |
|
|
|
— |
|
|
|
1,212 |
|
Restructuring charges, net |
|
|
78 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
78 |
|
Depreciation |
|
|
4,154 |
|
|
|
30,579 |
|
|
|
16,280 |
|
|
|
— |
|
|
|
51,013 |
|
Amortization |
|
|
1,662 |
|
|
|
4,131 |
|
|
|
726 |
|
|
|
— |
|
|
|
6,519 |
|
| |
|
|
Operating income |
|
|
2,748 |
|
|
|
(16,034 |
) |
|
|
2,210 |
|
|
|
— |
|
|
|
(11,076 |
) |
Interest expense, net of amounts capitalized |
|
|
(41,046 |
) |
|
|
(39,118 |
) |
|
|
(8,620 |
) |
|
|
49,773 |
|
|
|
(39,011 |
) |
Interest income |
|
|
43,754 |
|
|
|
993 |
|
|
|
6,041 |
|
|
|
(49,773 |
) |
|
|
1,015 |
|
Unrealized loss on Viacom stock |
|
|
(119,052 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(119,052 |
) |
Unrealized gain on derivatives |
|
|
84,314 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
84,314 |
|
Income (loss) from unconsolidated companies |
|
|
— |
|
|
|
— |
|
|
|
3,383 |
|
|
|
— |
|
|
|
3,383 |
|
Other gains and (losses), net |
|
|
2,420 |
|
|
|
(31 |
) |
|
|
1 |
|
|
|
— |
|
|
|
2,390 |
|
| |
|
|
(Loss) income before (benefit) provision for income taxes |
|
|
(26,862 |
) |
|
|
(54,190 |
) |
|
|
3,015 |
|
|
|
— |
|
|
|
(78,037 |
) |
(Benefit) provision for income taxes |
|
|
(12,839 |
) |
|
|
(19,076 |
) |
|
|
(370 |
) |
|
|
— |
|
|
|
(32,285 |
) |
Equity in subsidiaries’ (earnings) losses, net |
|
|
30,715 |
|
|
|
— |
|
|
|
— |
|
|
|
(30,715 |
) |
|
|
— |
|
| |
|
|
Income (loss) from continuing operations |
|
|
(44,738 |
) |
|
|
(35,114 |
) |
|
|
3,385 |
|
|
|
30,715 |
|
|
|
(45,752 |
) |
Gain from discontinued operations, net of taxes |
|
|
— |
|
|
|
395 |
|
|
|
619 |
|
|
|
— |
|
|
|
1,014 |
|
| |
|
|
Net (loss) income |
|
$ |
(44,738 |
) |
|
$ |
(34,719 |
) |
|
$ |
4,004 |
|
|
$ |
30,715 |
|
|
$ |
(44,738 |
) |
| |
|
|
31
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
Condensed Consolidating Balance Sheet
September 30, 2005
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
| |
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
| |
|
(in thousands) |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents — unrestricted |
|
$ |
20,641 |
|
|
$ |
7,212 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
27,853 |
|
Cash and cash equivalents — restricted |
|
|
1,565 |
|
|
|
37,277 |
|
|
|
— |
|
|
|
— |
|
|
|
38,842 |
|
Short term investments |
|
|
5,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,000 |
|
Trade receivables, net |
|
|
447 |
|
|
|
39,913 |
|
|
|
— |
|
|
|
— |
|
|
|
40,360 |
|
Deferred financing costs |
|
|
26,865 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
26,865 |
|
Deferred income taxes |
|
|
6,387 |
|
|
|
3,043 |
|
|
|
13 |
|
|
|
— |
|
|
|
9,443 |
|
Other current assets |
|
|
6,492 |
|
|
|
27,561 |
|
|
|
123 |
|
|
|
(126 |
) |
|
|
34,050 |
|
Intercompany receivables, net |
|
|
1,054,815 |
|
|
|
— |
|
|
|
33,449 |
|
|
|
(1,088,264 |
) |
|
|
— |
|
Current assets of discontinued operations |
|
|
— |
|
|
|
4,369 |
|
|
|
— |
|
|
|
— |
|
|
|
4,369 |
|
| |
|
|
Total current assets |
|
|
1,122,212 |
|
|
|
119,375 |
|
|
|
33,585 |
|
|
|
(1,088,390 |
) |
|
|
186,782 |
|
| |
Property and equipment, net of accumulated depreciation |
|
|
80,924 |
|
|
|
1,299,232 |
|
|
|
— |
|
|
|
— |
|
|
|
1,380,156 |
|
Intangible assets, net of accumulated amortization |
|
|
9 |
|
|
|
29,129 |
|
|
|
— |
|
|
|
— |
|
|
|
29,138 |
|
Goodwill |
|
|
— |
|
|
|
176,700 |
|
|
|
— |
|
|
|
— |
|
|
|
176,700 |
|
Indefinite lived intangible assets |
|
|
1,480 |
|
|
|
38,835 |
|
|
|
— |
|
|
|
— |
|
|
|
40,315 |
|
Investments |
|
|
817,119 |
|
|
|
21,297 |
|
|
|
69,919 |
|
|
|
(472,806 |
) |
|
|
435,529 |
|
Estimated fair value of derivative assets |
|
|
213,565 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
213,565 |
|
Long-term deferred financing costs |
|
|
36,697 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
36,697 |
|
Other long-term assets |
|
|
4,644 |
|
|
|
9,315 |
|
|
|
7,500 |
|
|
|
— |
|
|
|
21,459 |
|
Long-term assets of discontinued operations |
|
|
— |
|
|
|
2,234 |
|
|
|
— |
|
|
|
— |
|
|
|
2,234 |
|
| |
|
|
Total assets |
|
$ |
2,276,650 |
|
|
$ |
1,696,117 |
|
|
$ |
111,004 |
|
|
$ |
(1,561,196 |
) |
|
$ |
2,522,575 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt and capital lease obligations |
|
$ |
324 |
|
|
$ |
429 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
753 |
|
Accounts payable and accrued liabilities |
|
|
44,022 |
|
|
|
143,090 |
|
|
|
— |
|
|
|
(291 |
) |
|
|
186,821 |
|
Intercompany payables, net |
|
|
— |
|
|
|
1,217,380 |
|
|
|
(129,116 |
) |
|
|
(1,088,264 |
) |
|
|
— |
|
Current liabilities of discontinued operations |
|
|
— |
|
|
|
2,936 |
|
|
|
540 |
|
|
|
— |
|
|
|
3,476 |
|
| |
|
|
Total current liabilities |
|
|
44,346 |
|
|
|
1,363,835 |
|
|
|
(128,576 |
) |
|
|
(1,088,555 |
) |
|
|
191,050 |
|
Secured forward exchange contract |
|
|
613,054 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
613,054 |
|
Long-term debt and capital lease obligations, net of current portion |
|
|
579,902 |
|
|
|
1,009 |
|
|
|
— |
|
|
|
— |
|
|
|
580,911 |
|
Deferred income taxes |
|
|
121,911 |
|
|
|
69,740 |
|
|
|
1,232 |
|
|
|
— |
|
|
|
192,883 |
|
Estimated fair value of derivative liabilities |
|
|
646 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
646 |
|
Other long-term liabilities |
|
|
54,943 |
|
|
|
26,985 |
|
|
|
(15 |
) |
|
|
165 |
|
|
|
82,078 |
|
Long-term liabilities of discontinued operations |
|
|
|
|
|
|
131 |
|
|
|
(6 |
) |
|
|
— |
|
|
|
125 |
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Common stock |
|
|
403 |
|
|
|
3,337 |
|
|
|
2 |
|
|
|
(3,339 |
) |
|
|
403 |
|
Additional paid-in capital |
|
|
668,611 |
|
|
|
517,184 |
|
|
|
53,846 |
|
|
|
(571,030 |
) |
|
|
668,611 |
|
Retained earnings |
|
|
211,385 |
|
|
|
(286,084 |
) |
|
|
184,521 |
|
|
|
101,563 |
|
|
|
211,385 |
|
Other stockholders’ equity |
|
|
(18,551 |
) |
|
|
(20 |
) |
|
|
— |
|
|
|
— |
|
|
|
(18,571 |
) |
| |
|
|
Total stockholders’ equity |
|
|
861,848 |
|
|
|
234,417 |
|
|
|
238,369 |
|
|
|
(472,806 |
) |
|
|
861,828 |
|
| |
|
|
Total liabilities and stockholders’ equity |
|
$ |
2,276,650 |
|
|
$ |
1,696,117 |
|
|
$ |
111,004 |
|
|
$ |
(1,561,196 |
) |
|
$ |
2,522,575 |
|
| |
|
|
32
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
Condensed Consolidating Balance Sheet
December 31, 2004
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
| |
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
| |
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents — unrestricted |
|
$ |
39,711 |
|
|
$ |
4,501 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
44,212 |
|
Cash and cash equivalents — restricted |
|
|
2,446 |
|
|
|
40,517 |
|
|
|
— |
|
|
|
— |
|
|
|
42,963 |
|
Short term investments |
|
|
27,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
27,000 |
|
Trade receivables, net |
|
|
614 |
|
|
|
29,545 |
|
|
|
— |
|
|
|
— |
|
|
|
30,159 |
|
Deferred financing costs |
|
|
26,865 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
26,865 |
|
Deferred income taxes |
|
|
7,413 |
|
|
|
2,985 |
|
|
|
13 |
|
|
|
— |
|
|
|
10,411 |
|
Other current assets |
|
|
6,418 |
|
|
|
14,680 |
|
|
|
94 |
|
|
|
(126 |
) |
|
|
21,066 |
|
Intercompany receivables, net |
|
|
990,597 |
|
|
|
— |
|
|
|
33,446 |
|
|
|
(1,024,043 |
) |
|
|
— |
|
Current assets of discontinued operations |
|
|
— |
|
|
|
11,337 |
|
|
|
— |
|
|
|
— |
|
|
|
11,337 |
|
| |
|
|
Total current assets |
|
|
1,101,064 |
|
|
|
103,565 |
|
|
|
33,553 |
|
|
|
(1,024,169 |
) |
|
|
214,013 |
|
Property and equipment, net |
|
|
85,535 |
|
|
|
1,256,273 |
|
|
|
— |
|
|
|
— |
|
|
|
1,341,808 |
|
Amortized intangible assets, net |
|
|
36 |
|
|
|
25,650 |
|
|
|
— |
|
|
|
— |
|
|
|
25,686 |
|
Goodwill |
|
|
— |
|
|
|
162,792 |
|
|
|
— |
|
|
|
— |
|
|
|
162,792 |
|
Indefinite lived intangible assets |
|
|
1,480 |
|
|
|
39,111 |
|
|
|
— |
|
|
|
— |
|
|
|
40,591 |
|
Investments |
|
|
873,871 |
|
|
|
16,747 |
|
|
|
68,170 |
|
|
|
(490,218 |
) |
|
|
468,570 |
|
Estimated fair value of derivative assets |
|
|
187,383 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
187,383 |
|
Long-term deferred financing costs |
|
|
50,323 |
|
|
|
550 |
|
|
|
— |
|
|
|
— |
|
|
|
50,873 |
|
Other long-term assets |
|
|
5,811 |
|
|
|
10,777 |
|
|
|
7,500 |
|
|
|
— |
|
|
|
24,088 |
|
Long-term assets of discontinued operations |
|
|
— |
|
|
|
5,241 |
|
|
|
— |
|
|
|
— |
|
|
|
5,241 |
|
| |
|
|
Total assets |
|
$ |
2,305,503 |
|
|
$ |
1,620,706 |
|
|
$ |
109,223 |
|
|
$ |
(1,514,387 |
) |
|
$ |
2,521,045 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt |
|
$ |
368 |
|
|
$ |
95 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
463 |
|
Accounts payable and accrued liabilities |
|
|
42,521 |
|
|
|
121,697 |
|
|
|
— |
|
|
|
(291 |
) |
|
|
163,927 |
|
Intercompany payables, net |
|
|
— |
|
|
|
1,152,042 |
|
|
|
(127,999 |
) |
|
|
(1,024,043 |
) |
|
|
— |
|
Current liabilities of discontinued operations |
|
|
— |
|
|
|
4,742 |
|
|
|
1,052 |
|
|
|
— |
|
|
|
5,794 |
|
| |
|
|
Total current liabilities |
|
|
42,889 |
|
|
|
1,278,576 |
|
|
|
(126,947 |
) |
|
|
(1,024,334 |
) |
|
|
170,184 |
|
Secured forward exchange contract |
|
|
613,054 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
613,054 |
|
Long-term debt |
|
|
575,727 |
|
|
|
219 |
|
|
|
— |
|
|
|
— |
|
|
|
575,946 |
|
Deferred income taxes |
|
|
137,645 |
|
|
|
69,630 |
|
|
|
(213 |
) |
|
|
— |
|
|
|
207,062 |
|
Estimated fair value of derivative liabilities |
|
|
4,514 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,514 |
|
Other long-term liabilities |
|
|
62,098 |
|
|
|
18,302 |
|
|
|
(3 |
) |
|
|
165 |
|
|
|
80,562 |
|
Long-term liabilities of discontinued operations |
|
|
— |
|
|
|
122 |
|
|
|
— |
|
|
|
— |
|
|
|
122 |
|
Minority interest of discontinued operations |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Common stock |
|
|
399 |
|
|
|
3,337 |
|
|
|
2 |
|
|
|
(3,339 |
) |
|
|
399 |
|
Additional paid-in capital |
|
|
655,110 |
|
|
|
517,184 |
|
|
|
53,846 |
|
|
|
(571,030 |
) |
|
|
655,110 |
|
Retained earnings |
|
|
232,270 |
|
|
|
(266,689 |
) |
|
|
182,538 |
|
|
|
84,151 |
|
|
|
232,270 |
|
Other stockholders’ equity |
|
|
(18,203 |
) |
|
|
25 |
|
|
|
— |
|
|
|
— |
|
|
|
(18,178 |
) |
| |
|
|
Total stockholders’ equity |
|
|
869,576 |
|
|
|
253,857 |
|
|
|
236,386 |
|
|
|
(490,218 |
) |
|
|
869,601 |
|
| |
|
|
Total liabilities and stockholders’ equity |
|
$ |
2,305,503 |
|
|
$ |
1,620,706 |
|
|
$ |
109,223 |
|
|
$ |
(1,514,387 |
) |
|
$ |
2,521,045 |
|
| |
|
|
33
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
Condensed Consolidating Statement of Cash Flows
For the Nine months Ended September 30, 2005
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
| |
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
| |
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by continuing operating activities |
|
$ |
(43,851 |
) |
|
$ |
95,955 |
|
|
$ |
382 |
|
|
$ |
— |
|
|
$ |
52,486 |
|
Net cash provided by (used in) discontinued operating activities |
|
|
— |
|
|
|
4,262 |
|
|
|
(382 |
) |
|
|
— |
|
|
|
3,880 |
|
| |
|
|
Net cash (used in) provided by operating activities |
|
|
(43,851 |
) |
|
|
100,217 |
|
|
|
— |
|
|
|
— |
|
|
|
56,366 |
|
| |
|
|
| |
Purchases of property and equipment |
|
|
(3,281 |
) |
|
|
(83,999 |
) |
|
|
— |
|
|
|
— |
|
|
|
(87,280 |
) |
Acquisition of businesses, net of cash acquired |
|
|
— |
|
|
|
(20,223 |
) |
|
|
— |
|
|
|
— |
|
|
|
(20,223 |
) |
Purchase of investment in RHAC Holdings, LLC |
|
|
— |
|
|
|
(4,747 |
) |
|
|
— |
|
|
|
— |
|
|
|
(4,747 |
) |
Proceeds from sales of assets |
|
|
5,967 |
|
|
|
4,419 |
|
|
|
— |
|
|
|
— |
|
|
|
10,386 |
|
Purchases of short term investments |
|
|
(15,000 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(15,000 |
) |
Proceeds from sale of short term investments |
|
|
37,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
37,000 |
|
Other investing activities |
|
|
(292 |
) |
|
|
(807 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,099 |
) |
| |
|
|
Net cash provided by (used in) investing activities — continuing
operations |
|
|
24,394 |
|
|
|
(105,357 |
) |
|
|
— |
|
|
|
— |
|
|
|
(80,963 |
) |
Net cash used in investing activities — discontinued operations |
|
|
— |
|
|
|
(211 |
) |
|
|
— |
|
|
|
— |
|
|
|
(211 |
) |
| |
|
|
Net cash provided by (used in) investing activities |
|
|
24,394 |
|
|
|
(105,568 |
) |
|
|
— |
|
|
|
— |
|
|
|
(81,174 |
) |
| |
|
|
| |
Deferred financing costs paid |
|
|
(8,451 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8,451 |
) |
Decrease in restricted cash and cash equivalents |
|
|
881 |
|
|
|
7,951 |
|
|
|
— |
|
|
|
— |
|
|
|
8,832 |
|
Proceeds from exercise of stock option and purchase plans |
|
|
8,195 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8,195 |
|
Other financing activities, net |
|
|
(238 |
) |
|
|
(271 |
) |
|
|
— |
|
|
|
— |
|
|
|
(509 |
) |
| |
|
|
Net cash provided by financing activities — continuing operations |
|
|
387 |
|
|
|
7,680 |
|
|
|
— |
|
|
|
— |
|
|
|
8,067 |
|
Net cash provided by financing activities — discontinued operations |
|
|
— |
|
|
|
382 |
|
|
|
— |
|
|
|
— |
|
|
|
382 |
|
| |
|
|
Net cash provided by financing activities |
|
|
387 |
|
|
|
8,062 |
|
|
|
— |
|
|
|
— |
|
|
|
8,449 |
|
| |
|
|
| |
Net change in cash and cash equivalents |
|
|
(19,070 |
) |
|
|
2,711 |
|
|
|
— |
|
|
|
— |
|
|
|
(16,359 |
) |
Cash and cash equivalents at beginning of year |
|
|
39,711 |
|
|
|
4,501 |
|
|
|
— |
|
|
|
— |
|
|
|
44,212 |
|
| |
|
|
Cash and cash equivalents at end of year |
|
$ |
20,641 |
|
|
$ |
7,212 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
27,853 |
|
| |
|
|
34
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
Condensed Consolidating Statement of Cash Flows
For the Nine months Ended September 30, 2004
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Former |
|
|
|
|
|
|
|
| |
|
|
|
|
|
Former |
|
|
Non- |
|
|
|
|
|
|
|
| |
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
| |
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by continuing operating activities |
|
$ |
(82,495 |
