GAYLORD ENTERTAINMENT CO /DE - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q


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

		For the quarterly period ended September 30, 2003

		or

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

Commission file number 1-13079

GAYLORD ENTERTAINMENT COMPANY

(Exact Name of Registrant as Specified in its Charter)


Delaware		73-0664379

(State or Other Jurisdiction of 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 x No o

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

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, 2003

Common Stock, $.01 par value		33,882,489 shares

TABLE OF CONTENTS


	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
	Part I — Financial Information
	Item 1. — Financial Statements
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
	CONDENSED CONSOLIDATED BALANCE SHEETS
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
	PART II — OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5. OTHER INFORMATION
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
EX-10.2 GUARANTY BY CRAIG LEIPOLD JUNE 25, 1997
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

GAYLORD ENTERTAINMENT COMPANY

FORM 10-Q

For the Quarter Ended September 30, 2003
INDEX


			Page No.

Part I — Financial Information
	Item 1. Financial Statements (Unaudited)
		Condensed Consolidated Statements of Operations - For the Three Months Ended September 30, 2003 and 2002		3
		Condensed Consolidated Statements of Operations - For the Nine Months Ended September 30, 2003 and 2002		4
		Condensed Consolidated Balance Sheets - September 30, 2003 and December 31, 2002		5
		Condensed Consolidated Statements of Cash Flows - For the Nine Months Ended September 30, 2003 and 2002		6
		Notes to Condensed Consolidated Financial Statements		7
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			23
	Item 3. Quantitative and Qualitative Disclosures About Market Risk			42
	Item 4. Controls and Procedures			43
Part II — Other Information
	Item 1. Legal Proceedings			44
	Item 2. Changes in Securities and Use of Proceeds			44
	Item 3. Defaults Upon Senior Securities			44
	Item 4. Submission of Matters to a Vote of Security Holders			44
	Item 5. Other Information			44
	Item 6. Exhibits and Reports on Form 8-K			44

Part I — Financial Information

Item 1. — Financial Statements

GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 2003 and 2002
(Unaudited)
(In thousands, except per share data)


			2003			2002

Revenues			$	98,101		$	100,421
Operating expenses:
	Operating costs			63,527			59,380
	Selling, general and administrative			24,621			26,909
	Preopening costs			3,283			1,867
	Gain on sale of assets			—			(19,962	)
	Depreciation			13,235			12,984
	Amortization			1,332			949

		Operating income (loss)		(7,897	)		18,294
Interest expense, net of amounts capitalized				(10,476	)		(11,939	)
Interest income				742			840
Unrealized loss on Viacom stock				(58,976	)		(42,032	)
Unrealized gain on derivatives				32,976			60,667
Other gains and (losses), net				152			787

		Income (loss) before income taxes and discontinued operations		(43,479	)		26,617
Provision (benefit) for income taxes				(19,072	)		7,283

		Income (loss) from continuing operations		(24,407	)		19,334
Income from discontinued operations, net of taxes				35,150			80,710

		Net income	$	10,743		$	100,044

Income (loss) per share:
	Income (loss) from continuing operations		$	(0.72	)	$	0.57
	Income from discontinued operations, net of taxes			1.04			2.39

	Net income		$	0.32		$	2.96

Income (loss) per share — assuming dilution:
	Income (loss) from continuing operations		$	(0.72	)	$	0.57
	Income from discontinued operations, net of taxes			1.04			2.39

	Net income		$	0.32		$	2.96

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

GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 2003 and 2002
(Unaudited)
(In thousands, except per share data)


			2003			2002

Revenues			$	317,951		$	296,015
Operating expenses:
	Operating costs			191,933			188,888
	Selling, general and administrative			79,941			76,363
	Preopening costs			7,111			7,946
	Gain on sale of assets			—			(30,529	)
	Restructuring charges, net			—			50
	Depreciation			39,661			39,237
	Amortization			3,783			2,688

		Operating income (loss)		(4,478	)		11,372
Interest expense, net of amounts capitalized				(31,139	)		(36,289	)
Interest income				1,773			1,917
Unrealized loss on Viacom stock				(27,067	)		(39,611	)
Unrealized gain on derivatives				24,016			80,805
Other gains and (losses), net				435			665

		Income (loss) before income taxes and discontinued operations		(36,460	)		18,859
Provision (benefit) for income taxes				(15,974	)		1,605

		Income (loss) from continuing operations, before discontinued operations and cumulative effect of accounting change		(20,486	)		17,254
Income from discontinued operations, net of taxes				36,126			83,093
Cumulative effect of accounting change, net of taxes				—			(2,572	)

	Net income		$	15,640		$	97,775

Income (loss) per share:
	Income (loss) from continuing operations		$	(0.61	)	$	0.51
	Income from discontinued operations, net of taxes			1.07			2.46
	Cumulative effect of accounting change, net of taxes			—			(0.08	)

	Net income		$	0.46		$	2.89

Income (loss) per share — assuming dilution:
	Income (loss) from continuing operations		$	(0.61	)	$	0.51
	Income from discontinued operations, net of taxes			1.07			2.46
	Cumulative effect of accounting change, net of taxes			—			(0.08	)

