FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

(Mark One)

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

For the quarterly period ended September 30, 2005

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

GAYLORD ENTERTAINMENT COMPANY

(Exact name of registrant as specified in its charter)

Delaware		73-0664379
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

One Gaylord Drive
Nashville, Tennessee 37214
(Address of principal executive offices)
(Zip Code)

(615) 316-6000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding as of October 31, 2005
Common Stock, $.01 par value		40,301,778 shares

 

 

GAYLORD ENTERTAINMENT COMPANY

FORM 10-Q

For the Quarter Ended September 30, 2005

No.		Page
Part I — Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Operations — For the Three Months Ended September 30, 2005 and 2004			2
Condensed Consolidated Statements of Operations — For the Nine Months Ended September 30, 2005 and 2004			3
Condensed Consolidated Balance Sheets — September 30, 2005 and December 31, 2004			4
Condensed Consolidated Statements of Cash Flows — For the Nine Months Ended September 30, 2005 and 2004			5
Notes to Condensed Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			36
Item 3. Quantitative and Qualitative Disclosures About Market Risk			66
Item 4. Controls and Procedures			68
Part II — Other Information
Item 1. Legal Proceedings			68
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			68
Item 3. Defaults Upon Senior Securities			68
Item 4. Submission of Matters to a Vote of Security Holders			68
Item 5. Other Information			68
Item 6. Exhibits			68
SIGNATURES			69
EX-10.1 FIRST AMENDMENT TO CREDIT AGREEMENT 06/01/05
EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
EX-32.1 SECTION 906 CERTIFICATION OF THE CEO & CFO

Part I — Financial Information

Item 1. — Financial Statements

GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

		2005				2004
Revenues		$	208,501			$	191,011
Operating expenses:
Operating costs			137,637				127,070
Selling, general and administrative			48,491				42,535
Preopening costs			1,213				223
Depreciation			18,294				17,914
Amortization			2,611				2,318
Operating income			255				951
Interest expense, net of amounts capitalized			(18,474	)			(14,850	)
Interest income			662				366
Unrealized gain (loss) on Viacom stock			10,828				(23,766	)
Unrealized (loss) gain on derivatives			(10,753	)			26,317
Income from unconsolidated companies			2,098				1,587
Other gains and (losses), net			1,102				753
Loss before benefit for income taxes			(14,282	)			(8,642	)
Benefit for income taxes			(4,769	)			(4,657	)
Loss from continuing operations			(9,513	)			(3,985	)
(Loss) gain from discontinued operations, net of income taxes			(2,104	)			793
Net loss		$	(11,617	)		$	(3,192	)
Basic (loss) income per share:
Loss from continuing operations		$	(0.24	)		$	(0.10	)
(Loss) gain from discontinued operations, net of income taxes			(0.05	)			0.02
Net loss		$	(0.29	)		$	(0.08	)
Fully diluted (loss) income per share:
Loss from continuing operations		$	(0.24	)		$	(0.10	)
(Loss) gain from discontinued operations, net of income taxes			(0.05	)			0.02
Net loss		$	(0.29	)		$	(0.08	)

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

GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

		2005				2004
Revenues		$	647,352			$	542,182
Operating expenses:
Operating costs			408,489				344,670
Selling, general and administrative			148,254				135,527
Preopening costs			3,329				14,239
Impairment and other charges			—				1,212
Restructuring charges			—				78
Depreciation			54,042				51,013
Amortization			8,001				6,519
Operating income (loss)			25,237				(11,076	)
Interest expense, net of amounts capitalized			(54,449	)			(39,011	)
Interest income			1,820				1,015
Unrealized loss on Viacom stock			(37,070	)			(119,052	)
Unrealized gain on derivatives			29,233				84,314
Income from unconsolidated companies			1,980				3,383
Other gains and (losses), net			6,022				2,390
Loss before benefit for income taxes			(27,227	)			(78,037	)
Benefit for income taxes			(8,718	)			(32,285	)
Loss from continuing operations			(18,509	)			(45,752	)
(Loss) gain from discontinued operations, net of income taxes			(2,376	)			1,014
Net loss		$	(20,885	)		$	(44,738	)
Basic (loss) income per share:
Loss from continuing operations		$	(0.46	)		$	(1.16	)
(Loss) gain from discontinued operations, net of income taxes			(0.06	)			0.03
Net loss		$	(0.52	)		$	(1.13	)
Fully diluted (loss) income per share:
Loss from continuing operations		$	(0.46	)		$	(1.16	)
(Loss) gain from discontinued operations, net of income taxes			(0.06	)			0.03
Net loss		$	(0.52	)		$	(1.13	)

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

GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

		September 30,				December 31,
		2005				2004
ASSETS
Current assets:
Cash and cash equivalents — unrestricted		$	27,853			$	44,212
Cash and cash equivalents — restricted			38,842				42,963
Short term investments			5,000				27,000
Trade receivables, less allowance of $2,158 and $1,755, respectively			40,360				30,159
Deferred financing costs			26,865				26,865
Deferred income taxes			9,443				10,411
Other current assets			34,050				21,066
Current assets of discontinued operations			4,369				11,337
Total current assets			186,782				214,013
Property and equipment, net of accumulated depreciation			1,380,156				1,341,808
Intangible assets, net of accumulated amortization			29,138				25,686
Goodwill			176,700				162,792
Indefinite lived intangible assets			40,315				40,591
Investments			435,529				468,570
Estimated fair value of derivative assets			213,565				187,383
Long-term deferred financing costs			36,697				50,873
Other long-term assets			21,459				24,088
Long-term assets of discontinued operations			2,234				5,241
Total assets		$	2,522,575			$	2,521,045
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and capital lease obligations		$	753			$	463
Accounts payable and accrued liabilities			186,821				163,927
Current liabilities of discontinued operations			3,476				5,794
Total current liabilities			191,050				170,184
Secured forward exchange contract			613,054				613,054
Long-term debt and capital lease obligations, net of current portion			580,911				575,946
Deferred income taxes			192,883				207,062
Estimated fair value of derivative liabilities			646				4,514
Other long-term liabilities			82,078				80,562
Long-term liabilities of discontinued operations			125				122
Commitments and contingencies			—				—
Stockholders’ equity:
Preferred stock, $.01 par value, 100,000 shares authorized, no shares issued or outstanding			—				—
Common stock, $.01 par value, 150,000 shares authorized, 40,285 and 39,930 shares issued and outstanding, respectively			403				399
Additional paid-in capital			668,611				655,110
Retained earnings			211,385				232,270
Unearned compensation			(1,665	)			(1,337	)
Accumulated other comprehensive loss			(16,906	)			(16,841	)
Total stockholders’ equity			861,828				869,601
Total liabilities and stockholders’ equity		$	2,522,575			$	2,521,045

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

GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

		2005				2004
Cash Flows from Operating Activities:
Net loss		$	(20,885	)		$	(44,738	)
Amounts to reconcile net loss to net cash flows provided by operating activities:
Loss (income) from discontinued operations, net of taxes			2,376				(1,014	)
Income from unconsolidated companies			(1,980	)			(3,383	)
Unrealized loss on Viacom stock and related derivatives			7,837				34,738
Gain on sales of assets			(2,619	)			—
Impairment and other charges			—				1,212
Depreciation and amortization			62,043				57,532
Benefit for deferred income taxes			(8,897	)			(32,621	)
Amortization of deferred financing costs			22,143				22,121
Changes in (net of acquisitions and divestitures):
Trade receivables			(9,340	)			(14,221	)
Accounts payable and accrued liabilities			8,098				3,240
Other assets and liabilities			(6,290	)			(3,772	)
Net cash flows provided by operating activities — continuing operations			52,486				19,094
Net cash flows provided by operating activities — discontinued operations			3,880				5,508
Net cash flows provided by operating activities			56,366				24,602
Cash Flows from Investing Activities:
Purchases of property and equipment			(87,280	)			(107,249	)
Acquisition of businesses, net of cash acquired			(20,223	)			—
Purchase of investment in RHAC Holdings, LLC			(4,747	)			—
Proceeds from sales of assets			10,386				—
Purchases of short-term investments			(15,000	)			(110,850	)
Proceeds from sale of short term investments			37,000				153,850
Other investing activities			(1,099	)			(2,676	)
Net cash flows used in investing activities — continuing operations			(80,963	)			(66,925	)
Net cash flows used in investing activities — discontinued operations			(211	)			(261	)
Net cash flows used in investing activities			(81,174	)			(67,186	)
Cash Flows from Financing Activities:
Repayment of long-term debt			—				(6,003	)
Deferred financing costs paid			(8,451	)			(909	)
Decrease (increase) in restricted cash and cash equivalents			8,832				(107	)
Proceeds from exercise of stock option and purchase plans			8,195				7,169
Other financing activities, net			(509	)			(525	)
Net cash flows provided by (used in) financing activities — continuing operations			8,067				(375	)
Net cash flows provided by financing activities — discontinued operations			382				782
Net cash flows provided by financing activities			8,449				407
Net change in cash and cash equivalents			(16,359	)			(42,177	)
Cash and cash equivalents — unrestricted, beginning of period			44,212				58,945
Cash and cash equivalents — unrestricted, end of period		$	27,853			$	16,768

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

GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION:

The condensed consolidated financial statements include the accounts of Gaylord Entertainment Company and subsidiaries (the “Company”) and have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the financial information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 filed with the Securities and Exchange Commission. In the opinion of management, all adjustments necessary for a fair statement of the results of operations for the interim period have been included. All adjustments are of a normal, recurring nature. The results of operations for such interim periods are not necessarily indicative of the results for the full year.