) |
|
$ |
87,960 |
|
|
$ |
13,629 |
|
|
$ |
— |
|
|
$ |
19,094 |
|
Net cash provided by (used in) discontinued operating activities |
|
|
— |
|
|
|
5,671 |
|
|
|
(163 |
) |
|
|
— |
|
|
|
5,508 |
|
| |
|
|
Net cash (used in) provided by operating activities |
|
|
(82,495 |
) |
|
|
93,631 |
|
|
|
13,466 |
|
|
|
— |
|
|
|
24,602 |
|
| |
|
|
| |
Purchases of property and equipment |
|
|
(4,254 |
) |
|
|
(94,662 |
) |
|
|
(8,333 |
) |
|
|
— |
|
|
|
(107,249 |
) |
Purchases of short term investments |
|
|
(110,850 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(110,850 |
) |
Proceeds from sale of short term investments |
|
|
153,850 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
153,850 |
|
Other investing activities |
|
|
(160 |
) |
|
|
(2,487 |
) |
|
|
(29 |
) |
|
|
— |
|
|
|
(2,676 |
) |
| |
|
|
Net cash provided by (used in) investing activities — continuing
operations |
|
|
38,586 |
|
|
|
(97,149 |
) |
|
|
(8,362 |
) |
|
|
— |
|
|
|
(66,925 |
) |
Net cash used in investing activities — discontinued operations |
|
|
— |
|
|
|
(261 |
) |
|
|
— |
|
|
|
— |
|
|
|
(261 |
) |
| |
|
|
Net cash provided by (used in) investing activities |
|
|
38,586 |
|
|
|
(97,410 |
) |
|
|
(8,362 |
) |
|
|
— |
|
|
|
(67,186 |
) |
| |
|
|
| |
Repayment of long-term debt |
|
|
— |
|
|
|
— |
|
|
|
(6,003 |
) |
|
|
— |
|
|
|
(6,003 |
) |
Deferred financing costs paid |
|
|
(718 |
) |
|
|
(108 |
) |
|
|
(83 |
) |
|
|
— |
|
|
|
(909 |
) |
(Increase) decrease in restricted cash and cash equivalents |
|
|
(642 |
) |
|
|
(91 |
) |
|
|
626 |
|
|
|
— |
|
|
|
(107 |
) |
Proceeds from exercise of stock option and purchase plans |
|
|
7,169 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7,169 |
|
Other financing activities, net |
|
|
(487 |
) |
|
|
(38 |
) |
|
|
— |
|
|
|
— |
|
|
|
(525 |
) |
| |
|
|
Net cash provided by (used in) financing activities — continuing
operations |
|
|
5,322 |
|
|
|
(237 |
) |
|
|
(5,460 |
) |
|
|
— |
|
|
|
(375 |
) |
Net cash provided by financing activities — discontinued operations |
|
|
— |
|
|
|
782 |
|
|
|
— |
|
|
|
— |
|
|
|
782 |
|
| |
|
|
Net cash provided by (used in) financing activities |
|
|
5,322 |
|
|
|
545 |
|
|
|
(5,460 |
) |
|
|
— |
|
|
|
407 |
|
| |
|
|
| |
Net change in cash and cash equivalents |
|
|
(38,587 |
) |
|
|
(3,234 |
) |
|
|
(356 |
) |
|
|
— |
|
|
|
(42,177 |
) |
Cash and cash equivalents at beginning of year |
|
|
54,413 |
|
|
|
2,938 |
|
|
|
1,594 |
|
|
|
— |
|
|
|
58,945 |
|
| |
|
|
Cash and cash equivalents at end of year |
|
$ |
15,826 |
|
|
$ |
(296 |
) |
|
$ |
1,238 |
|
|
$ |
— |
|
|
$ |
16,768 |
|
| |
|
|
35
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our Current Operations
Our operations are organized into four principal business segments:
| |
• |
|
Hospitality, consisting of our Gaylord Opryland Resort and Convention Center (“Gaylord
Opryland”), our Gaylord Palms Resort and Convention Center (“Gaylord Palms”), our Gaylord
Texan Resort and Convention Center (“Gaylord Texan”), and our Radisson Hotel at Opryland
(“Radisson Hotel”). |
| |
| |
• |
|
ResortQuest, consisting of our vacation rental property management business. |
| |
| |
• |
|
Opry and Attractions, consisting of our Grand Ole Opry assets, WSM-AM and our Nashville
attractions. |
| |
| |
• |
|
Corporate and Other, consisting of our ownership interests in certain entities and our
corporate expenses. |
For the three and nine months ended September 30, our total revenues were divided among these
business segments as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months |
|
Nine Months |
| |
|
Ended September |
|
Ended September |
| |
|
30, |
|
30, |
| Segment |
|
2005 |
|
2004 |
|
2005 |
|
2004 |
Hospitality |
|
|
58.8 |
% |
|
|
59.5 |
% |
|
|
63.8 |
% |
|
|
62.2 |
% |
ResortQuest |
|
|
31.7 |
% |
|
|
30.8 |
% |
|
|
28.2 |
% |
|
|
29.0 |
% |
Opry and Attractions |
|
|
9.5 |
% |
|
|
9.6 |
% |
|
|
7.9 |
% |
|
|
8.8 |
% |
Corporate and Other. |
|
|
— |
|
|
|
0.1 |
% |
|
|
0.1 |
% |
|
|
— |
|
We generate a significant portion of our revenues from our Hospitality segment. We believe that we
are the only hospitality company focused primarily on the large group meetings and conventions
sector of the lodging market. Our strategy is to continue this focus by concentrating on our
“All-in-One-Place” self-contained service offerings and by emphasizing customer rotation among our
convention properties, while also offering additional vacation and entertainment opportunities to
guests and target customers through the ResortQuest and Opry and Attractions business segments.
Our concentration in the hospitality industry, and in particular the large group meetings sector of
the hospitality industry, exposes us to certain risks outside of our control. General economic
conditions, particularly national and global economic conditions, can affect the number and size of
meetings and conventions attending our hotels. Our business is also exposed to risks related to
tourism, including terrorist attacks and other global events which affect levels of tourism in the
United States and, in particular, the areas of the country in which our properties are located.
Competition and the desirability of the locations in which our hotels and other vacation properties
are located are also important risks to our business.
36
Key Performance Indicators
Hospitality Segment. The operating results of our Hospitality segment are highly dependent on
the volume of customers at our hotels and the quality of the customer mix at our hotels. These
factors impact the price we can charge for our hotel rooms and other amenities, such as food and
beverage and meeting space. Key performance indicators related to revenue are:
| |
• |
|
hotel occupancy (volume indicator) |
| |
| |
• |
|
average daily rate (“ADR”) (price indicator) |
| |
| |
• |
|
Revenue per Available Room (“RevPAR”) (a summary measure of hotel results calculated by
dividing room sales by room nights available to guests for the period) |
| |
| |
• |
|
Total Revenue per Available Room (“Total RevPAR”) (a summary measure of hotel results
calculated by dividing the sum of room, food and beverage and other ancillary service
revenue by room nights available to guests for the period) |
| |
| |
• |
|
Net Definite Room Nights Booked (a volume indicator which represents the total number
of definite bookings for future room nights at Gaylord hotels confirmed during the
applicable period, net of cancellations) |
We recognize Hospitality segment revenue from rooms as earned on the close of business each day and
from concessions and food and beverage sales at the time of sale. Almost all of our Hospitality
segment revenues are either cash-based or, for meeting and convention groups meeting our credit
criteria, billed and collected on a short-term receivables basis. Our industry is capital
intensive, and we rely on the ability of our hotels to generate operating cash flow to repay debt
financing, fund maintenance capital expenditures and provide excess cash flow for future
development.
The results of operations of our Hospitality segment are affected by the number and type of group
meetings and conventions scheduled to attend our hotels in a given period. We attempt to offset any
identified shortfalls in occupancy by creating special events at our hotels or offering incentives
to groups in order to attract increased business during this period. A variety of factors can
affect the results of any interim period, including the nature and quality of the group meetings
and conventions attending our hotels during such period, which meetings and conventions have often
been contracted for several years in advance, and the level of transient business at our hotels
during such period.
ResortQuest Segment. Our ResortQuest segment earns revenues through property management fees
and other sources such as real estate commissions. The operating results of our ResortQuest segment
are primarily dependent on the volume of guests staying at vacation properties managed by us and
the number and quality of vacation properties managed by us. Key performance factors related to
revenue are:
| |
• |
|
occupancy rate of units available for rental (volume indicator) |
| |
| |
• |
|
average daily rate (price indicator) |
| |
| |
• |
|
ResortQuest Revenue per Available Room (“ResortQuest RevPAR”) (a summary measure of
ResortQuest results calculated by dividing gross lodging revenue for properties under
exclusive rental management contracts by net available unit nights available to guests for
the period) |
37
| |
• |
|
Total Units Under Management (a volume indicator which represents the total number of
vacation properties available for rental) |
We recognize revenues from property management fees ratably over the rental period based on our
share of the total rental price of the vacation rental property. Almost all of our vacation rental
property revenues are deducted from the rental fees paid by guests prior to paying the remaining
rental price to the property owner. Other ResortQuest revenues are recognized at the time of sale.
The results of operations of our ResortQuest segment are principally affected by the number of
guests staying at the vacation rental properties managed by us in a given period. A variety of
factors can affect the results of any interim period, such as adverse weather conditions, economic
conditions in a particular region or the nation as a whole, the perceived attractiveness of the
vacation destinations in which we are located and the quantity and quality of our vacation rental
property units under management. In addition, many of the units that we manage are located in
seasonal locations (for example, our beach resorts in Florida), resulting in our business locations
recognizing a larger percentage of their revenues during those peak seasons.
38
Overall Outlook
Hospitality Segment. We have invested heavily in our operations in the nine months ended
September 30, 2005 and the years ended December 31, 2004 and 2003, primarily in connection with the
construction and ultimate opening of the Gaylord Texan in 2003 and 2004, as well as the ResortQuest
acquisition, which was consummated on November 20, 2003. Our investments in 2005 consist primarily
of ongoing capital improvements for our existing properties and the construction of the Gaylord
National hotel project described below.
On February 24, 2005, we acquired approximately 42 acres of land and related land improvements in
Prince George’s County, Maryland (Washington D.C. area) for approximately $29 million on which we
plan to develop a hotel to be known as the Gaylord National Resort & Convention Center.
Approximately $17 million of this was paid in the first quarter of 2005, with the remainder payable
upon completion of various phases of the project. We currently expect to open the hotel in 2008. In
connection with this project, Prince George’s County, Maryland approved, in July 2004, two bond
issues related to the development. The first bond issuance, in the amount of $65 million, will
support the cost of infrastructure being constructed by the project developer, such as roads, water
and sewer lines. The second bond issuance, in the amount of $95 million, will be issued directly to
us upon completion of the project. We will initially hold the bonds and receive the debt service
thereon which is payable from tax increment, hotel tax and special hotel rental taxes generated
from our development. On May 9, 2005, we entered into an agreement with a general contractor for
the provision of certain initial construction services at the site. We expect to enter into a
construction contract for the entire hotel project when we have determined the guaranteed maximum
price for the project. We are also considering other potential hotel sites throughout the country.
The timing and extent of any of these development projects is uncertain.
ResortQuest Segment. We plan to grow our ResortQuest brand through acquisitions from time to
time depending on the opportunities. We acquired certain vacation rental management businesses
from East West Resorts and Whistler Lodging Company Ltd. in the first quarter of 2005. Also, on
May 31, 2005 we completed the purchase of the Aston Waikiki Beach Hotel in Honolulu, Hawaii for a
purchase price of $107 million and the simultaneous sale of an 80.1% interest in the property to a
private real estate fund managed by DB Real Estate Opportunities Group. As a result of the
completion of the property acquisition and the equity investment by the real estate fund, we expect
our gross investment in the property after expected capital improvements to be $5-7 million.
Additionally, ResortQuest (which was already managing the property) entered into a new 20-year
management agreement with respect to the property. Our investment in the Aston Waikiki Beach Hotel
is discussed in further detail in Notes 4 and 15 to our condensed consolidated financial statements
for the three and nine months ended September 30, 2005 included herewith and which is incorporated
by reference herein.
The 2005 hurricane season had an adverse effect on ResortQuest’s results for the third quarter of
2005. In particular, Hurricane Dennis, which made landfall in Northwest Florida in early July,
severely disrupted travel to the Southeast during a peak demand period resulting in a large number
of cancellations in affected markets. Given a seasonal ramp-up of staffing levels tied to
servicing the greater number of vacationers during the summer months, an unexpected shortfall in
demand contributed to high operating losses in Florida’s seasonally strong profit generating
markets. While the total extent of the damage to our inventory and business interruption due to
hurricane Dennis is in the process of being assessed, we have filed a business interruption claim
with our insurers. Third quarter 2005 results were also adversely affected by the ongoing
reinvestment in brand-building initiatives, such as technology, marketing and organizational
improvements.
