GAYLORD ENTERTAINMENT CO. - FORM S-4
 

As filed with the Securities and Exchange Commission on January 9, 2004.
Registration No. 333-               


UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form S-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933


Gaylord Entertainment Company

(Exact name of registrant as specified in its charter)
         
Delaware   7011   73-0664379
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

One Gaylord Drive

Nashville, TN 37214
(615) 316-6000
(Address, including ZIP code, and telephone number, including area code, of registrant’s principal executive offices)

Carter R. Todd, Esq.

Senior Vice President, Secretary and General Counsel
Gaylord Entertainment Company
One Gaylord Drive
Nashville, TN 37214
(615) 316-6000
(Name, address, including ZIP code, and telephone number, including area code, of agent for service)

Copies to:

F. Mitchell Walker, Jr., Esq.

Bass, Berry & Sims PLC
315 Deaderick Street, Suite 2700
Nashville, Tennessee 37238
Phone: (615) 742-6200
Fax: (615) 742-6293


     Approximate date of commencement of proposed sale to the public: As soon as practicable after the effectiveness of this Registration Statement.

     If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. o

     If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

     If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration for the same offering. o

CALCULATION OF REGISTRATION FEE

                 


Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount to be Offering Price Aggregate Registration
Securities to be Registered Registered per Unit(1) Offering Price(1) Fee(1)

8% Senior Notes due 2013
  $350,000,000   100%   $350,000,000   $28,315.00(2)

Guarantees of 8% Senior Notes due 2013
          —(3)


(1)  Determined in accordance with Rule 457(f) under the Securities Act.
 
(2)  The Registrant has a balance in the amount of $482.82 and therefore has wired the amount of $27,832.18 to the Securities and Exchange Commission
 
(3)  Pursuant to Rule 457(n) of the Securities Act of 1933, no separate registration fee is payable for the guarantees.


     The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.




 

TABLE OF ADDITIONAL REGISTRANTS

                         
State or Other Primary Standard IRS
Jurisdiction of Industrial Employer
Exact Name of Registrant as Specified in its Incorporation or Classification Code Identification
Charter or Organizational Document* Organization Number Number




CCK Holdings, LLC
    Delaware       7990       02-1696563  
Corporate Magic, Inc.
    Texas       7990       75-2620110  
Gaylord Creative Group, Inc.
    Delaware       7990       62-1673308  
Gaylord Hotels, LLC
    Delaware       7011       11-3689948  
Gaylord Investments, Inc.
    Delaware       7990       62-1619801  
Gaylord Program Services, Inc.
    Delaware       7990       92-2767112  
Grand Ole Opry Tours, Inc.
    Tennessee       7990       62-0882286  
OLH, G.P
    Tennessee       7990       62-1586927  
OLH Holdings, LLC
    Delaware       7990       11-3689947  
Opryland Attractions, Inc.
    Delaware       7990       62-1618413  
Opryland Hospitality, LLC
    Tennessee       7011       62-1586924  
Opryland Hotel-Florida Limited Partnership
    Florida       7011       62-1795659  
Opryland Hotel-Texas Limited Partnership
    Delaware       7011       62-1798694  
Opryland Hotel-Texas, LLC
    Delaware       7011       11-3689950  
Opryland Productions, Inc.
    Tennessee       7990       62-1048127  
Opryland Theatricals, Inc.
    Delaware       7990       62-1664967  
Wildhorse Saloon Entertainment Ventures, Inc.
    Tennessee       7990       62-1706672  
ResortQuest International, Inc.
    Delaware       7990       62-1750352  
Abbott & Andrews Realty, LLC
    Florida       6531-08       65-1176006  
Abbott Realty Services, Inc.
    Florida       6531-08       58-1775514  
Abbott Resorts, LLC
    Florida       6531-08       65-1176000  
Accommodations Center, Inc.
    Colorado       6531-08       84-1204561  
Advantage Vacation Homes by Styles, LLC
    Florida       6431-08       14-1873132  
B&B on the Beach, Inc.
    North Carolina       6531-08       56-1802086  
Base Mountain Properties, Inc.
    Delaware       6531-08       82-0534961  
Bluebill Properties, LLC
    Florida       6531-08       65-1175994  
Brindley & Brindley Realty & Development, Inc.
    North Carolina       6531-08       56-1491059  
Coastal Real Estate Sales, LLC
    Florida       6531-08       33-1047660  
Coastal Resorts Management, Inc.
    Delaware       6531-08       51-0377887  
Coastal Resorts Realty, L.L.C
    Delaware       6531-08       51-6000279  
Coates, Reid & Waldron, Inc.
    Delaware       6531-08       84-1509467  
Collection of Fine Properties, Inc.
    Colorado       6531-08       84-1225208  
Columbine Management Company
    Colorado       6531-08       84-0912550  
Cove Management Services, Inc.
    California       6531-08       95-3866031  
CRW Property Management, Inc.
    Delaware       6531-08       84-1509471  
Exclusive Vacation Properties, Inc.
    Delaware       6531-08       84-1569208  
First Resort Software, Inc.
    Colorado       6531-08       84-0996530  
High Country Resorts, Inc.
    Delaware       6531-08       84-1509478  
Houston and O’Leary Company
    Colorado       6531-08       84-1035054  
K-T-F Acquisition Co.
    Delaware       6531-08       75-3013706  
Maui Condominium and Home Realty, Inc.
    Hawaii       6531-08       99-0266391  
Mountain Valley Properties, Inc.
    Delaware       6531-08       62-1863208  
Office and Storage LLC
    Hawaii       6531-08       22-0558755  


 

                         
State or Other Primary Standard IRS
Jurisdiction of Industrial Employer
Exact Name of Registrant as Specified in its Incorporation or Classification Code Identification
Charter or Organizational Document* Organization Number Number




Peak Ski Rentals LLC
    Colorado       6531-08       84-1248929  
Plantation Resort Management, Inc.
    Delaware       6531-08       63-1209112  
Priscilla Murphy Realty, LLC
    Florida       6531-08       14-1873125  
R&R Resort Rental Properties, Inc.
    North Carolina       6531-08       56-1555075  
REP Holdings, Ltd.
    Hawaii       6531-08       99-0335453  
Resort Property Management, Inc.
    Utah       6531-08       87-0411513  
Resort Rental Vacations, LLC
    Tennessee       6531-08       71-0896813  
ResortQuest Hawaii, LLC
    Hawaii       6531-08       13-4207830  
ResortQuest Hilton Head, Inc.
    Delaware       6531-08       58-2480429  
ResortQuest Southwest Florida, LLC
    Delaware       6531-08       62-1856796  
Ridgepine, Inc.
    Delaware       6531-08       93-1260694  
RQI Holdings, Ltd.
    Hawaii       6531-08       03-0530842  
Ryan’s Golden Eagle Management, Inc.
    Montana       6531-08       81-0392778  
Scottsdale Resort Accommodations, Inc.
    Delaware       6531-08       86-0960835  
Steamboat Premier Properties, Inc.
    Delaware       6531-08       84-1051074  
Styles Estates, LLC
    Florida       6531-08       14-1873135  
Telluride Resort Accommodations, Inc.
    Colorado       6531-08       84-1264479  
Ten Mile Holdings, Ltd.
    Colorado       6531-08       84-1225208  
THE Management Company
    Georgia       6531-08       58-1710389  
The Maury People, Inc.
    Massachusetts       6531-08       22-3079376  
The Tops’l Group, Inc.
    Florida       6531-08       59-3450553  
Tops’l Club of NW Florida, LLC
    Florida       6531-08       65-1176005  
Trupp-Hodnett Enterprises, Inc.
    Georgia       6531-08       58-1592548  


Address and telephone numbers of principal executive offices of each of the registrants listed above are the same as that of Gaylord.


 

The information in this prospectus is not complete and may be changed. We may not exchange for these securities until the registration filed with the Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JANUARY 9, 2004

PROSPECTUS

$350,000,000

(GAYLORD ENTERTAINMENT COMPANY LOGO)

Gaylord Entertainment Company

8% Senior Notes due 2013

Terms of the new 8% senior notes offered in the exchange offer:

          •  The terms of the new notes are identical to the terms of the outstanding notes, except that the new notes have been registered under the Securities Act of 1933 and will not contain restrictions on transfer, or certain registration rights or liquidated damages provisions.

Terms of the exchange offer:

          •  We are offering to exchange up to $350,000,000 of our outstanding 8% senior notes due 2013 for new notes with materially identical terms that have been registered under the Securities Act and are generally freely tradable.
 
          •  We will exchange all outstanding notes that you validly tender and do not validly withdraw before the exchange offer expires for an equal principal amount of new notes.
 
          •  The exchange offer expires at 5:00 p.m., Eastern time, on                     , 2004, unless extended.
 
          •  Tenders of outstanding notes may be withdrawn at any time prior to the expiration of the exchange offer.
 
          •  The exchange of new notes for outstanding notes should not be a taxable event for U.S. federal income tax purposes.


          You should carefully consider the Risk Factors beginning on page 18 of this prospectus before participating in the exchange offer.


          Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the new notes or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

                          , 2004


 

      You should rely only on the information contained in or incorporated by reference in this prospectus and in the accompanying letter of transmittal. We have not authorized anyone to provide you with different information. We are not making an offer of these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

      This prospectus incorporates by reference important business and financial information about us that is not included in or delivered with this prospectus. See “Where You Can Find Additional Information” and “Incorporation of Certain Documents by Reference.” This information, excluding exhibits to the information unless the exhibits are specifically incorporated by reference into the information, is available without charge to any holder or beneficial owner of outstanding notes upon written or oral request to Gaylord Entertainment Company, One Gaylord Drive, Nashville, Tennessee 37214, Attn: Corporate Secretary, Telephone: (615) 316-6000. To obtain timely delivery of this information, you must request this information no later than five business days before the expiration of the exchange offer. Therefore, you must request information on or before                     , 2004.


TABLE OF CONTENTS

         
Page

Summary
    1  
Risk Factors
    18  
Forward-Looking Statements
    28  
Market, Ranking and Other Data
    28  
The Exchange Offer
    29  
Use of Proceeds
    39  
Capitalization
    40  
Unaudited Pro Forma Combined Condensed Consolidated Financial Information
    41  
Selected Historical Financial Information
    51  
Management’s Discussion and Analysis of Financial Condition and Results of Operations
    55  
Business
    91  
Description of Certain Indebtedness
    103  
Description of Notes
    105  
Material U.S. Federal Income Tax Considerations
    151  
Plan of Distribution
    153  
Legal Matters
    154  
Experts
    154  
Where You Can Find Additional Information
    154  
Incorporation of Certain Documents by Reference
    155  
Index to Consolidated Financial Statements
    F-1  

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SUMMARY

      This summary highlights the information contained elsewhere in this prospectus. Because this is only a summary, it does not contain all the information that may be important to you. For a more complete understanding of this exchange offer, we encourage you to read this entire prospectus, the documents incorporated by reference into this prospectus and the documents to which we refer you. You should read the following summary together with the more detailed information and consolidated financial statements and the notes to those statements included elsewhere in this prospectus. You should also carefully consider the matters discussed in “Risk Factors.” References to “notes” means both the outstanding notes and the new notes unless the context otherwise requires.

Terms Used in This Prospectus

      Unless otherwise noted, in this prospectus:

  •  the terms “Company,” “Gaylord,” “we,” “us” and “our” refer to Gaylord Entertainment Company and its subsidiaries;
 
  •  the term “new notes” refers to the 8% senior notes due 2013, which have been registered and are being offered in exchange for the outstanding notes in this exchange offer;
 
  •  the term “outstanding notes” refers to the 8% senior notes due 2013, which were issued in a private placement on November 12, 2003;
 
  •  the term “ResortQuest” refers to ResortQuest International, Inc. and its subsidiaries;
 
  •  the term “ResortQuest acquisition” refers to our acquisition of ResortQuest on November 20, 2003 pursuant to an Agreement and Plan of Merger dated as of August 4, 2003;
 
  •  the term “November Transactions” refers to the ResortQuest acquisition, the offering of the outstanding notes, the application of the proceeds therefrom, and the amendment to our 2003 Florida/Texas senior secured credit facility as described in greater detail under “Summary—The November Transactions;”
 
  •  the term “RevPAR” refers to room revenues divided by room nights available to guests for the applicable period;
 
  •  the term “ADR” refers to average daily rate per room in dollars.

Our Company

      We are the only hospitality company focused primarily on the large group meetings segment of the lodging market. Our hospitality business includes our Gaylord branded hotels consisting of the Gaylord Opryland Resort & Convention Center in Nashville, Tennessee, the Gaylord Palms Resort & Convention Center near Orlando, Florida and the Gaylord Texan Resort & Convention Center near Dallas, Texas (scheduled completion date: April 2004). We also own and operate the Radisson Opryland Hotel in Nashville, Tennessee. Driven by our “All in One Place” strategy, our award-winning Gaylord branded hotels incorporate not only high quality lodging, but also significant meeting, convention and exhibition space, superb food and beverage options and retail facilities within a single self-contained property. As a result, our properties provide a convenient and entertaining environment for our convention guests. In addition, our custom-tailored, all-inclusive solutions cater to the unique needs of meeting planners.

      In order to strengthen and diversify our hospitality business, on November 20, 2003, we acquired ResortQuest in a stock-for-stock transaction. ResortQuest is a leading provider of vacation condominium and home rental property management services in premier destination resort locations in the United States and Canada, with a branded network of vacation rental properties. ResortQuest currently offers management services to approximately 20,000 vacation rental properties.

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      In addition to our hospitality business, we own and operate several attractions in Nashville, including the Grand Ole Opry, a live country music variety show, which is the nation’s longest running radio show and an icon in country music. Our local Nashville attractions provide entertainment opportunities for Nashville-area residents and visitors, including our Nashville hotel and convention guests, while adding to our destination appeal.

      Prior to the November Transactions, our operations were organized into three principal business segments: (i) Hospitality, which includes our hotel operations; (ii) Opry and Attractions Group, which includes our Nashville attractions and assets related to the Grand Ole Opry; and (iii) Corporate and Other, which includes corporate expenses and results from our minority investments. On a pro forma basis reflecting the November Transactions for the nine months ended September 30, 2003, our total revenues and operating income were $471.1 million and $10.1 million, respectively.

Hospitality

      Our Gaylord branded hotels target the large group meetings segment of the lodging market and are designed to minimize the logistical and organizational challenges typically associated with planning and hosting a large group meeting. To accommodate large group meetings, our Gaylord branded hotels feature among the highest ratios of meeting space per guest room among convention hotels in the United States and include our award-winning food and beverage offerings and a variety of entertainment options. Each of our Gaylord branded hotels offers the following: lodging, banquet and meeting facilities, exhibition space, restaurants, bars, shopping, recreational facilities and other resort amenities. For the nine months ended September 30, 2003, our revenues for our Hospitality segment were $272.5 million.

      Gaylord Opryland Resort & Convention Center — Nashville, Tennessee. Our flagship resort, the Gaylord Opryland in Nashville, is one of the leading convention destinations in the United States and is the largest hotel in terms of the number of guest rooms in the United States outside of Las Vegas. We invested approximately $603 million for the Gaylord Opryland property, which opened in 1977, including approximately $80 million in renovations completed from 1998 through September 2003. Designed with the lavish gardens and magnificent charm of a glorious Southern mansion, the resort is situated on approximately 172 acres, which we own. Gaylord Opryland features 2,881 signature guest rooms, four ballrooms with approximately 121,000 square feet, 85 banquet/meeting facilities, 16 restaurants and eateries, a fitness center, four swimming pools and total dedicated exhibition space of approximately 289,000 square feet. Total meeting, exhibition and pre-function space in the hotel is approximately 600,000 square feet. The hotel also serves as a destination resort for vacationers due to its proximity to the Grand Ole Opry, our General Jackson Showboat, the Springhouse Golf Club (our 18-hole championship golf course) and other attractions in the Nashville area. The Gaylord Opryland has been recognized by many industry and commercial publications, receiving the Meeting News’ Planners Choice Award, Travel & Leisure’s World’s Best Award and Meeting and Convention’s Gold Key Elite Award. For the nine months ended September 30, 2003, Gaylord Opryland revenues, occupancy and RevPAR were $151.5 million, 72.2%, and $97.64, respectively.

      Gaylord Palms Resort & Convention Center — Kissimmee, Florida. In January 2002, we opened our Gaylord Palms Resort & Convention Center on a 65-acre site in Osceola County, Florida, approximately 5 minutes’ drive from the main gate of the Walt Disney World® Resort complex. In aggregate, we spent approximately $421 million to construct the resort, which opened on the schedule and budget developed by our current management. Gaylord Palms has 1,406 signature guest rooms, eight restaurants and eateries, approximately 380,000 square feet of total pre-function, meeting and exhibit space, three ballrooms with approximately 80,000 square feet and 76 banquet/ meeting facilities. Gaylord Palms has a Canyon Ranch full-service spa with 20,000 square feet of dedicated space and 15 treatment rooms. Hotel guests also enjoy golf privileges at the world class Falcon’s Fire Golf Club, located a half-mile from the property. The Gaylord Palms has been recognized by many publications and was named Best Florida Resort by Florida Monthly for 2003. For the nine months ended September 30, 2003, Gaylord Palms revenues, occupancy and RevPAR were $115.8 million, 76.2% and $129.28, respectively. According to Smith Travel Research,

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for the nine months ended September 30, 2003, Gaylord Palms ranked as the top hotel in its Orlando, Florida competitive set in terms of RevPAR.

      Gaylord Texan Resort & Convention Center — Grapevine, Texas. We began construction on our new Gaylord branded hotel in Grapevine, Texas, in June 2000, and the hotel is scheduled to open in April 2004 on the schedule and budget developed by our current management. As of September 30, 2003, we have spent approximately $330 million, and expect to spend an additional $151 million, to complete the hotel. We intend to finance the balance of this project through existing cash on hand. The 1,511 signature guest room hotel and convention center is located eight miles from the Dallas/ Fort Worth International Airport. Similar to the Gaylord Palms, the Gaylord Texan hotel will feature a grand atrium enclosing several acres as well as over 360,000 square feet of pre-function, meeting and exhibition space all under one roof. The property will also include a luxury 15,000 square foot full-service spa, two swimming pools and seven themed restaurants with an additional restaurant and entertainment venue located on the point overlooking Lake Grapevine. The Gaylord Texan has already attracted significant demand as evidenced by its advanced bookings. As of September 30, 2003, approximately 518,000 group room nights have been booked for future periods. In addition, we expect the hotel’s proximity to the Dallas/ Fort Worth International Airport will attract business travelers.

      Radisson Hotel at Opryland. We own and operate the Radisson Hotel at Opryland in Nashville, Tennessee, a Radisson franchise hotel which is located across the street from the Gaylord Opryland. The hotel has 303 rooms and approximately 14,000 square feet of meeting space. This hotel provides us additional rooms when booking large convention groups at the Gaylord Opryland hotel. It also serves smaller regional groups and visitors to the nearby Grand Ole Opry and Opry Mills shopping complex.

Opry and Attractions Group

      Our Opry and Attractions Group segment assets include the Grand Ole Opry, General Jackson Showboat, Ryman Auditorium, Springhouse Golf Club and the Wildhorse Saloon. It also includes the operations of our radio station, WSM-AM, and Corporate Magic, our corporate events production business. For the nine months ended September 30, 2003, our total Opry and Attractions Group segment revenues were $45.3 million.

Corporate and Other

      Our Corporate and Other segment includes our corporate activities, plus our 19.1% minority investment in Bass Pro, Inc., which owns and operates Bass Pro Shops, a retailer of premium outdoor sporting goods and fishing tackle, and our 12.8% minority investment in the Nashville Hockey Club Limited Partnership, which owns the Nashville Predators National Hockey League franchise.

ResortQuest

      ResortQuest is a leading provider of vacation condominium and home rental property management services in premier destination resort locations in the United States and Canada. ResortQuest has developed a branded network of vacation rental properties and currently offers management services to approximately 20,000 vacation rental properties. ResortQuest’s operations are located in more than 50 premier beach, mountain, desert and tropical resort locations. We completed the ResortQuest acquisition in November 2003. For the nine months ended September 30, 2003, ResortQuest had total revenues of $153.2 million.

Competitive Strengths

      Strong Revenue and Cash Flow Visibility. We have significant visibility with regards to our future revenues and cash flows. Approximately 82% of our total room nights booked in 2002 were related to large group meetings. Within the group meetings segment, we identify and market to meeting planners for large group clients who reserve more than 200 peak room nights per group event and typically hold meetings on

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an annual basis. In 2002, these large groups accounted for only 18% of the total number of our group customers but represented 86% of our occupied room nights. In order to reserve the required capacity, our large group clients typically contract room nights several years in advance. As of September 30, 2003, we have events booked as far into the future as 2021, with the median large group client contracting 3.4 years in advance. The terms of our contracts typically specify total number and average daily rates of reserved rooms and minimum food and beverage spending requirements, and often contain mechanisms to increase rates based on increases in hotel occupancy or on inflation measures and impose significant cancellation penalties. Approximately 50% of our group room nights in 2002 were generated by associations, which typically have more attendees, longer advance booking periods, longer stays and a pattern of rotating meetings through locations around the country. In addition, as their meetings are an integral part of the associations’ business, these clients tend to exhibit more consistent booking cycles that are less influenced by economic downturns. As a result of the implementation of cross-marketing plans among our three Gaylord branded hotels, we have created further visibility into our future results as large group clients often arrange multiple meetings at our properties. Many associations are required by their charter to rotate their meetings among different locations, and we are well positioned to capture their business. As of September 30, 2003, advanced bookings at the Gaylord Opryland and Gaylord Palms for 2004 through 2005 represented approximately 40% of our total available room nights at these hotels for that period.

      Superior Business Model. We believe that through a combination of excellent customer service, a unique product offering and an entertaining environment, we are able to provide our customers with a one-of-a-kind experience that distinguishes our hotels from those of our competitors. Our properties have gained significant industry recognition, as evidenced by Gaylord Opryland receiving the prestigious 2002 Gold Key Elite Award from Meeting & Conventions magazine, and the Gaylord Palms receiving the AAA Four Diamond Award 2003 and Successful Meeting’s Pinnacle Award 2003. Our superior business model is characterized by the following:

        Excellent Customer Service. We strive to provide our hotel guests with a level of service that ranks among the highest in the industry. Through the Gaylord University training program, we instill our “Consider it Done” service philosophy in each employee. In order to maintain the highest levels of customer service and employee morale, we provide all property-level employees with financial incentives based on feedback received from our guests and the financial performance of their individual hotel. We strive to provide excellent service to all of our guests, and we also offer more specialized services that cater to the needs of the meeting planners who coordinate large group events. These services are designed to facilitate the entire process of an event from the initial planning and booking to its consummation. Examples of such services include providing a single contact to plan the event, constructing a marketing toolkit to attract attendees and assigning a customer service representative at the hotel during the event to assist with smooth execution.
 
        Unique Product Offering. Our hotels combine significant scale with an “All in One Place” approach to create a product which we believe is unique in our industry. With some of the highest ratios of meeting space per room in our industry, our resort properties have the capability to accommodate multiple large groups simultaneously on a regular basis. Through our “All in One Place” approach, we incorporate meeting and exhibition space, signature guest rooms, award-winning food and beverage offerings, fitness facilities and other attractions within a single, self-contained location which provides our guests with a convenient and entertaining environment. This approach allows meeting planners to avoid local travel logistics issues, improves the attendees’ experience by enhancing interaction and allows us to gain a larger amount of our customers’ business than a traditional hotel. Capitalizing on this approach, our Gaylord branded hotels generally derive as much food, beverage and other revenues as room revenues. Finally, our Gaylord branded hotels offer state-of-the-art meeting facilities, a proprietary advanced meeting planner communication system, express check-out and customizable meeting room set-up, all of which provide maximum convenience to meeting planners and reduce administrative functions related to the organization of an event.
 
        Entertaining Environment. In an effort to provide the best all around experience to our guests, we offer unique entertainment options inside each of our resort hotels. Each of these hotels offers a

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  series of expansive atriums themed to capture geographical and cultural aspects of the region in which the property is located. These properties also offer a wide range of restaurants, bars, shopping and other options to meet the varying preferences of individual guests. Our in-house entertainment amenities are complemented by local attractions which add to our destination appeal. Our properties are strategically located in close proximity to a wide range of attractions which include the Grand Ole Opry and Ryman Auditorium in Nashville, Tennessee, Universal Studios® and Walt Disney World® in Orlando, Florida and Lake Grapevine and the Dallas Cowboys® Golf Club in Grapevine, Texas. Our attractions provide an advantage when we compete for large contracts as we are able to offer attractive entertainment rates as an incentive to book with us. We also opportunistically leverage our attractions by creating promotional packages which combine hotel stays with offerings of local attractions to drive leisure room night demand. These packages generate incremental business for our properties by attracting additional guests from the leisure travel segment as well as convincing convention attendees to return for leisure stays.

      Solid Brand Recognition. An American icon with a 75-year legacy, the Grand Ole Opry is a unique asset that provides us with a significant competitive advantage. The Grand Ole Opry appeals to the “country lifestyle” consumer, which we estimate to number approximately 70 million in the United States. The Grand Ole Opry has an 84% brand awareness among consumers in the U.S. and a 92% brand awareness among consumers in the “country lifestyle” demographic. Since 1925, when WSM-AM broadcast the first radio show which became the Grand Ole Opry, the Grand Ole Opry has entertained, and continues to entertain, millions of country-music lovers both nationally and abroad. With its high level of brand name awareness, the Grand Ole Opry provides us opportunities to leverage and extend its brand equity into other products and markets. In addition to significant brand awareness of the Grand Ole Opry name, we also enjoy a high level of brand name awareness among meeting planners with our Gaylord hotels brand.

      Experienced and Proven Management. Our senior management team has substantial experience in the lodging industry. In April 2001, Michael Rose, Chairman, and Colin Reed, President and CEO, joined us with a combined 56 years of industry experience. Mr. Rose was previously Chairman of the Board of Promus Hotel Corporation and Chairman of the Board of Harrah’s Entertainment, Inc. Prior to joining us, Mr. Reed was a member of the three-executive office of the President of Harrah’s Entertainment, Inc. During 2001, Mr. Rose and Mr. Reed applied their industry experience to refocus Gaylord as the only hospitality company with a primary emphasis on the large group meetings segment. Upon joining Gaylord, Mr. Rose and Mr. Reed significantly improved the management team by replacing nine out of ten senior managers. On average, our new senior management team has approximately 13 years of experience in the hospitality industry.

