UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 1, 2012 (June 1, 2012)
GAYLORD ENTERTAINMENT COMPANY
(Exact name of registrant as specified in its charter)
| Delaware | 1-13079 | 73-0664379 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) | ||
| One Gaylord Drive Nashville, Tennessee |
37214 | |||
| (Address of principal executive offices) | (Zip Code) | |||
Registrant’s telephone number, including area code: (615) 316-6000
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| x | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
ITEM 8.01 OTHER EVENTS
On June 1, 2012, Gaylord Entertainment Company (the “Company”) made available presentation slides that will be used with investor presentations related to the Company’s sale of the Gaylord Hotels brand and management of its four hotels to Marriott International (“Marriott”) and its plans to reorganize and elect to be taxed as a real estate investment trust (“REIT”) effective January 1, 2013. A copy of the presentation slides is attached as Exhibit 99.1 and incorporated herein by reference. A copy of the investor presentation slides is also available at the Company’s Investor Relations website page at www.gaylordentertainment.com.
Cautionary Statement Concerning Forward-Looking Statements
This Current Report on Form 8-K, including the exhibit hereto, contains “forward-looking statements” concerning the Company’s goals, beliefs, expectations, strategies, objectives, plans, future operating results and underlying assumptions, and other statements that are not necessarily based on historical facts. Examples of these statements include, but are not limited to, statements regarding the closing of the Marriott sale transaction and the fulfillment of conditions to the closing, the Company’s expectation to elect REIT status, the timing and effect of that election, the form, timing and amount of the special earnings and profits distribution, the anticipated amount of conversion and other costs relating to the transactions, the amounts of revenue and cost synergies, and other business or operational issues. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, among other things, the following risks and uncertainties: risks and uncertainties associated with economic conditions affecting the hospitality business generally; the failure to receive, on a timely basis or otherwise, the required approvals by the Company’s stockholders or the private letter ruling from the IRS; the Company’s expectation to elect and qualify for REIT status, the timing and effect of that election; the Company’s ability to remain qualified as a REIT; the form, timing and amount of the special earnings and profits distribution; the Company’s and Marriott’s ability to consummate the sale; operating costs and business disruption may be greater than expected; and the Company’s ability to realize cost savings and revenue enhancements from the proposed REIT conversion. Other factors that could cause operating and financial results to differ are described in the filings made from time to time by the Company with the Securities and Exchange Commission (the “SEC”). The Company does not undertake any obligation to release publicly any revisions to forward-looking statements made by it to reflect events or circumstances occurring after the date hereof or the occurrence of unanticipated events.
Additional Information and Where to Find It
The Company expects to restructure its operations in connection with the proposed REIT conversion and as part of this restructuring it intends to file with the SEC a proxy statement and other documents regarding the proposed REIT conversion. STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT REGARDING THE PROPOSED REIT CONVERSION AND ANY OTHER RELEVANT DOCUMENTS CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED REIT CONVERSION. The final proxy statement will be mailed to the Company’s stockholders. You may obtain copies of all documents filed with the SEC concerning the proposed transaction, free of charge, at the SEC’s website at www.sec.gov. In addition, stockholders may obtain free copies of the documents filed with the SEC by the Company by going to the Company’s Investor Relations website page at www.gaylordentertainment.com or by sending a written request to the Company’s Secretary at Gaylord Entertainment Company, One Gaylord Drive, Nashville, Tennessee 37214, or by calling the Secretary at (615) 316-6000.
Interests of Participants
The Company and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of the Company in connection with the proposed REIT conversion. Information regarding the Company’s directors and executive officers is set forth in the Company’s proxy statement for its 2012 annual meeting of stockholders and its Annual Report on Form 10-K for the fiscal year ended December 31, 2011, which were filed with the SEC on April 3, 2012 and February 24, 2012, respectively. Additional information regarding persons who may be deemed to be participants in the solicitation of proxies in respect of the proposed REIT conversion will be contained in the proxy statement to be filed by the Company with the SEC when it becomes available.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
| (d) | Exhibits | |
| 99.1 | Investor Presentation | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| GAYLORD ENTERTAINMENT COMPANY | ||||
| Date: June 1, 2012 | By: | /s/ Carter R. Todd | ||
| Name: | Carter R. Todd | |||
| Title: | Executive Vice President, General Counsel and Secretary | |||
INDEX TO EXHIBITS
| 99.1 | Investor Presentation |
Exhibit 99.1
Gaylord Entertainment Company
Investor Presentation
May 2012
GAYLORD HOTELS®
GRANDOLE OPRY®
FORWARD LOOKING STATEMENTS AND IMPORTANT DISCLOSURES
This slide presentation contains “forward-looking statements” concerning the Gaylord Entertainment Company’s (the “Company”) goals, beliefs, expectations, strategies, objectives, plans, future operating results and underlying assumptions, and other statements that are not necessarily based on historical facts. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, among other things, the following risks and uncertainties: risks and uncertainties associated with economic conditions affecting the hospitality business generally; the failure to receive, on a timely basis or otherwise, the required approvals by the Company’s stockholders or the private letter ruling from the IRS; the Company’s expectation to elect and qualify for REIT status and the timing and effect of that election; the Company’s ability to remain qualified as a REIT; the form, timing and amount of the special earnings and profits distribution; the Company’s and Marriott ’s ability to consummate the sale; operating costs and business disruption may be greater than expected; and the Company’s ability to realize cost savings and revenue enhancements from the proposed REIT conversion. Other factors that could cause operating and financial results to differ are described in the filings made from time to time by the Company with the Securities and Exchange Commission (the “SEC”). The Company does not undertake any obligation to release publicly any revisions to forward-looking statements made by it to reflect events or circumstances occurring after the date hereof or the occurrence of unanticipated events.
Gaylord Entertainment Co. 2
ADDITIONAL INFORMATION AND WHERE TO FIND IT
The Company expects to restructure its operations in connection with the proposed REIT conversion and as part of this restructuring it intends to file with the SEC a proxy statement and other documents regarding the proposed REIT conversion. STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT REGARDING THE PROPOSED REIT CONVERSION AND ANY OTHER RELEVANT DOCUMENTS CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED REIT CONVERSION. The final proxy statement will be mailed to the Company’s stockholders. You may obtain copies of all documents filed with the SEC concerning the proposed transaction, free of charge, at the SEC’s website at www.sec.gov. In addition, stockholders may obtain free copies of the documents filed with the SEC by the Company by going to Gaylord’s Investor Relations website page at www.gaylordentertainment.com or by sending a written request to the Company’s Secretary at Gaylord Entertainment Company, One Gaylord Drive, Nashville, Tennessee 37214, or by calling the Secretary at (615) 316-6000.
Gaylord Entertainment Co. 3
INTERESTS OF PARTICIPANTS
The Company and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the Company’s stockholders in connection with the proposed REIT conversion. Information regarding the Company’s directors and executive officers is set forth in the Company’s proxy statement for its 2012 annual meeting of stockholders and its Annual Report on Form 10-K for the fiscal year ended December 31, 2011, which was filed with the SEC on April 3, 2012 and February 24, 2012, respectively. Additional information regarding persons who may be deemed to be participants in the solicitation of proxies in respect of the proposed REIT conversion will be contained in the proxy statement to be filed by the Company with the SEC when it becomes available.
Gaylord Entertainment Co. 4
TABLE OF CONTENTS
GAYLORD HOTELS®
GRANDOLE OPRY®
I. Situation Overview
II. Unique Portfolio and Focus
III. Lodging REIT Comparison
IV. Growth Opportunities
V. Capitalization
Gaylord Entertainment Co. 5
I. SITUATION OVERVIEW
GAYLORD ENTERTAINMENT®
SITUATION OVERVIEW
Gaylord Entertainment (“Gaylord” or the “Company”) is a hospitality lodging company with a unique focus on the large group meetings/convention sector
Gaylord is one of the only publicly traded lodging companies that owns and operates 100% of its hotel properties
The Challenge:
For the past few years, the Company has been undervalued by the public equity markets
– Company has built a very well recognized and respected brand
– Assets have demonstrated good profit growth – even during a challenging economic environment
– Shares have consistently traded at a discount to C-corp peers
As an owner and operator of “big-box” resort hotels, Gaylord is faced with a few challenges:
– Overhead costs spread over a relatively small property portfolio
– Atypical level of asset ownership for a C-Corp structure
– Limited ability to grow asset base as it is currently configured
– High level of capital and significant lead time required to develop convention-focused hotels
I. Situation Overview Gaylord Entertainment Co. 7
THE SOLUTION
Sell the Gaylord brand and management company for significant cash
Significantly reduce corporate overhead
Significantly reduce property level expenses
Work with world-class lodging operator who will deliver revenue synergies through new customer flows, an expansive frequent traveler program and a leading capability in managing group business
Convert Gaylord to tax-efficient lodging REIT structure
I. Situation Overview Gaylord Entertainment Co. 8
ESTIMATED REIT VALUE CREATION – THREE COMPONENTS
I. Non-Recurring Adjustments ($ in millions) Low Range High Range
Upfront proceeds from sale of management contracts $ 210 – $ 210
Brand conversion, severance and transaction costs (55) – (55)
Cash taxes 1 (53) – (43)
Cash dividend payment 2 (83) – (90)
Cash Impact 19 – 22
Cash dividend received 2 83 – 90
Total non-recurring impact to shareholders $ 102 – $ 112
II. Recurring Cost Savings ($ in millions)
Property level cost savings 3 $ 19 – $ 24
Corporate level cost savings 4 14 – 16
Total recurring cost savings 3 4 $ 33 – $ 40
III. Recurring Revenue Synergies
In addition to the cost savings highlighted above, Gaylord expects revenue synergies from a combination of:
Marriott’s strong relationships with meeting planners and group customers
Access to Marriott Rewards program members
1 Represents taxes associated with up-front payment net of the Company’s remaining Net Operating Losses (NOLs).
2 Based on estimated earnings and profits purge $415 - $450 million resulting from REIT conversion, with 20% being funded with cash and 80% funded with stock.
3 Property level cost savings include estimated cost and procurement synergies; savings shown are net of management fees.
4 Corporate savings shown are net of management fees
I. Situation Overview Gaylord Entertainment Co. 9
PROCESS TO EVALUATE OPPORTUNITIES TO ENHANCE SHAREHOLDER VALUE
In August 2011, Gaylord retained Deutsche Bank Securities Inc. to help evaluate opportunities to enhance shareholder value; subsequently, management and its advisors presented to the Board several strategic alternatives designed to increase shareholder value
– Leveraged recapitalization
– Reorganization as a REIT
– Sale of company to third party
– Sale of assets to third party or parties
In November 2011, the Board authorized management to explore the sale of the operating company and reorganization as a REIT and a Negotiating Committee was formed to oversee the process
Through an RFP process, Gaylord solicited bids from four operators to purchase the management company and brand
In February 2012, Gaylord retained McKinsey & Co. to help evaluate the overall fit and synergies for each of the operators as well as perform various diligence related tasks
On May 30, based on the recommendation of the Negotiating Committee, the Board decided to pursue the sale of the management company and brand to Marriott International and convert to a REIT
– This transaction should enable the Company to overcome the challenges it faces and unlock significant value for shareholders while retaining ownership of the properties (which are expected to increase in value through the recovery)
I. Situation Overview Gaylord Entertainment Co. 10
TRANSACTION SUMMARY
Sell the management company and brand for $210 million and subsequently reorganize as a REIT
– Company expects to realize ~$14 to ~$16 million in annualized corporate level savings
Marriott will manage the hotels under the Gaylord brand for an initial term of 35 years
– Property level savings net of management fees expected to be ~$19 to ~$24 million per annum; additionally, Gaylord assets should realize a material amount of revenue synergies
– The company will pay a base management fee as well as an incentive fee in excess of a preferred return
Company expects to incur ~$55 million in one-time conversion, transaction and severance expense
Iconic Grand Ole Opry, along with the company’s Nashville-based attractions will remain and be operated within taxable REIT subsidiaries
Shareholders will receive a special dividend relating to the earnings and profits purge required for a conversion from a C-corporation to a REIT
– Company estimates the E&P distribution to total approximately $415 to $450 million
– After receiving a private letter ruling from the IRS, the Company intends to pay 80% of the dividend in shares of Gaylord common stock and 20% in cash
Transaction will require approval of Gaylord shareholders
I. Situation Overview Gaylord Entertainment Co. 11
ILLUSTRATIVE TRANSACTION STRUCTURE
Current
Public Shareholders
Gaylord
(C-corporation)
100% Owned and Managed
Real Estate Assets and Other Attractions
Planned
Public Shareholders
Gaylord (REIT)
Third-party operator
100% Owned
100% Owned
100% Owned and Managed
Hotel trademarks/ intellectual property
Long-term management contract
“OpCo” (taxable REIT subsidiary)
Lease
Real Estate Assets
Opry & Other Attractions (taxable REIT subsidiary)
I. Situation Overview Gaylord Entertainment Co. 12
REIT CONVERSION TIMELINE
Company intends to declare REIT status effective January 1, 2013
May 31
Announcement of sale of management contracts
June
File proxy statement with the SEC
August
Shareholder vote to approve transaction
October
Marriott to commence management of hotel assets
November
Ex-dividend date for earnings and profits purge
January
Conversion from C-corporation to REIT
I. Situation Overview Gaylord Entertainment Co. 13
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STRATEGIC RATIONALE
Alignment with best-in-class operator
Combines convention hotels of the two companies most preferred by meeting planners
Marriott is expected to drive significant transient demand at the Gaylord properties
Up-front payment
$210 million up-front payment in exchange for management and brand rights
Opportunity for cost revenue synergies
Transferring mgmt to Marriott expected to reduce annual property costs by $19-$24 million
Gaylord expected to realize corporate overhead savings that total approximately $14-$16 million under a REIT structure
Leverage Marriott’s distribution to generate significant revenue synergies
Tax efficient structure
Improved cash flow generation from reduction of corporate income tax
Taxable REIT subsidiary structure to capture non-REIT income from Opry and other attractions segment
I. Situation Overview Gaylord Entertainment Co. 14
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WHY MARRIOTT?
Significant brand and marketing scale
Preferred operator by meeting planners
Marriott Rewards program
Ability to drive visitation
Significant recurring cost savings
Dominant large group distribution with 66 convention hotels managed worldwide
Network hotels command 112% RevPAR index premium over competitive set
#1 ranked preferred brand for booking large meetings requiring 200 – 2,000 rooms
#1 ranked operator for satisfying all large meeting needs
38 million members worldwide
11.2 million members reside within 300 miles of a Gaylord hotel
Employs a team of 2,960 sales associates across eight U.S. markets
$19-$24 million gross property level cost and procurement reductions anticipated on an annualized basis (net of management fees)
Source: Marriott International presentation, Company projections, and Company research
I. Situation Overview Gaylord Entertainment Co. 15
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ILLUSTRATIVE FFO AND AFFO – BASED ON 2013 CONSENSUS ESTIMATE
($ in millions) 2013
Low High
Consensus net income $54 $54
Add: Tax Savings(a) 15 15
Add: Cost savings 33 40
Pro forma net income $102 $109
Add: Consensus depreciation 124 124
Pro forma FFO $226 $233
Less: Consensus capital expenditures (56) (56)
Add: Non-cash Ground Rent 6 6
Add: Amortization of Debt Premiums/Disc. 15 15
Add: Amortization of DFC 5 5
Pro forma AFFO $196 $203
(a) Assumes REIT pays $10 million in taxes. Based on consensus 2013 taxes estimate of $25 million.
NOTE: THE TABLE ABOVE IS ILLUSTRATIVE ONLY AND IS BASED ON CONSENSUS ESTIMATES. THE COMPANY HAS NOT MADE ANY ESTIMATES OF 2013 PERFORMANCE, AND THIS PRESENTATION IS GIVEN SOLELY TO ILLUSTRATE THE EFFECTS OF THE PROPOSED TRANSACTIONS.
Source: First Call Consensus and Company estimates
I. Situation Overview Gaylord Entertainment Co. 16
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II. UNIQUE PORTFOLIO AND FOCUS
GAYLORD ENTERTAINMENT®
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UNIQUE REIT STRATEGY
Gaylord will be the only publicly traded REIT that will be focused on group-oriented destination hotel assets located in urban and resort markets
II. Unique Portfolio and Focus Gaylord Entertainment Co. 18
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OVERVIEW OF CURRENT ASSETS
Gaylord
a Delaware REIT
Year Completed Location Rooms Meeting Space Atriums F&B Outlets Retail Outlets
GAYLORD OPRYLAND
1977
Nashville, TN
2,882
640,000 sq ft
9 acres
17
25
GAYLORD PALMS
2002
Kissimmee, FL
1,406
400,000 sq ft
4 acres
9
9
GAYLORD TEXAN
2004
Dallas, TX
1,511
400,000 sq ft
4 acres
11
7
GAYLORD NATIONAL
2008
Washington, D.C.
1,996
470,000 sq ft
2 acres
10
5
RADISSON NASHVILLE
303 rooms
(to be managed by independent 3rd Party Operator)
Taxable REIT subsidiary
Ryman Auditorium
Grand Ole Opry
General Jackson
Wildhorse Saloon
Gaylord Springs Golf Course
II. Unique Portfolio and Focus Gaylord Entertainment Co. 19
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UNIQUE REVENUE MIX AND VISIBILITY
Our assets are custom built to serve meeting planners, resulting in a unique customer mix that provides unmatched visibility and protection
- We anticipate that the addition of Marriott will improve the quality of the group business mix
Customer Mix
Transient 22%
Group 78%
Group Business Mix
50% Corporate
35% Association
15% Other
Average Group Booking Window (yrs)
Corporate 1.5
Association 4.3
Other 2.7
Note: Customer mix is based on full year 2011 for all hotels (includes Opryland, Palms, Texan, National and Radisson).
II. Unique Portfolio and Focus Gaylord Entertainment Co. 20
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SIGNIFICANT NON-ROOM REVENUE
“All under one roof” offerings capture a greater share of the meeting attendee spending
- Approximately 70% of outside the room spend is related to food and beverage offerings
Revenue Mix FY 2011
Room 40%
Outside the Room 60%
Outside the room revenue mix FY 2011
44% Banquets
25% Food & beverage outlets
31% Other
Note: Revenue profile numbers are based on full year 2011 for all hotels (includes Opryland, Palms, Texan, National and Radisson).
II. Unique Portfolio and Focus Gaylord Entertainment Co. 21
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CONTRACTS PROVIDE A MEASURE OF PROFIT PROTECTION
Our contractual model and group focus worked as designed and delivered high margin revenue that partially offset declines in RevPAR during the recession
Attrition and cancellation fee collections for our hotels brand peaked in 2009 and have steadily decreased as the market continues to recover
Gaylord Hotels Fee Collections
vs. Occupancy
$30.0
$15.0
$0.0
78%
80%
72%
$27.7
71%
72%
66%
65%
Fee Collections
US$ in Millions
$14.6
Occupancy
$10.3
$9.3
$9.2
50%
2007
2008
2009
2010
2011
Attrition & Cancellation Fees Occupancy
Source: Company filings
Note: 2008 includes the opening of the Gaylord National in April; 2010 includes the flood impact to Gaylord Opryland - which was closed for 6 months for repair
II. Unique Portfolio and Focus Gaylord Entertainment Co. 22
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UNIQUE MODEL OUTPERFORMED DURING THE RECESSION
Contractual nature of advance group bookings provides a measure of top-line protection during periods of economic volatility – as a result, Gaylord’s group-focused model outperformed during the downturn
Additional upside exists beyond prior peak as Gaylord National continues to ramp and as a result of recent investments in leisure offerings
Relative RevPAR Performance Base Year = 2008
100 96.8 99.6
95 93.1
90 93.3
85 87.6
80 82.4
75
70
2008 2009 2010 2011
Upper Upscale Adjusted Gaylord Hotels
Note: Adjusted Gaylord Hotels includes Palms, Texan, National and Radisson. Upper Upscale segment numbers per Smith Travel Research.
II. Unique Portfolio and Focus Gaylord Entertainment Co. 23
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HIGH BARRIERS TO ENTRY LIMIT FUTURE COMPETITION
Gaylord owns four of the nine convention hotels with greater than 400,000 square feet of meeting space
Exhibit/Meeting
Facility Name Location Hotel Rooms Space (ft2)
Venetian Resort & Casino Las Vegas, NV 4,049 2,250,000
Mandalay Bay Resort & Casino Las Vegas, NV 4,332 1,295,655
Gaylord Opryland Resort & Convention Center Nashville, TN 2,882 640,000
MGM Grand Hotel & Casino Las Vegas, NV 5,044 600,000
Gaylord National Resort & Convention Center National Harbor, MD 1,996 470,000
Marriott Orlando World Center Orlando, FL 2,000 450,000
Rosen Shingle Creek Orlando, FL 1,500 445,000
Gaylord Texan Resort & Convention Center Grapevine, TX 1,511 400,000
Gaylord Palms Resort & Convention Center Kissimmee, FL 1,406 400,000
Source: Company filings.
II. Unique Portfolio and Focus Gaylord Entertainment Co. 24
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ASSETS IN PRISTINE CONDITION
Gaylord Opryland
1977 Initial phase of property completed and opened
2007-08 Renovation of rooms, guest corridors and public space
2010 Renovation of public space, guest rooms and areas damaged by the flood
Gaylord Palms
2002 Property completed and opened
2011-12 Renovation of rooms and guest corridors
2012 Addition of new amenities including a sports bar and two pools
Gaylord Texan
2004 Property completed and opened
2011 Addition of Paradise Springs, an award-winning resort pool
Gaylord National
2008 Property completed and opened
II. Unique Portfolio and Focus Gaylord Entertainment Co. 25
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EXTENSIVE MEETING SPACE AND ELEGANT BANQUETING OFFERINGS
II. Unique Portfolio and Focus Gaylord Entertainment Co. 26
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ENTERTAINING ENVIRONMENTS FOR MEETING AND NETWORKING
II. Unique Portfolio and Focus Gaylord Entertainment Co. 27
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TASTEFULLY DECORATED ROOMS PROVIDE WARMTH AND COMFORT
II. Unique Portfolio and Focus Gaylord Entertainment Co. 28
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III. LODGING REIT COMPARISON
GAYLORD ENTERTAINMENT®
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LODGING REIT COMPARISON - ROOM COUNT
Gaylord will be in the middle one-third of the comparable set as measured by total number of guest rooms
Number of Rooms
As of Q1 2012
65,864 43,515 26,195 20,646 18,326 13,208 10,406 10,200 8,160 8,072 7,469 6,886 4,661 3,516 3,264
HST HPT AHT RLJ FCH SHO DRH LHO HT GET INN BEE PEB CHSP CLDT
Note: Room count includes pro rata share of consolidated and unconsolidated rooms.
Source: Company filings, Wall Street Research and Capital IQ.
III. Lodging REIT Comparison Gaylord Entertainment Co. 30
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LODGING REIT COMPARISON - AVERAGE DAILY RATE
The ADR is a reflection of the high quality assets Gaylord owns; we anticipate that ADR will benefit from the addition of Marriott as the operator
FY 2011 Average Daily Rate
$248 $203 $193 $182 $175 $167 $167 $163 $153 $129 $129 $126 $125 $94 $90
BEE PEB LHO HST CHSP GET SHO DRH HT AHT FCH CLDT RLJ HPT INN
Source: Company filings, Wall Street Research and Capital IQ.
III. Lodging REIT Comparison Gaylord Entertainment Co. 31
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LODGING REIT COMPARISON - TOTAL REVPAR
Gaylord has among the highest Total RevPAR compared to other lodging REITS, reflecting Gaylord’s ability to capture a greater share of guest spending
FY 2011 Total RevPAR
$338 $305 $258 $225 $216 $182 $181 $174 $120 $119 $109 $103 $103 $92 $58
BEE GET PEB LHO HST CHSP SHO DRH AHT FCH HT CLDT RLJ HPT INN
Note: Based on 2011 total revenue and 2011 estimated available rooms derived from Company reported RevPAR. Source: Company filings, Wall Street Research and Capital IQ.
III. Lodging REIT Comparison Gaylord Entertainment Co. 32
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LODGING REIT COMPARISON - EBITDA / AVAILABLE ROOMS
Due to Gaylord’s ability to capture a greater share of guest spending, the Company generates the highest EBITDA/available room relative to other lodging REITS
FY 2011 EBITDA / Available Rooms
$25,374 $24,820 $22,998 $22,845 $18,139 $17,732 $16,790 $16,070 $15,870 $14,861 $13,921 $11,631 $11,587 $9,298 $5,256
GET BEE LHO PEB HT CHSP SHO HST HPT DRH AHT CLDT RLJ FCH INN
Note: Based on 2011 estimated available rooms derived from Company reported RevPAR. Source: Company filings, Wall Street Research and Capital IQ.
III. Lodging REIT Comparison Gaylord Entertainment Co. 33
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LODGING REIT COMPARISON - CURRENT TRADING MULTIPLE
Despite being among the leaders in performance on Total RevPAR and EBITDA/Available Room, Gaylord’s trading multiple as a C-corp has consistently traded at a discount to most lodging REITs TEV / 2012E EBITDA
17.2x 15.8x 14.4x 13.9x 13.6x 13.6x 13.3x 13.1x 13.1x 12.8x 12.8x 11.5x 11.5x 11.1x 10.2x
PEB BEE HST LHO HT AHT DRH CHSP FCH SHO INN RLJ GET CLDT HPT
Note: TEV calculated using stock prices as of May 30, 2012. 2012E EBITDA represents high end of Gaylord Entertainment consolidated EBTIDA guidance. Source: Company filings, Wall Street Research and Capital IQ.
III. Lodging REIT Comparison Gaylord Entertainment Co. 34
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IV. GROWTH OPPORTUNITIES
GAYLORD ENTERTAINMENT®
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GROUP SEGMENT IS POSITIONED FOR RECOVERY
Lodging fundamentals suffered more severe declines during the downturn relative to other sectors
- Expected to recover at a stronger rate over the next few years
Group ADR has lagged the transient ADR recovery and presents a greater opportunity for upside at this point in the cycle
Occupancy is expected to return to peak 2007 levels in 2012 giving operators pricing power to drive rate growth
Rate growth is expected to drive strong RevPAR gains until supply growth accelerates in 2015
Group ADR vs. Transient ADR
(Year-Over-Year Growth)
8.0% 3.0% -2.0% -7.0% -12.0%
2005 2006 2007 2008 2009 2010 2011
-Group ADR -Transient ADR
Source: Smith Travel Research; reflects Upper Upscale segment across all U.S. markets
IV. Growth Opportunities Gaylord Entertainment Co. 36
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FAVORABLE LODGING OUTLOOK
Supply growth remains at historically low levels
High replacement cost and long lead times remain as significant barriers to entry
Group bookings remain strong while attrition and cancellation rates remain low
Upper Upscale Supply & Demand Year-Over-Year % Change
10.0 4.0 -2.0 -8.0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
- Demand - Supply
Source: Smith Travel Research
IV. Growth Opportunities Gaylord Entertainment Co. 37
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SIGNIFICANT ORGANIC GROWTH OPPORTUNITIES
Recent capital investments present a high-return, compelling opportunity for organic growth
Marriott synergies provide an opportunity to further enhance the returns on these investments
The pipeline of potential investment opportunities is robust and attractive
Recent Investments
~$25 million
Investment at Gaylord Palms for a Sports Bar & 2 Pools
$13 million
Resort pool at Gaylord Texan
Robust Pipeline
Texan room expansion
Opryland room expansion
Palms room expansion
Dollywood joint venture (adjacent to Opryland)
Resort pool at National
IV. Growth Opportunities Gaylord Entertainment Co. 38
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ACQUISITION STRATEGY
While we are focused on the reorganization as a REIT and the transition of the four hotels to Marriott near-term, acquisitions will be part of our long-term unit growth strategy
The following parameters will be used to target acquisition opportunities:
- Group-oriented large hotels and “overflow” hotels with existing or potential leisure appeal
Upper-Upscale assets with over 400 hotel rooms in top group destination markets
Highly accessible assets located in urban and resort markets
Possess or are located near convention centers
- Present a repositioning opportunity and/or would significantly benefit from capital investment in additional rooms or meeting space
- Improve geographic diversity of asset portfolio
Existing property brand flag will no longer be a constraint to acquisitive growth
The REIT will seek to purchase below replacement cost and apply its group expertise in yielding attractive returns on group-oriented, resort assets
IV. Growth Opportunities Gaylord Entertainment Co. 39
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GAYLORD “COLORADO” PROJECT
As a REIT, the Company will no longer view large scale development as a means for growth
- Company will not proceed with Colorado project as previously anticipated
- However, the project has some very attractive and unique attributes
- Company will re-examine how the project could be completed with minimal financial commitment by Gaylord during the development phase
- This examination will be undertaken with investor expectations at the forefront and the company will keep investors informed as the process evolves
IV. Growth Opportunities Gaylord Entertainment Co. 40
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V. CAPITALIZATION
GAYLORD ENTERTAINMENT®
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BALANCE SHEET AND LIQUIDITY
Company has no maturities until the third quarter of 2014 and has ample liquidity
Debt Maturity Schedule 1 US$ in millions
$152.2 $185.0 $360.0 $400.0
2014 2015
Term Loan (L+225) Revolver (L+225) 3.75% Convertible Notes 6.75% Unsecured Notes
As of March 31, 2012
B3/B+
Corporate Family Rating
Caa2/B
Senior Unsecured Rating
$340 million
Revolver capacity
Source: Company filings.
1 Subject to compliance with terms of Notes indentures for 6.75% Unsecured Notes
V. Capitalization Gaylord Entertainment Co. 42
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DEBT / 2012E EBITDA
Gaylord has less leverage than the majority of lodging REITs
Total Debt / 2012 E EBITDA
10.4x 8.5x 7.2x 7.0x 6.4x 5.7x 5.6x 5.1x 5.1x 4.9x 4.6x 4.5x 4.4x 4.0x 3.9x
AHT FCH BEE CLDT SHO INN CHSP HT RLJ DRH PEB GET HST HPT LHO
Note: Based on debt as of Q1 2012 and 2012E EBITDA per high end of Gaylord Entertainment consolidated EBITDA guidance. Source: Company filings, Wall Street Research and Capital IQ.
V. Capitalization Gaylord Entertainment Co. 43
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INTEREST COVERAGE
Gaylord will have adequate interest coverage relative to other lodging REITs
Interest Coverage
6.6x 6.0x 5.3x 4.5x 3.8x 3.6x 3.6x 3.5x 3.0x 2.9x 2.8x 2.7x 2.3x 1.7x 1.7x
PEB GET LHO HPT CHSP DRH INN HST CLDT RLJ SHO HT BEE FCH AHT
Note: Based on LTM EBITDA and LTM net cash interest expense as of Q1 2012. Source: Company filings, Wall Street Research and Capital IQ.
V. Capitalization Gaylord Entertainment Co. 44
SUMMARY
GAYLORD ENTERTAINMENT®
INVESTMENT HIGHLIGHTS
High quality purpose-built assets
Transaction with world-class operator with ability to generate significant synergies
Conservative balance sheet and efficient capital allocation strategy
Strong organic and external growth strategy
Upside as lodging fundamentals continue to improve
High barriers to entry limiting future competition
New Co REIT
Summary Gaylord Entertainment Co. 46
RECONCILIATION OF NON-GAAP FINANCIAL METRICS
GAYLORD ENTERTAINMENT®
RECONCILIATION OF NON-GAAP FINANCIAL METRICS
$ in thousands
Full Year TTM
Gaylord Entertainment Company 2011 as of 3/31/12
Net income (loss) $10,177 $18,162
(Income) loss from discontinued operations, net of taxes (109)(126)
Provision (benefit) for income taxes 7,420 12,856
Other (gains) and losses, net 916 725
Income from unconsolidated companies (1,086)(913)
Interest expense, net 62,213 55,785
Operating income (loss) $79,531 $86,489
Depreciation & amortization 125,289 128,666
EBITDA $204,820 $215,155
Full Year
Gaylord Entertainment Company 2012 Guidance
Estimated operating income (loss) $118,450
Estimated depreciation & amortization 122,400
Estimated EBITDA $240,850
Source: Company filings
Note: Full Year 2012 Guidance shown is the high end of the range
Reconciliation of Non-GAAP Financial Metrics Gaylord Entertainment Co. 48