As part of its strategic plan, ResortQuest is in the process of exiting certain markets in the
upcoming months. These markets, which represent less than 10% of ResortQuest’s total inventory,
are inconsistent
39
with the long-term growth strategy of ResortQuest and will not have a material impact on
ResortQuest’s financial results. The operating results for ResortQuest’s non-core markets for all
periods presented are reflected in Gaylord’s consolidated financial results as discontinued
operations, net of taxes.
40
Selected Financial Information
The following table contains our unaudited selected summary financial data for the three and nine
month periods ended September 30, 2005 and 2004. The table also shows the percentage relationships
to total revenues and, in the case of segment operating income (loss), its relationship to segment
revenues.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months ended September 30, |
|
|
Nine Months ended September 30, |
|
| |
|
2005 |
|
|
% |
|
|
2004 |
|
|
% |
|
|
2005 |
|
|
% |
|
|
2004 |
|
|
% |
|
| |
|
(in thousands, except percentages) |
|
|
(in thousands, except percentages) |
|
Income Statement Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hospitality |
|
$ |
122,623 |
|
|
|
58.8 |
% |
|
$ |
113,725 |
|
|
|
59.5 |
% |
|
$ |
412,802 |
|
|
|
63.8 |
% |
|
$ |
337,008 |
|
|
|
62.2 |
% |
Opry and Attractions |
|
|
19,727 |
|
|
|
9.5 |
% |
|
|
18,352 |
|
|
|
9.6 |
% |
|
|
51,272 |
|
|
|
7.9 |
% |
|
|
47,749 |
|
|
|
8.8 |
% |
ResortQuest |
|
|
66,014 |
|
|
|
31.7 |
% |
|
|
58,817 |
|
|
|
30.8 |
% |
|
|
182,866 |
|
|
|
28.2 |
% |
|
|
157,182 |
|
|
|
29.0 |
% |
Corporate and Other |
|
|
137 |
|
|
|
0.0 |
% |
|
|
117 |
|
|
|
0.1 |
% |
|
|
412 |
|
|
|
0.1 |
% |
|
|
243 |
|
|
|
0.0 |
% |
| |
|
|
|
|
Total revenues |
|
|
208,501 |
|
|
|
100.0 |
% |
|
|
191,011 |
|
|
|
100.0 |
% |
|
|
647,352 |
|
|
|
100.0 |
% |
|
|
542,182 |
|
|
|
100.0 |
% |
| |
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs |
|
|
137,637 |
(D) |
|
|
66.0 |
% |
|
|
127,070 |
|
|
|
66.5 |
% |
|
|
408,489 |
(D) |
|
|
63.1 |
% |
|
|
344,670 |
|
|
|
63.6 |
% |
Selling, general and administrative |
|
|
48,491 |
(D) |
|
|
23.3 |
% |
|
|
42,535 |
|
|
|
22.3 |
% |
|
|
148,254 |
(D) |
|
|
22.9 |
% |
|
|
135,527 |
|
|
|
25.0 |
% |
Preopening costs |
|
|
1,213 |
|
|
|
0.6 |
% |
|
|
223 |
|
|
|
0.1 |
% |
|
|
3,329 |
|
|
|
0.5 |
% |
|
|
14,239 |
|
|
|
2.6 |
% |
Impairment and other charges |
|
|
— |
|
|
|
0.0 |
% |
|
|
— |
|
|
|
0.0 |
% |
|
|
— |
|
|
|
0.0 |
% |
|
|
1,212 |
|
|
|
0.2 |
% |
Restructuring charges |
|
|
— |
|
|
|
0.0 |
% |
|
|
— |
|
|
|
0.0 |
% |
|
|
— |
|
|
|
0.0 |
% |
|
|
78 |
|
|
|
0.0 |
% |
Depreciation and amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hospitality |
|
|
15,861 |
|
|
|
7.6 |
% |
|
|
15,387 |
|
|
|
8.1 |
% |
|
|
47,040 |
|
|
|
7.3 |
% |
|
|
42,756 |
|
|
|
7.9 |
% |
Opry and Attractions |
|
|
1,375 |
|
|
|
0.7 |
% |
|
|
1,292 |
|
|
|
0.7 |
% |
|
|
3,927 |
|
|
|
0.6 |
% |
|
|
3,918 |
|
|
|
0.7 |
% |
ResortQuest |
|
|
2,683 |
|
|
|
1.3 |
% |
|
|
2,402 |
|
|
|
1.3 |
% |
|
|
8,029 |
|
|
|
1.2 |
% |
|
|
7,147 |
|
|
|
1.3 |
% |
Corporate and Other |
|
|
986 |
|
|
|
0.5 |
% |
|
|
1,151 |
|
|
|
0.6 |
% |
|
|
3,047 |
|
|
|
0.5 |
% |
|
|
3,711 |
|
|
|
0.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation and amortization |
|
|
20,905 |
|
|
|
10.0 |
% |
|
|
20,232 |
|
|
|
10.6 |
% |
|
|
62,043 |
|
|
|
9.6 |
% |
|
|
57,532 |
|
|
|
10.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
208,246 |
|
|
|
99.9 |
% |
|
|
190,060 |
|
|
|
99.5 |
% |
|
|
622,115 |
|
|
|
96.1 |
% |
|
|
553,258 |
|
|
|
102.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME (LOSS): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hospitality |
|
|
4,123 |
|
|
|
3.4 |
% |
|
|
2,215 |
|
|
|
1.9 |
% |
|
|
50,060 |
|
|
|
12.1 |
% |
|
|
27,740 |
|
|
|
8.2 |
% |
Opry and Attractions |
|
|
1,577 |
|
|
|
8.0 |
% |
|
|
967 |
|
|
|
5.3 |
% |
|
|
1,574 |
|
|
|
3.1 |
% |
|
|
(794 |
) |
|
|
-1.7 |
% |
ResortQuest |
|
|
4,795 |
|
|
|
7.3 |
% |
|
|
7,441 |
|
|
|
12.7 |
% |
|
|
5,870 |
|
|
|
3.2 |
% |
|
|
9,940 |
|
|
|
6.3 |
% |
Corporate and Other |
|
|
(9,027 |
) |
|
|
(A |
) |
|
|
(9,449 |
) |
|
|
(A |
) |
|
|
(28,938 |
) |
|
|
(A |
) |
|
|
(32,433 |
) |
|
|
(A |
) |
Preopening costs |
|
|
(1,213 |
) |
|
|
(B |
) |
|
|
(223 |
) |
|
|
(B |
) |
|
|
(3,329 |
) |
|
|
(B |
) |
|
|
(14,239 |
) |
|
|
(B |
) |
Impairment and other charges |
|
|
— |
|
|
|
(B |
) |
|
|
— |
|
|
|
(B |
) |
|
|
— |
|
|
|
(B |
) |
|
|
(1,212 |
) |
|
|
(B |
) |
Restructuring charges |
|
|
— |
|
|
|
(B |
) |
|
|
— |
|
|
|
(B |
) |
|
|
— |
|
|
|
(B |
) |
|
|
(78 |
) |
|
|
(B |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income (loss) |
|
|
255 |
|
|
|
0.1 |
% |
|
|
951 |
|
|
|
0.5 |
% |
|
|
25,237 |
|
|
|
3.9 |
% |
|
|
(11,076 |
) |
|
|
-2.0 |
% |
Interest expense, net of amounts capitalized |
|
|
(18,474 |
) |
|
|
(C |
) |
|
|
(14,850 |
) |
|
|
(C |
) |
|
|
(54,449 |
) |
|
|
(C |
) |
|
|
(39,011 |
) |
|
|
(C |
) |
Interest income |
|
|
662 |
|
|
|
(C |
) |
|
|
366 |
|
|
|
(C |
) |
|
|
1,820 |
|
|
|
(C |
) |
|
|
1,015 |
|
|
|
(C |
) |
Unrealized gain (loss) on Viacom stock and derivatives, net |
|
|
75 |
|
|
|
(C |
) |
|
|
2,551 |
|
|
|
(C |
) |
|
|
(7,837 |
) |
|
|
(C |
) |
|
|
(34,738 |
) |
|
|
(C |
) |
Income from unconsolidated companies |
|
|
2,098 |
|
|
|
(C |
) |
|
|
1,587 |
|
|
|
(C |
) |
|
|
1,980 |
|
|
|
(C |
) |
|
|
3,383 |
|
|
|
(C |
) |
Other gains and (losses), net |
|
|
1,102 |
|
|
|
(C |
) |
|
|
753 |
|
|
|
(C |
) |
|
|
6,022 |
|
|
|
(C |
) |
|
|
2,390 |
|
|
|
(C |
) |
Benefit for income taxes |
|
|
4,769 |
|
|
|
(C |
) |
|
|
4,657 |
|
|
|
(C |
) |
|
|
8,718 |
|
|
|
(C |
) |
|
|
32,285 |
|
|
|
(C |
) |
(Loss) gain on discontinued operations, net |
|
|
(2,104 |
) |
|
|
(C |
) |
|
|
793 |
|
|
|
(C |
) |
|
|
(2,376 |
) |
|
|
(C |
) |
|
|
1,014 |
|
|
|
(C |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(11,617 |
) |
|
|
(C |
) |
|
$ |
(3,192 |
) |
|
|
(C |
) |
|
$ |
(20,885 |
) |
|
|
(C |
) |
|
$ |
(44,738 |
) |
|
|
(C |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (A) |
|
These amounts have not been shown as a percentage of segment revenue because the Corporate and Other segment generates only minimal revenue. |
| |
| (B) |
|
These amounts have not been shown as a percentage of segment revenue because the Company does not associate them with any individual segment in managing the Company. |
| |
| (C) |
|
These amounts have not been shown as a percentage of total revenue because they have no relationship to total revenue. |
| |
| (D) |
|
Please note that these amounts reflect a change from the
Company’s October 27, 2005 press release announcing the
Company’s preliminary third quarter 2005 results as a result of
a reclassification of $4.4 million of engineering and maintenance
expense relating to the Gaylord Texan from selling, general, and
administrative expenses to operating costs. |
41
Summary Financial Results
Results
The following table summarizes our financial results for the three and nine months ended September
30, 2005 and 2004:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months |
|
|
|
|
|
Nine Months |
|
|
| |
|
Ended September 30, |
|
|
|
|
|
Ended September 30, |
|
|
| |
|
2005 |
|
2004 |
|
% Change |
|
2005 |
|
2004 |
|
% Change |
| |
|
(In thousands, except per share data) |
|
|
|
|
Total revenues |
|
$ |
208,501 |
|
|
$ |
191,011 |
|
|
|
9.2 |
% |
|
$ |
647,352 |
|
|
$ |
542,182 |
|
|
|
19.4 |
% |
Total operating expenses |
|
$ |
208,246 |
|
|
$ |
190,060 |
|
|
|
9.6 |
% |
|
$ |
622,115 |
|
|
$ |
553,258 |
|
|
|
12.4 |
% |
Operating income (loss) |
|
$ |
255 |
|
|
$ |
951 |
|
|
|
-73.2 |
% |
|
$ |
25,237 |
|
|
$ |
(11,076 |
) |
|
|
327.9 |
% |
Net loss |
|
$ |
(11,617 |
) |
|
$ |
(3,192 |
) |
|
|
-263.9 |
% |
|
$ |
(20,885 |
) |
|
$ |
(44,738 |
) |
|
|
53.3 |
% |
Net loss per share — fully diluted |
|
$ |
(0.29 |
) |
|
$ |
(0.08 |
) |
|
|
-262.5 |
% |
|
$ |
(0.52 |
) |
|
$ |
(1.13 |
) |
|
|
54.0 |
% |
Total Revenues
The increase in our total revenues for the three and nine months ended September 30, 2005, as
compared to the three and nine months ended September 30, 2004, is primarily attributable to:
| |
• |
|
increased Hospitality segment revenues (an increase of $8.9 million and an increase of
$75.8 million for the three and nine months ended September 30, 2005, respectively, as
compared to the same periods in 2004), described more fully below; and |
| |
| |
• |
|
increased revenues in our ResortQuest segment (an increase of $7.2 million and an
increase of $25.7 million for the three and nine months ended September 30, 2005,
respectively, as compared to the same periods in 2004), also as described more fully below. |
Total Operating Expenses
The increase in our total operating expenses for the three and nine months ended September 30,
2005, as compared to the three and nine months ended September 30, 2004, is primarily due to:
| |
• |
|
increased Hospitality segment operating expenses (excluding preopening costs, an increase
in total Hospitality operating expenses of $7.0 million and an
increase of $53.5 million for
the three and nine months ended September 30, 2005, respectively, as compared to the same
periods in 2004), described more fully below; and |
| |
| |
• |
|
increased ResortQuest segment operating expenses (an increase of $9.8 million and an
increase of $29.8 million for the three and nine months ended September 30, 2005,
respectively, as compared to the same periods in 2004), also as described more fully below. |
Operating Income (Loss)
Our operating income of $0.3 million for the three months ended September 30, 2005 (as compared to
an operating income of $1.0 million for the same period in 2004) was, as more fully described
below:
42
| |
• |
|
positively impacted by increases in Hospitality segment (an increase of $1.9 million from
the same period in 2004) and Opry and Attractions segment (an increase of $0.6 million from
the same period in 2004) operating income; |
| |
| |
• |
|
negatively impacted by a decrease in ResortQuest segment operating income (a decrease of
$2.6 million from the same period in 2004); and |
| |
| |
• |
|
negatively impacted by a $1.0 million increase in preopening costs from the same period
in 2004. |
Our operating income of $25.2 million for the nine months ended September 30, 2005 (as compared to
an operating loss of $11.1 million for the same period in 2004) was, as more fully described below:
| |
• |
|
positively impacted by increases in Hospitality segment operating income (an increase of
$22.3 million from the same period in 2004) and reductions in Corporate and Other segment
operating losses (a decrease of $3.5 million from the same period in 2004); |
| |
| |
• |
|
positively impacted by decreased preopening costs (a decrease of $10.9 million from the
same period in 2004); and |
| |
| |
• |
|
negatively impacted by a reduction in ResortQuest segment operating income (a decrease of
$4.1 million from the same period in 2004). |
Net Loss
Our net loss for the three months ended September 30, 2005, as compared to our net loss for the
same period in 2004, was negatively impacted primarily by the following factors, each of which are
more fully described below:
| |
• |
|
a $3.6 million increase in our interest expense in the period (as compared to the same
period in 2004); |
| |
| |
• |
|
a $2.5 million reduction in our unrealized gain on Viacom stock and derivatives, net, for
the period (a $0.1 million unrealized gain in 2005, as compared to a $2.6 million unrealized
gain in 2004); and |
| |
| |
• |
|
a $2.1 million loss on discontinued operations, net (as compared to a gain on
discontinued operations, net, of $0.8 million in the same period in 2004). |
Our net loss for the nine months ended September 30, 2005, as compared to our net loss for the same
period in 2004, was, as more fully described herein:
| |
• |
|
positively impacted by our operating income for the first nine months of 2005 (as
compared to our operating loss in the same period in 2004); |
| |
| |
• |
|
positively impacted by a $26.9 million reduction in the unrealized loss on Viacom stock
and derivatives, net, for the first nine months of 2005 (as compared to the same period in
2004); |
| |
| |
• |
|
negatively impacted by a $15.4 million increase in our interest expense for the first
nine months of 2005 (as compared to the same period in 2004); and |
43
| |
• |
|
negatively impacted by a $23.6 million decrease in the amount of our benefit for income
taxes (as compared to the same period in 2004). |
Factors and Trends Contributing to Operating Performance
The most important factors and trends contributing to our operating performance during the periods
described herein have been:
| |
• |
|
Increased Hospitality segment ADR and a slightly lower occupancy rate for the three
months ended September 30, 2005, which resulted in increased Hospitality RevPAR for the
period. For the nine months ended September 30, 2005, increased Hospitality segment ADR and
occupancy rate resulted in a higher Hospitality RevPAR for the period. These improvements
drove higher Hospitality segment revenues during the applicable periods in 2005, as
compared to the same periods in 2004. |
| |
| |
• |
|
Improved food and beverage, banquet and catering revenues at our hotels for the three
and nine months ended September 30, 2005, which positively impacted Total RevPAR at our
hotels and served to supplement the impact of the improved ADR of the Hospitality segment
on Hospitality segment revenues during the applicable periods in 2005, as compared to the
same periods in 2004. |
| |
| |
• |
|
The opening of the Gaylord Texan in April 2004 and the resulting addition of Hospitality
segment revenues and operating expenses associated with the hotel, as well as improved
results at the Gaylord Texan in the three and nine months ended September 30, 2005, as
compared to prior periods in 2004. |
| |
| |
• |
|
The addition of revenues and expenses to our ResortQuest segment associated with the
approximately 2,500 additional units gained in the acquisition of vacation rental management
businesses from East West Resorts and Whistler Lodging Company Ltd. in the first quarter of
2005. |
| |
| |
• |
|
Slightly increased average daily rates at ResortQuest during the
third quarter of 2005. ResortQuest results were negatively impacted by Hurricane Dennis.