      Since early 2002, we identified and divested a number of non-core assets at attractive valuations. These divestitures resulted in cash proceeds in excess of $340 million, which we subsequently employed to repay existing debt and to partially fund the construction of our new Gaylord Texan hotel. In addition, our management team has implemented measures to improve customer satisfaction and employee morale and enacted cost-cutting measures aimed at improving operating performance and cash flow.

Business Strategy

      Our goal is to become the nation’s premier hotel brand serving the meetings and conventions sector and to enhance our business by offering additional vacation and entertainment opportunities to our guests and target consumers. Our Gaylord branded hotels focus on the $86 billion large group meetings market. Our properties and service are designed to appeal to meeting planners who arrange these large group meetings. Upon consummation of the ResortQuest acquisition, we will operate a leading provider of vacation, condominium and home rental management services with approximately 20,000 vacation rental properties under management. The Grand Ole Opry is one of the brands best-known by the “country lifestyle” consumer, which we estimate to number approximately 70 million in the United States.

5


 

      “All in One Place” Product Offering. Through our “All in One Place” strategy, our Gaylord branded hotels incorporate meeting and exhibition space, signature guest rooms, award-winning food and beverage offerings, fitness facilities and other attractions within a large hotel property so our attendees’ needs are met in one location. This strategy creates a better experience for both meeting planners and our guests, while at the same time allowing us to capture a greater share of their event spending. It is through this strategy of a self-contained destination dedicated primarily to the meetings industry that our Gaylord Opryland hotel in Nashville and our Gaylord Palms hotel in Florida claim a place among the leading convention hotels in the country.

      Create Customer Rotation Between Our Hotels. In order to further capitalize on our success in Nashville, we opened our Gaylord Palms Resort & Convention Center in Kissimmee, Florida in January 2002, and are scheduled to open our new Gaylord Texan Resort & Convention Center in Grapevine, Texas in April 2004. In 2001, we refocused the efforts of our sales force to capitalize on our expansion and the desires of some of our large group meeting clients to meet in different parts of the country each year. In addition, we establish relationships with new customers as we increase our geographic reach. For example, upon opening the Gaylord Palms, we added new association clients such as the North American Veterinarian Association and the Area Resort Development Association. There is a significant opportunity to establish strong relationships with new customers and rotate them to our other properties. For example, the National Collegiate Athletic Association (NCAA) has contracted for approximately 25,000 room nights among our Gaylord branded hotels over the next 5 years.

      Leverage Brand Name Awareness. We believe that the Grand Ole Opry is one of the most recognized entertainment brands within the United States. We promote the Grand Ole Opry name through a number of media including our WSM-AM radio station, the internet, television and performances by the Grand Ole Opry’s members, many of whom are renowned country music artists. In addition to these long-standing promotion media, we believe that significant growth opportunities exist through leveraging and extending the Grand Ole Opry brand into other products and markets. As such, we have alliances in place with multiple distribution partners such as Great American Country (GAC) cable television channel, Westwood One Radio Network and Sirius Satellite Radio in an effort to foster brand extension. We are currently exploring additional products, such as television specials and retail products, through which we can capitalize on our brand affinity and awareness. We believe that licensing our brand for products may provide an opportunity to increase revenues and cash flow with relatively little capital investment.

      Capitalize on the ResortQuest Acquisition. We believe the combination of Gaylord and ResortQuest formed a stronger, more diversified hospitality company with the ability to offer a broader range of accommodations to existing and potential customers. We believe that there are significant opportunities to cross-sell hospitality products by offering ResortQuest’s vacation properties to our “country lifestyle” consumers and introducing our hotels and “country lifestyle” offerings to ResortQuest’s customers. Drawing upon the experience of our combined management teams, we believe that we can more fully develop the ResortQuest brand and take advantage of future growth opportunities through increased scale, improved operational efficiency and access to additional sources of capital. In addition, we have identified a number of cost saving opportunities and synergies, including the elimination of redundant functions and optimization of the combined company’s infrastructure.

The November Transactions

      We acquired ResortQuest International, Inc. on November 20, 2003. Based on an exchange ratio of 0.275 share of Gaylord common stock issued as consideration for each outstanding share of ResortQuest common stock, we issued 5,318,363 shares of Gaylord common stock as consideration for the ResortQuest acquisition. In this prospectus we refer to this transaction as the “ResortQuest acquisition.” For a more detailed description of ResortQuest and the ResortQuest acquisition, see “Business—ResortQuest.”

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      The net proceeds from the offering of the outstanding notes, together with cash on hand, were used as follows:

  •  $275.6 million was used to repay the term loan portion of our 2003 Florida/Texas senior secured credit facility, our subordinated term loan and our Nashville mezzanine loan and to pay certain fees and expenses related to the ResortQuest acquisition; and
 
  •  $79.2 million was used, together with available cash, to repay ResortQuest’s senior notes and its credit facility.

      In connection with the notes offering and the ResortQuest acquisition, we amended our 2003 Florida/ Texas senior secured credit facility, to, among other things, permit the ResortQuest acquisition and the issuance of the notes, retire the term loan portion of our 2003 Florida/Texas senior secured credit facility and make certain other amendments. We also replaced our revolving credit facility with a new $65.0 million revolving credit facility, which was increased to $100.0 million (which we refer to as our “new revolving credit facility”). See “Description of Certain Indebtedness” for a more detailed description of the amendment to our 2003 Florida/Texas senior secured credit facility and our new revolving credit facility.

      We refer in this prospectus to the ResortQuest acquisition, the offering of the outstanding notes, the application of the offering proceeds, the amendment of our 2003 Florida/Texas senior secured credit facility as the “November Transactions.”

Recent Developments

New Revolving Credit Facility

      On November 20, 2003, we entered into a new $65.0 million revolving credit facility, which has been increased to $100.0 million. The new revolving credit facility, which replaced the revolving credit portion under the 2003 Florida/Texas senior secured credit facility, matures in May 2006 and borrowings thereunder bear interest at a rate of either LIBOR plus 3.50% or the lending banks’ base rate plus 2.25%. The new revolving credit facility is guaranteed by our subsidiaries that were guarantors or borrowers under our 2003 Florida/Texas senior secured credit facility and is secured by a leasehold mortgage on the Gaylord Palms Resort & Convention Center. The new revolving credit facility requires us to achieve substantial completion and initial opening of our Gaylord Texan hotel by June 30, 2004. The new revolving credit facility was arranged by Deutsche Bank Securities Inc. and Banc of America Securities LLC.

Sale of Radio Stations

      On July 21, 2003, we completed the sale of WSM-FM and WWTN(FM) to Cumulus Broadcasting, Inc. for $62.5 million in cash. Net cash proceeds of $50.2 million from this sale were designated as restricted cash for completion of our Gaylord Texan hotel and the remaining net cash proceeds of $10.8 million were designated as unrestricted cash. We also entered into a joint sales agreement pursuant to which we received an initial payment of $2.5 million and Cumulus will sell airtime on our remaining radio station, WSM-AM.

Sale of Oklahoma Redhawks Interest

      We sold our interest in the Oklahoma Redhawks Class AAA baseball franchise for approximately $7 million in November 2003.


      Our principal executive offices are located at One Gaylord Drive, Nashville, Tennessee 37214. Our telephone number is (615) 316-6000 and our website address is www.gaylordentertainment.com (information set forth in our website is not incorporated herein by reference). Our common stock is listed on the New York Stock Exchange under the symbol “GET.”

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The Exchange Offer

      On November 12, 2003, we completed a private offering of the outstanding notes. We entered into a registration rights agreement with the initial purchasers of the outstanding notes in which we agreed to deliver you this prospectus.

      The new notes will be identical to the outstanding notes except that the new notes have been registered under the Securities Act and will not have restrictions on transfer or certain registration rights. The new notes will evidence the same debt as the outstanding notes, and the same indenture will govern the new notes and the outstanding notes.

      The following summary contains basic information about the new notes and is not intended to be complete. It does not contain all of the information that is important to you. For a more complete understanding of the new notes, see “Description of the Notes.”

 
Issuer Gaylord Entertainment Company.
 
Securities $350.0 million in principal amount of senior notes due 2013.
 
Maturity November 15, 2013.
 
Interest Annual rate: 8%.
Payment frequency: every six months on May 15 and November 15.
First payment: May 15, 2004.
 
Outstanding Notes 8% senior notes due 2013, which were issued on November 12, 2003.
 
New Notes 8% senior notes due 2013, which have been registered under the Securities Act.
 
Registration Rights Agreement You are entitled under the registration rights agreement to exchange your outstanding notes for new registered notes with substantially identical terms. The exchange offer is intended to satisfy these rights. After the exchange offer is complete, except as set forth in the next paragraph, you will no longer be entitled to any exchange or registration rights with respect to your outstanding notes.
 
The registration rights agreement requires us to file a registration statement for a continuous offering in accordance with Rule 415 under the Securities Act for your benefit if you would not receive freely tradeable registered notes in the exchange offer or you are ineligible to participate in the exchange offer and indicate that you wish to have your outstanding notes registered under the Securities Act. See “The Exchange Offer — Procedures for Tendering.”
 
Exchange Offer We are offering to exchange new notes for outstanding notes. The exchange offer is not conditioned on a minimum aggregate principal amount of the outstanding notes being tendered.
 
Resales of the New notes We believe that the new notes to be issued in the exchange offer may be offered for resale, resold and otherwise transferred by you without compliance with the registration and prospectus

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delivery provisions of the Securities Act if you meet the following conditions:
 
(1) the new notes are acquired by you in the ordinary course of your business;
 
(2) you are not engaging in and do not intend to engage in a distribution of the new notes;
 
(3) you do not have an arrangement or understanding with any person to participate in the distribution of the new notes; and
 
(4) you are not an affiliate of ours, as that term is defined in Rule 405 under the Securities Act.
 
Our belief is based on interpretations by the staff of the Commission, as set forth on no-action letters issued to third parties unrelated to us. The staff has not considered this exchange offer in the context of a no-action letter, and we cannot assure you that the staff would make a similar determination with respect to this exchange offer.
 
If you do not meet the above conditions, you may incur liability under the Securities Act if you transfer any registered note without delivering a prospectus meeting the requirements of the Securities Act. We do not assume or indemnify you against that liability.
 
Each broker-dealer that is issued new notes in the exchange offer for its own account in exchange for old notes which were acquired by that broker-dealer as a result of market-making activities or other trading activities must agree to deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of the new notes. A broker-dealer may use this prospectus for an offer to resell or to otherwise transfer these new notes.
 
For more information on resales of the new notes, see “Exchange Offer — Resale of the New Notes.”
 
Expiration Date The exchange offer will expire at 5:00 p.m., Eastern time, on                           , 2004, unless we decide to extend it.
 
Procedures for Tendering Outstanding Notes To participate in the exchange offer, you must complete, sign and date the letter of transmittal and send it, together with all other documents required by the letter of transmittal, including the outstanding notes that you wish to exchange, to U.S. Bank National Association, as exchange agent, at the address indicated on the cover page of the letter of transmittal. In the alternative, you can tender your outstanding notes by following the procedures for book-entry transfer described in this prospectus.
 
If your outstanding notes are held through The Depository Trust Company, or DTC, and you wish to participate in the exchange offer, you may do so through the automated tender offer program of DTC. If you tender under this program, you will agree to be

9


 

bound by the letter of transmittal that we are providing with this prospectus as though you had signed the letter of transmittal.
 
If a broker, dealer, commercial bank, trust company or other nominee is the registered holder of your outstanding notes, we urge you to contact that person promptly to tender your outstanding notes in the exchange offer.
 
For more information on tendering your outstanding notes, see “Exchange Offer — Terms of the Exchange Offer,” “— Procedures for Tendering” and “— Book-Entry Transfer.”
 
Guaranteed Delivery Procedures If you wish to tender your outstanding notes and you cannot get your required documents to the exchange agent on time, you may tender your outstanding notes according to the guaranteed delivery procedures described in “Exchange Offer — Guaranteed Delivery Procedures.”
 
Withdrawal of Tenders You may withdraw your tender of outstanding notes at any time prior to the expiration date of the exchange offer. To withdraw, you must deliver a written or facsimile transmission notice of withdrawal to the exchange agent at its address indicated on the cover page of the letter of transmittal before 5:00 p.m., Eastern time, on the expiration date of the exchange offer.
 
Acceptance of Outstanding Notes and Delivery of New Notes If you fulfill all conditions required for proper acceptance of outstanding notes, we will accept any and all outstanding notes that you properly tender in the exchange offer on or before 5:00 p.m., Eastern time, on the expiration date. We will return any outstanding notes that we do not accept for exchange to you as promptly as practicable after the expiration date and acceptance of the outstanding notes for exchange. See “Exchange Offer — Terms of the Exchange Offer.”
 
Broker-Dealers Each broker-dealer registered as such under the Exchange Act that receives new notes for its own account in exchange for outstanding notes, when such outstanding notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of those new notes. See “Plan of Distribution.”
 
Fees and Expenses We will bear all expenses related to the exchange offer. See “Exchange Offer — Fees and Expenses.”
 
Use of Proceeds We will not receive any proceeds from the issuance of the new notes. We are making this exchange offer solely to satisfy our obligations under the registration rights agreement.
 
Consequences of Failure to Exchange Outstanding Notes If you do not exchange your outstanding notes in this exchange offer, you will no longer be able to require us to register the outstanding notes under the Securities Act, except in the limited circumstances provided under the registration rights agreement. In addition, you will not be able to resell, offer to resell or otherwise transfer the outstanding notes unless we have regis-

10


 

tered the outstanding notes under the Securities Act, or unless you resell, offer to resell or otherwise transfer the outstanding notes under an exemption from the registration requirements of, or in a transaction not subject to, the Securities Act.
 
U.S. Federal Income Tax
Considerations
The exchange of the new notes for the outstanding notes in the exchange offer should not be a taxable event for U.S. federal income tax purposes. See “Material U.S. Federal Income Tax Considerations.”
 
Exchange Agent We have appointed U.S. Bank National Association as exchange agent for the exchange offer. You should direct questions and requests for assistance, requests for additional copies of this prospectus or the letter of transmittal and requests for the notice of guaranteed delivery to the exchange agent addressed as follows: U.S. Bank National Association, 60 Livingston Avenue, St. Paul, MN 55107-2292, Attention: Specialized Finance, (800) 934-6802. Eligible institutions may make requests by facsimile at (651) 495-8097.
 
Registration Rights Pursuant to the terms of the registration rights agreement among us, the guarantors and the initial purchasers of the outstanding notes, we and the guarantors have agreed:
 
• to file a registration statement on or prior to 60 days after the date of issuance of the outstanding notes with respect to an offer to exchange the outstanding notes for new registered notes with substantially identical terms to the outstanding notes, except that the new notes will not contain terms with respect to transfer restrictions;
 
• to use our best efforts to cause the registration statement to be declared effective under the Securities Act within 230 days after the date of the issuance of the outstanding notes; and
 
• upon the exchange offer registration statement being declared effective, to offer the new notes in exchange for surrender of the outstanding notes.
 
In the event that the exchange offer is not permitted by applicable law or Commission policy or any holder notifies us prior to the 20th day following the consummation of the exchange offer that such holder (i) is prohibited by law or Commission policy from participating in the exchange offer, (ii) may not resell the new notes acquired in the exchange offer to the public without delivering a prospectus and this prospectus is not appropriate or available for such resales, or (iii) is a broker-dealer who holds notes acquired directly from us or any of our affiliates, we and the guarantors will also be required to provide a shelf registration statement to cover resales of the notes by the holders thereof.
 
Guarantees All of our subsidiaries that have guaranteed borrowings under our old 2003 Florida/Texas senior secured credit facility and our revolving credit facility will be guarantors of the new notes on a senior unsecured basis.

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Ranking The new notes will be unsecured unsubordinated debt of Gaylord Entertainment Company. Accordingly, they will rank:
 
• equally with all of its existing and future unsecured unsubordinated debt;
 
• effectively subordinated to its existing and future secured debt to the extent of the assets securing such debt, including our new revolving credit facility;
 
• ahead of any of its existing and future subordinated debt; and
 
• structurally behind all of the existing and future liabilities of its subsidiaries that are not guarantors, including the Nashville hotel loan and trade payables.
 
The guarantees will be general unsecured unsubordinated obligations of the guarantors. Accordingly, they will rank equally with all unsecured unsubordinated debt of the guarantors, effectively behind all secured debt of the guarantors to the extent of the assets securing such debt, and ahead of all future subordinated debt of the guarantors.
 
Assuming we had consummated the November Transactions as of September 30, 2003, we would have had $552.4 million of debt outstanding, $202.2 million of which would have been secured debt.
 
Optional Redemption We may redeem the new notes, in whole or in part, at any time on or after November 15, 2008, at the redemption prices described in the section “Description of Notes — Optional Redemption,” plus accrued and unpaid interest.
 
In addition, on or before November 15, 2006, we may redeem up to 35% of the notes with the net cash proceeds from certain equity offerings at the redemption price listed in “Description of Notes — Optional Redemption.” However, we may only make such redemptions if at least 65% of the aggregate principal amount of notes issued under the indenture remains outstanding immediately after the occurrence of such redemption.
 
Change of Control If we experience specific kinds of changes in control, we must offer to purchase the new notes at 101% of their face amount, plus accrued interest.
 
Certain Covenants The indenture governing the notes, among other things, limits our ability and the ability of our restricted subsidiaries to:
 
• borrow money or sell preferred stock;
 
• create liens;
 
• pay dividends on or redeem or repurchase stock;
 
• make certain types of investments;
 
• sell stock in our restricted subsidiaries;
 
• restrict dividends or other payments from subsidiaries;
 
• enter into transactions with affiliates;
 
• issue guarantees of debt; and
 
• sell assets or merge with other companies.

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These covenants contain important exceptions, limitations and qualifications. For more details, see “Description of Notes.”
 
Covenant Suspension If the notes are rated investment grade by Moody’s Investors Service, Inc. and Standard & Poor’s Rating Services and we are not in default under the indenture, most of the covenants contained in the indenture will be subject to suspension. We currently do not meet the conditions for covenant suspension.
 
Transfer Restrictions The new notes have been registered under the Securities Act and generally will be freely transferable. We do not intend to list the notes on any securities exchange.

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SUMMARY HISTORICAL AND PRO FORMA COMBINED CONDENSED

CONSOLIDATED FINANCIAL INFORMATION

      The following table sets forth, for the periods and as of the dates indicated, summary historical consolidated financial information for Gaylord Entertainment Company. The summary historical consolidated financial information as of December 31, 2002 and 2001 and for each of the three years in the period ended December 31, 2002 was derived from our audited consolidated financial statements. The summary historical consolidated financial information as of December 31, 2000 was derived from previously issued consolidated financial statements adjusted for unaudited revisions for discontinued operations. The summary historical consolidated financial information as of and for the nine months ended September 30, 2003 and 2002 was derived from our unaudited condensed consolidated financial statements. These interim unaudited condensed consolidated financial statements have been prepared on a basis consistent with our audited consolidated financial statements and include all adjustments necessary (consisting of normal recurring adjustments) in the opinion of management for a fair presentation of the financial position and the results of operations for these periods.

      The following table also sets forth summary unaudited pro forma combined condensed consolidated financial information as of September 30, 2003 and for the year ended December 31, 2002 and for the nine-month period ended September 30, 2003. The summary unaudited pro forma combined condensed consolidated financial information has been prepared to give effect to the ResortQuest acquisition, the issuance of the outstanding notes and the application of the net proceeds from the issuance of the outstanding notes, together with cash on hand, to retire our senior term loan, our Nashville mezzanine loan, ResortQuest’s credit facility, ResortQuest’s senior notes, and our subordinated term loan, and to pay fees and expenses related to the ResortQuest acquisition and in connection with the repayment of indebtedness and is based upon the assumptions and adjustments described in the notes to the unaudited pro forma combined condensed consolidated financial statements included elsewhere in this prospectus. The summary unaudited pro forma combined condensed consolidated financial information was prepared as if the November Transactions had been completed on January 1, 2002 for statements of operations purposes and on September 30, 2003, for balance sheet purposes. The unaudited pro forma combined condensed consolidated financial information presented below is not necessarily indicative of either future results or the results that might have been recorded if such transactions had been consummated on such dates.

      The table below should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this prospectus, “Selected Historical Financial Information,” “Unaudited Pro Forma Combined Condensed Consolidated Financial Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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Pro Forma,
Pro Forma, Nine Months Nine Months
Years Ended December 31, Year Ended Ended September 30, Ended

December 31,
September 30,
2002 2001 2000 2002 2003 2002 2003







(In thousands)
Income Statement Data:
                                                       
Revenues:
                                                       
 
Hospitality
  $ 339,380     $ 228,712     $ 237,260     $ 339,380     $ 272,502     $ 245,834     $ 272,502  
 
Attractions and Opry Group
    65,600       67,064       69,283       65,600       45,310       50,037       45,310  
 
ResortQuest
                      190,241                   153,187  
 
Corporate and other
    272       290       64       272       139       144       139  
     
     
     
     
     
     
     
 
   
Total revenues
    405,252       296,066       306,607       595,493       317,951       296,015       471,138  
     
     
     
     
     
     
     
 
Operating expenses:
                                                       
 
Operating costs
    254,583       201,299       210,018       338,190       191,933       188,888       256,405  
 
Selling, general and administrative
    108,732       67,212       89,052       175,216       79,941       76,363       118,774  
 
Preopening costs(1)
    8,913       15,927       5,278       8,913       7,111       7,946       7,111  
 
Other expenses from managed entities
                      36,504                   28,062  
 
Gain on sale of assets(2)
    (30,529 )                 (30,529 )           (30,529 )      
 
Impairment and other charges
          14,262 (4)     75,660 (4)                        
 
Restructuring charges
    (17 )(5)     2,182 (5)     12,952 (5)     (17 )           50        
 
Depreciation and amortization
    56,480       38,405       44,659       65,821       43,444       41,925       50,651  
     
     
     
     
     
     
     
 
   
Total operating expenses
    398,162       339,287       437,619       594,098       322,429       284,643       461,003  
     
     
     
     
     
     
     
 
 
Operating income (loss)
    7,090       (43,221 )     (131,012 )     1,395       (4,478 )     11,372       10,135  
Interest expense, net of amounts capitalized
    (46,960 )     (39,365 )     (30,307 )     (62,893 )     (31,139 )     (36,289 )     (42,203 )
Interest income
    2,808       5,554       4,046       3,374       1,773       1,917       1,773  
Unrealized gain (loss) on Viacom stock, net
    (37,300 )     782             (37,300 )     (27,067 )     (39,611 )     (27,067 )
Unrealized gain (loss) on derivatives
    86,476       54,282             86,476       24,016       80,805       24,016  
Other gains and (losses)
    1,163       2,661       (3,514 )     1,189       435       665       435  
     
     
     
     
     
     
     
 
Income (loss) from continuing operations before income taxes
    13,277       (19,307 )     (160,787 )     (7,759 )     (36,460 )     18,859       (32,911 )
Provision (benefit) for income taxes
    1,318       (9,142 )     (52,331 )     (5,204 )     (15,974 )     1,605       (13,412 )
     
     
     
     
     
     
     
 
Income (loss) from continuing operations
    11,959       (10,165 )     (108,456 )   $ (2,555 )     (20,486 )     17,254     $ (19,499 )
                             
                     
 
Gain (loss) from discontinued operations, net of taxes(3)
    85,757       (48,833 )     (47,600 )             36,126       83,093          
Cumulative effect of accounting change, net of taxes
    (2,572 )(7)     11,202 (6)                         (2,572 )        
     
     
     
             
     
         
   
Net income (loss)
  $ 95,144     $ (47,796 )   $ (156,056 )           $ 15,640     $ 97,775          
     
     
     
             
     
         
                                                   
As of December 31, As of September 30, Pro Forma At


September 30,
2000 2001 2002 2002 2003 2003






(In thousands)
Balance Sheet Data:
                                               
Cash and cash equivalents:
                                               
 
Unrestricted
  $ 26,757     $ 9,194     $ 98,632     $ 166,082     $ 24,772     $ 3,899  
 
Restricted(8)
    12,667       64,993       19,323       15,080       150,543       165,018  
Total assets(9)
    1,930,805       2,177,644       2,192,196       2,209,484       2,314,551       2,569,748  
Total debt(10)
    175,500       468,997       340,638       355,002       468,385       552,385  
Secured forward exchange
contract(9)
    613,054       613,054       613,054       613,054       613,054       613,054  
Total stockholders’ equity
    765,937       696,988       787,579       797,267       806,268       907,127  
 
See footnotes beginning on page 16

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      The ratio of earnings to fixed charges below is computed by dividing (a) the sum of income from continuing operations before income taxes, plus fixed charges, plus amortization of capitalized interest, less interest capitalized, by (b) fixed charges. Fixed charges consist of interest expense, including capitalized interest, amortization of debt issuance costs and a portion of operating lease rental expense deemed to be representative of the interest factor. For the nine months ended September 30, 2003 and for the years ended December 31, 2000 and 2001, earnings were insufficient to cover fixed charges. The amount of earnings needed to cover fixed charges were $45.6 million for the nine months ended September 30, 2003 and $37.8 million and $167.3 million for the years ended December 31, 2001 and 2000, respectively. On a pro forma basis for the nine months ended September 30, 2003 and for the year ended December 31, 2002, earnings would have been insufficient to cover fixed charges. The pro forma amount of earnings needed to cover pro forma fixed charges would have been $42.1 million for the nine months ended September 30, 2003 and $13.7 million for the year ended December 31, 2002.

                                                         
Nine Months
Ended
Years Ended December 31, September 30,


2002 2001 2000 1999 1998 2003 2002







Other Financial Data
                                                       
Ratio of earnings to fixed charges
    1.12 x                 28.03 x     2.61 x           1.30 x
                                           
Nine Months
Ended
Years Ended December 31, September 30,


2002 2001 2000 2003 2002





Operating Data:
                                       
Gaylord Nashville:
                                       
 
Occupancy
    68.6 %     70.3 %     75.9 %     72.2 %     67.0 %
 
ADR
  $ 142.58     $ 140.33     $ 140.03     $ 135.16     $ 140.09  
 
RevPAR
  $ 97.80     $ 98.65     $ 106.22     $ 97.64     $ 93.83  
Gaylord Palms(11):
                                       
 
Occupancy
    64.8 %                 76.2 %     68.2 %
 
ADR
  $ 168.65     $     $     $ 169.57     $ 170.66  
 
RevPAR
  $ 109.37     $     $     $ 129.28     $ 116.41  

  (1)  Preopening costs are the costs associated with preopening expenses related to the construction of new hotels, start-up activities and organization costs related to the Gaylord Palms Resort & Convention Center hotel in Kissimmee, Florida and the new Gaylord Texan Resort & Convention Center under construction in Grapevine, Texas. Gaylord Palms opened in January 2002 and the Gaylord Texan is scheduled to open in April 2004.
 