During 2003 and prior years, the Company classified certain market auction rate debt securities as cash and cash equivalents – unrestricted. During 2004, the Company determined that these securities should be classified as short-term investments due to the fact that the original maturity of these securities is greater than three months. As a result, the Company revised its statement of cash flows for the nine months ended September 30, 2004 to present the purchases and sales of these securities as investing activities. This reclassification had no impact on net income for the three months and nine months ended September 30, 2004 or cash flows provided by operating activities — continuing operations for the nine months ended September 30, 2004.

2. LOSS PER SHARE:

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

(in thousands)			Three Months Ended September 30,								Nine Months Ended September 30,
			2005				2004				2005				2004
Weighted average shares outstanding			40,234				39,726				40,126				39,594
Effect of dilutive stock options			—				—				—				—
Weighted average shares outstanding - assuming dilution			40,234				39,726				40,126				39,594

For the three months and nine months ended September 30, 2005, the effect of dilutive stock options was the equivalent of approximately 1,231,000 and 1,131,000 shares of common stock outstanding, respectively. For the three months and nine months ended September 30, 2004, the effect of dilutive stock options was the equivalent of approximately 446,000 and 475,000 shares of common stock outstanding, respectively. Because the Company had a loss from continuing operations in the three months and nine months ended September 30, 2005 and 2004, these incremental shares were excluded

from the computation of diluted earnings per share for those periods as the effect of their inclusion would have been anti-dilutive.

3. COMPREHENSIVE LOSS:

Comprehensive loss is as follows for the three months and nine months of the respective periods:

(in thousands)		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2005				2004				2005				2004
Net loss		$	(11,617	)		$	(3,192	)		$	(20,885	)		$	(44,738	)
Unrealized loss on interest rate hedges			—				(19	)			(19	)			(73	)
Foreign currency translation			1				11				(45	)			97
Comprehensive loss		$	(11,616	)		$	(3,200	)		$	(20,949	)		$	(44,714	)

4. INVESTMENTS

On May 31, 2005, the Company, through a wholly-owned subsidiary named RHAC, LLC, entered into an agreement to purchase the 716-room Aston Waikiki Beach Hotel and related assets located in Honolulu, Hawaii (“the Waikiki Hotel”) for an aggregate purchase price of $107.0 million. Simultaneously with this purchase, G.O. IB-SIV US, a private real estate fund managed by DB Real Estate Opportunities Group (“IB-SIV”) acquired an 80.1% ownership interest in the parent company of RHAC, LLC, RHAC Holdings, LLC, in exchange for its capital contribution of $19.1 million to RHAC Holdings, LLC. As a part of this transaction, the Company entered into a joint venture arrangement with IB-SIV and retained a 19.9% ownership interest in RHAC Holdings, LLC in exchange for its $4.7 million capital contribution to RHAC Holdings, LLC. Both the Company and IB-SIV will contribute additional funds as needed for their pro-rata share of specified construction costs associated with the redevelopment of the Waikiki Hotel. RHAC, LLC financed the purchase of the Waikiki Hotel by entering into a series of loan transactions with Greenwich Capital Financial Products, Inc. (the “Waikiki Hotel Lender”) consisting of a $70.0 million loan secured by the Waikiki Hotel and a $16.25 million mezzanine loan secured by the ownership interest of RHAC, LLC (collectively, the “Waikiki Hotel Loans”). IB-SIV is the managing member of RHAC Holdings, LLC, but certain actions initiated by IB-SIV require the approval of the Company. In addition, under the joint venture arrangement, the Company’s ResortQuest subsidiary secured a 20-year hotel management agreement from RHAC, LLC. Pursuant to the terms of the hotel management agreement, ResortQuest will be responsible for the day-to-day operations of the Waikiki Hotel in accordance with RHAC, LLC’s business plan. The Company will account for its investment in RHAC Holdings, LLC under the equity method of accounting in accordance with Emerging Issues Task Force (“EITF”) Issue No. 03-16, Accounting for Investments in Limited Liability Companies, American Institute of Certified Public Accountants Statement of Position 78-9, Accounting for Investments in Real Estate Ventures, and EITF Abstracts Topic No. D-46, Accounting for Limited Partnership Investment.

In the second quarter of 2005, Bass Pro Shops, L.P. (“Bass Pro”) restated its previously issued historical financial statements to reflect certain non-cash changes, which resulted primarily from a change in the manner in which Bass Pro accounts for its long term leases. This restatement resulted in a cumulative reduction in Bass Pro’s net income of $8.6 million through December 31, 2004, which resulted in a pro-rata cumulative reduction in the Company’s income from unconsolidated companies of $1.7 million. The Company determined that the impact of the adjustments recorded by Bass Pro is immaterial to the Company’s consolidated financial statements in all prior periods. Therefore, the Company reflected its

$1.7 million share of the re-statement adjustments as a one-time adjustment to income from unconsolidated companies during the second quarter of 2005.

5. DISCONTINUED OPERATIONS:

The Company has reflected the following businesses as discontinued operations, consistent with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets and Accounting Principles Board (“APB”) Opinion No. 30, Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. The results of operations, net of taxes, and the carrying value of the assets and liabilities of these businesses have been reflected in the accompanying consolidated financial statements as discontinued operations in accordance with SFAS No. 144 for all periods presented. These required revisions to the prior year financial statements did not impact cash flows from operating, investing or financing activities.

ResortQuest Markets

During the third quarter of 2005, the Company committed to a plan of disposal of certain markets of its ResortQuest business that were considered to be inconsistent with the Company’s long term growth strategy. The Company plans to sell the assets used in the operations of these markets as soon as practical. In connection with this plan of disposal, the Company recorded pre-tax restructuring charges of $0.4 million for employee severance benefits related to the discontinued markets. Based on its decision to dispose of these markets, the Company also recorded pre-tax impairment charges of $2.8 million during the third quarter of 2005. Included in this charge are the impairment of goodwill of $2.3 million, the impairment of fixed assets of $0.4 million, and the impairment of intangible assets of $0.1 million.

WSM-FM and WWTN(FM)

During the first quarter of 2003, the Company committed to a plan of disposal of WSM-FM and WWTN(FM) (the “Radio Operations’). Subsequent to committing to a plan of disposal during the first quarter of 2003, the Company, through a wholly-owned subsidiary, entered into an agreement to sell the assets primarily used in the operations of the Radio Operations to Cumulus Broadcasting, Inc. (“Cumulus”) in exchange for approximately $62.5 million in cash. On July 22, 2003, the Company finalized the sale of the Radio Operations for approximately $62.5 million, at which time, net proceeds of approximately $50 million were placed in an escrow account for completion of the Gaylord Texan. Concurrently, the Company also entered into a joint sales agreement with Cumulus for WSM-AM in exchange for $2.5 million in cash. The Company continues to own and operate WSM-AM, and under the terms of the joint sales agreement with Cumulus, Cumulus is responsible for all sales of commercial advertising on WSM-AM and provides certain sales promotion, billing and collection services relating to WSM-AM, all for a specified commission. The joint sales agreement has a term of five years.

During the third quarter of 2005, due to the expiration and resolution of certain claims and indemnifications in the sales contract, a previously established indemnification reserve of $0.1 million was reversed and is included in income from discontinued operations in the condensed consolidated statement of operations.

Acuff-Rose Music Publishing

During the third quarter of 2002, the Company finalized the sale of the Acuff-Rose Music Publishing entity to Sony/ ATV Music Publishing for approximately $157.0 million in cash. The Company recognized a pretax gain of $130.6 million during the third quarter of 2002 related to the sale.