ResortQuest results were also impacted by continued infrastructure and re-branding
investments, as well as the impact
of units out of service and ResortQuest’s decision to exit certain markets (and the resulting
reclassification of results from these markets as discontinued operations). |
44
Operating
Results — Detailed Segment Financial Information
Hospitality Segment
Total Segment Results. The following presents the financial results of our Hospitality segment
for the three and nine months ended September 30, 2005 and 2004:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months |
|
|
|
|
|
|
Nine Months |
|
|
|
|
| |
|
Ended September 30, |
|
|
|
|
|
|
Ended September 30, |
|
|
|
|
| |
|
2005 |
|
|
2004 |
|
|
% Change |
|
|
2005 |
|
|
2004 |
|
|
% Change |
|
Hospitality revenue(1) |
|
$ |
122,623 |
|
|
$ |
113,725 |
|
|
|
7.8 |
% |
|
$ |
412,802 |
|
|
$ |
337,008 |
|
|
|
22.5 |
% |
Hospitality operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs |
|
|
79,995 |
|
|
|
77,008 |
|
|
|
3.9 |
% |
|
|
247,475 |
|
|
|
205,506 |
|
|
|
20.4 |
% |
Selling, general and
administrative |
|
|
22,644 |
|
|
|
19,115 |
|
|
|
18.5 |
% |
|
|
68,227 |
|
|
|
61,006 |
|
|
|
11.8 |
% |
Depreciation and
amortization |
|
|
15,861 |
|
|
|
15,387 |
|
|
|
3.1 |
% |
|
|
47,040 |
|
|
|
42,756 |
|
|
|
10.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Hospitality
operating expenses |
|
|
118,500 |
|
|
|
111,510 |
|
|
|
6.3 |
% |
|
|
362,742 |
|
|
|
309,268 |
|
|
|
17.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hospitality operating income (2) |
|
$ |
4,123 |
|
|
$ |
2,215 |
|
|
|
86.1 |
% |
|
$ |
50,060 |
|
|
$ |
27,740 |
|
|
|
80.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hospitality performance
metrics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy (6) |
|
|
69.3 |
% |
|
|
70.8 |
% |
|
|
-2.1 |
% |
|
|
73.5 |
% |
|
|
71.1 |
% |
|
|
3.4 |
% |
ADR |
|
$ |
143.79 |
|
|
$ |
130.03 |
|
|
|
10.6 |
% |
|
$ |
148.02 |
|
|
$ |
140.88 |
|
|
|
5.1 |
% |
RevPAR(3)(6) |
|
$ |
99.66 |
|
|
$ |
92.07 |
|
|
|
8.2 |
% |
|
$ |
108.77 |
|
|
$ |
100.12 |
|
|
|
8.6 |
% |
Total RevPAR(4)(6) |
|
$ |
224.95 |
|
|
$ |
202.61 |
|
|
|
11.0 |
% |
|
$ |
251.51 |
|
|
$ |
219.89 |
|
|
|
14.4 |
% |
Net Definite Room
Nights Booked (5) |
|
|
488,000 |
|
|
|
288,000 |
|
|
|
69.4 |
% |
|
|
1,063,000 |
|
|
|
907,000 |
|
|
|
17.2 |
% |
|
|
|
| (1) |
|
Hospitality results and performance metrics include the results of our Radisson Hotel and
include the results of the Gaylord Texan from April 2, 2004, its first date of operation. |
| |
| (2) |
|
Hospitality operating income does not include preopening costs. See the discussion of
preopening costs set forth below. |
| |
| (3) |
|
We calculate Hospitality RevPAR by dividing room sales by room nights available to guests for
the period. Hospitality RevPAR is not comparable to similarly titled measures such as
revenues. |
| |
| (4) |
|
We calculate Hospitality Total RevPAR by dividing the sum of room sales, food and beverage,
and other ancillary services (which equals Hospitality segment revenue) by room nights
available to guests for the period. Hospitality Total RevPAR is not comparable to similarly
titled measures such as revenues. |
| |
| (5) |
|
Net Definite Room Nights Booked included 135,000 and 0 room nights for the three months
ended September 30, 2005 and 2004, respectively, and 250,000 and 0 room nights for the nine
months ended September 30, 2005 and 2004, respectively, related to Gaylord National, which we
expect to open in 2008. |
| |
| (6) |
|
Excludes 16,001 and 23,941 room nights that were taken out of service during the three months
and nine months ended September 30, 2005, respectively, as a
result of a continued multi-year rooms renovation
program at Gaylord Opryland. |
45
The increase in total Hospitality segment revenue in the three and nine months ended September
30, 2005, as compared to the same periods in 2004, is primarily due to increased system-wide ADR,
RevPAR and Total RevPAR, at each Gaylord Hotels property. The inclusion of a full years’ worth of
revenue from the Gaylord Texan positively impacted revenues for the nine months ended September 30,
2005, while the Gaylord Texan’s improved operating results as compared to 2004, discussed below,
positively impacted both the three and nine month periods ended September 30, 2005.
Hospitality segment operating expenses consist of direct operating costs, selling, general and
administrative expenses, and depreciation and amortization expense. Hospitality segment operating
costs, which consist of direct costs associated with the daily operations of our hotels (primarily
room, food and beverage and convention costs), increased in the three
and nine months ended September 30, 2005, as compared to the same
periods in 2004, due to increased costs necessary to service the increased Hospitality segment
revenues. Total Hospitality segment selling, general and administrative expenses, consisting of
administrative and overhead costs, increased in the three and nine months ended September 30, 2005,
as compared to the same periods in 2004, primarily due to increases in selling, general
and administrative expenses at Gaylord Opryland and Gaylord Texan in the third quarter of 2005, as
more fully described below. Total Hospitality depreciation and amortization expense also increased
in the three and nine months ended September 30, 2005, as compared to the same periods in 2004,
primarily due to the opening of the Gaylord Texan.
46
Property-Level Results. The following presents the property-level financial results of our
Hospitality segment for the three and nine months ended September 30, 2005 and 2004 and include the
results of the Gaylord Texan from April 2, 2004, its date of opening.
Gaylord Opryland Results. The results of Gaylord Opryland for the three and nine months ended
September 30, 2005 and 2004 are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months |
|
|
|
|
|
|
Nine Months |
|
|
|
|
| |
|
Ended September 30, |
|
|
|
|
|
|
Ended September 30, |
|
|
|
|
| |
|
2005 |
|
|
2004 |
|
|
% Change |
|
|
2005 |
|
|
2004 |
|
|
% Change |
|
| |
|
(In thousands, except percentages and performance metrics) |
|
Total revenues |
|
$ |
53,028 |
|
|
$ |
50,008 |
|
|
|
6.0 |
% |
|
$ |
162,198 |
|
|
$ |
149,911 |
|
|
|
8.2 |
% |
Operating expense data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs |
|
$ |
34,716 |
|
|
$ |
31,799 |
|
|
|
9.2 |
% |
|
$ |
101,402 |
|
|
$ |
93,564 |
|
|
|
8.4 |
% |
Selling, general and
administrative |
|
$ |
9,318 |
|
|
$ |
7,313 |
|
|
|
27.4 |
% |
|
$ |
26,079 |
|
|
$ |
22,669 |
|
|
|
15.0 |
% |
Hospitality performance
metrics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy (1) |
|
|
71.9 |
% |
|
|
72.6 |
% |
|
|
-1.0 |
% |
|
|
73.4 |
% |
|
|
69.8 |
% |
|
|
5.2 |
% |
ADR |
|
$ |
140.40 |
|
|
$ |
130.89 |
|
|
|
7.3 |
% |
|
$ |
136.08 |
|
|
$ |
136.38 |
|
|
|
-0.2 |
% |
RevPAR (1) |
|
$ |
101.01 |
|
|
$ |
95.07 |
|
|
|
6.2 |
% |
|
$ |
99.92 |
|
|
$ |
95.17 |
|
|
|
5.0 |
% |
Total RevPAR (1) |
|
$ |
213.08 |
|
|
$ |
188.67 |
|
|
|
12.9 |
% |
|
$ |
212.80 |
|
|
$ |
189.93 |
|
|
|
12.0 |
% |
| (1) |
|
Excludes 16,001 and 23,941 room nights that were taken out of service during the three months
and nine months ended September 30, 2005, respectively, as a
result of a continued multi-year rooms renovation
program at Gaylord Opryland. |
The increase in Gaylord Opryland revenue and RevPAR in the three months ended September 30,
2005, as compared to the same period in 2004, is due to a combination of relatively consistent
occupancy and increased average daily rates (as a result of higher-paying groups) during the
period. Gaylord Opryland’s revenues and operating performance
metrics for the period were also impacted by a continued multi-year
rooms renovation program, as described above.
Improved food and beverage and other ancillary revenue at the hotel served to increase the hotel’s
Total RevPAR during the period. The increase in Gaylord Opryland revenue and RevPAR in the nine
months ended September 30, 2005, as compared to the same period in 2004, is due to a combination of
increased occupancy and relatively stable ADR at the hotel. Improved food and beverage and other
ancillary revenue at the hotel supplemented the impact of the hotel’s RevPAR upon its Total RevPAR
for the period.
The increase in operating costs at Gaylord Opryland in the three and nine month periods ended
September 30, 2005, as compared to the same periods in 2004, was due to increased costs necessary
to serve the increased room and food and beverage and other ancillary revenue at the hotel. The
significant increase in selling, general and administrative expenses at Gaylord Opryland in the
three and nine months ended September 30, 2005, as compared to the same periods in 2004, is due to
the substantial investment in marketing and service initiatives taken in connection with the annual
meeting of the American Society of Association Executives, an organization comprised of over 2,000
association executives and meeting planners, held at Gaylord Opryland in the third quarter of 2005.
47
Gaylord Palms Results. The results of Gaylord Palms for the three and nine months ended
September 30, 2005 and 2004 are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months |
|
|
|
|
|
|
Nine Months |
|
|
|
|
| |
|
Ended September 30, |
|
|
|
|
|
|
Ended September 30, |
|
|
|
|
| |
|
2005 |
|
|
2004 |
|
|
% Change |
|
|
2005 |
|
|
2004 |
|
|
% Change |
|
| |
|
(In thousands, except percentages and performance metrics) |
|
|
|
|
|
Total revenues |
|
$ |
31,155 |
|
|
$ |
29,064 |
|
|
|
7.2 |
% |
|
$ |
125,790 |
|
|
$ |
117,551 |
|
|
|
7.0 |
% |
Operating expense data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs |
|
$ |
20,524 |
|
|
$ |
19,129 |
|
|
|
7.3 |
% |
|
$ |
69,040 |
|
|
$ |
64,006 |
|
|
|
7.9 |
% |
Selling, general and
administrative |
|
$ |
7,697 |
|
|
$ |
7,726 |
|
|
|
-0.4 |
% |
|
$ |
24,834 |
|
|
$ |
25,211 |
|
|
|
-1.5 |
% |
Hospitality performance
metrics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
61.0 |
% |
|
|
62.6 |
% |
|
|
-2.6 |
% |
|
|
75.8 |
% |
|
|
75.6 |
% |
|
|
0.3 |
% |
ADR |
|
$ |
157.10 |
|
|
$ |
138.28 |
|
|
|
13.6 |
% |
|
$ |
170.45 |
|
|
$ |
165.63 |
|
|
|
2.9 |
% |
RevPAR |
|
$ |
95.79 |
|
|
$ |
86.60 |
|
|
|
10.6 |
% |
|
$ |
129.26 |
|
|
$ |
125.20 |
|
|
|
3.2 |
% |
Total RevPAR |
|
$ |
240.85 |
|
|
$ |
224.69 |
|
|
|
7.2 |
% |
|
$ |
327.72 |
|
|
$ |
305.13 |
|
|
|
7.4 |
% |
The increase in Gaylord Palms revenue and RevPAR in the three and nine months ended September
30, 2005, as compared to the same periods in 2004, is due to a combination of relatively consistent
occupancy and increased average daily rates (as a result of groups with higher room rates) during
the periods. The increase in rates in the third quarter of 2005, as compared to 2004, is also due
in part to discounted room rates made available to hurricane evacuees and aid workers in 2004. The
hotel’s improved food and beverage and other ancillary revenue contributed to the increase in Total
RevPAR for the three and nine months ended September 30, 2005, as compared to the same periods in
2004.
Operating costs for the three and nine months ended September 30, 2005, increased, as compared to
the same periods in 2004, due to the increased costs necessary to service the increased revenues at
the hotel. Selling, general and administrative expense for the three and nine months ended
September 30, 2005 remained stable as compared to the same periods in 2004.
48
Gaylord Texan Results. The results of the Gaylord Texan for the three and nine months ended
September 30, 2005 and 2004 are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months |
|
|
|
|
|
|
Nine Months |
|
|
|
|
| |
|
Ended September 30, |
|
|
|
|
|
|
Ended September 30, |
|
|
|
|
| |
|
2005 |
|
|
2004 |
|
|
% Change |
|
|
2005 |
|
|
2004 |
|
|
% Change |
|
| |
|
(In thousands, except percentages and performance metrics) |
|
|
|
|
|
Total revenues |
|
$ |
36,413 |
|
|
$ |
32,808 |
|
|
|
11.0 |
% |
|
$ |
118,860 |
|
|
$ |
64,107 |
|
|
|
85.4 |
% |
Operating expense data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs |
|
$ |
23,719 |
|
|
$ |
25,241 |
|
|
|
-6.0 |
% |
|
$ |
73,988 |
|
|
$ |
45,120 |
|
|
|
64.0 |
% |
Selling, general and
administrative |
|
$ |
5,179 |
|
|
$ |
3,713 |
|
|
|
39.5 |
% |
|
$ |
15,874 |
|
|
$ |
11,980 |
|
|
|
32.5 |
% |
Hospitality performance
metrics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
72.1 |
% |
|
|
75.7 |
% |
|
|
-4.8 |
% |
|
|
72.4 |
% |
|
|
69.9 |
% |
|
|
3.6 |
% |
ADR |
|
$ |
150.58 |
|
|
$ |
130.25 |
|
|
|
15.6 |
% |
|
$ |
160.02 |
|
|
$ |
132.74 |
|
|
|
20.6 |
% |
RevPAR |
|
$ |
108.51 |
|
|
$ |
98.60 |
|
|
|
10.1 |
% |
|
$ |
115.83 |
|
|
$ |
92.82 |
|
|
|
24.8 |
% |
Total RevPAR |
|
$ |
261.94 |
|
|
$ |
236.00 |
|
|
|
11.0 |
% |
|
$ |
288.14 |
|
|
$ |
233.11 |
|
|
|
23.6 |
% |
The increase in Gaylord Texan revenue and RevPAR in the three and nine months ended September
30, 2005, as compared to the same period in 2004, is due to improvements in the hotel’s ADR as a
result of higher-paying groups staying at the hotel, combined with relatively stable occupancy
during the periods. The hotel’s food and beverage and other ancillary revenue supplemented the
impact of RevPAR on the hotel’s Total RevPAR. Revenues for the nine months ended September 30,
2005, as compared to the same period in 2004, increased as a result of the inclusion of a full nine
months of operations.