  (2)  During 2002, we sold our one-third interest in the Opry Mills Shopping Center in Nashville, Tennessee and the interest in the related land lease between Gaylord and the Mills Corporation.
 
  (3)  In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” In accordance with the provisions of SFAS No. 144, we have presented the operating results and financial position of the following businesses as discontinued operations: WSM-FM and WWTN; Acuff-Rose Music Publishing; OKC Redhawks; Word Entertainment; GET Management, the artist management business; the international cable networks; the businesses sold to affiliates of The Oklahoma Publishing Company in 2001 consisting of Pandora Films, Gaylord Films, Gaylord Sports Management, Gaylord Event Television and Gaylord Production Company; and the water taxis.
 
  (4)  Reflects the divestiture of certain businesses and reduction in the carrying values of certain assets.
 
  (5)  Related primarily to employee severance and contract termination costs. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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  (6)  Reflects the cumulative effect of the change in accounting method related to recording the derivatives associated with the secured forward exchange contract at fair value as of January 1, 2001 of $18.3 million less a related tax provision of $7.1 million. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview-Derivatives.”
 
  (7)  Reflects the cumulative effect of the change in accounting method related to adopting the provisions of SFAS No. 142. We recorded an impairment loss related to impairment of the goodwill of the Radisson Hotel at Opryland. The impairment loss was $4.2 million, less taxes of approximately $1.6 million.
 
  (8)  Cash and cash equivalents — restricted for Gaylord represent cash held in escrow for required capital expenditures, property taxes, insurance payments and other reserves required pursuant to the terms of credit agreements and certain collateralized outstanding letters of credit. For ResortQuest, this primarily represents guest advance deposits held in escrow for lodging reservations and deposits on real estate transactions.
 
  (9)  Total assets include the Viacom, Inc. Class B common stock at its market values of $448.5 million, $485.8 million and $514.4 million at December 31, 2002, 2001 and 2000, respectively, and $421.4 million and $446.2 million at September 30, 2003 and 2002, respectively. During 2000, we entered into a seven-year secured forward exchange contract for a notional amount of $613.1 million with respect to 10,937,900 shares of the Viacom, Inc. Class B common stock. Prepaid interest related to the secured forward exchange contract of $118.1 million, $145.0 million and $171.9 million was included in total assets at December 31, 2002, 2001 and 2000, respectively, and $98.0 million and $124.9 million was included in total assets at September 30, 2003 and 2002, respectively.

(10)  Total debt includes both short-term and long-term debt.
 
(11)  Gaylord Palms opened in February 2002.

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RISK FACTORS

      Participating in the exchange offer involves a number of risks. You should carefully consider the factors described and referred to below in addition to the other information set forth in this prospectus and the documents incorporated by reference into this prospectus before deciding whether to participate in the exchange offer.

Risks Relating to the Notes

 
      If you do not properly tender your outstanding notes, you will continue to hold unregistered outstanding notes and your ability to transfer outstanding notes will remain restricted and may be adversely affected.

      We will only issue new notes in exchange for outstanding notes that you timely and properly tender. Therefore, you should allow sufficient time to ensure timely delivery of the outstanding notes and you should carefully follow the instructions on how to tender your outstanding notes. Neither we nor the exchange agent is required to tell you of any defects or irregularities with respect to your tender of outstanding notes.

      If you do not exchange your outstanding notes for new notes pursuant to the exchange offer, the outstanding notes you hold will continue to be subject to the existing transfer restrictions. In general, you may not offer or sell the outstanding notes except under an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. We do not plan to register outstanding notes under the Securities Act unless our registration rights agreement with the initial purchasers of the outstanding notes requires us to do so. Further, if you continue to hold any outstanding notes after the exchange offer is consummated, you may be unable to sell them because there will be fewer of these notes outstanding.

 
      Our substantial debt could adversely affect our cash flow and our financial health and prevent us from fulfilling our obligations under the notes.

      We have now, and will continue to have after the exchange offer, a significant amount of debt. As of September 30, 2003, we had $468.4 million of total debt, and stockholders’ equity of $806.3 million.

      Our substantial amount of debt could have important consequences to you. For example, it could:

  •  make it more difficult for us to satisfy our obligations under the notes;
 
  •  increase our vulnerability to general adverse economic and industry conditions;
 
  •  require us to dedicate a substantial portion of our cash flow from operations to make interest and principal payments on our debt, thereby limiting the availability of our cash flow to fund future capital expenditures, working capital and other general corporate requirements;
 
  •  limit our flexibility in planning for, or reacting to, changes in our business and the hospitality industry, which may place us at a competitive disadvantage compared with competitors that are less leveraged;
 
  •  increase our vulnerability to general adverse economic and industry conditions; and
 
  •  limit our ability to borrow additional funds, even when necessary to maintain adequate liquidity.

      In addition, the terms of our Nashville hotel loan, our new revolving credit facility and the indenture governing the notes allow us to incur substantial amounts of additional debt subject to certain limitations. Any such additional debt could increase the risks associated with our substantial leverage.

 
Although the notes are referred to as senior notes, they are effectively subordinated to our and the subsidiary guarantors’ secured debt and the liabilities of our non-guarantor subsidiaries.

      The notes, and each guarantee of the notes, are unsecured and therefore will be effectively subordinated to any secured debt we, or the relevant guarantor, may incur to the extent of the assets

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securing such debt. In the event of a bankruptcy or similar proceeding involving us or a guarantor, the assets which serve as collateral for any secured debt will be available to satisfy the obligations under the secured debt before any payments are made on the notes. Assuming we had completed the November Transactions, as of September 30, 2003, we would have had $552.4 million of debt outstanding, $202.2 million of which would have been secured debt, and up to $25.0 million of additional availability under our 2003 Florida/ Texas senior secured credit facility. The notes are effectively subordinated to our Nashville hotel loan and any borrowings under our new revolving credit facility (which currently has approximately $88.7 million of availability) and our other secured debt. The terms of the indenture governing the notes allows us to incur substantial amounts of additional secured debt. See “Description of Certain Indebtedness.” In addition, the notes are effectively subordinated to the liabilities of our non-guarantor subsidiaries.
 
Not all of our subsidiaries have guaranteed the notes, and the assets of our non-guarantor subsidiaries may not be available to make payments on the notes.

      Not all of our subsidiaries have guaranteed the notes. In particular, our subsidiary that incurred our Nashville hotel loan, and certain affiliates thereof have not guaranteed, and all of our future unrestricted subsidiaries will not guarantee, the notes. Payments on the notes are only required to be made by us and the subsidiary guarantors. As a result, no payments are required to be made from assets of subsidiaries that do not guarantee the notes, unless those assets are transferred by dividend or otherwise to us or a subsidiary guarantor. In 2002, our non-guarantor subsidiaries had revenues of $206.1 million, or 50.9% of our consolidated 2002 revenues, and loss from continuing operations before income taxes of $25.6 million. Similarly, at September 30, 2003, our non-guarantor subsidiaries had total assets of $531.5 million.

      In the event that any non-guarantor subsidiary becomes insolvent, liquidates, reorganizes, dissolves or otherwise winds up, holders of its debt and its trade creditors generally will be entitled to payment on their claims from the assets of that subsidiary before any of those assets are made available to us. Consequently, your claims in respect of the notes are effectively subordinated to all of the liabilities of our non-guarantor subsidiaries, including trade payables. As of September 30, 2003, our non-guarantor subsidiaries had $349.6 million of debt and other liabilities (excluding intercompany liabilities).

 
Gaylord Entertainment Company is a holding company.

      Gaylord Entertainment Company is a holding company, and it conducts a substantial portion of its operations through its subsidiaries. As a result, its ability to meet its debt service obligations, including its obligations under the notes, substantially depends upon its subsidiaries’ cash flow and payment of funds to it by its subsidiaries as dividends, loans, advances or other payments. In addition, the payment of dividends or the making of loans, advances or other payments to Gaylord Entertainment Company may be subject to regulatory or contractual restrictions.

 
To service our debt, we will require a significant amount of cash, which may not be available to us.

      Our ability to make payments on, or repay or refinance, our debt, including the notes, and to fund planned capital expenditures will depend largely upon our future operating performance. Our future performance, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. In addition, our ability to borrow funds in the future to make payments on our debt will depend on the satisfaction of the covenants in our new revolving credit facility and our other debt agreements, including the indenture governing the notes, and other agreements we may enter into in the future. Specifically, we will need to maintain certain financial ratios and complete construction of our new Gaylord Texan hotel in Grapevine, Texas in 2004. We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under our new revolving credit facility or from other sources in an amount sufficient to enable us to pay our debt, including the notes, or to fund our other liquidity needs.

      In addition, prior to the repayment of the notes, we will be required to refinance our Nashville hotel loan ($201.2 million outstanding as of September 30, 2003), which matures in 2004, subject to extension

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to 2006, and our new revolving credit facility which matures in 2006. At the expiration of the secured forward exchange contract relating to shares of Viacom stock we own, we will be required to incur additional debt or use any cash on hand to pay the deferred tax payable at that time. See Note 10 to our consolidated financial statements for the year ended December 31, 2002 and “Management’s Discussion and Analysis of Financial Conditions and Results of Operation — Liquidity and Capital Resources.” We cannot assure you that we will be able to refinance any of our debt, including our Nashville hotel loan, our new revolving credit facility or finance the deferred taxes on our Viacom stock on commercially reasonable terms or at all. If we were unable to make payments or refinance our debt or obtain new financing under these circumstances, we would have to consider other options, such as:

  •  sales of assets;
 
  •  sales of equity; and/or
 
  •  negotiations with our lenders to restructure the applicable debt.

      Our credit agreements and the indenture governing the notes may restrict, or market or business conditions may limit, our ability to do some of these things.

 
The agreements governing our debt, including the notes and our senior secured loans, contain various covenants that limit our discretion in the operation of our business and could lead to acceleration of debt.

      Our existing agreements, including our new revolving credit facility, our Nashville hotel loan and the notes, impose, and future financing agreements are likely to impose, operating and financial restrictions on our activities. These restrictions require us to comply with or maintain certain financial tests and ratios, including minimum consolidated net worth, minimum interest coverage ratio and maximum leverage ratios, and limit or prohibit our ability to, among other things:

  •  incur additional debt and issue preferred stock;
 
  •  create liens;
 
  •  redeem and/or prepay certain debt;
 
  •  pay dividends on our stock to our stockholders or repurchase our stock;
 
  •  make certain investments;
 
  •  enter new lines of business;
 
  •  engage in consolidations, mergers and acquisitions;
 
  •  make certain capital expenditures; and
 
  •  pay dividends and make other distributions from our subsidiaries to us.

      These restrictions on our ability to operate our business could seriously harm our business by, among other things, limiting our ability to take advantage of financing, merger and acquisition and other corporate opportunities. In addition, our new revolving credit facility requires us to meet certain conditions relating to our new Gaylord Texan hotel in Grapevine, Texas by June 30, 2004. In particular, we are required to achieve substantial completion and initial opening of the Gaylord Texan by June 30, 2004. Failure to meet these conditions on schedule could result in a default and acceleration of any borrowings under our new revolving credit facility. See “Description of Certain Indebtedness.”

      Various risks, uncertainties and events beyond our control could affect our ability to comply with these covenants and maintain these financial tests and ratios. Failure to comply with any of the covenants in our existing or future financing agreements could result in a default under those agreements and under other agreements containing cross-default provisions. A default would permit lenders to accelerate the maturity for the debt under these agreements and to foreclose upon any collateral securing the debt. Under these circumstances, we might not have sufficient funds or other resources to satisfy all of our obligations,

20


 

including our obligations under the notes. In addition, the limitations imposed by financing agreements on our ability to incur additional debt and to take other actions might significantly impair our ability to obtain other financing.
 
The subsidiary guarantees may not be enforceable because of fraudulent conveyance laws or state corporate laws prohibiting shareholder distributions by an insolvent subsidiary.

      The subsidiary guarantors’ guarantees of the notes may be subject to review under U.S. federal bankruptcy law or relevant state fraudulent conveyance laws or state laws prohibiting subsidiary guarantees or other shareholder distributions by an insolvent subsidiary if a bankruptcy lawsuit or other action is commenced by or on behalf of our or the guarantors’ unpaid creditors.

      Under these laws, if in such a lawsuit a court were to find that, at the time a guarantor incurred debt (including debt represented by the guarantee), such guarantor:

  •  incurred this debt with the intent of hindering, delaying or defrauding current or future creditors; or
 
  •  received less than reasonably equivalent value or fair consideration for incurring this debt and the guarantor:

  •  was insolvent or was rendered insolvent by reason of the related financing transactions;
 
  •  was engaged, or about to engage, in a business or transaction for which its remaining assets constituted unreasonably small capital to carry on its business;
 
  •  intended to incur, or believed that it would incur, debts beyond its ability to pay these debts as they mature; or

  •  in some states, had assets valued at less than its liabilities, or would not be able to pay its debts as they become due in the usual course of business (regardless of the consideration for incurring the debt);

as all of the foregoing terms are defined in or interpreted under the relevant fraudulent transfer or conveyance statutes or shareholder distribution statute, then the court could void the guarantee or subordinate the amounts owing under the guarantee to the guarantor’s presently existing or future debt or take other actions detrimental to you.

      In addition, the subsidiary guarantors may be subject to the allegation that, since they incurred their guarantees for our benefit, they incurred the obligations under the guarantees for less than reasonably equivalent value or fair consideration.

      The measure of insolvency for purposes of the foregoing considerations will vary depending upon the law of the jurisdiction that is being applied in any such proceeding. Generally, a company would be considered insolvent if, at the time it incurred the debt or issued the guarantee:

  •  it could not pay its debts or contingent liabilities as they become due;
 
  •  the sum of its debts, including contingent liabilities, is greater than its assets, at fair valuation; or
 
  •  the present fair saleable value of its assets is less than the amount required to pay the probable liability on its total existing debts and liabilities, including contingent liabilities, as they become absolute and mature.

      If a guarantee is voided as a fraudulent conveyance, is a prohibited distribution to the parent shareholder or found to be unenforceable for any other reason, you will not have a claim against that obligor and will only be Gaylord Entertainment Company’s creditor or that of any guarantor whose obligation was not set aside or found to be unenforceable. In addition, the loss of a guarantee will constitute a default under the indenture, which default would cause all outstanding notes to become immediately due and payable.

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      We believe that, at the time the guarantors initially incurred the debt represented by the guarantees, the guarantors:

  •  were not insolvent or rendered insolvent by the incurrence;
 
  •  had sufficient capital to run our or their businesses effectively; and
 
  •  were able to pay obligations on the notes and the guarantees as they matured or became due.

      In reaching the foregoing conclusions we have relied upon our analyses of internal cash flow projections and estimated values of the assets and liabilities of the guarantors. In addition, we have relied on a limitation to be contained in the guarantors’ guarantees that limits the guarantee as necessary to prevent it from constituting a fraudulent conveyance or prohibited distribution to shareholders under applicable law. However, a court passing on these questions might not reach the same conclusions.

 
      We may be unable to make a change of control offer required by the indenture governing the notes, which would cause defaults under the indenture governing the notes, our new revolving credit facility and our other financing arrangements.

      The terms of the notes require us to make an offer to repurchase the notes upon the occurrence of a change of control at a purchase price equal to 101% of the principal amount of the notes, plus accrued and unpaid interest and liquidated damages, if any, to the date of the purchase. The terms of our new revolving credit facility may require, and other financing arrangements may require, repayment of amounts outstanding in the event of a change of control and limit our ability to fund the repurchase of your notes in certain circumstances. It is possible that we will not have sufficient funds at the time of the change of control to make the required repurchase of notes or that restrictions in our new revolving credit facility, and other financing agreements will not allow the repurchases. See “Description of Notes — Repurchase at the Option of Holders — Change of Control.”

 
      There is no public trading market for the new notes and we do not know if a market will develop or, if a market does develop, whether it will be sustained.

      There is no established trading market for the new notes. Although the initial purchasers of the outstanding notes have informed us that they currently intend to make a market in the new notes, they have no obligation to do so and may discontinue making a market at any time without notice. We do not intend to apply for listing of the new notes on any securities exchange or for quotation through The Nasdaq National Market. The liquidity of any market for the new notes will depend upon the number of holders of the new notes, our performance, the market for similar securities, the interest of securities dealers in making a market in the new notes and other factors relating to us. A liquid trading market may not develop for the new notes.

Risks Relating to the Business of Gaylord

 
      We may not be able to implement successfully our business strategy.

      We have refocused our business strategy on the development of additional resort and convention center hotels in selected locations in the United States and on our attractions properties and the Grand Ole Opry, which are focused primarily on the country music genres, as well as our recently acquired ResortQuest vacation rental and property management business. The success of our future operating results depends on our ability to implement our business strategy by successfully operating the Gaylord Opryland and Gaylord Palms and completing and successfully operating our new Gaylord Texan hotel in Grapevine, Texas, which is under construction, and further exploiting our attractions assets and our vacation rental business. Our ability to do this depends upon many factors, some of which are beyond our control. These include:

  •  our ability to finance and complete the construction of our new Gaylord Texan hotel in Grapevine, Texas on schedule and to achieve positive cash flow from operations within the anticipated ramp-up period;

22


 

  •  our ability to generate cash flows from existing operations;
 
  •  our ability to hire and retain hotel management, catering and convention-related staff for our hotels and staff for our vacation rental offices;
 
  •  our ability to capitalize on the strong brand recognition of certain of our media assets; and
 
  •  the continued popularity and demand for country music.
 
      Our hotel and convention business and our vacation rental and property management business are subject to significant market risks.

      Our ability to continue to successfully operate the Gaylord Opryland, the Gaylord Palms and our new Gaylord Texan hotel in Grapevine, Texas upon its completion, as well as our ability to operate our ResortQuest vacation rental business, is subject to factors beyond our control which could adversely impact these properties. These factors include:

  •  the desirability and perceived attractiveness of the Nashville, Tennessee area; the Orlando, Florida area; and the Dallas, Texas area as tourist and convention destinations;
 
  •  adverse changes in the national economy and in the levels of tourism and convention business that would affect our hotels or vacation rental properties we manage;
 
  •  the hotel and convention business is highly competitive and Gaylord Palms is operating, and our new Gaylord Texan hotel will operate, in extremely competitive markets for convention and tourism business;
 
  •  our group convention business is subject to reduced levels of demand during the year-end holiday periods, and we may not be able to attract sufficient general tourism guests to offset this seasonality; and
 
  •  the vacation rental and property management business is highly competitive and has low barriers to entry, and we compete primarily with local vacation rental and property management companies located in its markets, some of whom are affiliated with the owners or operators of resorts where these competitors provide their services or which may have lower cost structures and may provide their services at lower rates.
 
      Our recent acquisition of ResortQuest International, Inc., which we completed on November 20, 2003, involves substantial risks.

      The ResortQuest acquisition, which we completed on November 20, 2003, involves the integration of two companies that previously have operated independently, which is a complex, costly and time-consuming process. The process of integrating operations could cause an interruption of, or loss of momentum in, the activities of the combined company’s business and the loss of key personnel. The diversion of management’s attention and any delays or difficulties encountered in connection with the ResortQuest acquisition and the integration of the two companies’ operations could harm the business, results of operations, financial condition or prospects of the combined company. In addition, we may be unable to achieve the anticipated cost savings from the ResortQuest acquisition for many reasons. Gaylord and ResortQuest have incurred substantial expenses, such as legal, accounting and financial advisor fees, in connection with the acquisition.

 
      Unanticipated costs could adversely affect the results of hotels we open in new markets.

      As part of our growth plans, we may open or acquire new hotels in geographic areas in which we have little or no operating experience and in which potential customers may not be familiar with our business. As a result, we may have to incur costs relating to the opening, operation and promotion of those new hotel properties that are substantially greater than those incurred in other areas. Even though we may incur substantial additional costs with these new hotel properties, they may attract fewer customers than

23


 

our existing hotels. As a result, the results of operations at new hotel properties may be inferior to those of our existing hotels. The new hotels may even operate at a loss. Even if we are able to attract enough customers to our new hotel properties to operate them at a profit, it is possible that those customers could simply be moving future meetings or conventions from our existing hotel properties to our new hotel properties. Thus, the opening of a new hotel property could reduce the revenue of our existing hotel properties.
 
      Our hotel development is subject to timing, budgeting and other risks.

      We intend to develop additional hotel properties as suitable opportunities arise, taking into consideration the general economic climate. New project development has a number of risks, including risks associated with:

  •  construction delays or cost overruns that may increase project costs;
 
  •  construction defects or noncompliance with construction specifications;
 
  •  receipt of zoning, occupancy and other required governmental permits and authorizations;
 
  •  development costs incurred for projects that are not pursued to completion;
 
  •  so-called acts of God such as earthquakes, hurricanes, floods or fires that could adversely impact a project;
 
  •  the availability and cost of capital; and
 
  •  governmental restrictions on the nature or size of a project or timing of completion.

      In particular, the terms of our new revolving credit facility require us to achieve substantial completion and initial opening of our Gaylord Texan hotel by June 30, 2004. We cannot assure you that any development project will be completed on time or within budget.

 
      Our real estate investments are subject to numerous risks.

      Because we own hotels and attractions properties, we are subject to the risks that generally relate to investments in real property. The investment returns available from equity investments in real estate depend in large part on the amount of income earned and capital appreciation generated by the related properties, as well as the expenses incurred. In addition, a variety of other factors affect income from properties and real estate values, including governmental regulations, insurance, zoning, tax and eminent domain laws, interest rate levels and the availability of financing. For example, new or existing real estate zoning or tax laws can make it more expensive and/or time-consuming to develop real property or expand, modify or renovate properties. When interest rates increase, the cost of acquiring, developing, expanding or renovating real property increases and real property values may decrease as the number of potential buyers decreases. Similarly, as financing becomes less available, it becomes more difficult both to acquire and to sell real property. Finally, governments can, under eminent domain laws, take real property. Sometimes this taking is for less compensation than the owner believes the property is worth. Any of these factors could have a material adverse impact on our results of operations or financial condition. In addition, equity real estate investments, such as the investments we hold and any additional properties that we may acquire, are relatively difficult to sell quickly. If our properties do not generate revenue sufficient to meet operating expenses, including debt service and capital expenditures, our income will be adversely affected.

 
      Our hotel and vacation rental properties are concentrated geographically.

      Our existing hotel properties are located predominately in the southeastern United States. As a result, our business and our financial operating results may be materially affected by adverse economic, weather or business conditions in the Southeast. In addition, our ResortQuest vacation rental business manages properties that are significantly concentrated in beach and island resorts located in Florida and Hawaii and mountain resorts located in Colorado. Adverse events or conditions which affect these areas in particular,

24


 

such as economic recession, changes in regional travel patterns, extreme weather conditions or natural disasters, may have an adverse impact on our ResortQuest operations.
 
      Hospitality companies have been the target of class actions and other lawsuits alleging violations of federal and state law.

      We are subject to the risk that our results of operations may be adversely affected by legal or governmental proceedings brought by or on behalf of our employees or customers. In recent years, a number of hospitality companies have been subject to lawsuits, including class action lawsuits, alleging violations of federal and state law regarding workplace and employment matters, discrimination and similar matters. A number of these lawsuits have resulted in the payment of substantial damages by the defendants. Similar lawsuits have been instituted against us from time to time, and we cannot assure you that we will not incur substantial damages and expenses resulting from lawsuits of this type, which could have a material adverse effect on our business.

 
      Our properties are subject to environmental regulations.

      Environmental laws, ordinances and regulations of various federal, state, local and foreign governments regulate certain of our properties and could make us liable for the costs of removing or cleaning up hazardous or toxic substances on, under or in the properties we currently own or operate or those we previously owned or operated. Those laws could impose liability without regard to whether we knew of, or were responsible for, the presence of hazardous or toxic substances. The presence of hazardous or toxic substances, or the failure to properly clean up such substances when present, could jeopardize our ability to develop, use, sell or rent the real property or to borrow using the real property as collateral. If we arrange for the disposal or treatment of hazardous or toxic wastes, we could be liable for the costs of removing or cleaning up wastes at the disposal or treatment facility, even if we never owned or operated that facility. Other laws, ordinances and regulations could require us to manage, abate or remove lead- or asbestos-containing materials. Similarly, the operation and closure of storage tanks are often regulated by federal, state, local and foreign laws. Finally, certain laws, ordinances and regulations, particularly those governing the management or preservation of wetlands, coastal zones and threatened or endangered species, could limit our ability to develop, use, sell or rent our real property.

 
Our business prospects depend on our ability to attract and retain senior level executives.

      During 2001, we appointed a new chairman and a new chief executive officer and had numerous changes in senior management. Our future performance depends upon our ability to attract qualified senior executives and to retain their services. Our future financial results also will depend upon our ability to attract and retain highly skilled managerial and marketing personnel in our different areas of operation. Competition for qualified personnel is intense and is likely to increase in the future. We compete for qualified personnel against companies with significantly greater financial resources than ours.

 
We have certain other minority equity interests over which we have no significant control and to or for which we may owe significant obligations.

      We have certain minority investments which are not liquid and over which we have no rights, or ability, to exercise the direction or control of the respective enterprises. These include our equity interests in Bass Pro and the Nashville Predators. When we make these investments, we sometimes extend guarantees related to such investments. For example, in connection with our investment in the Nashville Predators, we agreed to guarantee, severally and jointly with other investors, up to $15.0 million of specified obligations. The ultimate value of each of these investments will be dependent upon the efforts of others over an extended period of time. The nature of our interests and the absence of a market for those interests restricts our ability to dispose of them. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” In addition, we may enter into joint venture arrangements. These arrangements are subject to uncertainties and risks, including those related to conflicting joint venture partner interests and to our joint venture partners failing to meet their financial or other obligations.

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We are subject to risks relating to acts of God, terrorist activity and war.

      Our financial and operating performance may be adversely affected by acts of God, such as natural disasters or acts of terror, in locations where we own and/or operate significant properties and areas of the world from which we draw a large number of customers. Some types of losses, such as from earthquake, hurricane, terrorism and environmental hazards, may be either uninsurable or too expensive to justify insuring against. Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we have invested in a hotel, as well as the anticipated future revenue from the hotel. In that event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. Similarly, wars (including the potential for war), terrorist activity (including threats of terrorist activity), political unrest and other forms of civil strife as well as geopolitical uncertainty have caused in the past, and may cause in the future, our results to differ materially from anticipated results.

 
We face risks related to an SEC investigation.