During the third quarter of 2004, due to the expiration of certain indemnification periods as specified in

the sales contract, a previously established indemnification reserve of $1.0 million was reversed and is included in income from discontinued operations in the consolidated statement of operations.

The following table reflects the results of operations of businesses accounted for as discontinued operations for the three months and nine months ended September 30, 2005 and 2004:

(in thousands)		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2005				2004				2005				2004
Revenues:
ResortQuest Markets		$	4,130			$	4,913			$	13,351			$	14,696
Operating (loss) income:
ResortQuest Markets		$	(163	)		$	302			$	(572	)		$	658
Impairment charges			(2,749	)			—				(2,749	)			—
Restructuring charges			(434	)			—				(434	)			—
Total operating (loss) income			(3,346	)			302				(3,755	)			658
Interest income			7				5				22				16
Other gains and (losses):
ResortQuest Markets			(14	)			—				(12	)			—
Radio Operations			136				—				136				—
Acuff-Rose Music Publishing			—				1,015				—				1,015
Total other gains and (losses)			122				1,015				124				1,015
(Loss) income before (benefit) provision for income taxes			(3,217	)			1,322				(3,609	)			1,689
(Benefit) provision for income taxes			(1,113	)			529				(1,233	)			675
(Loss) gain from discontinued operations		$	(2,104	)		$	793			$	(2,376	)		$	1,014

Other gains and (losses) in 2005 and 2004 are primarily comprised of the reversal of certain previously established indemnification reserves and miscellaneous income and expenses.

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

(in thousands)		September 30,				December 31,
		2005				2004
Current assets:
Cash and cash equivalents — unrestricted		$	1,659			$	1,280
Cash and cash equivalents — restricted			1,804				2,186
Trade receivables, net			524				169
Prepaid expenses			165				169
Other current assets			217				7,533
Total current assets			4,369				11,337
Property and equipment, net of accumulated depreciation			999				1,443
Intangible assets, net of accumulated amortization			225				278
Goodwill			1,006				3,276
Other long-term assets			4				244
Total long-term assets			2,234				5,241
Total assets		$	6,603			$	16,578
Current liabilities:
Accounts payable and accrued liabilities		$	3,476			$	5,794
Total current liabilities			3,476				5,794
Other long-term liabilities			125				122
Total long-term liabilities			125				122
Total liabilities		$	3,601			$	5,916

6. ACQUISITIONS:

Whistler Lodging Company, Ltd.

On February 1, 2005, the Company acquired 100% of the outstanding common shares of Whistler Lodging Company, Ltd. (“Whistler”) from O’Neill Hotels and Resorts Whistler, Ltd. for an aggregate purchase price of $0.1 million in cash plus the assumption of Whistler’s liabilities as of February 1, 2005 of $4.9 million. Whistler manages approximately 600 vacation rental units located in Whistler, British Columbia. The results of operations of Whistler have been included in the Company’s financial results beginning February 1, 2005.

The total cash purchase price of the Whistler acquisition was as follows (in thousands):

Cash received from Whistler		$	(45	)
Direct merger costs incurred by the Company			194
Total		$	149

The purchase price allocation as of February 1, 2005 was as follows (in thousands):

Tangible assets acquired		$	1,771
Amortizable intangible assets			212
Goodwill			3,024
Total assets acquired			5,007
Liabilities assumed			(4,858	)
Net assets acquired		$	149

Tangible assets acquired totaled $1.8 million, which included $0.7 million of restricted cash, $0.6 million of net trade receivables and $0.2 million of property and equipment.

Approximately $0.2 million was allocated to amortizable intangible assets consisting of existing property management contracts. Property management contracts represent existing contracts with property owners, homeowner associations and other direct ancillary service contracts. Property management contracts are amortized on a straight-line basis over the remaining useful life of the contracts, which is estimated to be seven years from acquisition.

As of September 30, 2005 and February 1, 2005, goodwill related to the Whistler acquisition totaled $3.4 million and $3.0 million, respectively. During the eight months ended September 30, 2005, the Company made adjustments to accrued liabilities associated with the Whistler acquisition as a result of obtaining additional information. These adjustments resulted in a net increase in goodwill of $0.4 million.

East West Resorts

On January 1, 2005, the Company acquired 100% of the outstanding membership interests of East West Resorts at Summit County, LLC, Aspen Lodging Company, LLC, Great Beach Vacations, LLC, East West Realty Aspen, LLC, and Sand Dollar Management Investors, LLC (collectively, “East West

Resorts”) from East West Resorts, LLC for an aggregate purchase price of $20.7 million in cash plus the assumption of East West Resort’s liabilities as of January 1, 2005 of $7.8 million. East West Resorts manages approximately 2,000 vacation rental units located in Colorado ski destinations and South Carolina beach destinations. The results of operations of East West Resorts have been included in the Company’s financial results beginning January 1, 2005.

The total cash purchase price of the East West Resorts acquisition was as follows (in thousands):

Cash paid to East West Resorts, LLC		$	20,650
Direct merger costs incurred by the Company			97
Total		$	20,747

The purchase price allocation as of January 1, 2005 was as follows (in thousands):

Tangible assets acquired		$	9,714
Amortizable intangible assets			6,955
Goodwill			11,893
Total assets acquired			28,562
Liabilities assumed			(7,815	)
Net assets acquired		$	20,747

Tangible assets acquired totaled $9.7 million, which included $4.0 million of restricted cash, $0.3 million of net trade receivables and $4.2 million of property and equipment.

Approximately $7.0 million was allocated to amortizable intangible assets consisting of existing property management contracts and non-competition agreements. Property management contracts are amortized on a straight-line basis over the remaining useful life of the contracts, which is estimated to be seven years from acquisition. Non-competition agreements represent contracts with certain former owners and managers of East West Resorts, LLC that prohibit them from competing with the acquired companies for a period of five years. Non-competition agreements are amortized on a straight-line basis over the five year life of the agreements.

As of September 30, 2005 and January 1, 2005, goodwill related to the East West Resorts acquisition totaled $11.6 million and $11.9 million, respectively. During the nine months ended September 30, 2005, the Company made adjustments to the final purchase price of ($0.6 million) and accrued liabilities associated with the East West Resorts acquisition of $0.3 million as a result of obtaining additional information. These adjustments resulted in a net decrease in goodwill of $0.3 million.

ResortQuest International, Inc.

On November 20, 2003, pursuant to the Agreement and Plan of Merger dated as of August 4, 2003, the Company acquired 100% of the outstanding common shares of ResortQuest International, Inc. in a tax-free, stock-for-stock merger. Under the terms of the agreement, ResortQuest stockholders received 0.275 shares of the Company’s common stock for each outstanding share of ResortQuest common stock, and the ResortQuest option holders received 0.275 options to purchase the Company’s common stock for each outstanding option to purchase one share of ResortQuest common stock. Based on the number of shares

of ResortQuest common stock outstanding as of November 20, 2003 (19,339,502) and the exchange ratio (0.275 of the Company common share for each ResortQuest common share), the Company issued 5,318,363 shares of the Company’s common stock. In addition, based on the total number of ResortQuest options outstanding at November 20, 2003, the Company exchanged ResortQuest options for options to purchase 573,863 shares of the Company’s common stock. Based on the average market price of the Company’s common stock ($19.81, which was based on an average of the closing prices for two days before, the day of, and two days after the date of the definitive agreement, August 4, 2003), together with the direct merger costs, this resulted in an aggregate purchase price of approximately $114.7 million plus the assumption of ResortQuest’s outstanding indebtedness as of November 20, 2003, which totaled $85.1 million. The Company has accounted for the ResortQuest acquisition under the purchase method of accounting.

As of September 30, 2005 and December 31, 2004, goodwill related to the ResortQuest acquisition in continuing operations totaled $154.8 million and $155.9 million, respectively. During the nine months ended September 30, 2005, the Company made adjustments to deferred taxes associated with the ResortQuest acquisition as a result of obtaining additional information. These adjustments resulted in a net decrease in goodwill of $1.1 million.