Operating costs for the three months ended September 30, 2005 decreased, as compared
to the same period in 2004, as costs stabilized following the hotel’s initial opening period.
Operating costs for the nine months ended September 30, 2005, as compared to the same period in
2004, increased primarily due to the inclusion of a full nine months of operations.
Selling, general and administrative expenses increased in the three months ended September 30,
2005, as compared to the same period in 2004, due to increased marketing expenses related to the
hotel’s Lone Star Christmas event. Selling, general and administrative expenses increased in the
nine months ended September 30, 2005, as compared to the same period in 2004, due to the inclusion
of a full nine months of operations.
49
Radisson Hotel at Opryland Results. The results of the Radisson Hotel at Opryland for the
three and nine months ended September 30, 2005 and 2004 are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months |
|
|
|
|
|
|
Nine Months |
|
|
|
|
| |
|
Ended September 30, |
|
|
|
|
|
|
Ended September 30, |
|
|
|
|
| |
|
2005 |
|
|
2004 |
|
|
% Change |
|
|
2005 |
|
|
2004 |
|
|
% Change |
|
| |
|
(In thousands, except percentages and performance metrics) |
|
|
|
|
|
Total revenues |
|
$ |
2,027 |
|
|
$ |
1,845 |
|
|
|
9.9 |
% |
|
$ |
5,954 |
|
|
$ |
5,439 |
|
|
|
9.5 |
% |
Operating expense data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs |
|
$ |
1,036 |
|
|
$ |
839 |
|
|
|
23.5 |
% |
|
$ |
3,045 |
|
|
$ |
2,816 |
|
|
|
8.1 |
% |
Selling, general and
administrative |
|
$ |
450 |
|
|
$ |
363 |
|
|
|
24.0 |
% |
|
$ |
1,440 |
|
|
$ |
1,146 |
|
|
|
25.7 |
% |
Hospitality performance
metrics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
70.8 |
% |
|
|
67.0 |
% |
|
|
5.7 |
% |
|
|
68.6 |
% |
|
|
66.1 |
% |
|
|
3.8 |
% |
ADR |
|
$ |
86.89 |
|
|
$ |
84.08 |
|
|
|
3.3 |
% |
|
$ |
87.57 |
|
|
$ |
83.29 |
|
|
|
5.1 |
% |
RevPAR |
|
$ |
61.48 |
|
|
$ |
56.37 |
|
|
|
9.1 |
% |
|
$ |
60.08 |
|
|
$ |
55.05 |
|
|
|
9.1 |
% |
Total RevPAR |
|
$ |
72.72 |
|
|
$ |
66.20 |
|
|
|
9.8 |
% |
|
$ |
71.98 |
|
|
$ |
65.34 |
|
|
|
10.2 |
% |
The increase in our Radisson hotel revenue, RevPAR and Total RevPAR in the three and nine
months ended September 30, 2005, as compared to the same periods in 2004, is due to increases in
the hotel’s occupancy and ADR resulting from more demand for rooms at the hotel and improved
ancillary revenues.
The increase in operating costs and selling, general and administrative expense at the Radisson
hotel in the three and nine month periods ended September 30, 2005, as compared to the same periods
in 2004, was due to increased costs necessary to service the increased revenues at the hotel, as
well as increased sales and marketing efforts at the hotel.
50
ResortQuest Segment
Total Segment Results. The following presents the financial results of our ResortQuest segment
for the three and nine months ended September 30, 2005 and 2004:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months |
|
|
|
|
|
|
Nine Months |
|
|
|
|
| |
|
Ended September 30, |
|
|
|
|
|
|
Ended September 30, |
|
|
|
|
| |
|
2005 |
|
|
2004 |
|
|
% Change |
|
|
2005 |
|
|
2004 |
|
|
% Change |
|
| |
|
(In thousands, except percentages and performance metrics) |
|
|
|
|
|
Total revenues |
|
$ |
66,014 |
|
|
$ |
58,817 |
|
|
|
12.2 |
% |
|
$ |
182,866 |
|
|
$ |
157,182 |
|
|
|
16.3 |
% |
Operating expense data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs |
|
|
43,697 |
|
|
|
36,294 |
|
|
|
20.4 |
% |
|
|
123,349 |
|
|
|
101,658 |
|
|
|
21.3 |
% |
Selling, general and
administrative |
|
|
14,839 |
|
|
|
12,680 |
|
|
|
17.0 |
% |
|
|
45,618 |
|
|
|
38,437 |
|
|
|
18.7 |
% |
Depreciation and
amortization |
|
|
2,683 |
|
|
|
2,402 |
|
|
|
11.7 |
% |
|
|
8,029 |
|
|
|
7,147 |
|
|
|
12.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
$ |
4,795 |
|
|
$ |
7,441 |
|
|
|
-35.6 |
% |
|
$ |
5,870 |
|
|
$ |
9,940 |
|
|
|
-40.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hospitality performance
metrics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
57.8 |
% |
|
|
58.2 |
% |
|
|
-0.7 |
% |
|
|
56.9 |
% |
|
|
57.5 |
% |
|
|
-1.0 |
% |
ADR |
|
$ |
187.63 |
|
|
$ |
182.49 |
|
|
|
2.8 |
% |
|
$ |
163.78 |
|
|
$ |
155.09 |
|
|
|
5.6 |
% |
RevPAR(1) |
|
$ |
108.51 |
|
|
$ |
106.23 |
|
|
|
2.1 |
% |
|
$ |
93.12 |
|
|
$ |
89.25 |
|
|
|
4.3 |
% |
Total Units Under
Management |
|
$ |
16,900 |
|
|
$ |
14,765 |
|
|
|
14.5 |
% |
|
$ |
16,900 |
|
|
$ |
14,765 |
|
|
|
14.5 |
% |
| (1) |
|
We calculate ResortQuest RevPAR by dividing gross lodging revenue for properties under
exclusive rental management contracts by net available unit nights available to guests for the
period. Our ResortQuest segment revenue represents a percentage of the gross lodging revenues
based on the services provided by ResortQuest. Net available unit nights (those available to
guests) are equal to total available unit nights less owner, maintenance, and complimentary
unit nights. ResortQuest RevPAR is not comparable to similarly titled measures such as
revenues. |
Revenues. Our ResortQuest segment earns revenues primarily as a result of property management
fees and service fees recognized over the time during which our guests stay at our properties.
Property management fees paid to us are generally a designated percentage of the rental price of
the vacation property, plus certain incremental fees, all of which are based upon the type of
services provided by us to the property owner and the type of rental units managed. We also
recognize other revenues primarily related to real estate broker commissions. The increase in
ResortQuest revenue in the three and nine months ended September 30, 2005, as compared to 2004, is
due primarily to the addition of units associated with the East-West and Whistler acquisitions, as
well as a combination of relatively stable occupancy and slightly increased average daily rates.
ResortQuest revenues were also adversely affected by disruptions in the Florida beach vacation
season caused by Hurricane Dennis.
Operating Expenses. ResortQuest operating expenses primarily consist of operating costs,
selling, general and administrative expenses and depreciation and amortization expense. Operating
costs of ResortQuest, which are comprised of payroll expenses, credit card transaction fees, travel
agency fees, advertising, payroll for managed entities and various other direct operating costs,
increased in the three and nine months ended September 30, 2005, as compared to the same periods in
2004, due to the addition of units associated with the East-West and Whistler acquisitions and as a
result of our continued
51
investment in brand-building initiatives such as technology, marketing and
organizational improvements. Selling, general and administrative expenses of ResortQuest, which are
comprised of payroll expenses, rent, utilities and various other general and administrative costs,
increased in the three and nine months ended September 30, 2005, as compared to the three and nine
months ended September 30, 2004, due primarily to additional
expenses associated with the East-West and Whistler acquisitions, as well as a result of the
brand-building initiatives discussed above.
ResortQuest’s results of operations were also impacted by our decision to dispose of certain
ResortQuest markets that were considered to be inconsistent with our long term growth strategy.
The results of operations of these markets are excluded from the results of continuing operations
presented above for all periods presented.
Opry and Attractions Segment
Total Segment Results. The following presents the financial results of our Opry and
Attractions segment for the three and nine months ended September 30, 2005 and 2004:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months |
|
|
|
|
|
|
Nine Months |
|
|
|
|
| |
|
Ended September 30, |
|
|
|
|
|
|
Ended September 30, |
|
|
|
|
| |
|
2005 |
|
|
2004 |
|
|
% Change |
|
|
2005 |
|
|
2004 |
|
|
% Change |
|
| |
|
|
|
|
|
(In thousands, except percentages) |
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
19,727 |
|
|
$ |
18,352 |
|
|
|
7.5 |
% |
|
$ |
51,272 |
|
|
$ |
47,749 |
|
|
|
7.4 |
% |
Operating expense data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs |
|
|
12,093 |
|
|
|
11,722 |
|
|
|
3.2 |
% |
|
|
32,590 |
|
|
|
31,373 |
|
|
|
3.9 |
% |
Selling, general and
administrative |
|
|
4,682 |
|
|
|
4,371 |
|
|
|
7.1 |
% |
|
|
13,181 |
|
|
|
13,252 |
|
|
|
-0.5 |
% |
Depreciation and
amortization |
|
|
1,375 |
|
|
|
1,292 |
|
|
|
6.4 |
% |
|
|
3,927 |
|
|
|
3,918 |
|
|
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) (1) |
|
$ |
1,577 |
|
|
$ |
967 |
|
|
|
63.1 |
% |
|
$ |
1,574 |
|
|
$ |
(794 |
) |
|
|
298.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Opry and Attractions operating income (loss) for the three and nine months ended September
30, 2004 excludes the effects of an impairment charge of $1.2 million recorded during those
periods.
The increase in revenues in the Opry and Attractions segment for the three months ended September
30, 2005, as compared to the same period in 2004, is primarily due to increased attendance at the
Grand Ole Opry, sales of the Grand Ole Opry Live Classics CD set, and increased sponsor and
distribution fees, as well as increased business at Corporate Magic, our corporate event planning
business. The increase in revenues in the Opry and Attractions segment for the nine months ended
September 30, 2005, as compared to the same period in 2004, is also due to increased attendance at
the Grand Ole Opry, sales of the Grand Ole Opry Live Classics CD set, and increased sponsor and
distribution fees.
The increase in Opry and Attractions operating costs in the three and nine months ended September
30, 2005, as compared to the same periods in 2004, is due primarily to increased costs necessary to
service the increased revenues. The increase in Opry and Attractions selling, general and
administrative expenses in the three months ended September 30, 2005, as compared to the same
period in 2004, is due primarily to an increase in property tax expense at the Grand Ole Opry and
higher marketing expense related to the Grand Ole Opry’s 80th birthday celebration. Opry
and Attraction’ selling, general and administrative expenses in the nine months ended September 30,
2005, as compared to the same period in 2004, was relatively consistent.
52
Corporate and Other Segment
Total Segment Results. The following presents the financial results of our Corporate and Other
segment for the three and nine months ended September 30, 2005 and 2004:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months |
|
|
|
|
|
|
Nine Months |
|
|
|
|
| |
|
Ended September 30, |
|
|
|
|
|
|
Ended September 30, |
|
|
|
|
| |
|
2005 |
|
|
2004 |
|
|
% Change |
|
|
2005 |
|
|
2004 |
|
|
% Change |
|
| |
|
|
|
|
|
(In thousands, except percentages) |
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
137 |
|
|
$ |
117 |
|
|
|
17.1 |
% |
|
$ |
412 |
|
|
$ |
243 |
|
|
|
69.5 |
% |
Operating expense data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs |
|
|
1,852 |
|
|
|
2,046 |
|
|
|
-9.5 |
% |
|
|
5,075 |
|
|
|
6,133 |
|
|
|
-17.3 |
% |
Selling, general and
administrative |
|
|
6,326 |
|
|
|
6,369 |
|
|
|
-0.7 |
% |
|
|
21,228 |
|
|
|
22,832 |
|
|
|
-7.0 |
% |
Depreciation and
amortization |
|
|
986 |
|
|
|
1,151 |
|
|
|
-14.3 |
% |
|
|
3,047 |
|
|
|
3,711 |
|
|
|
-17.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss (1) |
|
$ |
(9,027 |
) |
|
$ |
(9,449 |
) |
|
|
4.5 |
% |
|
$ |
(28,938 |
) |
|
$ |
(32,433 |
) |
|
|
10.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Corporate and other operating loss for the three and nine months ended September 30, 2004
excludes the effects of an adjustment to restructuring charges of $0.1 million recorded during
those periods.
Corporate and Other group revenue for the three and nine months ended September 30, 2005 consists
of rental income and corporate sponsorships.
Corporate and Other operating expenses decreased in the three and nine months ended September 30,
2005, as compared to the three and nine months ended September 30, 2004. Corporate and Other
operating costs, which consist primarily of costs associated with information technology, decreased
in the first three and nine months of 2005, as compared to the first and three months of 2004,
primarily due to a reduction in contract service costs and consulting fees related to information
technology initiatives. Corporate and Other selling, general and administrative expenses, which
consist of the Gaylord Entertainment Center naming rights agreement (prior to its termination on
February 22, 2005), senior management salaries and benefits, legal, human resources, accounting,
pension and other administrative costs, decreased in the three and nine months ended September 30,
2005, as compared to the three and nine months ended September 30, 2004, due primarily to the
elimination of expense associated with the naming rights agreement. Corporate and Other selling,
general and administrative expenses during the nine months ended September 30, 2005 were also
impacted by the net reversal of $2.4 million of expense previously accrued under the naming rights
agreement as a result of the settlement of litigation in connection with that agreement, the effect
of which was largely offset by the contribution by us of $2.3 million of Viacom stock to the newly
formed Gaylord charitable foundation in the first quarter of 2005. Corporate and Other
depreciation and amortization expense, which is primarily related to information technology
equipment and capitalized electronic data processing software costs, for the three and nine months
ended September 30, 2005 decreased from the same periods in 2004 due to the retirement of certain
depreciable assets.
53
Operating
Results — Preopening costs
In accordance with AICPA SOP 98-5, “Reporting on the Costs of Start-Up Activities”, we expense the
costs associated with start-up activities and organization costs as incurred. Preopening costs
increased by $1.0 million to $1.2 million in the three months ended September 30, 2005 (as compared
to $0.2 million in the three months ended September 30, 2004), as a result of increased
construction activity with respect to our Gaylord National hotel project.
Preopening costs decreased by $10.9 million to $3.3 million for the nine months ended September 30,
2005, as compared to the same period in 2004, due to the opening of the Gaylord Texan on April 2,
2004.