      In March 2003, we restated our historical financial statements for 2000, 2001 and the first nine months of 2002 to reflect certain non-cash changes, which resulted primarily from a change to our income tax accrual and a change in the manner in which we accounted for our investment in the Nashville Predators. We have been advised by the SEC staff that it is conducting a formal investigation into the financial results and transactions that were the subject of our restatement. We have been cooperating with the SEC staff and intend to continue to do so. Although we cannot predict the ultimate outcome of the investigation, we do not currently believe that the investigation will have a material adverse effect on our financial condition or results of operations. Nevertheless, if the SEC makes a determination adverse to us, we may face sanctions, including, but not limited to, monetary penalties and injunctive relief.

 
The hospitality industry and the vacation and property management industry are heavily regulated, including with respect to food and beverage sales, real estate brokerage licensing, employee relations and construction concerns, and compliance with these regulations could reduce our revenues and profits.

      Our hotel operations are subject to numerous laws, including those relating to the preparation and sale of food and beverages, liquor service and health and safety of premises. Our vacation rental operations are also subject to licensing requirements applicable to real estate operations, laws and regulations relating to consumer protection and local ordinances. We are also subject to laws regulating our relationship with our employees in areas such as hiring and firing, minimum wage and maximum working hours, overtime and working conditions. The success of expanding our hotel operations also depends upon our obtaining necessary building permits and zoning variances from local authorities.

 
If vacation rental property owners do not renew a significant number of property management contracts, our ResortQuest vacation rental business would be adversely affected.

      Through our ResortQuest vacation rental business, we provide rental and property management services to property owners pursuant to management contracts, which generally have one-year terms. The majority of such contracts contain automatic renewal provisions but also allow property owners to terminate the contract at any time. If property owners do not renew a significant number of management contracts or if we are unable to attract additional property owners, it would have a material adverse effect on our vacation rental business and financial results. In addition, although most of its contracts are exclusive, industry standards in certain geographic markets dictate that rental services be provided on a non-exclusive basis.

 
You are unlikely to be able to seek remedies against Arthur Andersen LLP, ResortQuest’s former independent auditor.

      ResortQuest’s consolidated financial statements as of and for the fiscal years ended December 31, 2000 and December 31, 2001 were audited by Arthur Andersen LLP, ResortQuest’s former independent

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auditor. In June 2002, Arthur Andersen was convicted of federal obstruction of justice charges in connection with its destruction of documents. As a result of its conviction, Arthur Andersen has ceased operations and is no longer in a position to reissue its audit reports or to provide consent to include financial statements reported on by it in this prospectus. Because Arthur Andersen has not reissued its reports and because ResortQuest is not able to obtain a consent from Arthur Andersen, you will be unable to sue Arthur Andersen for material misstatements or omissions, if any, in this prospectus, including the financial statements covered by its previously issued reports. Even if you have a basis for asserting a remedy against, or seeking to recover from, Arthur Andersen, we believe that it is unlikely that you would be able to recover damages from Arthur Andersen.

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FORWARD-LOOKING STATEMENTS

      The prospectus contains “forward-looking statements” within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws. Forward-looking statements may include the words “may,” “will,” “plans,” “estimates,” “anticipates,” “believes,” “expects,” “intends” and similar expressions. Although we believe that such statements are based on reasonable assumptions, these forward-looking statements are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those projected or assumed in our forward-looking statements. These factors, risks and uncertainties include, among others, the following:

  •  the potential adverse effect of our debt on our cash flow and our ability to fulfill our obligations under the notes;
 
  •  the availability of debt and equity financing on terms that are favorable to us;
 
  •  the challenges associated with the integration of ResortQuest’s operations into our operations;
 
  •  general economic and market conditions and economic and market conditions related to the hotel and large group meetings and convention industry;
 
  •  the timing, budgeting and other factors and risks relating to new hotel development, including our ability to open our new Gaylord Texan hotel in Grapevine, Texas;
 
  •  our restatement of our financial results and the related SEC investigation;
 
  •  the possibility that an active market may not develop for the notes and therefore hinder your ability to liquidate your investment; and
 
  •  other risks that are described in “Risk Factors.”

      Our actual results, performance or achievements could differ materially from those expressed in, or implied by, the forward-looking statements. We can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them do, what impact they will have on our results of operations and financial condition. We do not intend, and we undertake no obligation, to update any forward-looking statement. We urge you to review carefully “Risk Factors” in this prospectus for a more complete discussion of the risks of an investment in the notes.

MARKET, RANKING AND OTHER DATA

      The data included in this prospectus regarding markets and ranking, including the size of certain markets and our position and the position of our competitors within these markets, are based on reports of published industry sources and our estimates based on our management’s knowledge and experience in the markets in which we operate. Our estimates have been based on information obtained primarily from trade and business organizations and other contacts in the markets in which we operate. We believe these estimates to be accurate as of the date of this prospectus. However, this information may prove to be inaccurate because of the method by which we obtained some of the data for our estimates or because this information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties. As a result, you should be aware that market, ranking and other similar data included in this prospectus, and estimates and beliefs based on that data, may not be reliable. We cannot guarantee the accuracy or completeness of such information contained in this prospectus.

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THE EXCHANGE OFFER

Purpose and Effect of the Exchange Offer

      In connection with the issuance of the outstanding notes, we entered into a registration rights agreement with the initial purchasers of the outstanding notes. The following description of the registration rights agreement is a summary only. It is not complete and does not describe all of the provisions of the registration rights agreement. For more information, you should review the provisions of the registration rights agreement that we filed with the Securities and Exchange Commission as an exhibit to the registration statement of which this prospectus is a part.

      Under the registration rights agreement, we agreed that, promptly after the effectiveness of the registration statement of which this prospectus is a part, we would offer to the holders of outstanding notes who are not prohibited by any law or policy of the Securities and Exchange Commission from participating in the exchange offer, the opportunity to exchange their outstanding notes for a new series of notes, which we refer to as the new notes, that are identical in all material respects to the outstanding notes, except that the new notes do not contain transfer restrictions, have been registered under the Securities Act and are not subject to further registration rights. We and our subsidiary guarantors have agreed to keep the exchange offer open for not less than 20 days, or longer if required by applicable law, after the date on which notice of the exchange offer is mailed to the holders of the outstanding notes. We and our subsidiary guarantors also have agreed to use our reasonable best efforts to cause the exchange offer to be consummated on or before the date that is 30 days after the registration statement of which this prospectus is a part has become effective, or longer, if required by the federal securities laws.

      If:

  •  we and our subsidiary guarantors are not permitted to consummate the exchange offer because the exchange offer is not permitted by applicable law or Securities and Exchange Commission policy; or
 
  •  any holder of notes notifies us prior to the 20th business day following consummation of the exchange offer that:

  •  it is prohibited by law or Securities and Exchange Commission policy from participating in the exchange offer; or
 
  •  that it may not resell the new notes acquired by it in the exchange offer to the public without delivering a prospectus and the prospectus contained in the registration statement of which this prospectus is a part is not appropriate or available for such resales; or
 
  •  that it is a broker-dealer and owns outstanding notes acquired directly from us or one of our affiliates,

then we and the subsidiary guarantors have agreed to file with the Securities and Exchange Commission a shelf registration statement to cover resales of the outstanding notes by the holders thereof who satisfy certain conditions relating to the provision of information in connection with the shelf registration statement.

      We and our subsidiary guarantors will use commercially reasonable efforts to cause the applicable registration statement to be declared effective as promptly as possible by the Commission.

      We and our subsidiary guarantors also have agreed:

  •  to use our reasonable best efforts to have the registration statement of which this prospectus is a part declared effective by the Securities and Exchange Commission on or prior to 230 days after the closing of the sale of the outstanding notes;
 
  •  unless the exchange offer would not be permitted by applicable law or Securities and Exchange Commission policy, we and our subsidiary guarantors will commence the exchange offer; and

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  •  we will issue new notes in exchange for all outstanding notes tendered prior thereto in the exchange offer pursuant to the requirements of the registration rights agreement; and
 
  •  if obligated to file a shelf registration statement, we will use our commercially reasonable efforts to file the shelf registration statement with the Securities and Exchange Commission on or prior to 45 days after such filing obligation arises and to cause the shelf registration to be declared effective by the Securities and Exchange Commission on or prior to 90 days after such obligation arises, but in no event prior to 230 days after the closing of the sale of the outstanding notes.

      If:

  •  we and our subsidiary guarantors fail to file any of the registration statements required by the registration rights agreement on or before the date specified for such filing; or
 
  •  any of such registration statements is not declared effective by the Securities and Exchange Commission on or prior to the date specified for such effectiveness, also known as the effectiveness target date; or
 
  •  we and our subsidiary guarantors fail to consummate the exchange offer within 30 business days of the effectiveness target date with respect to the registration statement of which this prospectus is a part; or
 
  •  the shelf registration statement or the registration statement of which this prospectus is a part is declared effective but thereafter ceases to be effective or usable in connection with resales of transfer restricted securities during the periods specified in the registration rights agreement,

then a registration default shall be deemed to have occurred and we and our subsidiary guarantors will pay liquidated damages to each holder of outstanding notes, with respect to the first 90-day period immediately following the occurrence of the first registration default in an amount equal to a per annum rate of 0.25% per annum on the principal amount of outstanding notes held by such holder. The amount of the liquidated damages will increase by an additional per annum rate of 0.25% per annum with respect to each subsequent 90-day period until all registration defaults have been cured, up to a maximum amount of liquidated damages for all registration defaults of 1.0% per annum on the principal amount of outstanding notes constituting transfer restricted securities.

      All accrued liquidated damages will be paid by us and our subsidiary guarantors on each damages payment date to the global note holder by wire transfer of immediately available funds or by federal funds check and to holders of certificated notes by wire transfer to the accounts specified by them or by mailing checks to their registered addresses if no such accounts have been specified.

      Following the cure of all registration defaults, the accrual of liquidated damages will cease. Holders of outstanding notes will be required to make certain representations to us in order to participate in the exchange offer and will be required to deliver certain information to be used in connection with the shelf registration statement and to provide comments on the shelf registration statement within the time periods set forth in the registration rights agreement in order to have their outstanding notes included in the shelf registration statement and benefit from the provisions regarding liquidated damages set forth above.

      By acquiring notes, a holder will be deemed to have agreed to indemnify us and our subsidiary guarantors against certain losses arising out of information furnished by such holder in writing for inclusion in any registration statement. Holders of outstanding notes will also be required to suspend their use of the prospectus included in the shelf registration statement under certain circumstances upon receipt of notice to that effect from us.

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Resale of the New Notes

      Based on no action letters of the Securities and Exchange Commission staff issued to third parties, we believe that new notes may be offered for resale, resold and otherwise transferred by you without further compliance with the registration and prospectus delivery provisions of the Securities Act if:

  •  the new notes are acquired in the ordinary course of your business;
 
  •  you have no arrangement or understanding with any person to participate in and are not engaged in, and do not intend to engage in, a distribution of the new notes; and
 
  •  you are not our affiliate (within the meaning of Rule 405 under the Securities Act) or a broker-dealer that acquired outstanding notes directly from us for its own account.

      The Securities and Exchange Commission, however, has not considered the exchange offer for the new notes in the context of a no action letter, and the Securities and Exchange Commission may not make a similar determination as in the no action letters issued to these third parties.

      If you tender outstanding notes in the exchange offer with the intention of participating in any manner in a distribution of the new notes or otherwise do not satisfy the foregoing criteria, you

  •  cannot rely on the interpretations by the Securities and Exchange Commission staff discussed above;
 
  •  will not be able to exchange your outstanding notes for new notes in the exchange offer; and
 
  •  must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a resale of the outstanding notes, unless the resale is made pursuant to an exemption from, or is otherwise not subject to, those requirements.

      Unless an exemption from registration is otherwise available, any security holder intending to distribute new notes should be covered by an effective registration statement under the Securities Act. This registration statement should contain the selling security holder’s information required by Item 507 of Regulation S-K under the Securities Act. This prospectus may be used for an offer to resell, resale or other transfer of new notes only as specifically described in this prospectus. Only broker-dealers that acquired the outstanding notes as a result of market-making activities or other trading activities may participate in the exchange offer. Each broker-dealer that receives new notes for its own account in exchange for outstanding notes, where such outstanding notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge in the letter of transmittal that it will deliver a prospectus in connection with any resale of the new notes. Please read the section captioned “Plan of Distribution” for more details regarding the transfer of new notes.

Terms of the Exchange Offer

      Subject to the terms and conditions described in this prospectus and in the letter of transmittal, we will accept for exchange any outstanding notes properly tendered and not withdrawn prior to 5:00 p.m., Eastern time, on the expiration date. We will issue new notes in principal amount equal to the principal amount of outstanding notes surrendered in the exchange offer. Outstanding notes may be tendered only for new notes and only in integral multiples of $1,000.

      The exchange offer is not conditioned upon any minimum aggregate principal amount of outstanding notes being tendered for exchange.

      As of the date of this prospectus, $350.0 million in aggregate principal amount of the outstanding notes are outstanding. This prospectus and the letter of transmittal are being sent to all registered holders of outstanding notes. There will be no fixed record date for determining registered holders of outstanding notes entitled to participate in the exchange offer.

      We intend to conduct the exchange offer in accordance with the provisions of the registration rights agreement, the applicable requirements of the Securities Act and the Exchange Act and the rules and

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regulations of the Securities and Exchange Commission. Outstanding notes that the holders thereof do not tender for exchange in the exchange offer will remain outstanding and continue to accrue interest. These outstanding notes will continue to be entitled to the rights and benefits such holders have under the indenture relating to the notes.

      We will be deemed to have accepted for exchange properly tendered outstanding notes when we have given oral or written notice of the acceptance to the exchange agent and complied with the applicable provisions of the registration rights agreement. The exchange agent will act as agent for the tendering holders for the purposes of receiving the new notes from us.

      If you tender outstanding notes in the exchange offer, you will not be required to pay brokerage commissions or fees or, subject to the letter of transmittal, transfer taxes with respect to the exchange of outstanding notes. We will pay all charges and expenses in connection with the exchange offer. It is important that you read the section labeled “— Fees and Expenses” for more details regarding fees and expenses incurred in the exchange offer.

      We will return any outstanding notes that we do not accept for exchange for any reason to the tendering holder as promptly as practicable after the expiration or termination of the exchange offer.

Expiration Date

      The exchange offer will expire at 5:00 p.m., Eastern time, on                     , 2004, unless, in our sole discretion, we extend it.

Extensions, Delays in Acceptance Termination or Amendment

      We expressly reserve the right, at any time or various times, to extend the period of time during which the exchange offer is open. We may delay acceptance of any outstanding notes by giving oral or written notice of such extension to their holders. During any such extensions, all outstanding notes previously tendered will remain subject to the exchange offer, and we may accept them for exchange.

      In order to extend the exchange offer, we will notify the exchange agent orally or in writing of any extension. We will notify the registered holders of outstanding notes of the extension no later than 9:00 a.m., Eastern time, on the business day after the previously scheduled expiration date.

      If any of the conditions described below under “— Conditions to the Exchange Offer” have not been satisfied, we reserve the right, in our sole discretion

  •  to delay accepting for exchange any outstanding notes,
 
  •  to extend the exchange offer, or
 
  •  to terminate the exchange offer,

by giving oral or written notice of such delay, extension or termination to the exchange agent. Subject to the terms of and the approvals required under the registration rights agreement, we also reserve the right to amend the terms of the exchange offer in any manner.

      Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice thereof to the registered holders of outstanding notes. If we amend the exchange offer in a manner that we determine to constitute a material change, we will promptly disclose such amendment by means of a prospectus supplement. The supplement will be distributed to the registered holders of the outstanding notes. Depending upon the significance of the amendment and the manner of disclosure to the registered holders, we may extend the exchange offer.

Conditions to the Exchange Offer

      We will not be required to accept for exchange, or exchange any new notes for, any outstanding notes if as a result of any change in law or applicable interpretations thereof by the staff of the Securities and

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Exchange Commission, we determine upon advice of our outside counsel that we are not permitted to effect the exchange offer as described in this prospectus.

      In addition, we will not be obligated to accept for exchange the outstanding notes of any holder that has not made to us the representations described under “— Purpose and Effect of the Exchange Offer,” “— Procedures for Tendering” and “Plan of Distribution” and such other representations as may be reasonably necessary under applicable Securities and Exchange Commission rules, regulations or interpretations to allow us to use an appropriate form to register the new notes under the Securities Act.

      We expressly reserve the right to extend, amend or terminate the exchange offer, and to reject for exchange any outstanding notes not previously accepted for exchange, upon the failure to be satisfied of any of the conditions to the exchange offer specified herein or in the letter of transmittal. We will give oral or written notice of any extension, amendment, non-acceptance or termination to the holders of the outstanding notes as promptly as practicable.

      These conditions are for our sole benefit, and we may assert them or waive them in whole or in part at any time or at various times in our sole discretion. If we fail at any time to exercise any of these rights, this failure will not mean that we have waived our rights. Each such right will be deemed an ongoing right that we may assert at any time or at various times.

      In addition, we will not accept for exchange any outstanding notes tendered, and will not issue new notes in exchange for any such outstanding notes, if at such time any stop order has been threatened or is in effect with respect to the registration statement of which this prospectus is a part or the qualification of the indenture relating to the notes under the Trust Indenture Act of 1939.

Procedures for Tendering

     Procedures for Tendering Generally

      Only a holder of outstanding notes may tender such outstanding notes in the exchange offer. To tender in the exchange offer, a holder must:

  •  complete, sign and date the letter of transmittal, or a facsimile of the letter of transmittal;
 
  •  have the signature on the letter of transmittal guaranteed if the letter of transmittal so requires; and
 
  •  mail or deliver such letter of transmittal or facsimile to the exchange agent prior to 5:00 p.m., Eastern time, on the expiration date; or
 
  •  comply with the automated tender offer program procedures of DTC described below.

      In addition, either:

  •  the exchange agent must receive outstanding notes along with the letter of transmittal;
 
  •  the exchange agent must receive, prior to 5:00 p.m., Eastern time, on the expiration date, a timely confirmation of book-entry transfer of such outstanding notes into the exchange agent’s account at DTC according to the procedure for book-entry transfer described below or a properly transmitted agent’s message; or
 
  •  the holder must comply with the guaranteed delivery procedures described below.

      To be tendered effectively, the exchange agent must receive any physical delivery of the letter of transmittal and other required documents at its address indicated on the cover page of the letter of transmittal. The exchange agent must receive such documents prior to 5:00 p.m., Eastern time, on the expiration date.

      The tender by a holder that is not withdrawn prior to 5:00 p.m., Eastern time, on the expiration date will constitute an agreement between the holder and us in accordance with the terms and subject to the conditions described in this prospectus and in the letter of transmittal.

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      THE METHOD OF DELIVERY OF OUTSTANDING NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR ELECTION AND RISK. RATHER THAN MAIL THESE ITEMS, WE RECOMMEND THAT YOU USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. YOU SHOULD NOT SEND THE LETTER OF TRANSMITTAL OR OUTSTANDING NOTES TO US. YOU MAY REQUEST YOUR BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR OTHER NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR YOU.

     How to Tender if You are a Beneficial Owner

      If you beneficially own outstanding notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender those notes, you should contact the registered holder promptly and instruct it to tender on your behalf. If you are a beneficial owner and wish to tender on your own behalf, you must, prior to completing and executing the letter of transmittal and delivering your outstanding notes, either:

  •  make appropriate arrangements to register ownership of the outstanding notes in your name; or
 
  •  obtain a properly completed bond power from the registered holder of outstanding notes.

      The transfer of registered ownership, if permitted under the indenture for the notes, may take considerable time and may not be completed prior to the expiration date.

     Signatures and Signature Guarantees

      You must have signatures on a letter of transmittal or a notice of withdrawal, as described below, guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc.,a commercial bank or trust company having an office or correspondent in the United States, or an “eligible guarantor institution” within the meaning of Rule 17Ad-15 under the Exchange Act. In addition, the entity must be a member of one of the recognized signature guarantee programs identified in the letter of transmittal.

     When You Need Endorsements or Bond Powers

      If the letter of transmittal is signed by a person other than the registered holder of any outstanding notes, the outstanding notes must be endorsed or accompanied by a properly completed bond power. The bond power must be signed by the registered holder as the registered holder’s name appears on the outstanding notes. A member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States, or an eligible guarantor institution must guarantee the signature on the bond power.

      If the letter of transmittal or any outstanding notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, those persons should so indicate when signing. Unless waived by us, they should also submit evidence satisfactory to us of their authority to deliver the letter of transmittal.

     Tendering Through DTC’s Automated Tender Offer Program

      The exchange agent and DTC have confirmed that any financial institution that is a participant in DTC’s system may use DTC’s automated tender offer program to tender. Participants in the program may, instead of physically completing and signing the letter of transmittal and delivering it to the exchange agent, transmit their acceptance of the exchange offer electronically. They may do so by causing DTC to transfer the outstanding notes to the exchange agent in accordance with its procedures for transfer. DTC will then send an agent’s message to the exchange agent.

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      The term “agent’s message” means a message transmitted by DTC, received by the exchange agent and forming part of the book-entry confirmation, to the effect that:

  •  DTC has received an express acknowledgment from a participant in its automated tender offer program that is tendering outstanding notes that are the subject of such book-entry confirmation;
 
  •  such participant has received and agrees to be bound by the terms of the letter of transmittal or, in the case of an agent’s message relating to guaranteed delivery, that such participant has received and agrees to be bound by the applicable notice of guaranteed delivery; and
 
  •  the agreement may be enforced against such participant.

Determinations Under the Exchange Offer

      We will determine in our sole discretion all questions as to the validity, form, eligibility, time of receipt, acceptance of tendered outstanding notes and withdrawal of tendered outstanding notes. Our determination will be final and binding. We reserve the absolute right to reject any outstanding notes not properly tendered or any outstanding notes our acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the right to waive any defect, irregularities or conditions of tender as to particular outstanding notes. Our interpretation of the terms and conditions of the exchange offer, including the instructions in the letter of transmittal, will be final and binding on all parties. Unless waived, all defects or irregularities in connection with tenders of outstanding notes must be cured within such time as we shall determine. Although we intend to notify holders of defects or irregularities with respect to tenders of outstanding notes, neither we, the exchange agent nor any other person will incur any liability for failure to give such notification. Tenders of outstanding notes will not be deemed made until such defects or irregularities have been cured or waived. Any outstanding notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned to the tendering holder, unless otherwise provided in the letter of transmittal, as soon as practicable following the expiration date.

When We Will Issue New Notes

      In all cases, we will issue new notes for outstanding notes that we have accepted for exchange in the exchange offer only after the exchange agent timely receives:

  •  outstanding notes or a timely book-entry confirmation of such outstanding notes into the exchange agent’s account at DTC; and
 
  •  a properly completed and duly executed letter of transmittal and all other required documents or a properly transmitted agent’s message.

Return of Outstanding Notes not Accepted or Exchanged

      If we do not accept any tendered outstanding notes for exchange or if outstanding notes are submitted for a greater principal amount than the holder desires to exchange, the unaccepted or non-exchanged outstanding notes will be returned to their tendering holder. In the case of outstanding notes tendered by book-entry transfer in the exchange agent’s account at DTC according to the procedures described below, such non-exchanged outstanding notes will be credited to an account maintained with DTC. These actions will occur as promptly as practicable after the expiration or termination of the exchange offer.

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Your Representations to Us

      By signing or agreeing to be bound by the letter of transmittal, you will represent to us that, among other things:

  •  you are not our affiliate (as defined in Rule 144 of the Securities Act);
 
  •  you are not engaged in, and do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of the new notes to be issued in the exchange offer;
 
  •  you are acquiring the new notes in your ordinary course of business; and
 
  •  if you are a broker-dealer, that you will receive new notes for your own account in exchange for outstanding notes that were acquired as a result of market-making activities or other trading activities and that you will comply with the registration and prospectus delivery requirement of the Securities Act in connection with any resale of the new notes.

Book Entry Transfer

      The exchange agent will establish an account with respect to the outstanding notes at DTC for purposes of the exchange offer promptly after the date of this prospectus. Any financial institution participating in DTC’s system may make book-entry delivery of outstanding notes by causing DTC to transfer such outstanding notes into the exchange agent’s account at DTC in accordance with DTC’s procedures for transfer. Holders of outstanding notes who are unable to deliver confirmation of the book-entry tender of their outstanding notes into the exchange agent’s account at DTC or all other documents required by the letter of transmittal to the exchange agent on or prior to 5:00 p.m., Eastern time, on the expiration date must tender their outstanding notes according to the guaranteed delivery procedures described below.

Guaranteed Delivery Procedures

      If you wish to tender your outstanding notes but your outstanding notes are not immediately available or you cannot deliver your outstanding notes, the letter of transmittal or any other required documents to the exchange agent or comply with the applicable procedures under DTC’s automated tender offer program prior to the expiration date, you may tender if:

  •  the tender is made through a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States, or an eligible guarantor institution;
 
  •  prior to the expiration date, the exchange agent receives from such member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., commercial bank or trust company having an office or correspondent in the United States, or eligible guarantor institution either a properly completed and duly executed notice of guaranteed delivery by facsimile transmission, mail or hand delivery or a properly transmitted agent’s message and notice of guaranteed delivery:

  •  setting forth your name and address, the registered number(s) of your outstanding notes and the principal amount of outstanding notes tendered,
 
  •  stating that the tender is being made thereby, and
 
  •  guaranteeing that, within three New York Stock Exchange trading days after the expiration date, the letter of transmittal or facsimile thereof, together with the outstanding notes or a book-entry confirmation, and any other documents required by the letter of transmittal will be deposited by the eligible guarantor institution with the exchange agent; and

  •  the exchange agent receives such properly completed and executed letter of transmittal or facsimile thereof, as well as all tendered outstanding notes in proper form for transfer or a book-entry

36


 

  confirmation, and all other documents required by the letter of transmittal, within three New York Stock Exchange trading days after the expiration date.

      Upon request to the exchange agent, a notice of guaranteed delivery will be sent you if you wish to tender your outstanding notes according to the guaranteed delivery procedures described above.

Withdrawal of Tenders

      Except as otherwise provided in this prospectus, you may withdraw your tender at any time prior to 5:00 p.m., Eastern time, on the expiration date.

      For a withdrawal to be effective:

  •  the exchange agent must receive a written notice of withdrawal at the address indicated on the cover page of the letter of transmittal, or
 
  •  you must comply with the appropriate procedures of DTC’s automated tender offer program system.

      Any notice of withdrawal must:

  •  specify the name of the person who tendered the outstanding notes to be withdrawn, and
 
  •  identify the outstanding notes to be withdrawn, including the principal amount of such withdrawn outstanding notes.

      If outstanding notes have been tendered under the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at DTC to be credited with withdrawn outstanding notes and otherwise comply with the procedures of DTC.