As of November 20, 2003, the Company recorded approximately $4.0 million of reserves and adjustments related to the Company’s plans to consolidate certain support functions, to adjust for employee benefits and to account for outstanding legal claims filed against ResortQuest as an adjustment to the purchase price allocation. The following table summarizes the activity related to these reserves for the nine months ended September 30, 2005 (amounts in thousands):

Balance at		Charges and						Balance at
December 31, 2004		Adjustments		Payments				September 30, 2005
$2,950		$—		$	2,145			$	805

The Company has accounted for these acquisitions under the purchase method of accounting. Under the purchase method of accounting, the total purchase price of each acquisition was allocated to the net tangible and identifiable intangible assets based upon their estimated fair value as of the date of completion of each of the acquisitions. The Company determined these fair values with the assistance of a third party valuation expert. The excesses of the purchases prices over the fair values of the net tangible and identifiable intangible assets were recorded as goodwill. Goodwill will not be amortized and will be tested for impairment on an annual basis and whenever events or circumstances occur indicating that the goodwill may be impaired. The final allocations of the purchase prices are subject to adjustments for a period not to exceed one year from the consummation date (the allocation period of each acquisition) in accordance with SFAS No. 141 “Business Combinations” and EITF Issue 95-3 “Recognition of Liabilities in Connection with a Purchase Business Combination.” The allocation period is intended to differentiate between amounts that are determined as a result of the identification and valuation process required by SFAS No. 141 for all assets acquired and liabilities assumed and amounts that are determined because information that was not previously obtainable becomes obtainable.

7. DEBT:

Senior Loan and Mezzanine Loan

In 2001, the Company, through wholly owned subsidiaries, entered into two loan agreements, a $275.0 million senior loan (the “Senior Loan”) and a $100.0 million mezzanine loan (the “Mezzanine Loan”) (collectively, the “Nashville Hotel Loans”) with affiliates of Merrill Lynch & Company acting as principal. The Senior and Mezzanine Loan borrower and its member were subsidiaries formed for the purposes of owning and operating the Gaylord Opryland and entering into the loan transaction and were special-purpose entities whose activities were strictly limited. The Company fully consolidates these entities in its consolidated financial statements. The Senior Loan was secured by a first mortgage lien on the assets of Gaylord Opryland. In March 2004, the Company exercised the first of two one-year extension options to extend the maturity of the Senior Loan to March 2005. Amounts outstanding under the Senior Loan bore interest at one-month LIBOR plus 1.20%. The Mezzanine Loan was secured by the equity interest in the wholly-owned subsidiary that owns Gaylord Opryland, was due in April 2004 and bore interest at one-month LIBOR plus 6.0%.

During November 2003, the Company used the proceeds of the 8% Senior Notes, as discussed below, to repay in full $66.0 million outstanding under the Mezzanine Loan portion of the Nashville Hotel Loans. During November 2004, the Company used the proceeds of the 6.75% Senior Notes, as discussed below, to repay in full $192.5 million outstanding under the Senior Loan portion of the Nashville Hotel Loans. The Nashville Hotel Loans were terminated in connection with their repayment.

8% Senior Notes

On November 12, 2003, the Company completed its offering of $350 million in aggregate principal amount of senior notes due 2013 (the “8% Senior Notes”) in an institutional private placement. In January 2004, the Company filed an exchange offer registration statement on Form S-4 with the Securities and Exchange Commission (the “SEC”) with respect to the 8% Senior Notes and exchanged the existing senior notes for publicly registered senior notes with the same terms after the registration statement was declared effective in April 2004. The interest rate on these notes is 8%, although the Company has entered into fixed to variable interest rate swaps with respect to $125 million principal amount of the 8% Senior Notes, which swaps result in an effective interest rate of LIBOR plus 2.95% with respect to that portion of the 8% Senior Notes. The 8% Senior Notes, which mature on November 15, 2013, bear interest semi-annually in arrears on May 15 and November 15 of each year, starting on May 15, 2004. The 8% Senior Notes are redeemable, in whole or in part, at any time on or after November 15, 2008 at a designated redemption amount, plus accrued and unpaid interest. In addition, the Company may redeem up to 35% of the 8% Senior Notes before November 15, 2006 with the net cash proceeds from certain equity offerings. The 8% Senior Notes rank equally in right of payment with the Company’s other unsecured unsubordinated debt, but are effectively subordinated to all the Company’s secured debt to the extent of the assets securing such debt. The 8% Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by generally all of the Company’s active domestic subsidiaries including the subsidiaries owning the assets of Gaylord Opryland. In connection with the offering and subsequent registration of the 8% Senior Notes, the Company paid approximately $10.1 million in deferred financing costs. The net proceeds from the offering of the 8% Senior Notes, together with $22.5 million of the Company’s cash on hand, were used as follows:

•

$275.5 million was used to repay the $150 million senior term loan portion and the $50 million subordinated term loan portion of a senior secured credit facility secured by the Company’s

			Florida and Texas hotel properties, as well as the remaining $66 million of the Company’s $100 million Mezzanine Loan and to pay certain fees and expenses related to the ResortQuest acquisition; and
	•		$79.2 million was placed in escrow pending consummation of the ResortQuest acquisition. As of November 20, 2003, the $79.2 million together with $8.2 million of the available cash, was used to repay (i) ResortQuest’s senior notes and its credit facility, the principal amount of which aggregated $85.1 million at closing, and (ii) a related prepayment penalty.

The 8% Senior Notes indenture contains certain covenants which, among other things, limit the incurrence of additional indebtedness, investments, dividends, transactions with affiliates, asset sales, capital expenditures, mergers and consolidations, liens and encumbrances and other matters customarily restricted in such agreements. The 8% Senior Notes are cross-defaulted to the Company’s other indebtedness.

6.75% Senior Notes

On November 30, 2004, the Company completed its offering of $225 million in aggregate principal amount of senior notes due 2014 (the “6.75% Senior Notes”) in an institutional private placement. The interest rate of these notes is 6.75%. The 6.75% Senior Notes, which mature on November 15, 2014, bear interest semi-annually in cash in arrears on May 15 and November 15 of each year, starting on May 15, 2005. The 6.75% Senior Notes are redeemable, in whole or in part, at any time on or after November 15, 2009 at a designated redemption amount, plus accrued and unpaid interest. In addition, the Company may redeem up to 35% of the 6.75% Senior Notes before November 15, 2007 with the net cash proceeds from certain equity offerings. The 6.75% Senior Notes rank equally in right of payment with the Company’s other unsecured unsubordinated debt, but are effectively subordinated to all of the Company’s secured debt to the extent of the assets securing such debt. The 6.75% Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by generally all of the Company’s active domestic subsidiaries including, following repayment of the Senior Loan arrangements discussed above, the subsidiaries owning the assets of Gaylord Opryland. In connection with the offering of the 6.75% Senior Notes, the Company paid approximately $4.2 million in deferred financing costs. The net proceeds from the offering of the 6.75% Senior Notes, together with cash on hand, were used to repay the Senior Loan and to provide capital for growth of the Company’s other businesses and other general corporate purposes. In addition, the 6.75% Senior Notes indenture contains certain covenants which, among other things, limit the incurrence of additional indebtedness, investments, dividends, transactions with affiliates, asset sales, capital expenditures, mergers and consolidations, liens and encumbrances and other matters customarily restricted in such agreements. The 6.75% Senior Notes are cross-defaulted to the Company’s other indebtedness.

In April 2005, the Company filed an exchange offer registration statement on Form S-4 with the SEC with respect to the 6.75% Senior Notes and exchanged the existing senior notes for publicly registered senior notes with the same terms after the registration statement was declared effective in May 2005.

New $600.0 Million Credit Facility

On March 10, 2005, the Company entered into a new $600.0 million credit facility with Bank of America, N.A. acting as the administrative agent. The Company’s new credit facility, which replaced the 2003 $100.0 million revolving credit facility, consists of the following components: (a) a $300.0 million senior secured revolving credit facility, which includes a $50.0 million letter of credit sublimit, and (b) a $300.0 million senior secured delayed draw term loan facility, which may be drawn on in one or more

advances during its term. The credit facility also includes an accordion feature that will allow the Company, on a one-time basis, to increase the credit facilities by a total of up to $300.0 million, subject to securing additional commitments from existing lenders or new lending institutions. The revolving loan, letters of credit and term loan mature on March 9, 2010. At the Company’s election, the revolving loans and the term loans may have an interest rate of LIBOR plus 2% or the lending banks’ base rate plus 1%, subject to adjustments based on the Company’s financial performance. Interest on the Company’s borrowings is payable quarterly, in arrears, for base rate loans and at the end of each interest rate period for LIBOR rate-based loans. Principal is payable in full at maturity. The Company is required to pay a commitment fee ranging from 0.25% to 0.50% per year of the average unused portion of the credit facility.

The purpose of the new credit facility is for working capital and capital expenditures and the financing of the costs and expenses related to the construction of the Gaylord National hotel. Construction of the Gaylord National hotel is required to be substantially completed by September 30, 2008 (subject to customary force majeure provisions).

The new credit facility is (i) secured by a first mortgage and lien on the real property and related personal and intellectual property of the Company’s Gaylord Opryland hotel, Gaylord Texan hotel, Gaylord Palms hotel and Gaylord National hotel (to be constructed) and pledges of equity interests in the entities that own such properties and (ii) guaranteed by each of the four wholly owned subsidiaries that own the four hotels as well as ResortQuest International, Inc. Advances are subject to a 60% borrowing base, based on the appraisal values of the hotel properties (reducing to 50% in the event a hotel property is sold). The Company’s 2003 revolving credit facility has been paid in full and the related mortgages and liens have been released.

In addition, the $600.0 million credit facility contains certain covenants which, among other things, limit the incurrence of additional indebtedness, investments, dividends, transactions with affiliates, asset sales, acquisitions, mergers and consolidations, liens and encumbrances and other matters customarily restricted in such agreements. The material financial covenants, ratios or tests contained in the new credit facility are as follows:

	•		the Company must maintain a consolidated leverage ratio of not greater than (i) 7.00 to 1.00 for calendar quarters ending during calendar year 2007, and (ii) 6.25 to 1.00 for all other calendar quarters ending during the term of the credit facility, which levels are subject to increase to 7.25 to 1.00 and 7.00 to 1.00, respectively, for three (3) consecutive quarters at the Company’s option if the Company makes a leverage ratio election.
	•		the Company must maintain a consolidated tangible net worth of not less than the sum of $550.0 million, increased on a cumulative basis as of the end of each calendar quarter, commencing with the calendar quarter ending March 31, 2005, by an amount equal to (i) 75% of consolidated net income (to the extent positive) for the calendar quarter then ended, plus (ii) 75% of the proceeds received by the Company or any of its subsidiaries in connection with any equity issuance.
	•		the Company must maintain a minimum consolidated fixed charge coverage ratio of not less than (i) 1.50 to 1.00 for any reporting calendar quarter during which the leverage ratio election is effective; and (ii) 2.00 to 1.00 for all other calendar quarters during the term hereof.
	•		the Company must maintain an implied debt service coverage ratio (the ratio of adjusted net operating income to monthly principal and interest that would be required if the outstanding

			balance were amortized over 25 years at an interest rate equal to the then current seven year Treasury Note plus 0.25%) of not less than 1.60 to 1.00.
	•		the Company’s investments in entities which are not wholly-owned subsidiaries may not exceed an amount equal to ten percent (10.0%) of the Company’s consolidated total assets.

As of September 30, 2005, the Company was in compliance with all covenants. As of September 30, 2005, no borrowings were outstanding under the $600.0 million credit facility, but the lending banks had issued $13.5 million of letters of credit under the credit facility for the Company. The credit facility is cross-defaulted to the Company’s other indebtedness.

8. SECURED FORWARD EXCHANGE CONTRACT:

During May 2000, the Company entered into a seven-year secured forward exchange contract (“SFEC”) with an affiliate of Credit Suisse First Boston with respect to 10,937,900 shares of Viacom, Inc. Class B common stock (“Viacom Stock”). The seven-year SFEC has a notional amount of $613.1 million and required contract payments based upon a stated 5% rate. The SFEC protects the Company against decreases in the fair market value of the Viacom Stock while providing for participation in increases in the fair market value, as discussed below. The Company realized cash proceeds from the SFEC of $506.5 million, net of discounted prepaid contract payments and prepaid interest related to the first 3.25 years of the contract and transaction costs totaling $106.6 million. In October 2000, the Company prepaid the remaining 3.75 years of contract interest payments required by the SFEC of $83.2 million. As a result of the prepayment, the Company is not required to make any further contract interest payments during the seven-year term of the SFEC. Additionally, as a result of the prepayment, the Company was released from certain covenants of the SFEC, which related to sales of assets, additional indebtedness and liens. The unamortized balances of the prepaid contract interest are classified as current assets of $26.9 million as of September 30, 2005 and December 31, 2004 and long-term assets of $17.3 million and $37.4 million as of September 30, 2005 and December 31, 2004, respectively, in the accompanying condensed consolidated balance sheets. The Company is recognizing the prepaid contract payments and deferred financing charges associated with the SFEC as interest expense over the seven-year contract period using the effective interest method, which resulted in non-cash interest expense of $6.8 million for the three months ended September 30, 2005 and 2004, and $20.1 million and $20.2 million for the nine months ended September 30, 2005 and 2004, respectively. The Company utilized $394.1 million of the net proceeds from the SFEC to repay all outstanding indebtedness under a 1997 revolving credit facility, and the 1997 revolving credit facility was terminated.

The Company’s obligation under the SFEC is collateralized by a security interest in the Company’s Viacom Stock. At the end of the seven-year contract term, the Company may, at its option, elect to pay in cash rather than by delivery of all or a portion of the Viacom Stock. The SFEC protects the Company against decreases in the fair market value of the Viacom Stock below $56.05 per share by way of a put option; the SFEC also provides for participation in the increases in the fair market value of the Viacom Stock in that the Company receives 100% of the appreciation between $56.05 and $64.45 per share and, by way of a call option, 25.93% of the appreciation above $64.45 per share, as of September 30, 2005. The call option strike price decreased from $67.97 as of December 31, 2004 to $64.45 as of September 30, 2005 due to the Company receiving dividend distributions from Viacom. The Company elected not to retain the dividend distribution declared by Viacom during the third quarter of 2005 and expects to remit any future dividend distributions declared by Viacom to Credit Suisse First Boston.

In accordance with the provisions of SFAS No. 133, as amended, certain components of the secured forward exchange contract are considered derivatives, as discussed in Note 9.

9. DERIVATIVE FINANCIAL INSTRUMENTS:

The Company utilizes derivative financial instruments to reduce certain of its interest rate risks and to manage risk exposure to changes in the value of its Viacom Stock.

Upon adoption of SFAS No. 133, the Company valued the SFEC based on pricing provided by a financial institution and reviewed by the Company. The financial institution’s market prices are prepared for each quarter close period on a mid-market basis by reference to proprietary models and do not reflect any bid/offer spread. For the three months and nine months ended September 30, 2005, the Company recorded a net pretax (loss) gain in the Company’s condensed consolidated statement of operations of $(10.8) million and $29.2 million, respectively, related to the (decrease) increase in the fair value of the derivatives associated with the SFEC. For the three months and nine months ended September 30, 2004, the Company recorded net pretax gains in the Company’s condensed consolidated statement of operations of $26.3 million and $84.3 million, respectively, related to the increase in the fair value of the derivatives associated with the SFEC.

Upon issuance of the 8% Senior Notes, the Company entered into two interest rate swap agreements with a notional amount of $125.0 million to convert the fixed rate on $125.0 million of the 8% Senior Notes to a variable rate in order to access the lower borrowing costs that were available on floating-rate debt. Under these swap agreements, which mature on November 15, 2013, the Company receives a fixed rate of 8% and pays a variable rate, in arrears, equal to six-month LIBOR plus 2.95%. The terms of the swap agreement mirror the terms of the 8% Senior Notes, including semi-annual settlements on the 15^th of May and November each year. Under the provisions of SFAS No. 133, as amended, changes in the fair value of this interest rate swap agreement must be offset against the corresponding change in fair value of the 8% Senior Notes through earnings. The Company has determined that there will not be an ineffective portion of this hedge and therefore, no impact on earnings. As of September 30, 2005, the Company determined that, based upon dealer quotes, the fair value of these interest rate swap agreements was $(0.1) million. The Company has recorded a derivative liability and an offsetting decrease in the balance of the 8% Senior Notes accordingly. As of December 31, 2004, the Company determined that, based upon dealer quotes, the fair value of these interest rate swap agreements was $0.5 million. The Company recorded a derivative asset and an offsetting increase in the balance of the 8% Senior Notes accordingly.

10. SUPPLEMENTAL CASH FLOW DISCLOSURES:

Cash paid for interest related to continuing operations for the three months and nine months ended September 30, 2005 and 2004 was comprised of:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(in thousands)		2005				2004				2005				2004
Debt interest paid		$	818			$	1,579			$	21,271			$	16,207
Deferred financing costs paid			—				—				8,451				909
Capitalized interest			(668	)			(79	)			(1,764	)			(5,323	)
Cash interest paid, net of capitalized interest		$	150			$	1,500			$	27,958			$	11,793

     Income taxes received (paid) were $0.4 million and $(0.7) million for the nine months ended September 30, 2005 and 2004, respectively.

Certain transactions have been reflected as non-cash activities in the accompanying condensed consolidated statement of cash flows for the nine months ended September 30, 2005, as further discussed below.

In March 2005, the Company donated 65,100 shares of Viacom stock with a market value of $2.3 million to a charitable foundation established by the Company, which was recorded as selling, general and administrative expense in the accompanying condensed consolidated statement of operations. This donation is reflected as an increase in net loss and a corresponding decrease in other assets and liabilities in the accompanying condensed consolidated statement of cash flows.

In connection with the settlement of litigation with the Nashville Hockey Club Limited Partnership (“NHC”) on February 22, 2005, as further discussed in Note 15, the Company issued to NHC a 5-year, $5 million promissory note. Because the Company continued to accrue expense under the naming rights agreement throughout the course of this litigation, the issuance of this promissory note resulted in an increase in long term debt and capital lease obligations and a decrease in accounts payable and accrued liabilities in the accompanying condensed consolidated balance sheet and statement of cash flows.

11. GOODWILL AND INTANGIBLES:

The changes in the carrying amounts of goodwill by business segment for the nine months ended September 30, 2005 are as follows (amounts in thousands):

														Purchase
		Balance as of				Impairment								Accounting				Balance as of
		December 31, 2004				Losses				Acquisitions				Adjustments				September 30, 2005
Hospitality		$	—			$	—			$	—			$	—			$	—
Opry and Attractions			6,915				—				—				—				6,915
ResortQuest			155,877				—				14,917				(1,009	)			169,785
Corporate and Other			—				—				—				—				—
Total		$	162,792			$	—			$	14,917			$	(1,009	)		$	176,700

During the nine months ended September 30, 2005, the Company recorded goodwill of $3.0 million and $11.9 million related to the acquisitions of Whistler and East West Resorts, respectively, as previously discussed in Note 6. During the nine months ended September 30, 2005, the Company made adjustments to accrued liabilities associated with the Whistler acquisition, the final purchase price and accrued liabilities associated with the East West Resorts acquisition, and deferred taxes associated with the ResortQuest acquisition as a result of obtaining additional information. These adjustments resulted in a net decrease in goodwill of $1.0 million.

The carrying amount of indefinite-lived intangible assets not subject to amortization was $40.3 million and $40.6 million at September 30, 2005 and December 31, 2004, respectively. The gross carrying amount of amortized intangible assets in continuing operations was $37.9 million and $30.1 million at September 30, 2005 and December 31, 2004, respectively. The significant increase in amortized intangible assets during the nine months ended September 30, 2005 is due to the acquisitions of Whistler and East West Resorts, as discussed in Note 6. The related accumulated amortization of amortized intangible assets in continuing operations was $8.7 million and $4.5 million at September 30, 2005 and December 31, 2004, respectively. The amortization expense related to intangible assets from continuing operations during the three months and nine months ended September 30, 2005 was $1.4 million and $4.0 million, respectively. The amortization expense related to intangible assets from continuing operations during the three months and nine months ended September 30, 2004 was $1.0 million and $3.0 million,

respectively. The estimated amounts of amortization expense for the next five years are as follows (in thousands):

Year 1		$	5,005
Year 2			4,822
Year 3			4,822
Year 4			4,822
Year 5			4,681
Total		$	24,152

12. STOCK PLANS:

SFAS No. 123, “Accounting for Stock-Based Compensation”, encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for employee stock-based compensation using the intrinsic value method as prescribed in APB Opinion No. 25, “Accounting for Stock Issued to Employees”, and related interpretations, under which no compensation cost related to employee stock options has been recognized. In December 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure, an amendment of SFAS No. 123”. SFAS No. 148 amends SFAS No. 123 to provide two additional methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. This statement also amends the disclosure requirements of SFAS No. 123 to require certain disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company adopted the amended disclosure provisions of SFAS No. 148 on December 31, 2002, and the information contained in this report reflects the disclosure requirements of the new pronouncement. The Company accounts for employee stock-based compensation in accordance with APB Opinion No. 25.

If compensation cost for these plans had been determined consistent with the provisions of SFAS No. 123, the Company’s net loss and loss per share for the three months and nine months ended September 30, 2005 and 2004 would have been increased to the following pro forma amounts:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(in thousands, except per share data)		2005				2004				2005				2004
Net loss:
As reported		$	(11,617	)		$	(3,192	)		$	(20,885	)		$	(44,738	)
Less: Stock-based employee compensation, net of tax effect			1,048				1,031				3,409				2,911
Pro forma		$	(12,665	)		$	(4,223	)		$	(24,294	)		$	(47,649	)
Net loss per share:
As reported		$	(0.29	)		$	(0.08	)		$	(0.52	)		$	(1.13	)
Pro forma		$	(0.31	)		$	(0.11	)		$	(0.61	)		$	(1.20	)
Net loss per share assuming dilution:
As reported		$	(0.29	)		$	(0.08	)		$	(0.52	)		$	(1.13	)
Pro forma		$	(0.31	)		$	(0.11	)		$	(0.61	)		$	(1.20	)

At September 30, 2005 and December 31, 2004, there were 3,798,299 and 3,586,551 shares, respectively, of the Company’s common stock reserved for future issuance pursuant to the exercise of outstanding stock options under its stock option and incentive plans. Under the terms of its plans, stock options are granted with an exercise price equal to the fair market value at the date of grant and generally expire ten years after the date of grant. Generally, stock options granted to non-employee directors are exercisable on the first anniversary of the date of grant, while options granted to employees are exercisable ratably over a period of four years beginning on the first anniversary of the date of grant. The Company accounts for this plan under APB Opinion No. 25 and related interpretations, under which no compensation expense for employee and non-employee director stock options has been recognized.

The plan also provides for the award of restricted stock and restricted stock units. At September 30, 2005 and December 31, 2004, awards of 82,542 and 93,805 shares, respectively, of restricted common stock were outstanding. The market value at the date of grant of these restricted shares was recorded as unearned compensation as a component of stockholders’ equity. Unearned compensation is amortized and expensed over the vesting period of the restricted stock.

The Company has an employee stock purchase plan whereby substantially all employees are eligible to participate in the purchase of designated shares of the Company’s common stock. Prior to January 1, 2005, participants in the plan purchased these shares at a price equal to 85% of the lower of the closing price at the beginning or end of each quarterly stock purchase period. Effective January 1, 2005, the plan was amended such that participants in the plan now purchase these shares at a price equal to 95% of the closing price at the end of each quarterly stock purchase period. The Company issued 2,257 and 2,487 shares of common stock at an average price per share of $45.27 and $26.35 pursuant to this plan during the three months ended September 30, 2005 and 2004, respectively.

Included in compensation expense for the three months ended September 30, 2005 and 2004 is $0.7 million and $0.7 million, respectively, related to the grant of 606,000 units and 604,000 units, respectively, under the Company’s Performance Accelerated Restricted Stock Unit Program. Included in

compensation expense for the nine months ended September 30, 2005 and 2004 is $2.1 million and $2.0 million related to the grant of these units.

13. RETIREMENT AND POSTRETIREMENT BENEFITS OTHER THAN PENSION PLANS:

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

		Three months ended								Nine months ended
		September 30,								September 30,
		2005				2004				2005				2004
Service cost		$	109			$	150			$	327			$	451
Interest cost			1,201				1,188				3,603				3,564
Expected return on plan assets			(960	)			(855	)			(2,880	)			(2,564	)
Amortization of net actuarial loss			648				668				1,944				2,003
Amortization of prior service cost			1				1				3				3
Total net periodic pension expense		$	999			$	1,152			$	2,997			$	3,457

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

		Three months ended								Nine months ended
		September 30,								September 30,
		2005				2004				2005				2004
Service cost		$	52			$	69			$	156			$	231
Interest cost			198				207				594				730
Amortization of net actuarial gain			(126	)			(141	)			(377	)			(282	)
Amortization of net prior service cost			(250	)			(250	)			(750	)			(750	)
Amortization of curtailment gain			(61	)			(61	)			(183	)			(183	)
Total net postretirement benefit expense		$	(187	)		$	(176	)		$	(560	)		$	(254	)

14. NEWLY ISSUED ACCOUNTING STANDARDS:

In December 2004, the FASB issued SFAS No. 123(R), Share Based Payment, which replaces SFAS No. 123 and supercedes APB 25. SFAS No. 123(R) requires the measurement of all share-based payments to employees, including grants of employee stock options, using a fair-value based method and the recording of such expense over the related vesting period. SFAS No. 123(R) also requires the recognition of compensation expense for the fair value of any unvested stock option awards outstanding at the date of adoption. The proforma disclosure previously permitted under SFAS No. 123 and SFAS No. 148 is no longer an alternative under SFAS No. 123(R). The effective date for adopting SFAS 123(R) is the beginning of the first fiscal year beginning after June 15, 2005, which will be January 1, 2006 for the Company. Early adoption is permitted but not required. The Company plans to adopt the modified prospective method permitted under SFAS No. 123(R). Under this method, companies are required to record compensation expense for new and modified awards over the related vesting period of such awards prospectively and record compensation expense prospectively for the unvested portion, at the date of

adoption, of previously issued and outstanding awards over the remaining vesting period of such awards. No change to prior periods is permitted under the modified prospective method. Based on the unvested stock option awards outstanding as of September 30, 2005 that are expected to remain unvested as of January 1, 2006, the Company expects to recognize additional pre-tax compensation expense during 2006 of approximately $4.9 million beginning in the first quarter of 2006 as a result of the adoption of SFAS No. 123(R). Future levels of compensation expense recognized related to stock option awards (including the aforementioned) may be impacted by new awards and/or modifications, repurchases and cancellations of existing awards before and after the adoption of this standard.

In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets — An Amendment of APB Opinion No. 29. The amendments made by SFAS No. 153 are based on the principle that exchanges of non-monetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the exception for non-monetary exchanges of similar productive assets and replace it with a general exception for exchanges of non-monetary assets that do not have commercial substance. SFAS No. 153 is to be applied prospectively for non-monetary exchanges occurring in fiscal periods beginning after June 15, 2005. The Company does not expect the adoption of SFAS No. 153 to have a material impact on the Company’s financial position or results of operations.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections. SFAS No. 154 is a replacement of APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. This statement applies to all voluntary changes in accounting principle and changes the accounting for and reporting of a change in accounting principle. SFAS No. 154 requires retrospective application to prior periods’ financial statements of a voluntary change in accounting principle unless it is impracticable to do so. APB Opinion No. 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. SFAS No. 154 carries forward many provisions of APB Opinion 20 without change, including the provisions related to the reporting of a change in accounting estimate, a change in the reporting entity, and the correction of an error. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Earlier application is permitted for accounting changes and corrections of errors made occurring in fiscal years beginning after June 1, 2005. SFAS No. 154 does not change the transition provisions of any existing accounting pronouncements, including those that are in a transition phase as of the effective date of the statement. The Company does not expect the adoption of SFAS No. 154 to have a material impact on the Company’s financial position or results of operations.

15. COMMITMENTS AND CONTINGENCIES:

On February 22, 2005, the Company concluded the settlement of litigation with NHC, which owns the Nashville Predators NHL hockey team, over (i) NHC’s obligation to redeem the Company’s ownership interest, and (ii) the Company’s obligations under the Nashville Arena Naming Rights Agreement dated November 24, 1999. Under the Naming Rights Agreement, which had a 20-year term through 2018, the Company was required to make annual payments to NHC, beginning at $2,050,000 in 1999 and with a 5% escalation each year thereafter, and to purchase a minimum number of tickets to Predators games each year. At the closing of the settlement, NHC redeemed all of the Company’s outstanding limited partnership units in the Predators pursuant to a Purchase Agreement dated February 22, 2005 effectively terminating the Company’s ownership interest in the Predators. In addition, the Naming Rights Agreement was cancelled pursuant to the Acknowledgment of Termination of Naming Rights Agreement. As a part of the settlement, the Company made a one-time cash payment to NHC of $4 million and issued to NHC a 5-year, $5 million promissory note bearing interest at 6% per annum. The note is payable at $1 million per year for 5 years, with the first payment due on the first anniversary of the resumption of NHL

Hockey in Nashville, Tennessee, which occurred on October 5, 2005. The Company’s obligation to pay the outstanding amount under the note shall terminate immediately if, at any time before the note is paid in full, the Predators cease to be an NHL team playing their home games in Nashville, Tennessee. In addition, if the Predators cease to be an NHL team playing its home games in Nashville prior to the first payment under the note (October 5, 2006), then in addition to the note being cancelled, the Predators will pay the Company $4 million. If the Predators cease to be an NHL team playing its home games in Nashville after the first payment but prior to the second payment under the note, then in addition to the note being cancelled, the Predators will pay the Company $2 million. In addition, pursuant to a Consent Agreement among the Company, the National Hockey League and owners of NHC, the Company’s guaranty described below has been limited as described below. The Company continued to recognize the expense under the Naming Rights Agreement throughout the course of this litigation. As a result, the net effect of the settlement resulted in the Company reversing $2.4 million of expense previously accrued under the Naming Rights Agreement during the first quarter of 2005.

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

In connection with RHAC, LLC’s execution of the Waikiki Hotel Loans as described in Note 4, IB-SIV, the parent company of the Company’s joint venture partner, entered into two separate Guaranties of Recourse Obligations with the Waikiki Hotel Lender whereby it guaranteed RHAC, LLC’s obligations under the Waikiki Hotel Loans for as long as those loans remain outstanding (i) in the event of certain types of fraud, breaches of environmental representations or warranties, or breaches of certain “special purpose entity” covenants by RHAC, LLC, on the one hand, or (ii) in the event of bankruptcy or reorganization proceedings of RHAC, LLC, on the other hand. As a part of the joint venture arrangement and simultaneously with the closing of the purchase of the Waikiki Hotel, the Company entered into a Contribution Agreement with IB-SIV, whereby the Company agreed that, in the event that IB-SIV is required to make any payments pursuant to the terms of these guarantees, it will contribute to IB-SIV an amount equal to 19.9% of any such guaranty payments. The Company estimates that the maximum potential amount that the Company could be liable under this contribution agreement is $17.2 million, which represents 19.9% of the $86.3 million of total debt that RHAC, LLC owes to the Waikiki Hotel Lender as of September 30, 2005. As of September 30, 2005, the Company had not recorded any liability in the condensed consolidated balance sheet associated with this guarantee.

Also in connection with RHAC, LLC’s execution of the Waikiki Hotel Loans described in Note 4, IB-SIV and the Company were required to execute an irrevocable letter of credit in favor of the Waikiki Hotel Lender with a total notional amount of $7.9 million in order to secure RHAC, LLC’s obligation to perform certain capital upgrades on the Waikiki Hotel and to provide additional security for payment of the Waikiki Hotel Loans. This letter of credit is required to remain outstanding until all required capital

upgrades have been completed. However, the notional amount of this letter of credit will be reduced by the amount of funds actually expended by RHAC, LLC on the capital upgrades. Under the terms of the Waikiki Hotel Loans, the Waikiki Hotel Lender may draw up to the notional amount of this letter of credit and apply the proceeds to the Waikiki Hotel Loans upon the occurrence of an event of default. Pursuant to the Contribution Agreement described above, the Company agreed to initially execute a letter of credit for the full $7.9 million notional amount required by the Lender, and IB-SIV agreed that, in the event that any amounts are drawn by Lender under the letter of credit, it will contribute an amount equal to 80.1% of any such letter of credit draw to the Company. IB-SIV further agreed to execute a separate letter of credit subsequent to closing with a notional amount of $6.3 million to allow the Company to reduce the notional amount of its letter of credit to $1.6 million. During the third quarter of 2005, IB-SIV executed this replacement letter of credit with a notional amount of $6.3 million, and the Company reduced the notional amount of its letter of credit to $1.6 million. The maximum potential amount which the Company could be liable under this obligation is $1.6 million as of September 30, 2005. As of September 30, 2005, the Company had not recorded any liability in the condensed consolidated balance sheet associated with this obligation.

Certain of the Company’s ResortQuest subsidiary’s property management agreements in Hawaii contain provisions for guaranteed levels of returns to the owners. These agreements, which have remaining terms of up to approximately 7 years, also contain force majeure clauses to protect the Company from forces or occurrences beyond the control of management.

On February 24, 2005, the Company acquired approximately 42 acres of land and related land improvements in Prince George’s County, Maryland (Washington D.C. area) for approximately $29 million on which the Company is developing a hotel to be known as the Gaylord National Resort & Convention Center. Approximately $17 million of this was paid in the first quarter of 2005, with the remainder payable upon completion of various phases of the project. The Company currently expects to open the hotel in 2008. In connection with this project, Prince George’s County, Maryland approved, in July 2004, two bond issues related to the development. The first bond issuance, in the amount of $65 million, will support the cost of infrastructure being constructed by the project developer, such as roads, water and sewer lines. The second bond issuance, in the amount of $95 million, will be issued directly to the Company upon completion of the project. The Company will initially hold the bonds and receive the debt service thereon which is payable from tax increment, hotel tax and special hotel rental taxes generated from the development. On May 9, 2005, the Company entered into an agreement with a general contractor for the provision of certain initial construction services at the site. The Company expects to enter into a construction contract for the entire hotel project when the Company has determined the guaranteed maximum price for the project. The Company is also considering other potential hotel sites throughout the country. The timing and extent of any of these development projects is uncertain.

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

16. FINANCIAL REPORTING BY BUSINESS SEGMENTS:

The Company’s continuing operations are organized and managed based upon its products and services. The following information from continuing operations is derived directly from the segments’ internal financial reports used for corporate management purposes.

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(in thousands)		2005				2004				2005				2004
Revenues:
Hospitality		$	122,623			$	113,725			$	412,802			$	337,008
Opry and Attractions			19,727				18,352				51,272				47,749
ResortQuest			66,014				58,817				182,866				157,182
Corporate and Other			137				117				412				243
Total		$	208,501			$	191,011			$	647,352			$	542,182
Depreciation and amortization:
Hospitality		$	15,861			$	15,387			$	47,040			$	42,756
Opry and Attractions			1,375				1,292				3,927				3,918
ResortQuest			2,683				2,402				8,029				7,147
Corporate and Other			986				1,151				3,047				3,711
Total		$	20,905			$	20,232			$	62,043			$	57,532
Operating income (loss):
Hospitality		$	4,123			$	2,215			$	50,060			$	27,740
Opry and Attractions			1,577				967				1,574				(794	)
ResortQuest			4,795				7,441				5,870				9,940
Corporate and Other			(9,027	)			(9,449	)			(28,938	)			(32,433	)
Preopening costs			(1,213	)			(223	)			(3,329	)			(14,239	)
Impairment and other charges			—				—				—				(1,212	)
Restructuring charges			—				—				—				(78	)
Total operating income (loss)			255				951				25,237				(11,076	)
Interest expense, net of amounts capitalized			(18,474	)			(14,850	)			(54,449	)			(39,011	)
Interest income			662				366				1,820				1,015
Unrealized gain (loss) on Viacom stock			10,828				(23,766	)			(37,070	)			(119,052	)
Unrealized (loss) gain on derivatives			(10,753	)			26,317				29,233				84,314
Income from unconsolidated companies			2,098				1,587				1,980				3,383
Other gains and (losses), net			1,102				753				6,022				2,390
Loss before benefit for income taxes and discontinued operations		$	(14,282	)		$	(8,642	)		$	(27,227	)		$	(78,037	)

17. INFORMATION CONCERNING GUARANTOR AND NON-GUARANTOR SUBSIDIARIES:

Prior to the issuance of the 6.75% Senior Notes and repayment of the Senior Loan on November 30, 2004, as discussed in Note 7, not all of the Company’s subsidiaries guaranteed the 8% Senior Notes. All of the Company’s subsidiaries that were borrowers under, or had guaranteed, the Company’s 2003 revolving credit facility or previously, the Company’s 2003 Florida/Texas senior secured credit facility, were guarantors of the 8% Senior Notes (the “Former Guarantors”). Certain of the Company’s subsidiaries, including those that incurred the Company’s Nashville Hotel Loan or owned or managed the Nashville loan borrower (the “Former Non-Guarantors”), did not guarantee the 8% Senior Notes. However, subsequent to the issuance of the 6.75% Senior Notes and repayment of the Senior Loan on November 30, 2004, the 8% Senior Notes and 6.75% Senior Notes became guaranteed on a senior unsecured basis by generally all of the Company’s active domestic subsidiaries (the “Guarantors”). As a result, the Company has classified the balance sheet, results of operations, and cash flows of the subsidiaries that incurred the Company’s Nashville Hotel Loan or owned or managed the Nashville loan borrower as of September 30, 2005 and December 31, 2004 and for the three months and nine months ended September 30, 2005 as guarantor subsidiaries in the consolidating financial information presented below. The results of operations and cash flows of these subsidiaries for the three months and nine months ended September 30, 2004 are classified as non-guarantor subsidiaries in the consolidating financial information presented below. The Company’s investment in Bass Pro and certain other discontinued operations remained non-guarantors of the 8% Senior Notes and 6.75% Senior Notes after repayment of the Senior Loan, so the Company has classified the balance sheet, results of operations and cash flows of these subsidiaries as of September 30, 2005 and December 31, 2004 and for the three and nine months ended September 30, 2005 as non-guarantor subsidiaries (the “Non-Guarantors”) in the consolidating financial information presented below. The condensed consolidating financial information includes certain allocations of revenues and expenses based on management’s best estimates, which are not necessarily indicative of financial position, results of operations and cash flows that these entities would have achieved on a stand-alone basis.

GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES

Condensed Consolidating Statement of Operations

For the Three Months Ended September 30, 2005

										Non-
		Issuer				Guarantors				Guarantors				Eliminations				Consolidated
		(In thousands)
Revenues		$	21,456			$	199,882			$	—			$	(12,837	)		$	208,501
Operating expenses:
Operating costs			5,915				135,304				—				(3,582	)			137,637
Selling, general and administrative			8,926				39,565				—				—				48,491
Management fees			—				9,255				—				(9,255	)			—
Preopening costs			—				1,213				—				—				1,213
Depreciation			1,344				16,950				—				—				18,294
Amortization			347				2,264				—				—				2,611
Operating income (loss)			4,924				(4,669	)			—				—				255
Interest expense, net of amounts capitalized			(19,614	)			(14,138	)			(1,333	)			16,611				(18,474	)
Interest income			14,678				779				1,816				(16,611	)			662
Unrealized gain on Viacom stock			10,828				—				—				—				10,828
Unrealized loss on derivatives			(10,753	)			—				—				—				(10,753	)
Income from unconsolidated companies			—				124				1,974				—				2,098
Other gains and (losses), net			743				359				—				—				1,102
Income (loss) before provision (benefit) for income taxes			806				(17,545	)			2,457				—				(14,282	)
(Benefit) provision for income taxes			(145	)			(5,583	)			959				—				(4,769	)
Equity in subsidiaries’ (earnings) losses, net			12,568				—				—				(12,568	)			—
(Loss) income from continuing operations			(11,617	)			(11,962	)			1,498				12,568				(9,513	)
(Loss) gain from discontinued operations, net of taxes			—				(2,191	)			87				—				(2,104	)
Net (loss) income		$	(11,617	)		$	(14,153	)		$	1,585			$	12,568			$	(11,617	)

GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES

Condensed Consolidating Statement of Operations

For the Three Months Ended September 30, 2004

										Former
						Former				Non-
		Issuer				Guarantors				Guarantors				Eliminations				Consolidated
		(In thousands)
Revenues		$	19,686			$	132,554			$	50,008			$	(11,237	)		$	191,011
Operating expenses:
Operating costs			6,688				90,561				33,239				(3,418	)			127,070
Selling, general and administrative			8,733				26,364				7,312				126				42,535
Management fees			—				4,822				3,123				(7,945	)			—
Preopening costs			—				223				—				—				223
Impairment and other charges			—				—				—				—				—
Restructuring charges, net			—				—				—				—				—
Depreciation			1,345				11,550				5,019				—				17,914
Amortization			499				1,586				233				—				2,318
Operating income (loss)			2,421				(2,552	)			1,082				—				951
Interest expense, net of amounts capitalized			(13,987	)			(15,744	)			(2,843	)			17,724				(14,850	)
Interest income			15,671				380				2,039				(17,724	)			366
Unrealized loss on Viacom stock			(23,766	)			—				—				—				(23,766	)
Unrealized gain on derivatives			26,317				—				—				—				26,317
Income from unconsolidated companies			—				—				1,587				—				1,587
Other gains and (losses)			731				22				—				—				753
Income (loss) before provision (benefit) for income taxes			7,387				(17,894	)			1,865				—				(8,642	)
Provision (benefit) for income taxes			1,528				(6,644	)			459				—				(4,657	)
Equity in subsidiaries’ (earnings) losses, net			9,051				—				—				(9,051	)			—
(Loss) income from continuing operations			(3,192	)			(11,250	)			1,406				9,051				(3,985	)
Gain from discontinued operations, net			—				174				619				—				793
Net income (loss) income		$	(3,192	)		$	(11,076	)		$	2,025			$	9,051			$	(3,192	)