Non-Operating Results Affecting Net Loss
General
The following table summarizes the other factors which affected our net income (loss) for the three
and nine months ended September 30, 2005 and 2004:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months |
|
|
|
|
|
|
Nine Months |
|
|
|
|
| |
|
Ended September 30, |
|
|
|
|
|
|
Ended September 30, |
|
|
|
|
| |
|
2005 |
|
|
2004 |
|
|
% Change |
|
|
2005 |
|
|
2004 |
|
|
% Change |
|
| |
|
|
|
|
|
(In thousands, except percentages) |
|
|
|
|
|
|
|
|
|
Interest expense, net of
amounts capitalized |
|
$ |
(18,474 |
) |
|
$ |
(14,850 |
) |
|
|
-24.4 |
% |
|
$ |
(54,449 |
) |
|
$ |
(39,011 |
) |
|
|
-39.6 |
% |
Interest income |
|
$ |
662 |
|
|
$ |
366 |
|
|
|
80.9 |
% |
|
$ |
1,820 |
|
|
$ |
1,015 |
|
|
|
79.3 |
% |
Unrealized gain (loss) on
Viacom stock and
derivatives, net |
|
$ |
75 |
|
|
$ |
2,551 |
|
|
|
-97.1 |
% |
|
$ |
(7,837 |
) |
|
$ |
(34,738 |
) |
|
|
77.4 |
% |
Income from
unconsolidated
companies |
|
$ |
2,098 |
|
|
$ |
1,587 |
|
|
|
32.2 |
% |
|
$ |
1,980 |
|
|
$ |
3,383 |
|
|
|
-41.5 |
% |
Other gains and losses, net |
|
$ |
1,102 |
|
|
$ |
753 |
|
|
|
46.3 |
% |
|
$ |
6,022 |
|
|
$ |
2,390 |
|
|
|
152.0 |
% |
Benefit for
income taxes |
|
$ |
4,769 |
|
|
$ |
4,657 |
|
|
|
2.4 |
% |
|
$ |
8,718 |
|
|
$ |
32,285 |
|
|
|
-73.0 |
% |
(Loss) gain from discontinued
operations, net of income
taxes |
|
$ |
(2,104 |
) |
|
$ |
793 |
|
|
|
-365.3 |
% |
|
$ |
(2,376 |
) |
|
$ |
1,014 |
|
|
|
-334.3 |
% |
Interest Expense, Net of Amounts Capitalized
Interest expense, net of amounts capitalized, increased during the three months ended September 30,
2005, as compared to the same period in 2004, due to higher average debt balances during 2005.
Interest expense, net of amounts capitalized, increased during the nine months ended September 30,
2005, as compared to the same period in 2004, due to higher average debt balances during 2005, the
write-off of $0.5 million of deferred financing costs in the first quarter of 2005 in connection
with the replacement of our $100.0 million credit facility, and a $3.6 million decrease in
capitalized interest. Capitalized interest decreased from $5.3 million during the nine months ended
September 30, 2004 to $1.8 million during the nine months ended September 30, 2005 as a result of
the opening of the Gaylord Texan in April 2004.
54
Our weighted average interest rate on our
borrowings, including the interest expense associated with the secured forward exchange contract
related to our Viacom stock investment and excluding the write-off of deferred financing costs
during the period, was 6.4% and 5.1% for the three months ended September 30, 2005 and 2004,
respectively, and was 6.3% and 5.1% for the nine months ended September 30, 2005 and 2004,
respectively. As further discussed in Note 8 to our condensed consolidated financial statements
for the three months and nine months ended September 30, 2005 and 2004 included herewith, the
secured forward exchange contract related to our Viacom Stock investment resulted in non-cash
interest expense of $6.8 million for the three months ended September 30, 2005 and 2004, and $20.1
million and $20.2 million for the nine months ended September 30, 2005 and 2004, respectively.
Interest Income
The increase in interest income during the three and nine months ended September 30, 2005, as
compared to the same periods in 2004, is due to higher cash balances invested in interest-bearing
accounts in 2005.
Unrealized Gain (Loss) on Viacom Stock and Derivatives, Net
During 2000, we entered into a seven-year secured forward exchange contract with respect to 10.9
million shares of our Viacom Class B common stock investment. Effective January 1, 2001, we adopted
the provisions of SFAS No. 133, as amended. Components of the secured forward exchange contract are
considered derivatives as defined by SFAS No. 133.
For the three months ended September 30, 2005, we recorded a net pretax gain of $10.8 million
related to the increase in fair value of the Viacom stock. For the three months ended September 30,
2005, we recorded a net pretax loss of $10.8 million related to the decrease in fair value of the
derivatives associated with the secured forward exchange contract. This resulted in a net pretax
gain of $0.1 million related to the unrealized gain (loss) on Viacom stock and derivatives, net,
for the three months ended September 30, 2005.
For the nine months ended September 30, 2005, we recorded a net pretax loss of $37.1 million
related to the decrease in fair value of the Viacom stock. For the nine months ended September 30,
2005, we recorded a net pretax gain of $29.2 million related to the increase in fair value of the
derivatives associated with the secured forward exchange contract. This resulted in a net pretax
loss of $7.8 million related to the unrealized gain (loss) on Viacom stock and derivatives, net,
for the nine months ended September 30, 2005.
Income from Unconsolidated Companies
We account for our investments in Bass Pro and RHAC, LLC, the entity which owns the Aston Waikiki
Beach Hotel, under the equity method of accounting. Income from unconsolidated companies for the
three months and nine months ended September 30, 2005 and 2004 consisted of equity method income
from these investments as follows:
55
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months |
|
|
|
|
|
|
Nine Months |
|
|
|
|
| |
|
Ended September 30, |
|
|
|
|
|
|
Ended September 30, |
|
|
|
|
| |
|
2005 |
|
|
2004 |
|
|
% Change |
|
|
2005 |
|
|
2004 |
|
|
% Change |
|
| |
|
|
|
|
|
(In thousands, except percentages and performance metrics) |
|
|
|
|
|
Bass Pro |
|
$ |
1,974 |
|
|
$ |
1,587 |
|
|
|
24.4 |
% |
|
$ |
1,749 |
|
|
$ |
3,383 |
|
|
|
-48.3 |
% |
RHAC, LLC |
|
|
124 |
|
|
|
— |
|
|
|
100.0 |
% |
|
|
231 |
|
|
|
— |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,098 |
|
|
$ |
1,587 |
|
|
|
32.2 |
% |
|
$ |
1,980 |
|
|
$ |
3,383 |
|
|
|
-41.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the second quarter of 2005, Bass Pro restated its previously issued historical financial
statements to reflect certain non-cash changes, which resulted primarily from a change in the
manner in which Bass Pro accounts for its long term leases. This restatement resulted in a
cumulative reduction in Bass Pro’s net income of $8.6 million through December 31, 2004, which
resulted in a pro-rata cumulative reduction in our income from unconsolidated companies of $1.7
million. We determined that the impact of the adjustments recorded by Bass Pro is immaterial to our
consolidated financial statements in all prior periods. Therefore, we reflected our $1.7 million
share of the re-statement adjustments as a one-time adjustment to loss from unconsolidated
companies during the second quarter of 2005.
Other Gains and Losses, Net
Our other gains and losses for the three months ended September 30, 2005 primarily consisted of a
gain resulting from the settlement of certain litigation, a dividend distribution from our
investment in Viacom stock, a loss on the retirement of certain fixed assets, and other
miscellaneous income and expenses. Our other gains and losses for the nine months ended September
30, 2005 primarily consisted of a gain resulting from the settlement of certain litigation, the
receipt of dividend distributions from our investment in Viacom stock, a gain on the sale of an
internet domain name, a $2.1 million gain on the sale of the Ryman Auditorium parking lot, gains
and losses on the sales of certain other fixed assets and other miscellaneous income and expenses.
Benefit for Income Taxes
The effective tax rate as applied to pretax income from continuing operations differed from the
statutory federal rate due to the following (as of September 30):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months |
|
Nine Months |
| |
|
Ended September 30, |
|
Ended September 30, |
| |
|
2005 |
|
2004 |
|
2005 |
|
2004 |
U.S. federal statutory rate |
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
State taxes (net of
federal tax benefit and
change in valuation
allowance) |
|
|
3 |
|
|
|
7 |
|
|
|
3 |
|
|
|
2 |
|
Adjustment to deferred tax
liabilities due to state
tax rate adjustment |
|
|
(6 |
) |
|
|
12 |
|
|
|
(6 |
) |
|
|
4 |
|
Other |
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
|
33 |
% |
|
|
54 |
% |
|
|
32 |
% |
|
|
41 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56
The decrease in our effective tax rate for the three months and nine months ended September 30,
2005, as compared to our effective tax rate for the same periods in 2004, was due primarily to a
change in the rate used to value certain prior year state deferred tax assets.
(Loss) Gain From Discontinued Operations, Net of Income Taxes
We reflected the following businesses as discontinued operations in our financial results for the
three months and nine months ended September 30, 2005 and 2004, consistent with the provisions of
SFAS No. 144. The results of operations, net of taxes, and the carrying value of the assets and
liabilities of these businesses have been reflected in our consolidated financial statements as
discontinued operations in accordance with SFAS No. 144 for all periods presented.
ResortQuest Markets. During the third quarter of 2005, we committed to a plan of disposal of
certain markets of our ResortQuest business that were considered to be inconsistent with our long
term growth strategy. We plan to sell the assets used in the operations of these markets as soon
as practical. In connection with this plan of disposal, we recorded pre-tax restructuring charges
of $0.4 million for employee severance benefits related to the discontinued markets. Based on our
decision to dispose of these markets, we also recorded pre-tax impairment charges of $2.8 million
during the third quarter of 2005. Included in this charge are the impairment of goodwill of $2.3
million, the impairment of fixed assets of $0.4 million, and the impairment of intangible assets of
$0.1 million.
WSM-FM and WWTN(FM). During the first quarter of 2003, we committed to a plan of disposal of
the Radio Operations. Subsequent to committing to a plan of disposal during the first quarter of
2003, we, through a wholly-owned subsidiary, entered into an agreement to sell the assets primarily
used in the operations of the Radio Operations to Cumulus in exchange for approximately $62.5
million in cash. On July 22, 2003, we finalized the sale of the Radio Operations for approximately
$62.5 million. Concurrently, we also entered into a joint sales agreement with Cumulus for WSM-AM
in exchange for $2.5 million in cash. We continue to own and operate WSM-AM, and under the terms of
the joint sales agreement with Cumulus, Cumulus is responsible for all sales of commercial
advertising on WSM-AM and provides certain sales promotion, billing and collection services
relating to WSM-AM, all for a specified commission. The joint sales agreement has a term of five
years.
During the third quarter of 2005, due to the expiration and resolution of certain claims and
indemnifications in the sales contract, a previously established indemnification reserve of $0.1
million was reversed and is included in income from discontinued operations in the consolidated
statement of operations.
Acuff-Rose Music Publishing. During the second quarter of 2002, we committed to a plan of
disposal of our Acuff-Rose Music Publishing catalog entity. During the third quarter of 2002, we
finalized the sale of the Acuff-Rose Music Publishing entity to Sony/ ATV Music Publishing for
approximately $157.0 million in cash. During the third quarter of 2004, due to the expiration of
certain indemnification periods as specified in the sales contract, a previously established
indemnification reserve of $1.0 million was reversed and is included in income from discontinued
operations in the consolidated statement of operations.
57
The following table reflects the results of operations of businesses accounted for as discontinued
operations for the three months and nine months ended September 30, 2005 and 2004:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Nine Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| (in thousands) |
|
2005 |
|
|
2004 |
|
|
2005 |
|
|
2004 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ResortQuest Markets |
|
$ |
4,130 |
|
|
$ |
4,913 |
|
|
$ |
13,351 |
|
|
$ |
14,696 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ResortQuest Markets |
|
$ |
(163 |
) |
|
$ |
302 |
|
|
$ |
(572 |
) |
|
$ |
658 |
|
Impairment charges |
|
|
(2,749 |
) |
|
|
— |
|
|
|
(2,749 |
) |
|
|
— |
|
Restructuring charges |
|
|
(434 |
) |
|
|
— |
|
|
|
(434 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating (loss) income |
|
|
(3,346 |
) |
|
|
302 |
|
|
|
(3,755 |
) |
|
|
658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
7 |
|
|
|
5 |
|
|
|
22 |
|
|
|
16 |
|
Other gains and (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ResortQuest Markets |
|
|
(14 |
) |
|
|
— |
|
|
|
(12 |
) |
|
|
— |
|
Radio Operations |
|
|
136 |
|
|
|
— |
|
|
|
136 |
|
|
|
— |
|
Acuff-Rose Music Publishing |
|
|
— |
|
|
|
1,015 |
|
|
|
— |
|
|
|
1,015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other gains and (losses) |
|
|
122 |
|
|
|
1,015 |
|
|
|
124 |
|
|
|
1,015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before (benefit) provision for income taxes |
|
|
(3,217 |
) |
|
|
1,322 |
|
|
|
(3,609 |
) |
|
|
1,689 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Benefit) provision for income taxes |
|
|
(1,113 |
) |
|
|
529 |
|
|
|
(1,233 |
) |
|
|
675 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) gain from discontinued operations |
|
$ |
(2,104 |
) |
|
$ |
793 |
|
|
$ |
(2,376 |
) |
|
$ |
1,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58
Liquidity and Capital Resources
Cash
Flows —Summary
Our cash flows consisted of the following during the nine months ended September 30 (in thousands):
| |
|
|
|
|
|
|
|
|
| |
|
2005 |
|
|
2004 |
|
Operating Cash Flows: |
|
|
|
|
|
|
|
|
Net cash flows provided by operating activities — continuing operations |
|
$ |
52,486 |
|
|
$ |
19,094 |
|
Net cash flows provided by operating activities — discontinued operations |
|
|
3,880 |
|
|
|
5,508 |
|
| |
|
|
Net cash flows provided by operating activities |
|
|
56,366 |
|
|
|
24,602 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Investing Cash Flows: |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(87,280 |
) |
|
|
(107,249 |
) |
Acquisition of businesses, net of cash acquired |
|
|
(20,223 |
) |
|
|
— |
|
Purchase of investment in RHAC Holdings, LLC |
|
|
(4,747 |
) |
|
|
— |
|
Proceeds from sales of assets |
|
|
10,386 |
|
|
|
— |
|
Purchases of short-term investments |
|
|
(15,000 |
) |
|
|
(110,850 |
) |
Proceeds from sale of short-term investments |
|
|
37,000 |
|
|
|
153,850 |
|
Other |
|
|
(1,099 |
) |
|
|
(2,676 |
) |
| |
|
|
Net cash flows used in investing activities — continuing operations |
|
|
(80,963 |
) |
|
|
(66,925 |
) |
Net cash flows used in investing activities — discontinued operations |
|
|
(211 |
) |
|
|
(261 |
) |
| |
|
|
Net cash flows used in investing activities |
|
|
(81,174 |
) |
|
|
(67,186 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Financing Cash Flows: |
|
|
|
|
|
|
|
|
Repayment of long-term debt |
|
|
— |
|
|
|
(6,003 |
) |
Deferred financing costs paid |
|
|
(8,451 |
) |
|
|
(909 |
) |
Decrease (increase) in restricted cash and cash equivalents |
|
|
8,832 |
|
|
|
(107 |
) |
Other |
|
|
7,686 |
|
|
|
6,644 |
|
| |
|
|
Net cash flows provided by (used in) financing activities — continuing operations |
|
|
8,067 |
|
|
|
(375 |
) |
Net cash flows provided by financing activities — discontinued operations |
|
|
382 |
|
|
|
782 |
|
| |
|
|
Net cash flows provided by financing activities |
|
|
8,449 |
|
|
|
407 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
$ |
(16,359 |
) |
|
$ |
(42,177 |
) |
| |
|
|
Cash Flows From Operating Activities. Cash flow from operating activities is the
principal source of cash used to fund our operating expenses, interest payments on debt, and
maintenance capital expenditures. During the nine months ended September 30, 2005, our net cash
flows provided by operating activities — continuing operations were $52.5 million, reflecting
primarily our loss from continuing operations before non-cash depreciation expense, amortization
expense, income tax benefit, interest expense, loss on the Viacom stock and related derivatives,
income from unconsolidated companies, and gains on sales of certain fixed assets of approximately
$60.0 million, offset by unfavorable changes in working capital of approximately $7.5 million. The
unfavorable changes in working capital primarily resulted from an increase in trade receivables due
to a seasonal change in the timing of guest lodging versus payments received at Gaylord Opryland,
an increase in prepaid expenses due to the timing of payments made to renew our insurance
contracts, and a significant decrease in receipts of deposits on advance bookings of vacation
properties (primarily related to a seasonal decrease in advance bookings at ResortQuest ahead of
the slower fall vacation months). These unfavorable changes in working capital were partially
offset by the favorable timing of payment of various liabilities, including trade payables, accrued
interest, and other accrued expenses, as well as an increase in receipts of deposits on advance
bookings of hotel rooms (primarily related to the timing of advanced bookings and deposits received
by the Gaylord Opryland and Gaylord Texan).
59
During the nine months ended September 30, 2004, our net cash flows provided by operating
activities — continuing operations were $19.1 million, reflecting primarily our loss from
continuing operations before non-cash depreciation expense, amortization expense, income tax
benefit, interest expense, loss on the Viacom stock and related derivatives, impairment charges,
and income from unconsolidated companies of approximately $33.8 million, offset by unfavorable
changes in working capital of approximately $14.8 million. The unfavorable changes in working
capital primarily resulted from an increase in trade receivables due to the opening of the Gaylord
Texan and the timing of guest lodging versus payments received at Gaylord Opryland, as well as a
significant decrease in receipts of deposits on advance bookings of vacation properties (primarily
related to a seasonal decrease in advance bookings at ResortQuest ahead of the slower fall vacation
months). These unfavorable changes in working capital were partially offset by the favorable timing
of payment of various liabilities, including trade payables, accrued interest, and other accrued
expenses, as well as an increase in receipts of deposits on advance bookings of hotel rooms
(primarily related to advance bookings at the Gaylord Texan which opened in April 2004 and the
timing of deposits received by the Gaylord Opryland and Gaylord Palms).
Cash Flows From Investing Activities. During the nine months ended September 30, 2005, our
primary uses of funds and investing activities were purchases of property and equipment, which
totaled $87.3 million, and the purchases of two businesses (Whistler Lodging Company, Ltd. and East
West Resorts), which totaled $20.2 million. Our capital expenditures during this period primarily
consisted of construction at the new Gaylord National Resort & Convention Center of $32.3 million,
continuing construction at the new Gaylord Texan of $15.7 million, approximately $21.5 million at
Gaylord Opryland primarily related to the construction of a new spa facility and a room
refurbishment project, and approximately $11.8 million related to ResortQuest. During the nine
months ended September 30, 2004, our primary uses of funds and investing activities were purchases
of property and equipment which totaled $107.2 million, consisting primarily of continuing
construction at the new Gaylord Texan of $86.3 million, approximately $8.3 million related to
Gaylord Opryland, and approximately $1.3 million related to the Grand Ole Opry.
We currently project capital expenditures for the twelve months of 2005 to total approximately $152
million, which includes approximately $66 million related to the construction of our new Gaylord
National Resort & Convention Center in Prince George’s County, Maryland, continuing construction
costs at the Gaylord Texan of approximately $21 million, approximately $30 million at Gaylord
Opryland primarily related to the construction of a new spa facility and a room refurbishment
project, and approximately $16 million related to ResortQuest.
Cash Flows From Financing Activities. Our cash flows from financing activities reflect
primarily the issuance of debt and the repayment of long-term debt. During the nine months ended
September 30, 2005, our net cash flows provided by financing activities – continuing operations
were approximately $8.1 million, reflecting an $8.8 million decrease in restricted cash and cash
equivalents and $8.2 million in proceeds received from the exercise of stock options, partially
offset by the payment of $8.5 million of deferred financing costs in connection with our entering
into a new $600.0 million credit facility. During the nine months ended September 30, 2004, our net
cash flows used in financing activities – continuing operations were approximately $0.4 million,
reflecting primarily the scheduled repayments of $6.0 million of the senior loan portion of the
Nashville hotel loan and the payment of $0.9 million in deferred financing costs, offset by
proceeds received from the exercise of stock options of $7.2 million.
On January 9, 2004, we filed a Registration Statement on Form S-3 with the SEC pursuant to which we
may sell from time to time up to $500 million of our debt or equity securities. The Registration
Statement as amended on April 27, 2004 was declared effective by the SEC on April 27, 2004. Except
as otherwise provided in the applicable prospectus supplement at the time of sale of the
securities, we may use the net proceeds from the sale of the securities for general corporate
purposes, which may include reducing our outstanding indebtedness, increasing our working capital,
acquisitions and capital expenditures.
60
Principal Debt Agreements
New $600 Million Credit Facility. On March 10, 2005, we entered into a new $600.0 million
credit facility with Bank of America, N.A. acting as the administrative agent. Our new credit
facility consists of the following components: (a) a $300.0 million senior secured revolving credit
facility, which includes a $50.0 million letter of credit sublimit, and (b) a $300.0 million senior
secured delayed draw term loan facility, which may be drawn on in one or more advances during its
term. The credit facility also includes an accordion feature that will allow us, on a one-time
basis, to increase the credit facilities by a total of up to $300.0 million, subject to securing
additional commitments from existing lenders or new lending institutions. The revolving loan,
letters of credit and term loan mature on March 9, 2010. At our election, the revolving loans and
the term loans may have an interest rate of LIBOR plus 2% or the lending banks’ base rate plus 1%,
subject to adjustments based on our financial performance. Interest on our 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. We are required to pay a commitment fee
ranging from 0.25% to 0.50% per year of the average unused portion of the credit facility.
The purpose of the new credit facility is for working capital and capital expenditures and the
financing of the costs and expenses related to the construction of the Gaylord National hotel.
Construction of the Gaylord National hotel is required to be substantially completed by June 30,
2008 (subject to customary force majeure provisions).
The new credit facility is (i) secured by a first mortgage and lien on the real property and
related personal and intellectual property of our Gaylord Opryland hotel, Gaylord Texan hotel,
Gaylord Palms hotel and Gaylord National hotel (to be constructed) and pledges of equity interests
in the entities that own such properties and (ii) guaranteed by each of our four wholly owned
subsidiaries that own the four hotels as well as ResortQuest International, Inc. Advances are
subject to a 60% borrowing base, based on the appraisal values of the hotel properties (reducing to
50% in the event a hotel property is sold). Our former revolving credit facility has been paid in
full and the related mortgages and liens have been released.
In addition, the new credit facility contains certain covenants which, among other things, limit
the incurrence of additional indebtedness, investments, dividends, transactions with affiliates,
asset sales, acquisitions, mergers and consolidations, liens and encumbrances and other matters
customarily restricted in such agreements. The material financial covenants, ratios or tests
contained in the new credit facility are as follows:
| |
• |
|
we must maintain a consolidated leverage ratio of not greater than (i)
7.00 to 1.00 for calendar quarters ending during calendar year 2007,
and (ii) 6.25 to 1.00 for all other calendar quarters ending during
the term of the credit facility, which levels are subject to increase
to 7.25 to 1.00 and 7.00 to 1.00, respectively, for three (3)
consecutive quarters at our option if we make a leverage ratio
election. |
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| |
• |
|
we must maintain a consolidated tangible net worth of not less than
the sum of $550.0 million, increased on a cumulative basis as of the
end of each calendar quarter, commencing with the calendar quarter
ending March 31, 2005, by an amount equal to (i) 75% of consolidated
net income (to the extent positive) for the calendar quarter then
ended, plus (ii) 75% of the proceeds received by us or any of our
subsidiaries in connection with any equity issuance. |
| |
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• |
|
we must maintain a minimum consolidated fixed charge coverage ratio of
not less than (i) 1.50 to 1.00 for any reporting calendar quarter
during which the leverage ratio election is effective; and (ii) 2.00
to 1.00 for all other calendar quarters during the term hereof. |
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• |
|
we must maintain an implied debt service coverage ratio (the ratio of
adjusted net operating income to monthly principal and interest that
would be required if the outstanding balance were amortized over 25
years at an interest rate equal to the then current seven year |
61
| |
|
|
Treasury Note plus 0.25%) of not less than 1.60 to 1.00. |
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• |
|
our investments in entities which are not wholly-owned subsidiaries
may not exceed an amount equal to ten percent (10.0%) of our
consolidated total assets. |
As of September 30, 2005, we were in compliance with all covenants. As of September 30, 2005, no
borrowings were outstanding under the $600.0 million credit facility, but the lending banks had
issued $13.5 million of letters of credit under the facility for us. The credit facility is
cross-defaulted to our other indebtedness.
8% Senior Notes. On November 12, 2003, we completed our offering of $350 million in aggregate
principal amount of senior notes due 2013 (the “8% Senior Notes”) in an institutional private
placement. In January 2004, we filed an exchange offer registration statement on Form S-4 with the
SEC with respect to the 8% Senior Notes and exchanged the existing senior notes for publicly
registered senior notes with the same terms after the registration statement was declared effective
in April 2004. The interest rate of the notes is 8%, although we have entered into interest rate
swaps with respect to $125 million principal amount of the 8% Senior Notes which results in an
effective interest rate of LIBOR plus 2.95% with respect to that portion of the notes. The 8%
Senior Notes, which mature on November 15, 2013, bear interest semi- annually in cash in arrears on
May 15 and November 15 of each year, starting on May 15, 2004. The 8% Senior Notes are redeemable,
in whole or in part, at any time on or after November 15, 2008 at a designated redemption amount,
plus accrued and unpaid interest. In addition, we may redeem up to 35% of the 8% Senior Notes
before November 15, 2006 with the net cash proceeds from certain equity offerings. The 8% Senior
Notes rank equally in right of payment with our other unsecured unsubordinated debt, but are
effectively subordinated to all of our secured debt to the extent of the assets securing such debt.
The 8% Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior
unsecured basis by generally all of our active domestic subsidiaries. In connection with the
offering and subsequent registration of the 8% Senior Notes, we paid approximately $10.1 million in
deferred financing costs. The net proceeds from the offering of the 8% Senior Notes, together with
cash on hand, were used as follows:
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• |
|
$275.5 million was used to repay our $150 million senior term loan
portion and the $50 million subordinated term loan portion of the 2003
Florida/Texas loans, as well as the remaining $66 million of our $100
million Nashville hotel mezzanine loan and to pay certain fees and
expenses related to the ResortQuest acquisition; and |
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| |
• |
|
$79.2 million was placed in escrow pending consummation of the
ResortQuest acquisition, at which time that amount was used, together
with available cash, to repay ResortQuest’s senior notes and its
credit facility. |
In addition, the 8% Senior Notes indenture contains certain covenants which, among other things,
limit the incurrence of additional indebtedness, investments, dividends, transactions with
affiliates, asset sales, capital expenditures, mergers and consolidations, liens and encumbrances
and other matters customarily restricted in such agreements. The 8% Senior Notes are
cross-defaulted to our other indebtedness.
6.75% Senior Notes. On November 30, 2004, we completed our offering of $225 million in
aggregate principal amount of senior notes due 2014 (the “6.75% Senior Notes”) in an institutional
private placement. In April 2005, we filed an exchange offer registration statement on Form S-4
with the SEC with respect to the 6.75% Senior Notes and exchanged the existing senior notes for
publicly registered senior notes after the registration statement was declared effective in June
2005. The interest rate of the notes is 6.75%. The 6.75% Senior Notes, which mature on November 15,
2014, bear interest semi-annually in cash in arrears on May 15 and November 15 of each year,
starting on May 15, 2005. The 6.75% Senior Notes are redeemable, in whole or in part, at any time
on or after November 15, 2009 at a designated redemption amount, plus accrued and unpaid interest.
In addition, we may redeem up to 35% of the 6.75% Senior Notes before November 15, 2007 with the
net cash proceeds from certain equity offerings. The 6.75% Senior Notes rank equally in right of
payment with our other unsecured unsubordinated debt, but are effectively subordinated
to all of our secured debt to the extent of the assets securing such debt. The 6.75% Senior Notes
are fully and
62
unconditionally guaranteed, jointly and severally, on a senior unsecured basis by
generally all of our active domestic subsidiaries. In connection with the offering of the 6.75%
Senior Notes, we paid approximately $4.2 million in deferred financing costs. The net proceeds from
the offering of the 6.75% Senior Notes, together with cash on hand, were used to repay the senior
loan secured by the Nashville hotel assets and to provide capital for growth of the Company’s other
businesses and other general corporate purposes. In addition, the 6.75% Senior Notes indenture
contains certain covenants which, among other things, limit the incurrence of additional
indebtedness, investments, dividends, transactions with affiliates, asset sales, capital
expenditures, mergers and consolidations, liens and encumbrances and other matters customarily
restricted in such agreements. The 6.75% Senior Notes are cross-defaulted to our other
indebtedness.
Prior Indebtedness
$100 Million Revolving Credit Facility. Prior to the completion of our $600 million credit
facility on March 10, 2005, we had in place, from November 20, 2003, a $65.0 million revolving
credit facility, which was increased to $100.0 million on December 17, 2003. The revolving credit
facility, which replaced the revolving credit portion of our 2003 Florida/Texas senior secured
credit facility discussed below, was scheduled to mature in May 2006. The revolving credit facility
had an interest rate, at our election, of either LIBOR plus 3.50%, subject to a minimum LIBOR of
1.32%, or the lending banks’ base rate plus 2.25%. Interest on our 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 revolving credit facility was
guaranteed on a senior unsecured basis by our subsidiaries that were guarantors of our 8% Senior
Notes and 6.75% Senior Notes, described above (consisting generally of all our active domestic
subsidiaries including, following repayment of the Nashville hotel loan arrangements in December
2004, the subsidiaries owning the Nashville hotel assets), and was secured by a leasehold mortgage
on the Gaylord Palms. We were required to pay a commitment fee equal to 0.5% per year of the
average daily unused revolving portion of the revolving credit facility.
In addition, the revolving credit facility contained certain covenants which, among other things,
limited the incurrence of additional indebtedness, investments, dividends, transactions with
affiliates, asset sales, acquisitions, capital expenditures, mergers and consolidations, liens and
encumbrances and other matters customarily restricted in such agreements. The material financial
covenants, ratios or tests in the revolving credit facility were as follows:
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• |
|
a maximum total leverage ratio requiring that at the end of each
fiscal quarter, our ratio of consolidated indebtedness minus
unrestricted cash on hand to consolidated EBITDA for the most recent
four fiscal quarters, subject to certain adjustments, not exceed a
range of ratios (decreasing from 7.5 to 1.0 for early 2004 to 5.0 to
1.0 for 2005 and thereafter) for the recent four fiscal quarters; |
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• |
|
a requirement that the adjusted net operating income for the Gaylord
Palms be at least $25 million at the end of each fiscal quarter ending
December 31, 2003, through December 31, 2004, and $28 million at the
end of each fiscal quarter thereafter, in each case based on the most
recent four fiscal quarters; and |
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• |
|
a minimum fixed charge coverage ratio requiring that, at the end of
each fiscal quarter, our ratio of consolidated EBITDA for the most
recent four fiscal quarters, subject to certain adjustments, to the
sum of (i) consolidated interest expense and capitalized interest
expense for the previous fiscal quarter, multiplied by four, and (ii)
required amortization of indebtedness for the most recent four fiscal
quarters, be not less than 1.5 to 1.0. |
Nashville Hotel Loan. On March 27, 2001, we, through wholly owned subsidiaries, entered into a
$275.0 million senior secured loan and a $100.0 million mezzanine loan with Merrill Lynch Mortgage
Lending, Inc. The mezzanine loan was repaid in November 2003 with the proceeds of the 8% Senior
Notes, and the senior loan was repaid in November 2004 with the proceeds of the 6.75% Senior Notes.
The senior and mezzanine loan borrower and its sole
member were subsidiaries formed for the purposes of owning and operating the Nashville hotel and
entering into the
63
loan transaction and were special-purpose entities whose activities were strictly limited,
although we fully consolidate these entities in our consolidated financial statements. The senior
loan was secured by a first mortgage lien on the assets of Gaylord Opryland. The terms of the
senior loan required us to purchase interest rate hedges in notional amounts equal to the
outstanding balances of the senior loan in order to protect against adverse changes in one-month
LIBOR which have been terminated. We used $235.0 million of the proceeds from the senior loan and
the mezzanine loan to refinance an existing interim loan incurred in 2000.
2003 Florida/Texas Senior Secured Credit Facility. Prior to the closing of the 8% Senior Notes
offering and establishment of our $100 million revolving credit facility, we had in place our 2003
Florida/Texas senior secured credit facility, consisting of a $150 million senior term loan, a $50
million subordinated term loan and a $25 million revolving credit facility, outstanding amounts of
which were repaid with proceeds of the 8% Senior Notes offering. When the 2003 loans were first
established, proceeds were used to repay 2001 term loans incurred in connection with the
development of the Gaylord Palms.
Future Developments
On February 24, 2005, we acquired approximately 42 acres of land and related land improvements in
Prince George’s County, Maryland (Washington D.C. area) for approximately $29 million on which we
are developing a hotel to be known as the Gaylord National Resort & Convention Center.
Approximately $17 million of this was paid in the first quarter of 2005, with the remainder payable
upon completion of various phases of the project. We currently expect to open the hotel in 2008. In
connection with this project, Prince George’s County, Maryland approved, in July 2004, two bond
issues related to the development. The first bond issuance, in the amount of $65 million, will
support the cost of infrastructure being constructed by the project developer, such as roads, water
and sewer lines. The second bond issuance, in the amount of $95 million, will be issued directly to
us upon completion of the project. We will initially hold the bonds and receive the debt service
thereon which is payable from tax increment, hotel tax and special hotel rental taxes generated
from our development. On May 9, 2005, we entered into an agreement with a general contractor for
the provision of certain initial construction services at the site. We expect to enter into a
construction contract for the entire hotel project when we have determined the guaranteed maximum
price for the project. We are also considering other potential hotel sites throughout the country.
The timing and extent of any of these development projects is uncertain.
Commitments and Contractual Obligations
The following table summarizes our significant contractual obligations as of September 30, 2005,
including long-term debt and operating and capital lease commitments (amounts in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total amounts |
|
|
Less than |
|
|
|
|
|
|
|
|
|
|
After |
|
| Contractual obligations |
|
committed |
|
|
1 year |
|
|
1-3 years |
|
|
3-5 years |
|
|
5 years |
|
Long-term debt |
|
$ |
575,100 |
|
|
$ |
100 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
575,000 |
|
Capital leases |
|
|
1,683 |
|
|
|
661 |
|
|
|
704 |
|
|
|
318 |
|
|
|
— |
|
Promissory note payable to
Nashville Predators |
|
|
5,000 |
|
|
|
— |
|
|
|
2,000 |
|
|
|
2,000 |
|
|
|
1,000 |
|
Construction commitments |
|
|
93,114 |
|
|
|
48,660 |
|
|
|
29,619 |
|
|
|
14,835 |
|
|
|
— |
|
Operating leases |
|
|
737,471 |
|
|
|
13,022 |
|
|
|
19,780 |
|
|
|
14,993 |
|
|
|
689,676 |
|
Other |
|
|
700 |
|
|
|
— |
|
|
|
525 |
|
|
|
175 |
|
|
|
— |
|
| |
|
|
Total contractual obligations |
|
$ |
1,413,068 |
|
|
$ |
62,443 |
|
|
$ |
52,628 |
|
|
$ |
32,321 |
|
|
$ |
1,265,676 |
|
| |
|
|
The total operating lease commitments of $737.5 million above includes the 75-year operating lease
agreement we entered into during 1999 for 65.3 acres of land located in Osceola County, Florida
where Gaylord Palms is located.
64
During 1999, we entered into a 20-year naming rights agreement related to the Nashville Arena with
the Nashville Hockey Club, L.P. (“NHC”), the owner of the Nashville Predators. The Nashville Arena
was renamed the Gaylord Entertainment Center as a result of the agreement. The contractual
commitment required us to pay $2.1 million during the first year of the contract, with a 5%
escalation each year for the remaining term of the agreement, and to purchase a minimum number of
tickets to Predators games each year. As further discussed in Note 15 to our condensed consolidated
financial statements for the three and nine months ended September 30, 2005 and 2004 included
herewith and which is incorporated herein by reference, on February 22, 2005, the Company concluded
the settlement of litigation with NHC 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. At
the closing of the settlement, NHC redeemed all of the Company’s outstanding limited partnership
units in NHC, effectively terminating the Company’s ownership interest in NHC. In addition, the
Naming Rights Agreement was cancelled. 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, with the first
payment due on the first anniversary of the resumption of NHL hockey in Nashville, Tennessee, which
occurred on October 5, 2005. 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, if the Predators
cease to be an NHL team playing its home games in Nashville prior to the first payment under the
note (October 5, 2006), then in addition to the note being cancelled, NHC will pay the Company $4
million. If the Predators cease to be an NHL team playing its home games in Nashville after the
first payment but prior to the second payment under the note, then in addition to the note being
cancelled, NHC will pay the Company $2 million.
At the expiration of the secured forward exchange contract relating to the Viacom stock owned by
us, which is scheduled for May 2007, we will be required to pay the deferred taxes relating
thereto. This deferred tax liability is estimated to be $152.8 million. A complete description of
the secured forward exchange contract is contained in Note 8 to our condensed consolidated
financial statements for the three and nine months ended September 30, 2005 and 2004 included
herewith.
Critical Accounting Policies and Estimates
We prepare our condensed consolidated financial statements in conformity with accounting principles
generally accepted in the United States. Certain of our accounting policies, including those
related to revenue recognition, impairment of long-lived assets and goodwill, restructuring
charges, derivative financial instruments, income taxes, and retirement and postretirement benefits
other than pension plans, require that we apply significant judgment in defining the appropriate
assumptions for calculating financial estimates. By their nature, these judgments are subject to an
inherent degree of uncertainty. Our judgments are based on our historical experience, our
observance of trends in the industry, information provided by our customers and information
available from other outside sources, as appropriate. There can be no assurance that actual results
will not differ from our estimates. For a discussion of our critical accounting policies and
estimates, please refer to Management’s Discussion and Analysis of Financial Condition and Results
of Operations and Notes to Consolidated Financial Statements presented in our 2004 Annual Report on
Form 10-K. There were no newly identified critical accounting policies in the first, second or
third quarters of 2005 nor were there any material changes to the critical accounting policies and
estimates discussed in our 2004 Annual Report on Form 10-K.
Recently Issued Accounting Standards
For a discussion of recently issued accounting standards, see Note 14 to our condensed consolidated
financial statements for the three and nine months ended September 30, 2005 and 2004 included
herewith.
65
Private Securities Litigation Reform Act
This quarterly report on Form 10-Q contains “forward-looking statements” intended to qualify for
the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995.
You can identify these statements by the
fact that they do not relate strictly to historical or current facts. These statements contain
words such as “may,” “will,” “project,” “might,” “expect,” “believe,” “anticipate,” “intend,”
“could,” “would,” “estimate,” “continue” or “pursue,” or the negative or other variations thereof
or comparable terminology. In particular, they include statements relating to, among other things,
future actions, new projects, strategies, future performance, the outcome of contingencies such as
legal proceedings and future financial results. We have based these forward-looking statements on
our current expectations and projections about future events.
We caution the reader that forward-looking statements involve risks and uncertainties that cannot
be predicted or quantified and, consequently, actual results may differ materially from those
expressed or implied by such forward-looking statements. Such risks and uncertainties include, but
are not limited to, the following factors, as well as other factors described in our Annual Report
on Form 10-K for the year ended December 31, 2004 or described from time to time in our other
reports filed with the Securities and Exchange Commission:
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• |
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the potential adverse effect of our debt on our cash flow and our ability to fulfill our
obligations under our indebtedness and maintain adequate cash to finance our business; |
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• |
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the availability of debt and equity financing on terms that are favorable to us; |
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• |
|
the challenges associated with the integration of ResortQuest’s operations into our operations; |
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• |
|
factors affecting the number of guests renting vacation properties managed by ResortQuest,
including adverse weather conditions such as hurricanes, economic conditions in a particular
region of the nation as a whole, or the perceived attractiveness of the destinations in which
we operate and the units we manage; |
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• |
|
general economic and market conditions and economic and market conditions related to the hotel
and large group meetings and convention industry; and |
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• |
|
the timing, budgeting and other factors and risks relating to new hotel development, including
our ability to generate cash flow from the Gaylord Texan and to develop and construct the
Gaylord National. |
Any forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of
1995 and, as such, speak only as of the date made. We undertake no obligation to publicly update
any forward-looking statements, whether as a result of new information, future events or otherwise.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss arising from adverse changes in market rates and prices, such as
interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to
market risk is from changes in the value of our investment in Viacom stock and changes in interest
rates.
Risks Related to a Change in Value of Our Investment in Viacom Stock
At September 30, 2005, we held an investment of 10.9 million shares of Viacom stock, which was
received as the result of the sale of television station KTVT to CBS in 1999 and the subsequent
acquisition of CBS by Viacom in 2000. We entered into a secured forward exchange contract related
to 10.9 million shares of the Viacom stock in 2000. The secured forward exchange contract protects
the Company against decreases in the fair market value of the Viacom stock, while providing for
participation in increases in the fair market value. At September 30, 2005, the fair market value
of our investment in the 10.9 million shares of Viacom stock was $361.1 million or $33.01 per
share. The secured
66
forward exchange contract protects us against decreases in the fair market
value of the Viacom Stock below $56.05 per share by way of a put option; the secured forward
exchange contract also provides for participation in the increases in the fair market value of the
Viacom Stock in that we receive 100% of the appreciation between $56.05 and $64.45 per share and,
by way of a call option, 25.93% of the appreciation above $64.45 per share, as of September 30,
2005. The
call option strike price decreased from $67.97 as of December 31, 2004 to $64.45 as of September
30, 2005 due to the Company receiving dividend distributions from Viacom. We elected not to retain
the dividend distribution declared by Viacom during the third quarter of 2005 and expect to remit
any future dividend distributions declared by Viacom to Credit Suisse First Boston.
Changes in the market price of the Viacom stock could have a significant impact on future earnings.
For example, a 5% increase in the value of the Viacom stock at September 30, 2005 would have
resulted in a decrease of $1.5 million in the net pre-tax loss on the investment in Viacom stock
and related derivatives for the nine months ended September 30, 2005. Likewise, a 5% decrease in
the value of the Viacom stock at September 30, 2005 would have resulted in an increase of $1.2
million in the net pre-tax loss on the investment in Viacom stock and related derivatives for the
nine months ended September 30, 2005.
Risks Related to Changes in Interest Rates
Interest rate risk related to our indebtedness. We have exposure to interest rate changes
primarily relating to outstanding indebtedness under our outstanding 8% Senior Notes and our $600
million credit facility.
In conjunction with our offering of the 8% Senior Notes, we terminated our variable to fixed
interest rate swaps with an original notional value of $200 million related to the senior term loan
and the subordinated term loan portions of the 2003 Florida/ Texas senior secured credit facility,
which were repaid for a net benefit aggregating approximately $242,000.
We also entered into a new interest rate swap with respect to $125 million aggregate principal
amount of our 8% Senior Notes. This interest rate swap, which has a term of ten years, effectively
adjusts the interest rate of that portion of the 8% Senior Notes to LIBOR plus 2.95%. The interest
rate swap on the 8% Senior Notes are deemed effective and therefore the hedge has been treated as
an effective fair value hedge under SFAS No. 133. If LIBOR were to increase by 100 basis points,
our annual interest cost on the 8% Senior Notes would increase by approximately $1.3 million.
Interest on borrowings under our $600.0 million credit facility bear interest at a variable rate of
either LIBOR plus 2% or the lending banks’ base rate plus 1%, subject to adjustments based on our
financial performance. As of September 30, 2005, no borrowings were outstanding under our $600.0
million credit facility. Therefore, if LIBOR and Eurodollar rates were to increase by 100 basis
points each, there would be no impact on our annual interest cost under the $600.0 million credit
facility based on debt amounts outstanding at September 30, 2005.
Cash Balances. Certain of our outstanding cash balances are occasionally invested overnight
with high credit quality financial institutions. We do not have significant exposure to changing
interest rates on invested cash at September 30, 2005. As a result, the interest rate market risk
implicit in these investments at September 30, 2005, if any, is low.
Risks Related to Foreign Currency Exchange Rates
Substantially all of our revenues are realized in U.S. dollars and are from customers in the United
States. Although we own certain subsidiaries who conduct business in foreign markets and whose
transactions are settled in foreign currencies, these operations are not material to our overall
operations. Therefore, we do not believe we have any significant foreign currency exchange rate
risk. We do not hedge against foreign currency exchange rate changes and do not speculate on the
future direction of foreign currencies.
67
Summary
Based upon our overall market risk exposures at September 30, 2005, we believe that the effects of
changes in the stock price of our Viacom stock or interest rates could be material to our
consolidated financial position, results of operations
or cash flows. However, we believe that the effects of fluctuations in foreign currency exchange
rates on our consolidated financial position, results of operations or cash flows would not be
material.
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated
under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that
information required to be disclosed by us in the reports that we file or submit under the Exchange
Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s
rules and forms and that such information is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure. The Company carried out an evaluation under the
supervision and with the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures, as of the end of the period covered by this report. Based on the
evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures were effective as of the
end of the period covered by this report. There have been no changes in our internal control over
financial reporting that occurred during the period covered by this report that materially
affected, or are likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to certain litigation, as described in Note 15 to our condensed consolidated
financial statements for the three months and nine months ended September 30, 2005 and 2004
included herewith and which is incorporated herein by reference.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Inapplicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Inapplicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Inapplicable.
ITEM 5. OTHER INFORMATION
Inapplicable.
ITEM 6. EXHIBITS
See Index to Exhibits following the Signatures page.
68
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
GAYLORD ENTERTAINMENT COMPANY
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Date: November 8, 2005
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By:
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/s/ |
Colin V. Reed |
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Colin V. Reed |
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Chairman of the Board of Directors, |
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President and Chief Executive Officer |
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(Principal Executive Officer) |
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By:
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/s/ |
David C. Kloeppel |
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David C. Kloeppel |
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Executive Vice President and |
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Chief Financial Officer |
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(Principal Financial Officer) |
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By:
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/s/ |
Rod Connor |
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Rod Connor |
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Senior Vice President and |
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Chief Administrative Officer |
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(Principal Accounting Officer) |
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69
INDEX TO EXHIBITS
| 10.1 |
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First Amendment to Credit Agreement dated as of June 1, 2005 by and among the Company,
certain Subsidiary Guarantors, certain Lenders party thereto and Bank of America, N.A.,
as Administrative Agent |
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| 31.1 |
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Certification of Colin V. Reed pursuant to Section 302 of Sarbanes-Oxley Act of 2002. |
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| 31.2 |
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Certification of David C. Kloeppel pursuant to Section 302 of Sarbanes-Oxley Act of 2002. |
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| 32.1 |
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Certification of Colin V. Reed and David C. Kloeppel pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002. |
70