      We will determine all questions as to the validity, form, eligibility and time of receipt of notice of withdrawal. Our determination shall be final and binding on all parties. We will deem any outstanding notes so withdrawn not to have been validly tendered for exchange for purposes of the exchange offer.

      Any outstanding notes that have been tendered for exchange but that are not exchanged for any reason will be returned to their holder without cost to the holder. In the case of outstanding notes tendered by book-entry transfer into the exchange agent’s account at DTC according to the procedures described above, such outstanding notes will be credited to an account maintained with DTC for the outstanding notes. This return or crediting will take place as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. You may retender properly withdrawn outstanding notes by following one of the procedures described under “— Procedures for Tendering” above at any time on or prior to the expiration date.

Fees and Expenses

      We will bear the expenses of soliciting tenders. The principal solicitation is being made by mail; however, we may make additional solicitation by facsimile, telephone, electronic mail or in person by our officers and regular employees and those of our affiliates.

      We have not retained any dealer-manager in connection with the exchange offer and will not make any payments to broker-dealers or others soliciting acceptances of the exchange offer. We will, however, pay the exchange agent reasonable and customary fees for its services and reimburse it for its related reasonable out-of-pocket expenses.

      We will pay the cash expenses to be incurred in connection with the exchange offer. They include:

  •  Securities and Exchange Commission registration fees;
 
  •  fees and expenses of the exchange agent and trustee;
 
  •  our accounting and legal fees and printing costs;

37


 

  •  reasonable fees and disbursements of counsel for the initial purchasers of the outstanding notes incurred in connection with the registration statement of which this prospectus is a part and, in the event of any shelf registration statement, reasonable fees and disbursements of one firm or counsel designated by the holders of a majority of the aggregate principal amount of the outstanding notes to act as counsel for the holders in connection with the shelf registration statement; and
 
  •  related fees and expenses.

Transfer Taxes

      You will not be obligated to pay any transfer taxes in connection with the tender of outstanding notes unless you instruct us to register new notes in the name of, or request that outstanding notes not tendered or accepted in the exchange offer be returned to, a person other than the registered tendering holder. In those cases, you will be responsible for the payment of any applicable transfer taxes.

Consequences of Failure to Exchange

      If you do not exchange new notes for your outstanding notes under the exchange offer, you will remain subject to the existing restrictions on transfer of the outstanding notes. In general, you may not offer or sell the outstanding notes unless they are registered under the Securities Act, or unless the offer or sale is exempt from the registration requirements under the Securities Act and applicable state securities laws. Except as required by the registration rights agreement, we do not intend to register resales of the outstanding notes under the Securities Act.

Accounting Treatment

      We will record the new notes in our accounting records at the same carrying value as the outstanding notes. This carrying value is the aggregate principal amount of the outstanding notes less any bond discount, as reflected in our accounting records on the date of exchange. Accordingly, we will not recognize any gain or loss for accounting purposes in connection with the exchange offer.

Other Considerations

      Participation in the exchange offer is voluntary, and you should carefully consider whether to accept. You are urged to consult your financial and tax advisors in making your own decision on what action to take.

      We may in the future seek to acquire untendered outstanding notes in open market or privately negotiated transactions, through subsequent exchange offers or otherwise. We have no present plans to acquire any outstanding notes that are not tendered in the exchange offer or to file a registration statement to permit resales of any untendered outstanding notes.

Exchange Agent

      We have appointed U.S. Bank National Association as exchange agent for the exchange offer. Questions, requests for assistance and requests for additional copies of the prospectus, the letter of transmittal and other related documents should be directed to the exchange agent addressed as follows:

         
By Mail:
  By Hand:   By Facsimile:
U.S. Bank National Association
60 Livingston Avenue
St. Paul, MN 55107
Attention: Specialized Finance
(800) 934-6802
  U.S. Bank National Association
60 Livingston Avenue
St. Paul, MN 55107
Attention: Specialized Finance
(800) 934-6802
  (651) 495-8097
(For Eligible Institutions Only)
Confirm by Telephone:
(651) 495-3913

38


 

USE OF PROCEEDS

      We will not receive any proceeds from the issuance of the new notes. We are making this exchange offer solely to satisfy our obligations under our registration rights agreement. In consideration for issuing the new notes as contemplated by this prospectus, we will receive outstanding notes in a like principal amount. The form and terms of the new notes are identical in all respects to the form and terms of the outstanding notes, except the new notes have been registered under the Securities Act and will not contain certain restrictions on transfer or registration rights. Outstanding notes surrendered in exchange for the new notes will be retired and canceled and will not be reissued. Accordingly, the issuance of the new notes will not result in any change in our outstanding indebtedness. In November 2003, we received net proceeds of approximately $340.0 million from the offering of the outstanding notes. The net proceeds, together with cash on hand, were used as follows: (1) $275.6 million was used to repay the term loan portion of our Florida/Texas senior secured credit facility, our subordinated term loan and our Nashville mezzanine loan and to pay certain fees and expenses related to the ResortQuest acquisition; and (2) $79.2 million was used, together with cash on hand, to repay ResortQuest’s senior notes and its credit facility.

39


 

CAPITALIZATION

      The following table sets forth cash and cash equivalents and capitalization as of September 30, 2003 on an actual basis and pro forma as adjusted basis after giving effect to the November Transactions.

                     
As of September 30, 2003

Pro Forma,
Actual As Adjusted


(In millions)
Unrestricted cash and cash equivalents(1)
  $ 24.8     $ 3.9  
Restricted cash and cash equivalents(2)
    150.5       165.0  
     
     
 
   
Total cash and cash equivalents
  $ 175.3     $ 168.9  
     
     
 
Long-term debt:
               
 
Gaylord Nashville senior secured debt due 2004
  $ 201.2     $ 201.2  
 
Gaylord Nashville mezzanine debt due 2004
    66.0        
 
Gaylord 2003 Florida/ Texas senior term loan due 2006
    150.0        
 
Gaylord 2003 Florida/ Texas revolving credit facility due 2006(3)
           
 
Gaylord 2003 Florida/ Texas subordinated term loan due 2006
    50.0        
 
Other debt(4)
    1.2       1.2  
 
8% Senior notes due 2013
          350.0  
     
     
 
   
Total debt
    468.4       552.4  
   
Total stockholders’ equity(5)
    806.3       907.1  
     
     
 
   
Total capitalization
  $ 1,274.7     $ 1,459.5  
     
     
 


(1)  The pro forma, as adjusted calculation includes $24.8 million of our unrestricted cash as of September 30, 2003, plus $1.3 million of ResortQuest’s unrestricted cash as of September 30, 2003, less $22.2 million of cash used, together with the proceeds from the issuance of the outstanding notes, to retire our senior term loan, our Nashville mezzanine loan, ResortQuest’s credit facility, ResortQuest’s senior notes, and our subordinated term loan, and to pay fees and expenses related to the ResortQuest acquisition and in connection with the repayment of indebtedness.
 
(2)  The pro forma, as adjusted calculation includes $150.5 million of our restricted cash as of September 30, 2003 and $14.5 million of ResortQuest’s restricted cash as of September 30, 2003.
 
(3)  The pro forma, as adjusted calculation reflects no borrowings under our old $25.0 million revolving credit facility. Our new revolving credit facility is not reflected in the pro forma, as adjusted calculation.
 
(4)  The pro forma, as adjusted calculation includes $6,292 of ResortQuest’s capital leases as of September 30, 2003. We expect approximately $11 million of letters of credit to be outstanding on a pro forma, as adjusted basis.
 
(5)  The pro forma, as adjusted calculation reflects $7.5 million of after-tax charges related to certain prepayment penalties and the write-off of debt issuance costs associated with the repayment of our and ResortQuest’s indebtedness in connection with issuance of the outstanding notes and $108.4 million of stockholders’ equity adjustment related to the ResortQuest acquisition.

40


 

UNAUDITED PRO FORMA COMBINED CONDENSED

CONSOLIDATED FINANCIAL INFORMATION

      The following unaudited pro forma combined condensed consolidated financial statements have been prepared to give effect to the issuance of the outstanding notes, and the merger of Gaylord and ResortQuest using the purchase method of accounting, and are based upon the assumptions and adjustments described in the notes below. These unaudited pro forma combined condensed consolidated financial statements were prepared as if the notes offering and related debt repayments, and the ResortQuest acquisition had been completed on January 1, 2002, for statements of operations purposes, and on September 30, 2003, for balance sheet purposes.

      The unaudited pro forma combined condensed consolidated financial statements are presented for illustrative purposes only and are not necessarily indicative of the financial position or results of operations that would have actually been reported had the notes been issued, the indebtedness repaid and the ResortQuest acquisition occurred on the dates indicated, nor is it necessarily indicative of the future financial position or results of operations of the combined company. The unaudited pro forma combined condensed consolidated financial statements include adjustments, which are based upon preliminary estimates, to reflect the allocation of purchase price to the acquired assets and assumed liabilities of ResortQuest. The final allocation of the purchase price will be determined after the completion of the ResortQuest acquisition and will be based upon actual net tangible and intangible assets acquired and liabilities assumed. The preliminary purchase price allocation for ResortQuest is subject to revision as more detailed analysis is completed and additional information related to the fair values of ResortQuest’s assets and liabilities becomes available. Any change in the fair value of the net assets of ResortQuest will change the amount of the purchase price allocable to goodwill. Additionally, changes in ResortQuest’s working capital, including the results of operations from September 30, 2003 through the date the ResortQuest acquisition was completed, will change the amount of goodwill recorded. The final purchase price is dependent on the actual number of shares of Gaylord common stock issued, the actual number of Gaylord stock options exchanged and actual direct merger costs incurred. Final purchase accounting adjustments may differ materially from the pro forma adjustments presented herein.

      The unaudited pro forma combined condensed consolidated financial statements also include adjustments to reflect the issuance of the outstanding notes plus amortization of estimated financing costs.

      These unaudited pro forma combined condensed consolidated financial statements are based upon, and should be read in conjunction with, the historical consolidated financial statements of Gaylord and ResortQuest and related notes and other financial information included in this prospectus.

41


 

UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED

BALANCE SHEET

SEPTEMBER 30, 2003

                                                     
ResortQuest Acquisition Notes
Historical Pro Forma Offering


Pro Forma Pro Forma
Gaylord ResortQuest Adjustments Combined Adjustments Combined






(amounts in thousands)
ASSETS
Current Assets:
                                               
 
Cash and cash equivalents — unrestricted
  $ 24,772     $ 1,287     $     $ 26,059     $ (22,160 )(o)   $ 3,899  
 
Cash and cash equivalents — restricted
    150,543       14,475             165,018             165,018  
 
Trade receivables, net
    21,271       9,178             30,449             30,449  
 
Deferred financing costs
    29,462                   29,462       (380 )(p)     29,082  
 
Deferred income taxes
    20,553       820       1,142 (f)     22,515             22,515  
 
Other current assets
    27,647       5,559       (2,475 )(g)     30,731             30,731  
 
Current assets of discontinued operations
    2,185                   2,185             2,185  
     
     
     
     
     
     
 
   
Total current assets
    276,433       31,319       (1,333 )     306,419       (22,540 )     283,879  
Property and Equipment, Net
    1,238,002       33,208       (1,971 )(h)     1,264,164             1,264,164  
                      (5,075 )(h)                        
Goodwill
    6,915       205,933       (29,718 )(a)     151,733             151,733  
                      (38,835 )(a)                        
                      4,165 (a,b)                        
                      (127,367 )(a,c)                        
                      104,901 (a,d)                        
                      3,464 (a,e)                        
                      10,838 (a,f)                        
                      2,475 (a,g)                        
                      7,046 (a,h)                        
                      1,916 (a,j)                        
Intangible Assets, Net of Accumulated Amortization
    1,970             29,718 (a)     31,688             31,688  
Indefinite Lived Intangible Assets
                    38,835 (a)     38,835             38,835  
Investments
    482,012                   482,012             482,012  
Estimated Fair Value of Derivative Assets
    200,274                   200,274             200,274  
Long-term Deferred Financing Costs
    78,177       781             78,958       2,190 (p)     81,148  
Other Long-term Assets
    22,370       5,247       (t)     27,617             27,617  
Long-term Assets of Discontinued Operations
    8,398                   8,398             8,398  
     
     
     
     
     
     
 
   
Total assets
  $ 2,314,551     $ 276,488     $ (941 )   $ 2,590,098     $ (20,350 )   $ 2,569,748  
     
     
     
     
     
     
 

42


 

UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED

BALANCE SHEET — (Continued)

SEPTEMBER 30, 2003

                                                     
ResortQuest Acquisition Notes
Historical Pro Forma Offering


Pro Forma Pro Forma
Gaylord ResortQuest Adjustments Combined Adjustments Combined






(amounts in thousands)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
                                               
 
Current portion of long-term debt
  $ 74,543     $ 83,906     $     $ 158,449     $ (149,906 )(q)   $ 8,543  
 
Accounts payable and accrued liabilities
    85,710       45,757       3,975 (b)     141,726       (3,975 )(r)     133,586  
                      4,165 (b)             (4,165 )(r)        
                      2,119 (j)                        
 
Current liabilities of discontinued operations
    3,167                   3,167             3,167  
     
     
     
     
     
     
 
   
Total current liabilities
    163,420       129,663       10,259       303,342       (158,046 )     145,296  
Secured Forward Exchange Contract
    613,054                   613,054             613,054  
Long-term Debt and Capital Lease Obligations, Net of Current Portion
    393,842                   393,842       150,000 (s)     543,842  
Deferred Income Taxes, Net
    246,962       10,708       11,980 (f)     269,650       (4,798 )(f)     264,852  
Estimated Fair Value of Derivative Liabilities
    17,177                   17,177             17,177  
Other Long-term Liabilities
    70,981       4,572             75,553             75,553  
Long-term Liabilities of Discontinued Operations
    828                   828             828  
Minority Interest of Discontinued Operations
    2,019                   2,019             2,019  
Stockholders’ Equity:
                                               
 
Preferred stock
                                   
 
Common stock
    339       193       (193 )(c)     392             392  
                      53 (d)                        
 
Additional paid-in capital
    523,330       153,952       (153,952 )(c)     632,202             632,202  
                      104,848 (d)                        
                      4,024 (e)                        
 
Retained earnings
    298,438       7,136       (3,975 )(b)     298,438       (7,506 )(k)     290,932  
                      (2,958 )(c)                        
                      (203 )(j)                        
 
Excess distributions
          (29,500 )     29,500 (c)                  
 
Other stockholders’ equity
    (15,839 )     (236 )     236 (c)     (16,399 )           (16,399 )
                      (560 )(e)                        
     
     
     
     
     
     
 
 
Total stockholders’ equity
    806,268       131,545       (23,180 )     914,633       (7,506 )     907,127  
     
     
     
     
     
     
 
 
Total liabilities and stockholders’ equity
  $ 2,314,551     $ 276,488     $ (941 )   $ 2,590,098     $ (20,350 )   $ 2,569,748  
     
     
     
     
     
     
 

The accompanying notes are an integral part of these unaudited pro forma

combined condensed consolidated financial statements.

43


 

UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT

OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003

                                                     
ResortQuest
Acquisition Notes
Historical Pro Forma Offering


Pro Forma Pro Forma
Gaylord ResortQuest Adjustments Combined Adjustments Combined






(amounts in thousands, except per share data)
Revenues
  $ 317,951     $ 153,187     $     $ 471,138     $     $ 471,138  
Operating Expenses:
                                               
 
Operating costs
    191,933       64,472             256,405             256,405  
 
Selling, general and administrative
    79,941       38,833               118,774               118,774  
 
Preopening costs
    7,111                   7,111             7,111  
 
Other expenses from managed entities
          28,062             28,062             28,062  
 
Depreciation
    39,661       5,030       (664 )(l)     44,027             44,027  
 
Amortization
    3,783             2,841  (l)     6,624               6,624  
     
     
     
     
     
     
 
   
Operating (loss) income
    (4,478 )     16,790       (2,177 )     10,135             10,135  
Interest Expense, Net of Amounts Capitalized
    (31,139 )     (6,306 )           (37,445 )     (4,758 )(i)     (42,203 )
Interest Income
    1,773                     1,773             1,773  
Unrealized Loss on Viacom Stock
    (27,067 )                 (27,067 )           (27,067 )
Unrealized Gain on Derivatives
    24,016                   24,016             24,016  
Other Gains and (Losses), Net
    435                   435             435  
     
     
     
     
     
     
 
 
Income (loss) before provision for income taxes and discontinued operations
    (36,460 )     10,484       (2,177 )     (28,153 )     (4,758 )     (32,911 )
Provision (Benefit) for Income Taxes
    (15,974 )     5,266       (849 )(m)     (11,557 )     (1,855 )(m)     (13,412 )
     
     
     
     
     
     
 
 
Income (loss) from continuing operations before discontinued operations
  $ (20,486 )   $ 5,218     $ (1,328 )   $ (16,596 )   $ (2,903 )   $ (19,499 )
     
     
     
     
     
     
 
Income (Loss) Per Share:
                                               
 
Income (loss) from continuing operations before discontinued operations
  $ (0.61 )   $ 0.27             $ (0.42 )           $ (0.50 )
     
     
             
             
 
 
Shares used in per share calculation — basic
    33,818       19,252       (13,958 )(n)     39,112             39,112  
     
     
     
     
     
     
 
Income (Loss) Per
                                               
 
Share — Assuming Dilution:
                                               
 
Income (loss) from continuing operations before discontinued operations
  $ (0.61 )   $ 0.27             $ (0.42 )           $ (0.50 )
     
     
             
             
 
 
Shares used in per share calculation — diluted
    33,840       19,293       (13,987 )(n)     39,146             39,146  
     
     
     
     
     
     
 

The accompanying notes are an integral part of these unaudited pro forma

combined condensed consolidated financial statements.

44


 

UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT

OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2002

                                                     
ResortQuest
Acquisitions Notes
Historical Pro Forma Offering


Pro Forma Pro Forma
Gaylord ResortQuest Adjustments Combined Adjustments Combined






(amounts in thousands, except per share data)
Revenues
  $ 405,252     $ 190,241     $     $ 595,493     $     $ 595,493  
Operating Expenses:
                                               
 
Operating costs
    254,583       83,607             338,190             338,190  
 
Selling, general and administrative
    108,732       66,484             175,216             175,216  
 
Preopening costs
    8,913                   8,913             8,913  
 
Other expenses from managed entities
          36,504             36,504             36,504  
 
Gain on sale of assets
    (30,529 )                 (30,529 )           (30,529 )
 
Restructuring charges, net
    (17 )                 (17 )           (17 )
 
Depreciation
    52,694       6,465       (912 )(l)     58,247             58,247  
 
Amortization
    3,786             3,788 (l)     7,574             7,574  
     
     
     
     
     
     
 
   
Operating income (loss)
    7,090       (2,819 )     (2,876 )     1,395             1,395  
Interest Expense, Net of Amounts Capitalized
    (46,960 )     (6,825 )           (53,785 )     (9,108 )(i)     (62,893 )
Interest Income
    2,808       566             3,374             3,374  
Unrealized Loss on Viacom Stock
    (37,300 )                 (37,300 )           (37,300 )
Unrealized Gain on Derivatives
    86,476                   86,476             86,476  
Other Gains and (Losses), Net
    1,163       26             1,189             1,189  
     
     
     
     
     
     
 
 
Income (loss) before income taxes, discontinued operations and cumulative effect of accounting change
    13,277       (9,052 )     (2,876 )     1,349       (9,108 )     (7,759 )
Provision (Benefit) for Income Taxes
    1,318       (1,848 )     (1,122 )(m)     (1,652 )     (3,552 )(m)     (5,204 )
     
     
     
     
     
     
 
 
Income (loss) from continuing operations before discontinued operations and cumulative effect of accounting change
  $ 11,959     $ (7,204 )   $ (1,754 )   $ 3,001     $ (5,556 )   $ (2,555 )
     
     
     
     
     
     
 
Income (Loss) Per Share:
                                               
 
Income (loss) from continuing operations before discontinued operations and cumulative effect of accounting change
  $ 0.36     $ (0.37 )           $ 0.08             $ (0.07 )
     
     
             
             
 
 
Shares used in per share calculation — basic
    33,763       19,249       (13,956 )(n)     39,056             39,056  
     
     
     
     
     
     
 
Income (Loss) Per Share —
                                               
 
Assuming Dilution:
                                               
 
Income (loss) from continuing operations before discontinued operations and cumulative effect of accounting change
  $ 0.36     $ (0.37 )           $ 0.08             $ (0.07 )
     
     
             
             
 
 
Shares used in per share calculation — diluted
    33,794       19,370       (13,970 )(n)     39,194             39,194  
     
     
     
     
     
     
 

The accompanying notes are an integral part of these unaudited pro forma

combined condensed consolidated financial statements.

45


 

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED

FINANCIAL INFORMATION
 
1. Basis of Pro Forma Presentation

      On November 20, 2003, pursuant to the Agreement and Plan of Merger dated as of August 4, 2003 Gaylord acquired ResortQuest, one of the nation’s largest vacation rental property management companies with approximately 20,000 units under management in 50 premier destination resorts located in the continental United States and Canada. Under the terms of the agreement, ResortQuest stockholders received 0.275 shares of Gaylord common stock for each outstanding share of ResortQuest common stock, and the ResortQuest option holders received 0.275 options to purchase Gaylord common stock for each outstanding option to purchase one share of ResortQuest common stock. Based on the number of shares of ResortQuest common stock outstanding as of September 30, 2003, Gaylord would have issued approximately 5.3 million shares of Gaylord common stock and would have issued an estimated 596,140 options. Together with direct merger costs, this would have resulted in an aggregate purchase price of approximately $113.1 million plus the assumption of ResortQuest’s outstanding debt as of September 30, 2003. The actual amount of Gaylord shares and options to be issued was determined on the effective date of the ResortQuest acquisition based on the number of shares of ResortQuest common stock and options actually outstanding on November 20, 2003. Gaylord will account for the ResortQuest acquisition under the purchase method of accounting.

      The proceeds from issuance of the notes on November 12, 2003 of $350.0 million were used to repay the ResortQuest credit facility and senior notes, the Gaylord senior term loan, the Gaylord Nashville mezzanine loan, the Gaylord subordinated term loan, the ResortQuest acquisition fees and expenses, estimated offering costs and certain prepayment penalties.

2.     Preliminary Purchase Price of ResortQuest

      The unaudited pro forma combined condensed consolidated financial statements reflect an estimated purchase price of approximately $113.1 million plus the assumption of ResortQuest’s outstanding debt as if the ResortQuest acquisition had been completed on September 30, 2003. The preliminary fair value of the Gaylord common stock to be issued is based on ResortQuest common stock outstanding as of September 30, 2003 (19,255,833 shares), the exchange ratio (0.275 Gaylord common shares for each ResortQuest common share) and the average market price of Gaylord’s common stock ($19.81), which is based on an average of the closing prices from two days before, the day of, and two days after the date of the definitive agreement, August 4, 2003. Based on the total number of ResortQuest options outstanding at September 30, 2003, Gaylord would exchange ResortQuest options for options to purchase approximately 596,140 shares of Gaylord common stock. The fair value of the options was determined using the Black-Scholes option pricing model and was based on the following weighted average assumptions: expected volatility — 34.42%; expected life — 4.03 years; risk-free interest rate — 2.9%; and expected dividend yield — 0%. The estimated total purchase price of the proposed ResortQuest acquisition is as follows (amounts in thousands):

           
Fair value of Gaylord common stock issued
  $ 104,901  
Fair value of Gaylord options issued
    4,024  
Estimated direct merger costs by Gaylord
    4,165  
     
 
 
Total
  $ 113,090  
     
 

      Under the purchase method of accounting, the total estimated purchase price is allocated to ResortQuest’s net tangible and identifiable intangible assets based upon their estimated fair value as of the date of completion of the ResortQuest acquisition. Any excess of the purchase price over the estimated fair value of the net tangible and identifiable intangibles will be recorded as goodwill. Based upon the estimated purchase price and the preliminary valuation, the preliminary purchase price allocation, which is

46


 

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
FINANCIAL INFORMATION — (Continued)

subject to change based on Gaylord’s final analysis and changes in ResortQuest’s working capital from September 30, 2003, through the date of the acquisition is as follows:

         
Amount

(in thousands)
Cash acquired
  $ 1,287  
Tangible assets acquired
    60,889  
Amortizable intangible assets
    29,718  
Trade names
    38,835  
Goodwill
    144,818  
     
 
Total assets acquired
    275,547  
Liabilities assumed
    (79,111 )
Debt assumed
    (83,906 )
Deferred stock-based compensation
    560  
     
 
Net assets acquired
  $ 113,090  
     
 

      Tangible assets acquired totaling $60.9 million include $14.5 million of restricted cash, $26.2 million of property and equipment and $9.2 million of net trade receivables. A preliminary estimate of $29.7 million has been allocated to amortizable intangible assets consisting primarily of existing property management contracts and ResortQuest’s customer database. Property management contracts represent existing contracts with property owners, homeowner associations and other direct ancillary service contracts.

      Gaylord expects to amortize property management contracts on a straight-line basis over the estimated useful life of the contracts which is estimated to be 10 years for all contracts originating in Hawaii and seven years for contracts originating in the continental United States and Canada. Gaylord expects to amortize the customer database over a two-year period. Included in the tangible assets acquired is ResortQuest’s vacation rental management software, First Resort Software. Gaylord expects to amortize First Resort Software over an estimated useful life of five years.

      The depreciation and amortization related to the fair value adjustments are reflected as pro forma adjustments to the unaudited pro forma combined condensed consolidated financial statements.

      Of the total estimated purchase price, approximately $38.8 million has been allocated to trade names. The assumption used in the preliminary valuation is that trade names, which consist primarily of the “ResortQuest” trade name, will not be amortized and will have an indefinite remaining useful life. If Gaylord should change the assumptions used in the valuation, amounts preliminarily allocated to trade names may significantly decrease or be eliminated, and amounts allocated to amortizable intangible assets may increase significantly, which could result in a material increase in amortization of intangible assets.

      Of the total estimated purchase price, a preliminary estimate of $144.8 million has been allocated to goodwill. Goodwill represents the excess of the purchase price over the fair market value of the net tangible and intangible assets acquired and liabilities assumed. 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 preliminary purchase price allocation for ResortQuest is subject to revision as more detailed analysis is completed and additional information on the fair values of ResortQuest’s assets and liabilities becomes available. Any change in the fair value of the net assets of ResortQuest will change the amount of the purchase price allocable to goodwill. Final purchase accounting adjustments may therefore differ materially from the pro forma adjustments presented here.

47


 

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
FINANCIAL INFORMATION — (Continued)

3.     Pro Forma Adjustments

      Pro forma adjustments are necessary to reflect the estimated purchase price, to adjust amounts related to ResortQuest’s net tangible and intangible assets to a preliminary estimate of their fair values, to reflect the amortization expense related to the estimated amortizable intangible assets, to reflect changes in depreciation and amortization expense resulting from the estimated fair value adjustments to net tangible assets and to reflect the income tax effect related to the pro forma adjustments. Intercompany transactions between Gaylord and ResortQuest were not significant. Certain reclassifications have been made to conform ResortQuest’s historical and unaudited pro forma combined condensed consolidated financial statements to Gaylord’s financial presentation.

      The pro forma combined provision (benefit) for income taxes does not reflect the amounts that would have resulted had Gaylord and ResortQuest filed consolidated income tax returns during the periods presented.

      The accompanying unaudited pro forma combined condensed consolidated financial statements have been prepared as if the ResortQuest acquisition was completed on September 30, 2003, for balance sheet purposes and as of January 1, 2002, for statements of operations purposes and reflect the following pro forma adjustments:

        (a) To eliminate ResortQuest existing intangible assets and to establish indefinite lived and amortizable intangible assets and goodwill resulting from the proposed purchase.
 
        (b) To record estimated direct merger costs of approximately $4.2 million to be incurred by Gaylord that are eligible to be capitalized in accordance with SFAS No. 141, “Business Combinations.” ResortQuest’s estimated direct costs of approximately $4.0 million have been reflected as an accrual and a reduction in ResortQuest’s retained earnings. Actual amounts could differ materially upon close of the proposed acquisition.
 
        (c) To eliminate adjusted pro forma stockholders’ equity of ResortQuest.
 
        (d) To record the estimated fair value of Gaylord shares of common stock to be issued.
 
        (e) To record the estimated fair value of $4.0 million of Gaylord vested and unvested options to be exchanged. For unvested awards, FASB Interpretation No. 44 requires that the intrinsic value (estimated at approximately $560,000 as of September 30, 2003) be allocated to unearned compensation and be expensed over the remaining future vesting period. The actual amount to be allocated to unearned compensation expense will be based on the stock price of Gaylord common stock and the number of unvested ResortQuest options on the date the ResortQuest acquisition is complete. The amortization of unearned compensation expense established at the date of the ResortQuest acquisition for unvested stock options as if the ResortQuest acquisition were effective January 1, 2002, is immaterial and has not been included in the unaudited pro forma combined condensed consolidated statements of operations for the nine months ended September 30, 2003 and the year ended December 31, 2002.
 
        (f) To adjust deferred tax assets and liabilities to reflect the impact of the pro forma adjustments at a tax rate of 39%.
 
        (g) To reduce ResortQuest’s inventory balance to conform ResortQuest’s accounting treatment for certain inventory items, including but not limited to linens, soaps, shampoos and miscellaneous supplies, to Gaylord’s method of accounting.
 
        (h) To adjust the ResortQuest vacation rental management software by approximately $2.0 million to its fair value based on preliminary valuations and to adjust the historical net book value of $5.1 million related to ResortQuest’s accounting and financial reporting software platform to

48


 

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
FINANCIAL INFORMATION — (Continued)

  zero. Gaylord intends to replace ResortQuest’s current accounting and financial reporting software platform with Gaylord’s accounting and financial reporting platform.
 
        (i) To adjust interest expense (including the amortization of deferred financing costs) for the estimated changes in interest expense resulting from the issuance of the notes offset by the debt repayments of the ResortQuest credit facility and senior notes and the Gaylord Nashville mezzanine loan, senior term loan and subordinated term loan.
 
        (j) Certain ResortQuest employees have existing employment contracts requiring payments by ResortQuest under certain circumstances, including change of control. These contractual payments are estimated to aggregate approximately $2.1 million in which approximately $1.9 million is eligible to be capitalized in accordance with EITF 95-8 “Accounting for Contingent Consideration Paid to the Shareholders of an Acquired Enterprise in a Purchase Business Combination” whereby the amount will be accounted for as an adjustment of the purchase price of ResortQuest. These capitalized items include change of control payments and other severance related costs.
 
        (k) To record the write-off of deferred financing costs and to recognize prepayment penalties aggregating $12.3 million, offset by an income tax benefit of $4.8 million utilizing a statutory tax rate of 39%.
 
        (l) To adjust depreciation expense related to purchase price adjustments of ResortQuest’s property and equipment and amortization expense related to the purchase price of the amortizable intangible assets.
 
        (m) To record the income tax effects of the pro forma statement of operations adjustments utilizing a statutory tax rate of 39%.
 
        (n) Represents reduction in weighted average shares outstanding based on the 0.275 exchange ratio in the ResortQuest acquisition. Shares used to calculate unaudited pro forma net income (loss) per basic share were computed by adding approximately 5.3 million shares assumed to be issued in exchange for the outstanding ResortQuest shares to Gaylord’s weighted average shares outstanding. Shares used to calculate unaudited pro forma net income per diluted share were computed by adding approximately 5.3 million assumed to be issued and approximately 107,000 options assumed to be issued and dilutive to Gaylord’s weighted average shares outstanding.
 
        (o) Reflects the use of cash on hand for payment of certain fees and expenses.
 
        (p) To record the estimated deferred financing costs associated with the offering of $10.3 million, offset by the write-off of deferred financing costs of $0.8 million related to the extinguishment of ResortQuest’s credit facility and senior notes and $7.7 million related to Gaylord’s mezzanine loan, senior term loan and subordinated term loan (of which $0.4 million was included in current assets).
 
        (q) To record the prepayment of the $33.9 million ResortQuest credit facility, the $50.0 million ResortQuest senior notes, and the $66.0 million Gaylord Nashville mezzanine loan from the proceeds of the offering.
 
        (r) To record the payment of the estimated direct merger costs of approximately $4.2 million to be incurred by Gaylord and $4.0 million to be incurred by ResortQuest from the proceeds of the offering.
 
        (s) To record the $350.0 million notes offering, offset by the prepayment of $50.0 million of the Gaylord subordinated term loan and the prepayment of $150.0 million of the Gaylord senior term loan from the proceeds of the notes offering.

49


 

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
FINANCIAL INFORMATION — (Continued)

        (t) As of September 30, 2003, ResortQuest had an outstanding note receivable totaling approximately $4 million which is collateralized by certain residential property. During November 2003, Gaylord contracted an independent external third party to appraise the property, confirm outstanding senior lien claims and assess the associated credit risk. Based on Gaylord’s assessment of the appraisal, the Company intends to recognize a valuation allowance effective at closing of the ResortQuest acquisition of approximately $3.8 million which will be accounted for as an adjustment of the ResortQuest purchase price allocations. The establishment of this valuation allowance, which will decrease the amount of the asset represented by the note receivable and increase the amount of the purchase price allocable to goodwill, has not been reflected in the accompanying pro forma combined condensed consolidated financial statements as the impairment was subsequent to September 30, 2003.
 
4. Integration and Miscellaneous Costs Related to ResortQuest Merger

      The unaudited pro forma combined condensed consolidated financial statements do not reflect any anticipated cost savings or synergies that are anticipated to result from the ResortQuest acquisition as there can be no assurances that such cost savings or synergies will occur.

      The unaudited pro forma combined condensed consolidated financial statements do not include any adjustments for liabilities resulting from integration planning, severance or relocation costs related to ResortQuest employees, costs of vacating some facilities of ResortQuest, or other costs associated with existing activities of ResortQuest that could affect amounts in the unaudited pro forma combined condensed consolidated financial statements. In addition, Gaylord may incur significant restructuring changes upon completion of the ResortQuest acquisition.

 
5. ResortQuest Other Charges

      ResortQuest’s general and administrative expenses included in the statement of operations for the year ended December 31, 2002 includes approximately $15.1 million of items that ResortQuest management considered other items. These charges include a $10.6 million non-cash write-down of certain capitalized software development costs and intangibles related to ResortQuest’s vacation rental management software, $2.6 million in severance and employee related charges, $1.1 million in professional fees and expenses related to financing and strategic alternatives, and $760,000 of other charges related to property and office closings/consolidations. These other charges have not been adjusted in the unaudited pro forma combined condensed consolidated financial statements.

50


 

SELECTED HISTORICAL FINANCIAL INFORMATION

      The following selected historical financial information of Gaylord and its subsidiaries as of December 31, 2002 and 2001 and for each of the three years in the period ended December 31, 2002 was derived from our audited consolidated financial statements. The selected financial information as of December 31, 2000, 1999 and 1998 and for each of the two years in the period ended December 31, 1999 was derived from previously issued audited consolidated financial statements adjusted for unaudited revisions for discontinued operations. The selected financial information for the nine-month periods ended September 30, 2003 and 2002 was derived from our unaudited consolidated financial statements. These unaudited interim consolidated financial statements have been prepared on a basis consistent with our audited consolidated financial statements and include all adjustments necessary (consisting of normal recurring adjustments) in the opinion of management for a fair presentation of the financial position and the results of operations for these periods. The information in the following table should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Income Statement Data

                                                             
Nine Months Ended
Years Ended December 31, September 30,


1998 1999 2000 2001 2002 2002 2003







(In thousands)
Revenues:
                                                       
 
Hospitality
  $ 237,076     $ 239,248     $ 237,260     $ 228,712     $ 339,380     $ 245,834     $ 272,502  
 
Attractions
    110,452       97,839       69,283       67,064       65,600       50,037       45,310  
 
Corporate and other
    5,797       5,318       64       290       272       144       139  
     
     
     
     
     
     
     
 
   
Total revenues
    353,325       342,405       306,607       296,066       405,252       296,015       317,951  
     
     
     
     
     
     
     
 
Operating expenses:
                                                       
 
Operating costs
    217,064       220,088       210,018       201,299       254,583       188,888       191,933  
 
Selling, general and administrative
    66,428       74,004       89,052       67,212       108,732       76,363       79,941  
 
Preopening costs(1)
          1,892       5,278       15,927       8,913       7,946       7,111  
 
Gain on sale of assets(2)
                            (30,529 )     (30,529 )      
 
Impairment and other charges
                75,660 (9)     14,262 (9)                  
 
Restructuring charges
          2,786 (6)     12,952 (6)     2,182 (6)     (17 )(6)     50        
 
Merger costs
          (1,741 )(7)                              
 
Depreciation and amortization
    34,663       40,857       44,659       38,405       56,480       41,925       43,444  
     
     
     
     
     
     
     
 
   
Total operating expenses
    318,155       337,886       437,619       339,287       398,162       284,643       322,429  
     
     
     
     
     
     
     
 
   
Total operating income (loss)
    35,170       4,519       (131,012 )     (43,221 )     7,090       11,372       (4,478 )
     
     
     
     
     
     
     
 
Interest expense, net of amounts capitalized
    (28,742 )     (15,047 )     (30,307 )     (39,365 )     (46,960 )     (36,289 )     (31,139 )
Interest income
    25,067       5,922       4,046       5,554       2,808       1,917       1,773  
Unrealized gain on Viacom stock, net
                      782       (37,300 )     (39,611 )     (27,067 )
Unrealized gain on derivatives
                      54,282       86,476       80,805       24,016  
Other gains and losses
    19,351 (4)(5)     586,371 (8)(4)     (3,514 )     2,661       1,163       665       435  
     
     
     
     
     
     
     
 
Income (loss) from continuing operations before income taxes
    50,846       581,765       (160,787 )     (19,307 )     13,277       18,859       (36,460 )
Provision (benefit) for income taxes
    19,866       172,831       (52,331 )     (9,142 )     1,318       1,605       (15,974 )
     
     
     
     
     
     
     
 
 
see footnotes beginning on page 52

51


 

                                                             
Nine Months Ended
Years Ended December 31, September 30,


1998 1999 2000 2001 2002 2002 2003







(In thousands)
Income (loss) from continuing operations
    30,980       408,934       (108,456 )     (10,165 )     11,959       17,254       (20,486 )
Gain (loss) from discontinued operations, net of taxes(3)
    (1,359 )     (15,280 )     (47,600 )     (48,833 )     85,757       83,093       36,126  
Cumulative effect of accounting change, net of taxes
                      11,202 (10)     (2,572 )(11)     (2,572 )      
     
     
     
     
     
     
     
 
   
Net income (loss)
  $ 29,621     $ 393,654     $ (156,056 )   $ (47,796 )   $ 95,144     $ 97,775     $ 15,640  
     
     
     
     
     
     
     
 
Income (loss) per share:
                                                       
Income (loss) from continuing operations
  $ 0.94     $ 12.42     $ (3.25 )   $ (0.30 )   $ 0.36     $ 0.51     $ (0.61 )
Gain (loss) from discontinued operations
    (0.04 )     (0.46 )     (1.42 )     (1.45 )     2.54       2.46       1.07  
Cumulative effect of accounting change
                      0.33       (0.08 )     (0.08 )      
     
     
     
     
     
     
     
 
 
Net income (loss)
  $ 0.90     $ 11.96     $ (4.67 )   $ (1.42 )   $ 2.82     $ 2.89     $ 0.46  
     
     
     
     
     
     
     
 
Income (loss) per share-assuming dilution:
                                                       
Income (loss) from continuing operations
  $ 0.93     $ 12.31     $ (3.25 )   $ (0.30 )   $ 0.36     $ 0.51     $ (0.61 )
Gain (loss) from discontinued operations
    (0.04 )     (0.46 )     (1.42 )     (1.45 )     2.54       2.46       1.07  
Cumulative effect of accounting change
                      0.33       (0.08 )     (0.08 )      
     
     
     
     
     
     
     
 
 
Net income (loss)
  $ 0.89     $ 11.85     $ (4.67 )   $ (1.42 )   $ 2.82     $ 2.89     $ 0.46  
     
     
     
     
     
     
     
 
Dividends per share
  $ 0.65     $ 0.80     $     $     $     $     $  
     
     
     
     
     
     
     
 

Other Financial Data

                                                         
Nine Months
Ended
Years Ended December 31, September 30,


1998 1999 2000 2001 2002 2002 2003







Ratio of earnings to fixed charges(13)
    2.61 x     28.03 x                 1.12 x     1.30 x      

Balance Sheet Data

                                                         
As of December 31, As of September 30,


1998 1999 2000 2001 2002 2002 2003







Total assets
  $ 1,012,624     $ 1,741,215     $ 1,930,805 (8)   $ 2,177,644 (8)   $ 2,192,196 (8)   $ 2,209,484     $ 2,314,551  
Total debt
    261,328       297,500       175,500       468,997 (12)     340,638 (12)     355,002       468,385  
Secured forward exchange contract
                613,054 (8)     613,054 (8)     613,054 (8)     613,054 (8)     613,054 (8)
Total stockholders’ equity
    523,587       1,007,149 (10)     765,937       696,988       787,579       797,267       806,268  

  (1)  Preopening costs are the costs associated with pre-opening expenses related to the construction of new hotels, start-up activities and organization costs related to the Company’s Gaylord Palms Resort and Convention Center hotel in Kissimmee, Florida and the new Gaylord Texan hotel under construction in Grapevine, Texas. Gaylord Palms opened in January 2002 and the Gaylord Texan is anticipated to open in April 2004.
 
  (2)  During 2002, the Company sold its one-third interest in the Opry Mills Shopping Center in Nashville, Tennessee and its interest in the related land lease between the Company and the Mills Corporation.

52


 

  (3)  In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” In accordance with the provisions of SFAS No. 144, the Company has presented the operating results and financial position of the following businesses as discontinued operations: WSM-FM and WWTN (the “Radio Operations”); Acuff-Rose Music; OKC Redhawks; Word Entertainment; GET Management; the Company’s artist management business; the Company’s international cable networks; the businesses sold to affiliates of The Oklahoma Publishing Company (“OPUBCO”) in 2001 consisting of Pandora Films, Gaylord Films, Gaylord Sports Management, Gaylord Event Television and Gaylord Production Company; and the Company’s water taxis.
 
  (4)  In 1995, the Company sold its cable television systems. Net proceeds were $198.8 million in cash and a note receivable with a face amount of $165.7 million, which was recorded at $150.7 million, net of a $15.0 million discount. As part of the sale transaction, the Company also received contractual equity participation rights (the “Rights”) equal to 15% of the net distributable proceeds from future asset sales. During 1998, the Company collected the full amount of the note receivable and recorded a pretax gain of $15.0 million related to the note receivable discount. During 1999, the Company received cash and recognized a pretax gain of $129.9 million representing the value of the Rights. The proceeds from the note receivable prepayment and the Rights were used to reduce outstanding bank indebtedness.
 
  (5)  Includes a pretax gain of $16.1 million on the sale of the Company’s investment in the Texas Rangers Baseball Club, Ltd. and a pretax gain totaling $8.5 million primarily related to the settlement of contingencies from the sales of television stations KHTV in Houston and KSTW in Seattle.
 
  (6)  Related primarily to employee severance and contract termination costs. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
 
  (7)  The merger costs relate to the reversal of merger costs associated with the October 1, 1997 merger when TNN and CMT were acquired by CBS.
 
  (8)  Includes a pretax gain of $459.3 million on the divestiture of television station KTVT in Dallas-Ft. Worth in exchange for CBS Series B preferred stock (which was later converted into 11,003,000 shares of Viacom, Inc. Class B common stock), $4.2 million of cash, and other consideration. The CBS Series B preferred stock was included in total assets at its market value of $648.4 million at December 31, 1999. The Viacom, Inc. Class B common stock was included in total assets at its market values of $448.5 million, $485.8 million and $514.4 million at December 31, 2002, 2001 and 2000, respectively, and $421.4 million and $446.2 million at September 30, 2003 and 2002, respectively. During 2000, the Company entered into a seven-year forward secured exchange contract for a notional amount of $613.1 million with respect to 10,937,900 shares of the Viacom, Inc. Class B common stock. Prepaid interest related to the secured forward exchange contract of $118.1 million, $145.0 million and $171.9 million was included in total assets at December 31, 2002, 2001 and 2000, respectively, and $98.0 million and $124.9 million was included in total assets at September 30, 2003 and 2002, respectively.
 
  (9)  Reflects the divestiture of certain businesses and reduction in the carrying values of certain assets.

(10)  Reflects the cumulative effect of the change in accounting method related to recording the derivatives associated with the secured forward exchange contract at fair value as of January 1, 2001, of $18.3 million less a related tax provision of $7.1 million.
 
(11)  Reflects the cumulative effect of the change in accounting method related to adopting the provisions of SFAS No. 142. The Company recorded an impairment loss related to impairment of the goodwill of the Radisson Hotel at Opryland. The impairment loss was $4.2 million, less taxes of approximately $1.6 million.
 
(12)  Related primarily to the construction of the Company’s Gaylord Palms Resort and Convention Center hotel in Kissimmee, Florida and its new Gaylord Texan Resort and Convention Center in Grapevine, Texas.

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(13)  The ratio of earnings to fixed charges is computed by dividing (a) the sum of income from continuing operations before income taxes, plus fixed charges, plus amortization of capitalized interest, less interest capitalized, by (b) fixed charges. Fixed charges consist of interest expense, including capitalized interest, amortization of debt issuance costs and a portion of operating lease rental expense deemed to be representative of the interest factor. For the nine months ended September 30, 2003 and for the years ended December 31, 2000 and 2001, earnings were insufficient to cover fixed charges. The amount of earnings needed to cover fixed charges were $45.6 million for the nine months ended September 30, 2003 and $167.3 million and $37.8 million for the years ended December 31, 2000 and 2001, respectively.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

      Gaylord Entertainment Company is a diversified hospitality and entertainment company which has operated through its subsidiaries, principally in three business segments: Hospitality; Opry and Attractions Group; and Corporate and Other. During 2003, the Company revised its reportable segments for all periods presented based upon the sale of WSM-FM and WWTN(FM), new management and an internal realignment of operational responsibilities. The Company is managed using the three business segments described above, as well as its recently acquired ResortQuest vacation rental and property management business, which will be a new segment. Due to management’s decision during 2003 and 2002 to pursue plans to dispose of certain businesses, those businesses have been presented as discontinued operations as described in more detail below.

 
Hotel Development and Financing

      Gaylord Palms in Kissimmee, Florida commenced operations in January 2002. The Company recorded $4.5 million and $12.2 million of preopening expenses during 2002 and 2001, respectively. The Gaylord Texan in Grapevine, Texas, which is currently under construction and is scheduled to open in April 2004, recorded $4.0 million and $3.1 million of preopening expenses during 2002 and 2001, respectively. The Company expects increases in preopening costs related to the Gaylord Texan until its completion. As of December 31, 2002, the Company had $98.6 million in unrestricted cash in addition to the net cash flows from certain operations to fund its cash requirements including the Company’s 2003 construction commitments related to its hotel construction projects. These resources were not adequate to fund all of the Company’s 2003 construction commitments. Therefore, additional long-term financing was required to fund the Company’s construction commitments related to its hotel development projects and to fund its overall anticipated operating losses in 2003. During May 2003, the Company finalized a $225 million credit facility, which we refer to as the 2003 Florida/ Texas senior secured loans or the 2003 Loans, with Deutsche Bank Trust Company Americas, Bank of America, N.A., CIBC Inc. and a syndicate of other lenders. The 2003 Florida/ Texas senior secured loans were repaid with the proceeds of our outstanding 8% senior notes due 2013 and were replaced by our new revolving credit facility in November 2003. The 2003 Loans consisted of a $25 million senior revolving facility, a $150 million senior term loan and a $50 million subordinated term loan. The 2003 Loans were due in 2006. The senior loan bore interest of LIBOR plus 3.5%. The subordinated loan bore interest of LIBOR plus 8.0%. The 2003 Loans were secured by the Gaylord Palms assets and the Gaylord Texan. At the time of closing the 2003 Loans, the Company engaged LIBOR interest rate swaps which fixed the LIBOR rates of the 2003 Loans at 1.48% in year one and 2.09% in year two. The Company was required to pay a commitment fee equal to 0.5% per year of the average daily unused portion of the 2003 Loans. At the end of the third quarter of 2003, the Company had 100% borrowing capacity of the $25 million revolver. Proceeds of the 2003 Loans were used to pay off the Term Loan of $60 million as discussed below and the remaining net proceeds of approximately $134 million were deposited into an escrow account for the completion of the construction of the Gaylord Texan. At September 30, 2003 the unamortized balances of the 2003 Loans deferred financing costs were $2.6 million in current assets and $4.3 million in long-term assets. The provisions of the 2003 Loans contained covenants and restrictions including compliance with certain financial covenants, restrictions on additional indebtedness, escrowed cash balances, as well as other customary restrictions. As of September 30, 2003, the Company was in compliance with all covenants under the 2003 loans.

 
Recent Developments

      On November 12, 2003, the Company completed its offering of $350 million in aggregate principal amount of senior notes due 2013 (the “Senior Notes”) in an institutional private placement, increased from the $225 million proposed offering previously announced. The interest rate of the Senior Notes is 8%, although the Company has entered into interest rate swaps with respect to $125 million principal amount

55


 

of the Senior Notes which results in an effective interest rate of LIBOR plus 2.95% with respect to that portion of the Senior Notes. The 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 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 Senior Notes before November 15, 2006 with the net cash proceeds from certain equity offerings. The 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 Senior Notes are guaranteed on a senior unsecured basis by each of the Company’s subsidiaries that was a borrower or guarantor under the 2003 Loans, and as of November 2003, of the new revolving credit facility. The net proceeds from the offering of the Senior Notes, together with the Company’s cash on hand, were used as follows:

  •  $275.6 million was used to repay the $150 million senior term loan portion and the $50 million subordinated term loan portion of the 2003 Loans, as well as the remaining $66 million of the Company’s $100 million Mezzanine Loan and to pay certain estimated fees and expenses related to the ResortQuest acquisition; and
 
  •  $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.

      On November 20, 2003, we entered into a new $65.0 million revolving credit facility, which has been increased to $100.0 million. The new revolving credit facility, which replaced the revolving credit portion under the 2003 Florida/Texas senior secured credit facility, matures in May 2006 and borrowings thereunder bear interest at a rate of either LIBOR plus 3.50% or the lending banks’ base rate plus 2.25%. The new revolving credit facility is guaranteed by our subsidiaries that were guarantors or borrowers under our 2003 Florida/Texas senior secured credit facility and is secured by a leasehold mortgage on the Gaylord Palms Resort & Convention Center. The new revolving credit facility requires us to achieve substantial completion and initial opening of the Gaylord Texan by June 30, 2004. The new revolving credit facility was arranged by Deutsche Bank Securities Inc. and Banc of America Securities LLC.

      On November 20, 2003, the Company acquired ResortQuest in a tax-free stock-for-stock merger. ResortQuest, which is based in Destin, Florida, is one of the largest vacation rental property manager in the United States. ResortQuest will continue to operate as a separate brand led by its existing senior management team. Under the terms of the definitive merger agreement, the ResortQuest stockholders received 0.275 shares of Gaylord common stock for each outstanding share of ResortQuest common stock.

      The Company revised its reportable segments during the first quarter of 2003 due to the Company’s decision to dispose of WSM-FM and WWTN(FM). 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 WSM-FM and WWTN(FM) to Cumulus Broadcasting, Inc. (“Cumulus”) in exchange for approximately $62.5 million in cash. The Company also entered into a local marketing agreement with Cumulus pursuant to which, from April 21, 2003 until the closing of the sale of the assets, the Company, for a fee, made available to Cumulus substantially all of the broadcast time on WSM-FM and WWTN(FM). In turn, Cumulus provided programming to be broadcast during such broadcast time and collected revenues from the advertising that it sold for broadcast during this programming time. On July 21, 2003, the Company finalized the sale of WSM-FM and WWTN(FM) for approximately $62.5 million. At the time of the sale, 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 will continue to own and operate WSM-AM, and under the terms of the joint sales agreement with Cumulus, Cumulus will be responsible for all sales of commercial advertising on WSM-AM and provide 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.

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      Gaylord is a party to the lawsuit styled Nashville Hockey Club Limited Partnership v. Gaylord Entertainment Company, Case No. 03-1474, now pending in the Chancery Court for Davidson County, Tennessee. In its complaint for breach of contract, Nashville Hockey Club Limited Partnership alleges that Gaylord failed to honor its payment obligation under a Naming Rights Agreement for the multi-purpose arena in Nashville known as the Gaylord Entertainment Center. Specifically, Plaintiff alleges that Gaylord failed to make a semi-annual payment to Plaintiff in the amount of $1,186,565.50 when due on January 1, 2003 and in the amount of $1,245,894 when due on July 1, 2003. Gaylord contends that it made the payment due under the Naming Rights Agreement by way of set off against obligations owed by Plaintiff to CCK Holdings, LLC (“CCK”) (a wholly-owned consolidated subsidiary of the Company) under a “put option” CCK exercised pursuant to the Partnership Agreement between CCK and Plaintiff. CCK has assigned the proceeds of its put option to Gaylord. Gaylord is vigorously contesting this case by filing an answer and counterclaim denying any liability to Plaintiff, specifically alleging that all payments due to Plaintiff under the Naming Rights Agreement have been paid in full and asserting a counterclaim for amounts owing on the put option under the Partnership Agreement. Nashville Hockey Club Limited Partnership has filed a motion for summary judgment, which has been set for hearing on February 6, 2004, and the parties are proceeding with discovery. Gaylord will continue to vigorously assert its rights in this litigation.

      The Company restated its historical financial statements for 2000, 2001 and the first nine months of 2002 to reflect certain non-cash changes, which resulted primarily from a change to the Company’s income tax accrual and the manner in which the Company accounted for its investment in the Nashville Hockey Club Limited Partnership, which owns the Nashville Predators. The Company has been advised by the SEC Staff that it is conducting a formal investigation into the financial results and transactions that were the subject of the restatement by the Company. The Company has been cooperating with the SEC staff and intends to continue to do so. Although the Company cannot predict the ultimate outcome of the investigation, the Company does not currently believe that the investigation will have a material adverse effect on the Company’s financial condition or results of operations.

 
      Critical Accounting Policies

      “Management’s Discussion and Analysis of Financial Condition and Results of Operations” discusses Gaylord’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. Accounting estimates are an integral part of the preparation of the consolidated financial statements and the financial reporting process and are based upon current judgments. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported period. Certain accounting estimates are particularly sensitive because of their complexity and the possibility that future events affecting them may differ materially from the Company’s current judgments and estimates.

      This listing of critical accounting policies is not intended to be a comprehensive list of all of the Company’s accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles, with no need for management’s judgment regarding accounting policy. The Company believes that of its significant accounting policies, as discussed in Note 1 to the consolidated financial statements, the following may involve a higher degree of judgment and complexity.

      Revenue Recognition. The Company recognizes revenue from its rooms as earned on the close of business each day. Revenues from concessions and food and beverage sales are recognized at the time of the sale. The Company recognizes revenues from the Opry and Attractions Group segment when services are provided or goods are shipped, as applicable. Provision for returns and other adjustments are provided for in the same period the revenues are recognized. The Company defers revenues related to deposits on

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advance room bookings and advance ticket sales at the Company’s tourism properties until such amounts are earned.

      Impairment of Long-Lived Assets and Goodwill. In accounting for the Company’s long-lived assets other than goodwill, the Company applies the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” The Company adopted the provisions of SFAS No. 144 during 2001 with an effective date of January 1, 2001. The Company previously accounted for goodwill using SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.” In June 2001, SFAS No. 142, “Goodwill and Other Intangible Assets,” was issued. SFAS No. 142 is effective January 1, 2002. Under SFAS No. 142, goodwill and other intangible assets with indefinite useful lives will not be amortized but will be tested for impairment at least annually and whenever events or circumstances occur indicating that these intangibles may be impaired. The determination and measurement of an impairment loss under these accounting standards require the significant use of judgment and estimates. The determination of fair value of these assets and the timing of an impairment charge are two critical components of recognizing an asset impairment charge that are subject to the significant use of judgment and estimation. Future events may indicate differences from these judgments and estimates.

      Restructuring Charges. The Company has recognized restructuring charges in accordance with Emerging Issues Task Force (“EITF”) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring),” in its consolidated financial statements. Restructuring charges are based upon certain estimates of liabilities related to costs to exit an activity. Liability estimates may change as a result of future events, including negotiation of reductions in contract termination liabilities and expiration of outplacement agreements.

 
Discontinued Operations

      In August 2001, the FASB issued SFAS No. 144, which superseded SFAS No. 121 and the accounting and reporting provisions for the disposal of a segment of a business of 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.” SFAS No. 144 retains the requirements of SFAS No. 121 for the recognition and measurement of an impairment loss and broadens the presentation of discontinued operations to include a component of an entity (rather than a segment of a business).

      In accordance with the provisions of SFAS No. 144, the Company has presented the operating results, financial position and cash flows of the following businesses as discontinued operations in its consolidated financial statements as of December 31, 2002 and 2001 and for each of the three years ended December 31, 2002 and as of September 30, 2003 and for the nine months ended September 30, 2003 and September 30, 2002: WSM-FM and WWTN(FM) (the “Radio Operations”); Word Entertainment (“Word”), the Company’s contemporary Christian music business; the Acuff-Rose Music Publishing catalog entity; GET Management, the Company’s artist management business which was sold during 2001; the Company’s ownership interest in the Oklahoma Redhawks (the “Redhawks”), a minor league baseball team based in Oklahoma City, Oklahoma; the Company’s international cable networks; the businesses sold to affiliates of OPUBCO in 2001 consisting of Pandora Films, Gaylord Films, Gaylord Sports Management, Gaylord Event Television and Gaylord Production Company; and the Company’s water taxis sold in 2001.

 
Derivatives

      The Company utilizes derivative financial instruments to reduce interest rate risks and to manage risk exposure to changes in the value of certain owned marketable securities. Effective January 1, 2001, the Company records derivatives in accordance with SFAS No. 133, as amended. SFAS No. 133, as amended, established accounting and reporting standards for derivative instruments and hedging activities.

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SFAS No. 133 requires all derivatives to be recognized in the statement of financial position and to be measured at fair value. Changes in the fair value of those instruments are reported in earnings or other comprehensive income depending on the use of the derivative and whether it qualifies for treatment as cash flow hedges in accordance with the provisions of SFAS No. 133. In October 1999, CBS Corporation (“CBS”) acquired the television station KTVT from the Company in exchange for $485.0 million of CBS Series B convertible preferred stock, $4.2 million of cash and other consideration. The Company recorded a pretax gain of $459.3 million, which is included in other gains and losses in the consolidated statements of operations, based upon the disposal of the net assets of KTVT of $29.9 million, including related selling costs. CBS merged with Viacom in May 2000, resulting in the conversion of CBS convertible preferred stock into Viacom stock. During 2000, the Company entered into a seven-year secured forward exchange contract with respect to 10,937,900 shares of its Viacom, Inc. (“Viacom”) stock investment acquired, indirectly, as a result of the divestiture of KTVT in exchange for $485.0 million of CBS Series B convertible preferred stock, $4.2 million of cash and other consideration. Under SFAS No. 133, components of the secured forward exchange contract are considered derivatives. The adoption of SFAS No. 133 has had a material impact on the Company’s results of operations and financial position.

      During 2001, the Company entered into three contracts to cap its interest rate risk exposure on its long-term debt. Two of the contracts cap the Company’s exposure to one-month LIBOR rates on up to $375.0 million of outstanding indebtedness at 7.5%. Another interest rate cap, which caps the Company’s exposure on one-month Eurodollar rates on up to $100.0 million of outstanding indebtedness at 6.625%, expired in October 2002. These interest rate caps qualify for hedge accounting and changes in the values of these caps are recorded as other comprehensive income and losses in the consolidated statements of stockholders’ equity.

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Results of Operations

      The following table contains unaudited summary financial data for the nine month periods ended September 30, 2003 and 2002 and the three years ended December 31, 2002. The table also shows the percentage relationships to total revenues and, in the case of segment operating income (loss), its relationship to segment revenues.

                                                                                     
Nine Months Ended
Years Ended December 31, September 30,


2002 % 2001 % 2000 % 2003 % 2002 %










(Dollars in thousands)
Revenues:
                                                                               
 
Hospitality
  $ 339,380       83.7     $ 228,712       77.3     $ 237,260       77.4     $ 272,502       85.7     $ 245,834       83.0  
 
Opry and Attractions Group
    65,600       16.2       67,064       22.6       69,283       22.6       45,310       14.3       50,037       16.9  
 
Corporate and other
    272       0.1       290       0.1       64             139             144        
     
     
     
     
     
     
     
     
     
     
 
   
Total revenues
    405,252       100.0       296,066       100.0       306,607       100.0       317,951       100.0       296,015       100.0  
     
     
     
     
     
     
     
     
     
     
 
Operating expenses:
                                                                               
 
Operating costs
    254,583       62.8       201,299       68.0       210,018       68.5       191,933       60.4       188,888       63.8  
 
Selling, general & administrative
    108,732       26.8       67,212       22.7       89,052       29.0       79,941       25.1       76,363       25.8  
 
Preopening costs
    8,913       2.2       15,927       5.4       5,278       1.7       7,111       2.2       7,946       2.7  
 
Gain on sale of assets
    (30,529 )                                               (30,529 )      
 
Impairment and other charges
                14,262             75,660                                        
 
Restructuring charge, net
    (17 )           2,182             12,952                         50        
 
Depreciation and amortization:
                                                                               
   
Hospitality
    44,924               25,593               24,447               34,991               33,547          
   
Opry and Attractions Group
    5,778               6,270               13,955               3,851               4,095          
   
Corporate and other
    5,778               6,542               6,257               4,602               4,283          
     
     
     
     
     
     
     
     
     
     
 
   
Total depreciation and amortization
    56,480       13.9       38,405       13.0       44,659       14.6       43,444       13.7       41,925       14.2  
     
     
     
     
     
     
     
     
     
     
 
   
Total operating expenses
    398,162       98.3       339,287       114.6       437,619       142.7       322,429       101.4       284,643       96.2  
Operating income (loss);
                                                                               
 
Hospitality
    25,972       7.7       34,270       15.0       45,478       19.2       34,687       12.7       18,018       7.3  
 
Opry and Attractions Group
    1,596       2.4       (5,010 )     (7.5 )     (44,413 )     (64.1 )     (610 )     (1.3 )     2,400       4.8  
 
Corporate and other
    (42,111 )           (40,110 )           (38,187 )           (31,379 )           (31,535 )      
 
Preopening costs
    (8,913 )           (15,927 )           (5,278 )           (7,176 )           (7,990 )      
 
Gain on sale of assets
    30,529                                                 30,529        
 
Impairment and other charges
                (14,262 )           (75,660 )                                      
Restructuring charge, net
    17             (2,182 )           (12,952 )                       (50 )      
     
     
     
     
     
     
     
     
     
     
 
   
Total operating income (loss)
    7,090       1.8       (43,221 )     (14.6 )     (131,012 )     (42.7 )     (4,478 )     (1.4 )     11,372       3.8  
Interest expense, net of amounts capitalized
    (46,960 )           (39,365 )           (30,307 )           (31,139 )           (36,289 )      
Interest income
    2,808             5,554             4,046             1,773             1,917        
Gain (loss) on Viacom and derivatives, net
    49,176             55,064                         (3,051 )           41,194        
Other gains and losses
    1,163             2,661             (3,514 )           435             665        
(Provision) benefit for income taxes
    (1,318 )           9,142             52,331             15,974             (1,605 )      
Income from discontinued operations, net of taxes
    85,757             (48,833 )           (47,600 )           36,126             83,093        
Cumulative effect of accounting change, net of taxes
    (2,572 )           11,202                                     (2,572 )      
     
     
     
     
     
     
     
     
     
     
 
Net income (loss)
  $ 95,144             $ (47,796 )         $ (156,056 )         $ 15,640           $ 97,775        
     
     
     
     
     
     
     
     
     
     
 

      The Company considers Revenue per Available Room (RevPAR) to be a meaningful indicator of our hospitality segment performance because it measures the period over period change in room revenues. The Company calculates RevPAR by dividing room sales by room nights available to guests for the period. RevPAR is not comparable to similarly titled measures such as revenues. Occupancy, average daily rate

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and RevPAR for Gaylord Opryland and Gaylord Palms, subsequent to its January 2002 opening, are shown in the following table.
                           
Years Ended December 31,

2002 2001 2000



Gaylord Opryland
                       
 
Occupancy
    68.6 %     70.3 %     75.9 %
 
ADR
  $ 142.58     $ 140.33     $ 140.03  
 
RevPAR
  $ 97.80     $ 98.65     $ 106.22  
Gaylord Palms
                       
 
Occupancy
    64.8 %            
 
ADR
  $ 168.65              
 
RevPAR
  $ 109.37              

Nine Month Periods Ended September 30, 2003 and September 30, 2002

 
Hospitality

      The Hospitality segment comprises the operations of the Gaylord Hotel properties and the Radisson Hotel at Opryland. The Gaylord Hotel properties consist of the Gaylord Opryland Resort and Convention Center located in Nashville, Tennessee (“Gaylord Opryland”) and the Gaylord Palms Resort and Convention Center located in Kissimmee, Florida (“Gaylord Palms”).

      The Company considers Revenue per Available Room (RevPAR) to be a meaningful indicator of our hospitality segment performance because it measures the period over period change in room revenues. The Company calculates RevPAR by dividing room sales by room nights available to guests for the period. RevPAR is not comparable to similarly titled measures such as revenues. Occupancy, Average Daily Rate and RevPAR for Gaylord Opryland and Gaylord Palms, subsequent to its January 2002 opening, are shown in the following table.

                                   
For the Three Months For the Nine Months
Ended September 30, Ended September 30,


2003 2002 2003 2002




Gaylord Opryland
                               
 
Occupancy
    70.7 %     68.7 %     72.2 %     67.0 %
 
Average Daily Rate
  $ 132.25     $ 140.78     $ 135.16     $ 140.09  
 
RevPAR
  $ 93.46     $ 96.71     $ 97.64     $ 93.83  
Gaylord Palms
                               
 
Occupancy
    70.0 %     68.6 %     76.2 %     68.2 %
 
Average Daily Rate
  $ 147.17     $ 155.54     $ 169.57     $ 170.66  
 
RevPAR
  $ 103.00     $ 106.72     $ 129.28     $ 116.41  

      Total revenues in the Hospitality segment decreased $2.3 million, or 2.7%, to $82.8 million in the third quarter of 2003 as compared to the third quarter of 2002, and increased $26.7 million, or 10.8%, to $272.5 million in the first nine months of 2003 compared to the same period of 2002. Revenues of Gaylord Palms decreased $3.1 million, or 9.0%, to $31.5 million in the third quarter of 2003, and increased $15.6 million, or 15.6%, to $115.8 million for the first nine months of 2003. Revenues of Gaylord Opryland increased $0.8 million, or 1.5%, to $49.4 million in the third quarter of 2003 and increased $10.8 million, or 7.7%, to $151.5 million in the first nine months of 2003.

      Revenues decreased at Gaylord Palms for the three months ended September 30, 2003, as compared to the three months ended September 30, 2002, due to a reduction in group rooms occupied due to accommodations to groups needing to move their meetings from third quarter 2003 to 2004. The increase in revenues at Gaylord Palms for the nine months ended September 30, 2003, as compared to the nine

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months ended September 30, 2002, is attributed to higher levels of occupancy at the hotel during the period and higher RevPAR during the period. This higher level of occupancy can be attributed to lower than anticipated results in 2002 due to the effects of the September 11, 2001 terrorist attacks, as well as the fact that the hotel was in operation for the full nine months of 2003. Management also believes this higher level of occupancy can also be attributed to higher customer satisfaction at the hotel, resulting in increases in return and first-time group and individual bookings.

      The increase in revenues at Gaylord Opryland for the three months ended September 30, 2003, as compared to the three months ended September 30, 2002, was driven by higher occupancy at the hotel. While occupancy increased, lower group room rates and an unfavorable change in group customer mix during the period contributed to a reduction in average daily rate and RevPAR during this period. The increase in revenues at Gaylord Opryland for the nine months ended September 30, 2003, as compared to the nine months ended September 30, 2002, is primarily attributed to increased occupancy during the period.

      Total operating expenses, which consists of operating costs and selling, general and administrative expenses, in the Hospitality segment increased $0.4 million, or 0.6%, to $65.7 million in the third quarter of 2003, and increased $8.6 million, or 4.4%, to $202.9 million in the first nine months of 2003. For the third quarter of 2003, Gaylord Palms’ total operating expenses decreased $0.4 million, or 1.5%, to $26.8 million and Gaylord Opryland’s total operating expenses increased $0.6 million, or 1.6%, to $37.6 million. For the first nine months of 2003, Gaylord Palms’ total operating expenses increased $6.3 million, or 8.0%, to $85.2 million and Gaylord Opryland’s total operating expenses increased $2.0 million, or 1.8%, to $113.8 million.

      Operating costs consists of direct costs associated with the daily operations of the Company’s businesses. Operating costs in the Hospitality segment increased $2.7 million, or 5.5%, to $51.5 million for the third quarter of 2003, and increased $6.8 million, or 4.5%, to $157.2 million in the first nine months of 2003. Operating costs at Gaylord Palms increased $0.7 million, to $19.4 million for the third quarter of 2003, and increased $3.8 million, to $61.6 million, for the first nine months of 2003. Operating costs at Gaylord Opryland increased $1.8 million to $31.0 million in the third quarter of 2003, and increased $2.8 million, to $92.9 million, for the first nine months of 2003. The increase at Gaylord Palms for the three months ended September 30, 2003 was due to the increased level of occupancy at the hotel, while the increase at Gaylord Palms for the nine months ended September 30, 2003 was primarily attributed to the fact that the hotel was open for the full nine months of 2003. The increase in operating costs at Gaylord Opryland for the three and nine months ended September 30, 2003 was due to an increase in utilities expense, as well as higher costs resulting from increased occupancy at the hotel.

      Selling, general and administrative expenses in the hospitality segment decreased $2.3 million, or 13.7%, to $14.3 million, for the three months ended September 30, 2003 compared to the same period ended 2002, and increased $1.8 million, or 4.0%, to $45.6 million for the first nine months of 2003. Selling, general and administrative expenses at Gaylord Palms decreased $1.1 million, to $7.3 million, for the third quarter of 2003, and increased $2.5 million to $23.6 million for the first nine months of 2003. The decrease in selling, general and administrative expenses at Gaylord Palms for the three months ending September 30, 2003 is due to a reduction in advertising expenditures and raw materials and supplies. This reduction can be attributed to a higher level of expenditures in 2002 associated with the hotel’s continued “start-up” operations in the third quarter of 2002. The increase in selling, general and administrative expenses at Gaylord Palms for the nine month period ended September 30, 2003, as compared to the nine month period ended September 30, 2002, is primarily attributable to the fact that the hotel was in operation for the full nine months of 2003.

      Selling, general and administrative expenses at Gaylord Opryland decreased $1.2 million, to $6.6 million for the third quarter of 2003, and decreased $0.8 million, to $21.0 million, for the first nine months of 2003. The decrease in selling, general and administrative expenses for the three and nine months ended September 30, 2003 for Gaylord Opryland is due to a decrease in advertising expense related to a reduction in special event advertising and a decrease in direct mail advertising.

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Attractions and Opry Group

      The Attractions and Opry Group consists of the Grand Ole Opry, WSM-AM, the Ryman Auditorium, the Wildhorse Saloon, the General Jackson Showboat, the Springhouse Golf Course and Corporate Magic, a company specializing in the production of creative and entertainment events in support of the corporate and meeting marketplace.

      Revenues in the Attractions and Opry Group segment were flat at $15.3 million for the third quarter of 2003 as compared to the third quarter of 2002, and decreased $4.7 million, or 9.4%, to $45.3 million for the first nine months of 2003. The decrease in revenues in the Attractions and Opry Group is primarily due to a $4.3 million decrease at Corporate Magic due to decreased corporate customer spending during the first nine months of 2003, as compared to the same period of 2002. The decrease in revenue of Corporate Magic was partially offset by increased revenues of the Grand Ole Opry and the Wildhorse Saloon during the first nine months of 2003 due to a slightly better tourism market during 2003 as compared to 2002.

      Total operating expenses in the Attractions and Opry Group segment increased $0.6 million, or 4.8%, to $13.2 million in the third quarter of 2003, and decreased $1.5 million, or 3.4%, to $42.1 million for the first nine months of 2003. The decrease in total operating expense for the nine months of 2003 is primarily due to the decrease in operating expenses associated with Corporate Magic’s decrease in revenue.

      Operating costs of the Attractions and Opry Group segment increased $1.3 million, or 15.2%, to $10.1 million for the third quarter of 2003, as compared to the third quarter of 2002, and decreased $4.7 million, or 14.1%, to $28.7 million for the first nine months of 2003, compared to the same period of 2002. The increase in operating costs for the third quarter is primarily attributed to increased labor costs and corporate shared services allocations. The operating costs decrease for the nine months ending September 30, 2003, is due to a decrease in the operating costs of Corporate Magic of $3.4 million, to $6.3 million for the first nine months of 2003, as compared to same period of 2002, as a result of a decrease in Corporate Magic revenue.

      During 2000, the Company began production of an IMAX movie to portray the history of country music. As a result of the 2001 Strategic Assessment, the carrying value of the IMAX film asset was reevaluated on the basis of its estimated future cash flows resulting in an initial impairment charge of $6.9 million.

      In the third quarter of 2003, based on the revenues generated by the theatrical release of the movie, the asset was again reevaluated on the basis of estimated future cash flows. As a result, an additional impairment charge of $0.9 million was recorded in the third quarter of 2003. The carrying value of the asset was $1.2 million, as of September 30, 2003.

      Selling, general and administrative expenses of the Attractions and Opry Group decreased $0.7 million to $3.2 million for the third quarter of 2003, as compared to the third quarter of 2002, and increased $3.3 million, to $13.4 million for the first nine months of 2003. The increase in selling, general and administrative expenses during the first nine months of 2003 is primarily due to the increase in certain profit sharing and bonus plan expenses.

 
Corporate and Other

      Corporate and Other segment consists of the naming rights agreement, salaries and benefits, legal, human resources, accounting, pension and other administrative costs. Total operating expenses in the Corporate and Other segment increased $0.8 million, or 10.1%, to $9.2 million during the third quarter of 2003, and decreased $0.5 million, or 1.8%, to $27.0 million for the first nine months of 2003. Effective December 31, 2001, the Company amended its retirement plans and its retirement savings plan. As a result of these amendments, the retirement cash balance benefit was frozen and the policy related to future Company contributions to the retirement savings plan was changed. The Company recorded a pretax charge of $5.7 million in the first quarter of 2002 related to the write-off of unamortized prior service cost in accordance with SFAS No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined

63


 

Benefit Pension Plans and for Termination Benefits”, and related interpretations, which is included in selling, general and administrative expenses. In addition, the Company amended the eligibility requirements of its postretirement benefit plans effective December 31, 2001. In connection with the amendment and curtailment of the plans and in accordance with SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions” and related interpretations, the Company recorded a gain of $2.1 million which is reflected as a reduction in corporate and other selling, general and administrative expenses in the first quarter of 2002. The change in operating costs associated with the change in pension plans was a net increase of selling, general and administrative costs in 2002 of $3.3 million. These nonrecurring gains and losses were recorded in the Corporate and Other segment and were not allocated to the Company’s other operating segments.
 
Preopening Costs

      Preopening costs are costs related to the Company’s hotel development activities. Preopening costs increased $1.4 million, to $3.3 million for the third quarter of 2003, and decreased $0.8 million, to $7.1 million for the first nine months of 2003. The changes in the preopening costs are attributed to the opening of Gaylord Palms in January 2002, and the increased activity in preparing the Gaylord Texan expected to open in April 2004. Preopening costs for the three months and nine months ended September 30 are as follows:

                                   
Three Months Nine Months
Ended Ended
September 30, September 30,


2003 2002 2003 2002




(In thousands)
Gaylord Palms
  $     $ 41     $     $ 4,846  
Gaylord Texan
    3,257       1,438       6,928       2,712  
Other preopening
    26       388       183       388  
     
     
     
     
 
 
Total preopening costs
  $ 3,283     $ 1,867     $ 7,111     $ 7,946  
     
     
     
     
 

      The Company expects preopening costs to increase during the remainder of 2003 as a result of the Gaylord Texan. The Company anticipates preopening costs associated with the Gaylord Texan to total approximately $12.6 million for the twelve months ended December 31, 2003.

 
Gain on Sale of Assets

      During 1998, the Company entered into a partnership with The Mills Corporation to develop the Opry Mills Shopping Center in Nashville, Tennessee. The Company held a one-third interest in the partnership as well as the title to the land on which the shopping center was constructed, which was being leased to the partnership. During the second quarter of 2002, the Company sold its partnership share to certain affiliates of The Mills Corporation for approximately $30.8 million in cash proceeds upon the disposition. In accordance with the provisions of SFAS No. 66, “Accounting for Sales of Real Estate”, and other applicable pronouncements, the Company deferred approximately $20.0 million of the gain representing the estimated present value of the continuing land lease interest between the Company and the Opry Mills partnership at June 30, 2002. The Company recognized approximately $10.6 million of the proceeds, net of certain transaction costs, as a gain during the second quarter of 2002. During the third quarter of 2002, the Company sold its interest in the land lease and recognized the remaining $20.0 million deferred gain, less certain transaction costs.

 
Restructuring Charges

      As part of the Company’s ongoing assessment of operations during 2002, the Company identified certain duplication of duties within divisions and realized the need to streamline those tasks and duties. Related to this assessment, during the second quarter of 2002 the Company adopted a plan of restructuring to streamline certain operations and duties. Accordingly, the Company recorded a pretax restructuring

64


 

charge of $1.1 million related to employee severance costs and other employee benefits. The restructuring charges all relate to continuing operations. The 2002 restructuring charge was partially offset by reversal of prior years’ restructuring accrual of $1.1 million, as discussed below.

      During the second quarter of 2002, the Company reversed $0.9 million of the 2001 restructuring charges related to continuing operations. The reversal included charges related to a lease commitment and certain placement costs related to the 2001 and 2000 restructuring. During the second quarter of 2002, the Company entered into two subleases to lease certain office space the Company previously had recorded in the 2001 and 2000 restructuring charges. The sublease agreements resulted in a reversal of the 2001 and 2000 restructuring charges in the amount of $0.7 million and $0.1 million, respectively. Also during the second quarter of 2002, the Company evaluated the 2001 restructuring accrual and determined certain severance benefits and outplacement services had expired.

      During the fourth quarter of 2000, the Company recognized pretax restructuring charges of $16.4 million related to exiting certain lines of business and implementing a new strategic plan. The restructuring charges consisted of contract termination costs of $10.0 million to exit specific activities and employee severance and related costs of $6.4 million. During the second quarter of 2001, the Company negotiated reductions in certain contract termination costs, which allowed the reversal of $2.3 million of the restructuring charges originally recorded during the fourth quarter of 2000.

 
      Depreciation Expense

      Depreciation expense was $13.2 million for the third quarter and $39.7 million for the first nine months of 2003 and remained relatively constant compared to the same periods of 2002, due to the same amount of depreciable assets in service during the periods.

 
      Amortization Expense

      Amortization expense increased $0.4 million for the third quarter and $1.1 million for the nine months ended September 30, 2003, as compared to the same periods of 2002. The increase in amortization expense is due to additional amortization of software during the periods.

 
      Consolidated Operating Income (Loss)

      Total operating income decreased $26.2 million to an operating loss of $7.9 million in the third quarter of 2003 as compared to the third quarter of 2002, and decreased $15.9 million, to a $4.5 million operating loss in the first nine months of 2003, as compared to the same period of 2002. This decrease is primarily attributed to a gain of $20.0 million representing the estimated fair value of the continuing land lease interest between the Company and the Opry Mills partnership at June 30, 2002, that was recognized in the operating results for the nine months ended September 30, 2002. Operating income in the hospitality segment decreased $4.7 million during the third quarter of 2003, and increased $17.5 million for the first nine months of 2003. The decrease for the three months ended September 30, 2003 is attributed to lower RevPAR. The increase for the first nine months of 2003 is primarily as a result of the Gaylord Palms being open for a full nine months in 2003. Operating income of the Attractions and Opry Group segment decreased $0.6 million to $0.8 million for the third quarter of 2003, and decreased $3.0 million, to an operating loss of $0.6 million for the first nine months of 2003. The operating income of the Attractions and Opry Group segment decreased as a result of decreased operating income of Corporate Magic of $1.0 million due to decreased corporate customer spending and a reduction in events for the first nine months of 2003 as compared to 2002.

      The Corporate and Other segment realized an operating loss of $10.7 million for the third quarter of 2003 compared to an operating income of $10.2 million for the same period a year earlier. The decrease of $20.9 million is primarily attributed to a gain of $20.0 million representing the estimated fair value of the continuing land lease interest between the Company and the Opry Mills partnership at June 30, 2002, that was recognized in the operating results for the third quarter of 2002. The change is due to increased

65


 

personnel costs, changes in the Company’s medical plans and the Company’s amendment of its retirement plans, retirement savings plan and postretirement benefits plans.
 
      Consolidated Interest Expense

      Consolidated interest expense, including amortization of deferred financing costs, decreased $1.5 million to $10.5 million for the third quarter of 2003 and decreased $5.2 million in the nine months ended September 30, 2003. The decrease in 2003 was caused by an increase in capitalized interest of $5.7 million primarily related to the increase in capitalized interest of the Gaylord Texan during the first nine months of 2003. The increase in capitalized interest was partially offset by the write-off of unamortized deferred financing costs of the Term Loan at the time the Term Loan was paid off in May 2003. The Company’s weighted average interest rate on its borrowings, including the interest expense related to the secured forward exchange contract, was 5.2% in the first nine months of 2003 as compared to 5.3% in the first nine months of 2002.

 
      Consolidated Interest Income

      Interest income remained relatively constant at $0.7 million for the third quarter of 2003, and $1.8 million for the first nine months of 2003.

 
      Unrealized Gain (Loss) on Viacom Stock and Derivatives

      During 2000, the Company entered into a seven-year secured forward exchange contract with respect to 10.9 million shares of Viacom Class B Common Stock (the “Viacom Stock”). Effective January 1, 2001, the Company adopted the provisions of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, as amended, and reclassified its investment in Viacom Stock from available-for-sale to trading. Under SFAS No. 133, components of the secured forward exchange contract are considered derivatives.

      For the three months ended September 30, 2003, the Company recorded net pretax losses of $59.0 million related to the decrease in fair value of the Viacom Stock and a pretax gain of $33.0 million related to the increase in fair value of the derivatives associated with the secured forward exchange contract. For the nine months ended September 30, 2003, the Company recorded a pretax loss of $27.1 million related to the decrease in fair value of the Viacom Stock and pretax gains of $24.0 million related to the increase in fair value of the derivatives associated with the secured forward exchange contract.

      For the three months ended September 30, 2002, the Company recorded net pretax losses of $42.0 million related to the decrease in fair value of the Viacom Stock and a pretax gain of $60.7 million related to the increase in fair value of the derivatives associated with the secured forward exchange contract. For the nine months ended September 30, 2002, the Company recorded a pretax loss of $39.6 million related to the decrease in fair value of the Viacom Stock and pretax gains of $80.8 million related to the increase in fair value of the derivatives associated with the secured forward exchange contract.

 
      Consolidated Other Gains and Losses

      Other gains and losses decreased $0.6 million during the three months ended September 30, 2003 as compared to the same period in 2002 and decreased $0.2 million for the nine months ended September 30, 2003.

 
      Consolidated Income Taxes

      The provision for income taxes decreased $26.4 million to a $19.1 million benefit in the third quarter of 2003, and decreased $17.6 million to a $16.0 million benefit for the nine months ended September 30,

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2003. The effective tax rate for income taxes was 43.87% for the first nine months of 2003 compared to 8.51% for the first nine months of 2002.

  Discontinued Operations

      In accordance with the provisions of SFAS No. 144, the Company has presented the operating results, financial position, cash flows and any gain or loss on disposal of the following businesses as discontinued operations in its financial statements as of September 30, 2003 and December 31, 2002 and for the three months and nine months ended September 30, 2003 and 2002: WSM-FM, WWTN(FM), Acuff-Rose Music Publishing, the Oklahoma Redhawks (the “Redhawks”), Word Entertainment (“Word”) and the Company’s international cable networks.

      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) (collectively, the “Radio operations”). Subsequent to committing to a plan of disposal during the first quarter, the Company, through a wholly-owned subsidiary, entered into an agreement to sell the assets primarily used in the operations of WSM-FM and WWTN(FM) to Cumulus Broadcasting, Inc. (“Cumulus”) in exchange for approximately $62.5 million in cash. In connection with this agreement, the Company also entered into a local marketing agreement with Cumulus pursuant to which, from April 21, 2003 until the closing of the sale of the assets, the Company, for a fee, made available to Cumulus substantially all of the broadcast time on WSM-FM and WWTN(FM). In turn, Cumulus provided programming to be broadcast during such broadcast time and collected revenues from the advertising that it sold for broadcast during this programming time. On July 21, 2003, the Company finalized the sale of WSM-FM and WWTN(FM) for approximately $62.5 million and recorded a pretax gain on the sale during the third quarter of 2003 of approximately $54.6 million. At the time of the sale, net proceeds of approximately $50 million were placed in restricted cash 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 will continue to own and operate WSM-AM, and under the terms of the joint sales agreement with Cumulus, Cumulus will be responsible for all sales of commercial advertising on WSM-AM and provide 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.

      Acuff-Rose Music Publishing. During the second quarter of 2002, the Company committed to a plan of disposal of its Acuff-Rose Music Publishing catalog entity. During the third quarter of 2002, the Company finalized the sale of the Acuff-Rose Music Publishing catalog entity to Sony/ATV Music Publishing for approximately $157.0 million in cash before royalties payable to Sony for the period beginning July 1, 2002 until the sale date. Proceeds of $25.0 million were used to reduce the Company’s outstanding indebtedness as further described in “Liquidity and Capital Resources — Financing”. During the third quarter of 2003, the Company revised its estimates of reserves previously established for certain sale-related, transaction costs resulting in a reduction in the reserve amount of $0.5 million.

      OKC Redhawks. During the first quarter of 2002, the Company committed to a plan of disposal of its ownership interests in the Redhawks, a minor league baseball team based in Oklahoma City, Oklahoma. During the third quarter 2003, the Company agreed to sell its interests in the Redhawks. The sale closed during November 2003.

      Word Entertainment. The Company committed to a plan to sell Word during the third quarter of 2001. During January 2002, the Company sold Word’s domestic operations to an affiliate of Warner Music Group for $84.1 million in cash. The Company recognized a pretax gain of $0.5 million during the three months ended March 31, 2002 related to the sale in discontinued operations in the condensed consolidated statements of operations. Proceeds from the sale of $80.0 million were used to reduce the Company’s outstanding indebtedness as further described in “Liquidity and Capital Resources — Financing”. During the third quarter of 2003, due to the expiration of certain indemnification periods as specified in the sales contract, the previously established indemnification reserve of $1.5 million was reversed.

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      International Cable Networks. On June 1, 2001, the Company adopted a formal plan to dispose of its international cable networks. During the first quarter of 2002, the Company finalized a transaction to sell certain assets of its Asia and Brazil networks. The terms of this transaction included the assignment of certain transponder leases, which resulted in a reduction of the Company’s transponder lease liability and a related $3.8 million pretax gain, during the first quarter of 2002, which is reflected in discontinued operations in the condensed consolidated statements of operations. The Company guaranteed $0.9 million in future lease payments by the assignee from the date of the sale until December 31, 2002. At the time the Company entered into the guarantee, the Company recorded the associated liability of $0.9 million. Due to the assignee’s failure to pay the lease liability during the fourth quarter of 2002, the Company was required to pay the lease payments. The Company is not required to pay any future lease payments related to the transponder lease. In addition, the Company ceased its operations based in Argentina during 2002.

      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:

                                     
Three Months Ended Nine Months Ended
September 30, September 30,


2003 2002 2003 2002




(In thousands)
Revenues:
                               
 
Radio operations
  $ 360     $ 2,764     $ 3,703     $ 7,344  
 
Acuff-Rose Music Publishing
                      7,654  
 
Redhawks
    2,137       2,557       5,000       6,048  
 
Word
                      2,594  
 
International cable networks
                      744  
     
     
     
     
 
   
Total revenues of discontinued operations
  $ 2,497     $ 5,321     $ 8,703     $ 24,384  
     
     
     
     
 
Operating income (loss):
                               
 
Radio operations
  $ 89     $ 741     $ 613     $ 661  
 
Acuff-Rose Music Publishing
          (460 )           933  
 
Redhawks
    497       711       529       974  
 
Word
          (11 )           (917 )
 
International cable networks
                      (1,576 )
     
     
     
     
 
   
Total operating income of discontinued operations
    586       981       1,142       75  
Interest expense
    (1 )           (1 )     (80 )
Interest income
    2       11       7       61  
Other gains and losses
    56,885       130,790       57,239       135,393  
     
     
     
     
 
Income before provision for income taxes
    57,472       131,782       58,387       135,449  
Provision for income taxes
    22,322       51,072       22,261       52,356  
     
     
     
     
 
Income from discontinued operations
  $ 35,150     $ 80,710     $ 36,126     $ 83,093  
     
     
     
     
 

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

                     
September 30, December 31,
2003 2002


(In thousands)
Current assets:
               
 
Cash and cash equivalents
  $ 1,919     $ 1,812  
 
Trade receivables, less allowance of $0 and $490, respectively
    112       1,600  
 
Inventories
    154       163  
 
Prepaid expenses
          127  
 
Other current assets
          393  
     
     
 
   
Total current assets
    2,185       4,095  
Property and equipment, net of accumulated depreciation
    3,256       5,157  
Goodwill
          3,527  
Amortizable intangible assets, net of accumulated amortization
    3,942       3,942  
Other long-term assets
    1,200       702  
     
     
 
   
Total long-term assets
    8,398       13,328  
     
     
 
   
Total assets
  $ 10,583     $ 17,423  
     
     
 
Current liabilities:
               
 
Current portion of long-term debt
  $     $ 94  
 
Accounts payable and accrued expenses
    3,167       6,558  
     
     
 
   
Total current liabilities
    3,167       6,652  
Other long-term liabilities
    828       789  
     
     
 
   
Total long-term liabilities
    828       789  
     
     
 
   
Total liabilities
    3,995       7,441  
     
     
 
 
Minority interest of discontinued operations
    2,019       1,885  
     
     
 
   
Total liabilities and minority interest of discontinued operations
  $ 6,014     $ 9,326  
     
     
 
 
      Cumulative Effect of Accounting Change

      During the second quarter of 2002, the Company completed its transitional goodwill impairment test as required by SFAS No. 142. In accordance with the provisions of SFAS No. 142, the Company has reflected the pretax $4.2 million impairment charge as a cumulative effect of a change in accounting principle in the amount of $2.6 million, net of tax benefit of $1.6 million, as of January 1, 2002 in the consolidated statements of operations.

Three Years Ended December 31, 2002

 
  Assessment of Strategic Alternatives

      As part of the Company’s ongoing assessment and streamlining of operations, the Company identified certain duplication of duties during 2002 within divisions and realized the need to streamline those tasks and duties. Related to this assessment, the Company adopted a plan of restructuring during 2002 as discussed in “Results of Operations.”

      In 2001, the Company named a new chairman and a new chief executive officer, and had numerous changes in senior management, primarily because of certain 2000 events discussed below. During 2001, the new management team instituted a corporate reorganization, re-evaluated the Company’s businesses and

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other investments and employed certain cost savings initiatives (the “2001 Strategic Assessment”). As a result of the 2001 Strategic Assessment, the Company recorded impairment and other charges and restructuring charges as discussed in “Results of Operations.”

      During 2000, the Company experienced a significant number of departures from its senior management, including the Company’s president and chief executive officer. In addition, the Company continued to produce weaker than anticipated operating results during 2000 while attempting to fund its capital requirements related to its hotel construction project in Florida and hotel development activities in Texas. As a result of these factors, during 2000, the Company assessed its strategic alternatives related to its operations and capital requirements and developed a strategic plan designed to refocus the Company’s operations, reduce its operating losses and reduce its negative cash flows (the “2000 Strategic Assessment”). As a result of the 2000 Strategic Assessment, the Company sold or ceased operations of several businesses and recorded impairment and other charges and restructuring charges as discussed in “Results of Operations.”

 
  Terrorist Attacks

      As a result of the September 11, 2001 terrorist attacks and a slowdown in the U.S. economy, the hospitality industry has experienced occupancy rates that were significantly lower than those experienced in the first eight months of 2001 and during 2000 due to decreased tourism and travel activity. Although the Company experienced a slight increase of occupancy, average daily rate and revenue per available room in the fourth quarter of 2002 over fourth quarter of 2001, there is no guarantee that this increase will continue. The September 11 terrorist attacks were dramatic in scope and in their impact on the hospitality industry and it is currently not possible to accurately predict if and when travel patterns will be restored to pre-September 11 levels.

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

 
  Revenues

      Total revenues increased $109.2 million, or 36.9%, to $405.3 million in 2002. As discussed below, the increase is primarily due to the opening of Gaylord Palms in January 2002.

      Revenues in the Hospitality segment increased $110.7 million, or 48.4%, to $339.4 million in 2002. Revenues of the Gaylord Palms, subsequent to the January 2002 opening, were $126.5 million. The increase in revenues of the Gaylord Palms was partially offset by a decrease in revenues of Gaylord Opryland of $15.8 million, to $206.1 million, in 2002. This decrease was primarily attributable to the impact of a softer economy and decreased occupancy levels in the weeks following the September 11, 2001 terrorist attacks. The decrease in revenue of the Gaylord Opryland was also partially attributable to the annual rotation of convention business among different markets that is common in the meeting and convention industry.

      Revenues in the Opry and Attractions Group segment decreased $1.5 million, or 2.2%, to $65.6 million in 2002. Revenues from Corporate Magic, a company specializing in the production of creative events in the corporate entertainment marketplace, decreased $5.1 million, to $18.7 million, primarily due to reduced spending by corporate customers as a result of the downturn in the economy. The decrease in revenue of Corporate Magic was partially offset by an increase in revenues of the Grand Ole Opry of $2.5 million, to $15.9 million in 2002. The Grand Ole Opry revenue increase is due to an increase in popular performers appearing on the Grand Ole Opry.

      Revenues in the Corporate and Other segment remained constant at $0.3 million.

 
  Operating Expenses

      Total operating expenses increased $58.9 million, or 17.4%, to $398.2 million in 2002. Operating costs, as a percentage of revenues, decreased to 62.8% during 2002 as compared to 68.0% during 2001. Selling, general and administrative expenses, as a percentage of revenues, increased to 26.9% during 2002 as

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compared to 22.7% in 2001. Excluding the gain on sale of assets, the impairment and other charges and restructuring charges from both periods, total operating expenses increased $105.9 million, or 32.8%, to $428.7 million in 2002.

      Total operating costs consist of direct costs associated with the daily operations of the Company’s core assets, primarily the room, food and beverage and convention costs in the Hospitality segment. Operating costs also include the direct costs associated with the operations of all of the Company’s business units. Total operating costs increased $53.3 million, or 26.5%, to $254.6 million in 2002.

      Operating costs in the Hospitality segment increased $68.6 million, or 49.0%, to $208.5 million in 2002 primarily as a result of the opening of the Gaylord Palms. Operating costs of the Gaylord Palms, subsequent to the January 2002 opening, was $75.2 million. The increase of operating costs generated by the opening of the Gaylord Palms was partially offset by a decrease in operating costs of the Gaylord Opryland of $6.9 million, to $129.7 million, in 2002. The decrease in operating costs at Gaylord Opryland is associated with lower revenues and reduced occupancy.

      Operating costs in the Opry and Attractions Group segment decreased $11.2 million, or 22.0%, to $39.5 million in 2002. The operating costs of Corporate Magic decreased $7.6 million, to $13.2 million in 2002 as compared to 2001 primarily due to the lower revenue and certain cost saving measures taken by the Company during 2002. The operating costs of the Grand Ole Opry and the General Jackson, the Company’s entertainment showboat, decreased $1.0 million in 2002 due to cost saving measures.

      The operating costs in the Corporate and Other segment decreased $4.1 million, or 38.4%, to $6.6 million in 2002 as compared to 2001 due to the elimination of unnecessary management levels and overhead at the hotels identified in the 2001 reorganization.

      Selling, general and administrative expenses consist of administrative and overhead costs. Selling, general and administrative expenses increased $41.5 million, or 61.8%, to $108.7 million in 2002.

      Selling, general and administrative expenses in the Hospitality segment increased $31.1 million, or 107.2%, to $60.0 million in 2002. The increase is primarily attributable to the opening of Gaylord Palms in January 2002. Selling, general and administrative expenses for Gaylord Palms subsequent to its January 2002 opening was $29.3 million. Selling, general and administrative expenses at Gaylord Opryland increased $2.3 million, to $29.9 million in 2002 primarily due to an increase in advertising to promote the special events held at the resort.

      Selling, general and administrative expenses in the Opry and Attractions Group segment increased $3.6 million, or 23.7%, to $18.7 million in 2002. Selling, general and administrative expenses increased $1.4 million, to $1.9 million, at the General Jackson due to increased labor costs associated with additional revenue and increased management support during 2002. Also, selling, general and administrative expenses increased $1.3 million, to $5.5 million, at the Grand Ole Opry associated with the increase in revenue.

      Corporate selling, general and administrative expenses, consisting primarily of the naming rights agreement, senior management salaries and benefits, legal, human resources, accounting, pension and other administrative costs increased $6.9 million, or 29.8%, to $30.0 million during 2002. Effective December 31, 2001, the Company amended its retirement plans and its retirement savings plan. As a result of these amendments, the retirement cash balance benefit was frozen and the policy related to future Company contributions to the retirement savings plan was changed. The Company recorded a pretax charge of $5.7 million in 2002 related to the write-off of unamortized prior service cost in accordance with SFAS No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits,” and related interpretations, which is included in selling, general and administrative expenses. In addition, the Company amended the eligibility requirements of its postretirement benefit plans effective December 31, 2001. In connection with the amendment and curtailment of the plans and in accordance with SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions,” and related interpretations, the Company recorded a gain of $2.1 million which is reflected as a reduction in corporate and other selling, general and administrative expenses in 2002. These nonrecurring gains and losses were recorded in the Corporate and Other segment

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and were not allocated to the Company’s other operating segments. Other increases in corporate, selling, general and administrative expenses can be attributed to increased personnel costs related to new corporate departments that did not exist last year, new management personnel in other corporate departments, and increased corporate marketing expenses as compared to the same period in 2001.

      Preopening costs decreased $7.0 million, or 44.0%, to $8.9 million in 2002 related to the Company’s hotel development activities. The decrease in preopening costs is due to the opening of the Gaylord Palms in January of 2002. Gaylord Palms preopening costs decreased $7.7 million, to $4.5 million in 2002 as compared to 2001. This decrease was partially offset by an increase in preopening costs related to the hotel development in Texas. Preopening costs related to the Gaylord Texan were $4.0 million in 2002, as compared to $3.1 million in 2001. The Gaylord Texan is scheduled to open in April, 2004. In accordance with AICPA SOP 98-5, “Reporting on the Costs of Start-Up Activities,” the Company expenses the costs associated with start-up activities and organization costs as incurred.

     Gain on Sale of Assets

      During 1998, the Company entered into a partnership with The Mills Corporation to develop the Opry Mills Shopping Center in Nashville, Tennessee. The Company held a one-third interest in the partnership as well as the title to the land on which the shopping center was constructed, which was being leased to the partnership. During the second quarter of 2002, the Company sold its partnership share to certain affiliates of The Mills Corporation for approximately $30.8 million in cash proceeds. In accordance with the provisions of SFAS No. 66, “Accounting for Sales of Real Estate,” and other applicable pronouncements, the Company deferred approximately $20.0 million of the gain representing the estimated fair value of the continuing land lease interest between the Company and the Opry Mills partnership at June 30, 2002. The Company recognized the remainder of the proceeds, net of certain transaction costs, as a gain of approximately $10.6 million during the second quarter of 2002. During the third quarter of 2002, the Company sold its interest in the land lease to an affiliate of the Mills Corporation and recognized the remaining $20.0 million deferred gain, less certain transaction costs.

     Impairment and Other Charges

      The Company recognized pretax impairment and other charges as a result of the 2001 Strategic Assessment. The components of these charges for the year ended December 31 are as follows (amounts in thousands):

           
2001

Programming, film and other content
  $ 6,858  
Technology investments
    4,576  
Property and equipment
    2,828  
     
 
 
Total impairment and other charges
  $ 14,262  
     
 

      The Company began production of an IMAX movie during 2000 to portray the history of country music. As a result of the 2001 Strategic Assessment, the carrying value of the IMAX film asset was reevaluated on the basis of its estimated future cash flows resulting in an impairment charge of $6.9 million. At December 31, 2000, the Company held a minority investment in a technology start-up business. During 2001, the unfavorable environment for technology businesses created difficulty for this business to obtain adequate capital to execute its business plan and, subsequently, the Company was notified that this technology business had been unsuccessful in arranging financing, resulting in an impairment charge of $4.6 million. The Company also recorded an impairment charge related to idle real estate of $2.0 million during 2001 based upon an assessment of the value of the property. The Company sold this idle real estate during the second quarter of 2002. Proceeds from the sale approximated the carrying value of the property. In addition, the Company recorded an impairment charge for other idle property and equipment totaling $0.8 million during 2001 primarily due to the consolidation of offices resulting from personnel reductions.

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     Restructuring Charges

      2002 Restructuring Charge. As part of the Company’s ongoing assessment of operations, the Company identified certain duplication of duties within divisions and realized the need to streamline those tasks and duties. Related to this assessment, during the second quarter of 2002, the Company adopted a plan of restructuring resulting in a pretax restructuring charge of $1.1 million related to employee severance costs and other employee benefits unrelated to discontinued operations. Also during 2002, the Company reversed approximately $1.1 million of the 2001 restructuring charge. The 2002 restructuring charges were recorded in accordance with EITF No. 94-3. As of December 31, 2002, the Company has recorded cash payments of $1.1 million against the 2002 restructuring accrual. During the fourth quarter of 2002, the outplacement agreements expired related to the 2002 restructuring charge. Therefore, the Company reversed the remaining $67,000. There was no remaining balance of the 2002 restructuring accrual at December 31, 2002.

      2001 Restructuring Charge. During 2001, the Company recognized pretax restructuring charges from continuing operations of $5.8 million related to streamlining operations and reducing layers of management. The Company recognized additional pretax restructuring charges from discontinued operations of $3.0 million in 2001. These restructuring charges were recorded in accordance with EITF No. 94-3. The restructuring costs from continuing operations consist of $4.7 million related to severance and other employee benefits and $1.1 million related to contract termination costs, offset by the reversal of restructuring charges recorded in 2000 of $3.7 million primarily related to negotiated reductions in certain contract termination costs. The restructuring costs from discontinued operations consist of $1.6 million related to severance and other employee benefits and $1.8 million related to contract termination costs offset by the reversal of restructuring charges recorded in 2000 of $0.4 million. The 2001 restructuring charges primarily resulted from the Company’s strategic decisions to exit certain businesses and reduce corporate overhead and administrative costs. The 2001 restructuring plan resulted in the termination or notification of pending termination of approximately 150 employees. As of December 31, 2002, the Company has recorded cash payments of $4.4 million against the 2001 restructuring accrual, all of which related to continuing operations. The remaining balance of the 2001 restructuring accrual related to continuing operations at December 31, 2002 of $0.4 million is included in accounts payable and accrued liabilities in the consolidated balance sheets. The Company expects the remaining balances of the restructuring accruals for both continuing and discontinued operations to be paid in 2003.

     Depreciation Expense

      Depreciation expense increased $18.0 million, or 51.7%, to $52.7 million in 2002. The increase during 2002 is primarily attributable to the opening of Gaylord Palms in January 2002. Depreciation expense of Gaylord Palms was $18.6 million subsequent to the January 2002 opening.

     Amortization Expense

      Amortization expense increased slightly, by $0.1 million in 2002. Amortization of software increased $0.9 million during 2002 primarily at Gaylord Opryland, Gaylord Palms and the Corporate and Other segment. This increase was partially offset by the adoption of SFAS No. 142 on January 1, 2002, under the provisions of which the Company no longer amortizes goodwill. Amortization of goodwill for continuing operations for 2001 was $0.7 million.

     Operating Income (Loss)

      Total operating loss decreased $50.3 million to an operating income of $7.1 million during 2002. Hospitality segment operating income decreased $8.3 million to $26.0 million in 2002 primarily as a result of decreased operating income of Gaylord Opryland. The operating loss of the Opry and Attractions Group segment decreased $6.6 million to an operating income of $1.6 million in 2002 primarily as a result of increased operating income of Corporate Magic and the Grand Ole Opry. The operating loss of the

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Corporate and Other segment increased $2.0 million to an operating loss of $42.1 million in 2002 primarily because of the net change in the Company’s pension plans.
 
Interest Expense

      Interest expense increased $7.6 million, or 19.3%, to $47.0 million in 2002, net of capitalized interest of $6.8 million. The increase in interest expense is primarily due to ceasing of interest capitalization in January 2002 because of the opening of the Gaylord Palms. Capitalized interest related to the Gaylord Palms hotel was $0.4 million during 2002 before its opening and was $16.4 million during 2001. The absence of capitalized interest related to Gaylord Palms was partially offset by an increase of $4.0 million of capitalized interest related to the Gaylord Texan. Interest expense related to the amortization of prepaid costs and interest of the secured forward exchange contract was $26.9 million during 2002 and 2001.

      Excluding capitalized interest from each period, interest expense decreased $4.4 million in 2002 due to the lower average borrowing levels and lower weighted