	Net income		$	0.46		$	2.89

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

GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2003 and December 31, 2002
(Unaudited)
(In thousands, except per share data)


				September 30,			December 31,
				2003			2002

ASSETS
Current assets:
	Cash and cash equivalents — unrestricted			$	24,772		$	98,632
	Cash and cash equivalents — restricted				150,543			19,323
	Trade receivables, less allowance of $885 and $467, respectively				21,271			22,374
	Deferred financing costs				29,462			26,865
	Deferred income taxes				20,553			20,553
	Other current assets				27,647			25,889
	Current assets of discontinued operations				2,185			4,095

		Total current assets			276,433			217,731

Property and equipment, net of accumulated depreciation					1,238,002			1,110,163
Goodwill					6,915			6,915
Amortized intangible assets, net of accumulated amortization					1,970			1,996
Investments					482,012			509,080
Estimated fair value of derivative assets					200,274			207,727
Long-term deferred financing costs					78,177			100,933
Other long-term assets					22,370			24,323
Long-term assets of discontinued operations					8,398			13,328

		Total assets		$	2,314,551		$	2,192,196

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Current portion of long-term debt			$	74,543		$	8,526
	Accounts payable and accrued liabilities				85,710			80,685
	Current liabilities of discontinued operations				3,167			6,652

			Total current liabilities		163,420			95,863

Secured forward exchange contract					613,054			613,054
Long-term debt, net of current portion					393,842			332,112
Deferred income taxes, net					246,962			244,372
Estimated fair value of derivative liabilities					17,177			48,647
Other long-term liabilities					70,981			67,895
Long-term liabilities of discontinued operations					828			789
Minority interest of discontinued operations					2,019			1,885
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, 33,852 and 33,780 shares issued and outstanding, respectively				339			338
	Additional paid-in capital				523,330			520,796
	Retained earnings				298,438			282,798
	Other stockholders’ equity				(15,839	)		(16,353	)

		Total stockholders’ equity			806,268			787,579

		Total liabilities and stockholders’ equity		$	2,314,551		$	2,192,196

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

GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2003 and 2002
(Unaudited)
(In thousands)


				2003			2002

Cash Flows from Operating Activities:
	Net income			$	15,640		$	97,775
	Amounts to reconcile net income to net cash flows provided by operating activities:
		Income from discontinued operations, net of taxes			(36,126	)		(83,093	)
		Cumulative effect of accounting change, net of taxes			—			2,572
		Unrealized (gain) loss on Viacom stock and related derivatives			3,051			(41,194	)
		Gain on sale of assets			—			(30,529	)
		Depreciation and amortization			43,444			41,925
		Benefit for deferred income taxes			(21,121	)		(4,439	)
		Amortization of deferred financing costs			28,154			27,054
		Changes in (net of acquisitions and divestitures):
			Trade receivables		1,103			(20,882	)
			Income tax refund received		1,450			64,598
			Accounts payable and accrued liabilities		4,693			(2,349	)
			Other assets and liabilities		4,163			12,140

	Net cash flows provided by operating activities — continuing operations				44,451			63,578
	Net cash flows provided by (used in) operating activities — discontinued operations				2,524			(366	)

	Net cash flows provided by operating activities				46,975			63,212

Cash Flows from Investing Activities:
	Purchases of property and equipment				(167,428	)		(105,892	)
	Sale of assets				—			30,875
	Other investing activities				(2,578	)		(242	)

		Net cash flows used in investing activities — continuing operations			(170,006	)		(75,259	)
		Net cash flows provided by investing activities — discontinued operations			59,485			232,745

		Net cash flows provided by (used in) investing activities			(110,521	)		157,486

Cash Flows from Financing Activities:
	Repayment of long-term debt				(72,003	)		(200,054	)
	Proceeds from issuance of long-term debt				200,000			85,000
	Deferred financing costs paid				(7,793	)		—
	(Increase) decrease in restricted cash and cash equivalents				(131,220	)		49,913
	Proceeds from exercise of stock option and purchase plans				1,287			856
	Other financing activities, net				(491	)		1,314

		Net cash flows used in financing activities — continuing operations			(10,220	)		(62,971	)
		Net cash flows used in financing activities — discontinued operations			(94	)		(839	)

		Net cash flows used in financing activities			(10,314	)		(63,810	)

Net change in cash and cash equivalents					(73,860	)		156,888
Cash and cash equivalents — unrestricted, beginning of period					98,632			9,194

Cash and cash equivalents — unrestricted, end of period				$	24,772		$	166,082

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

GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. BASIS OF PRESENTATION:

The condensed consolidated financial statements include the accounts of Gaylord Entertainment Company and subsidiaries (the “Company”) and have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States 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. It is recommended that these condensed consolidated financial statements 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, 2002, and the audited consolidated financial statements and the notes thereto as of December 31, 2002 and 2001 and for each of the three years ended December 31, 2002, as amended in the Company’s Current Report on Form 8-K dated September 18, 2003, as 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 periods have been included. All adjustments are of a normal, recurring nature. The results of operations for such interim periods are not necessarily indicative of the results for the full year.

2. INCOME 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,

2003

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents