<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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 (I.R.S. Employer
incorporation or organization) 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 [ ]
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding as of April 30, 2000
----- --------------------------------
Common Stock, $.01 par value 33,320,282 shares
<PAGE> 2
GAYLORD ENTERTAINMENT COMPANY
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Income -
For the Three Months Ended March 31, 2000 and 1999 3
Condensed Consolidated Balance Sheets -
March 31, 2000 and December 31, 1999 4
Condensed Consolidated Statements of Cash Flows -
For the Three Months Ended March 31, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
Part II - Other Information
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Revenues $ 105,724 $ 113,139
Operating expenses:
Operating costs 75,763 74,491
Selling, general and administrative 34,973 31,272
Depreciation and amortization 13,509 12,024
--------- ---------
Operating income (loss) (18,521) (4,648)
Interest expense (5,618) (3,148)
Interest income 498 447
Other gains and losses 677 129,699
--------- ---------
Income (loss) before provision (benefit) for income taxes (22,964) 122,350
Provision (benefit) for income taxes (7,923) 42,558
--------- ---------
Net income (loss) $ (15,041) $ 79,792
========= =========
Net income (loss) per share $ (0.45) $ 2.43
========= =========
Net income (loss) per share - assuming dilution $ (0.45) $ 2.41
========= =========
Dividends per share $ -- $ 0.20
========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
<PAGE> 4
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 AND DECEMBER 31, 1999
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
March 31, Dec. 31,
2000 1999
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 17,373 $ 18,696
Trade receivables, less allowance of $7,398 and $7,474, respectively 91,778 83,289
Inventories 29,405 28,527
Other assets 47,234 33,524
----------- -----------
Total current assets 185,790 164,036
----------- -----------
Property and equipment, net of accumulated depreciation 627,299 611,582
Intangible assets, net of accumulated amortization 154,020 141,874
Investments 672,578 742,155
Long-term notes receivable, net 19,447 19,715
Other assets 52,568 53,022
----------- -----------
Total assets $ 1,711,702 $ 1,732,384
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 372,359 $ 299,788
Accounts payable and accrued liabilities 122,206 128,123
----------- -----------
Total current liabilities 494,565 427,911
----------- -----------
Long-term debt, net of current portion 9,670 10,335
Deferred income taxes 264,706 292,966
Other liabilities 40,107 38,693
Minority interest 1,400 1,320
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,
33,317 and 33,282 shares issued and outstanding, respectively 333 333
Additional paid-in capital 512,554 512,308
Retained earnings 335,987 351,028
Unrealized gain on investments 54,546 99,858
Other stockholders' equity (2,166) (2,368)
----------- -----------
Total stockholders' equity 901,254 961,159
----------- -----------
Total liabilities and stockholders' equity $ 1,711,702 $ 1,732,384
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
<PAGE> 5
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
2000 1999
-------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $(15,041) $ 79,792
Amounts to reconcile net income (loss) to net cash flows
used in operating activities:
Depreciation and amortization 13,509 12,024
Deferred income taxes 589 (552)
Gain on equity participation rights -- (129,875)
Changes in (net of acquisitions and divestitures):
Trade receivables (5,526) (2,406)
Accounts payable and accrued liabilities (11,141) (11,820)
Other assets and liabilities (12,935) (587)
-------- ---------
Net cash flows used in operating activities (30,545) (53,424)
-------- ---------
Cash Flows from Investing Activities:
Purchases of property and equipment (24,872) (15,267)
Proceeds from equity participation rights -- 130,000
Acquisition of businesses, net of cash acquired (11,620) --
Investments in, advances to and distributions from affiliates, net (5,084) (32,253)
Other investing activities (1,772) (1,746)
-------- ---------
Net cash flows provided by (used in) investing activities (43,348) 80,734
-------- ---------
Cash Flows from Financing Activities:
Repayment of long-term debt (822) (8,550)
Proceeds from issuance of long-term debt 500 500
Net borrowings (repayments) under revolving credit agreements 72,228 (20,377)
Proceeds from exercise of stock option and purchase plans 664 20
Dividends paid -- (6,562)
-------- ---------
Net cash flows provided by (used in) financing activities 72,570 (34,969)
-------- ---------
Net change in cash (1,323) (7,659)
Cash, beginning of period 18,696 18,746
-------- ---------
Cash, end of period $ 17,373 $ 11,087
======== =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
5
<PAGE> 6
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
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. It is suggested 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, 1999, 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. The results of operations for such interim period are not necessarily
indicative of the results for the full year.
2. INCOME PER SHARE:
The Company calculates income per share using the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share". Under the
standards established by SFAS No. 128, earnings per share is measured at two
levels: basic earnings per share and diluted earnings per share. Basic earnings
per share is computed by dividing net income by the weighted average number of
common shares outstanding during the period. Diluted earnings per share is
computed by dividing net income by the weighted average number of common shares
outstanding after considering the additional dilution related to stock options.
The weighted average number of common shares outstanding is calculated as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
------ ------
<S> <C> <C>
Weighted average shares outstanding 33,329 32,809
Effect of dilutive stock options -- 257
------ ------
Weighted average shares outstanding -
assuming dilution 33,329 33,066
====== ======
</TABLE>
For the three months ended March 31, 2000, the Company's effect of dilutive
stock options was the equivalent of 176 shares of common stock outstanding.
These incremental shares were excluded from the computation of diluted earnings
per share for the three months ended March 31, 2000 as the effect of their
inclusion would be anti-dilutive.
6
<PAGE> 7
3. COMPREHENSIVE INCOME:
SFAS No. 130, "Reporting Comprehensive Income", requires that changes in the
amounts of certain items, including gains and losses on certain securities, be
shown in the financial statements. Comprehensive income for the three months
ended March 31, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
--------- --------
<S> <C> <C>
Net income (loss) $ (15,041) $ 79,792
Unrealized loss on investments (45,312) --
Foreign currency translation 18 (265)
--------- --------
Comprehensive income (loss) $ (60,335) $ 79,527
========= ========
</TABLE>
4. GAYLORD DIGITAL:
During 1999, the Company acquired 84% of two online operations, Musicforce.com
and Lightsource.com, for approximately $23,400 in cash. During the first three
months of 2000, the Company acquired the remaining 16% of Musicforce.com and
Lightsource.com for approximately $6,500 in cash. The acquisition was financed
through borrowings under the Company's revolving credit agreement and has been
accounted for using the purchase method of accounting. The operating results of
the online operations have been included in the consolidated financial
statements from the date of acquisition of a controlling interest. The purchase
price allocation has been completed on a preliminary basis, subject to
adjustment should additional facts about the online operations become known. The
excess of purchase price over the fair values of the net assets acquired as of
March 31, 2000 was $27,934 and has been recorded as goodwill, which is being
amortized on a straight-line basis over seven years.
7
<PAGE> 8
5. FINANCIAL REPORTING BY BUSINESS SEGMENTS:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
--------- ---------
<S> <C> <C>
Revenues:
Hospitality and attractions $ 53,958 $ 60,267
Creative content 46,556 38,638
Interactive media 5,210 14,870
Corporate and other -- (636)
--------- ---------
Total $ 105,724 $ 113,139
========= =========
Depreciation and amortization:
Hospitality and attractions $ 6,446 $ 6,233
Creative content 3,446 3,238
Interactive media 1,997 1,187
Corporate and other 1,620 1,366
--------- ---------
Total $ 13,509 $ 12,024
========= =========
Operating income (loss):
Hospitality and attractions $ 4,759 $ 7,718
Creative content (7,366) (5,718)
Interactive media (7,351) 1,237
Corporate and other (8,563) (7,885)
--------- ---------
Total $ (18,521) $ (4,648)
========= =========
</TABLE>
8
<PAGE> 9
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS SEGMENTS
The Company is managed using the following four business segments: hospitality
and attractions, creative content, interactive media, and corporate and other.
The hospitality and attractions segment primarily consists of the Opryland Hotel
Nashville; the Opryland Hotel Florida, which is currently under construction;
the General Jackson showboat and various other tourist attractions located in
Nashville, Tennessee. The creative content segment primarily consists of Word
Entertainment ("Word"), the Company's contemporary Christian music company;
Pandora Investments, S.A. ("Pandora"), a Luxembourg-based company which
acquires, distributes and produces theatrical feature film and television
programming primarily for markets outside of the United States; the Grand Ole
Opry; the Wildhorse Saloons and Acuff-Rose Music Publishing. The interactive
media segment primarily consists of CMT International, a country music video
cable network operated in Latin America and the Pacific Rim; Gaylord Digital,
the Company's Internet division; the Company's television station prior to its
disposal and three radio stations in Nashville, Tennessee. The Company's
unallocated corporate expenses are reported separately.
GAYLORD DIGITAL
During the third quarter of 1999, the Company announced the creation of a
division, now known as Gaylord Digital, formed to initiate a focused Internet
strategy, and the acquisition of a controlling equity interest in two online
operations, Musicforce.com and Lightsource.com. At December 31, 1999, the
Company had acquired 84% of Musicforce.com and Lightsource.com for $23.4 million
in cash. During the first three months of 2000, the Company acquired the
remaining 16% of Musicforce.com and Lightsource.com for an additional $6.5
million in cash. The acquisition was financed through borrowings under the
Company's revolving credit agreement and has been accounted for using the
purchase method of accounting. The Company expects that Gaylord Digital will
have operating losses of approximately $13 million (excluding goodwill
amortization) during the year ended December 31, 2000.
DIVESTITURE OF KTVT
In October 1999, CBS Corporation acquired the Company's television station KTVT
in Dallas-Ft. Worth in exchange for $485 million of CBS Series B convertible
preferred stock, $4.2 million of cash and other consideration. As a result of
the merger of CBS Corporation and Viacom Inc. in May 2000, the 10,141.691 shares
of CBS Series B convertible preferred stock received as a result of the KTVT
divestiture converted into 11,003.734 shares of Viacom Inc. Series C convertible
preferred stock.
9
<PAGE> 10
RESULTS OF OPERATIONS
The following table contains unaudited selected summary financial data for the
three month period ended March 31, 2000 and 1999 (amounts in thousands). The
table also shows the percentage relationships to total revenues and, in the case
of segment operating income (loss), its relationship to segment revenues.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------------
2000 % 1999 %
--------- ----- -------- -----
<S> <C> <C> <C> <C>
Revenues:
Hospitality and attractions $ 53,958 51.1 $ 60,267 53.3
Creative content 46,556 44.0 38,638 34.2
Interactive media 5,210 4.9 14,870 13.1
Corporate and other -- -- (636) (0.6)
--------- ----- -------- -----
Total revenues 105,724 100.0 113,139 100.0
--------- ----- -------- -----
Operating expenses:
Operating costs 75,763 71.6 74,491 65.9
Selling, general & administrative 34,973 33.1 31,272 27.6
Depreciation and amortization:
Hospitality and attractions 6,446 6,233
Creative content 3,446 3,238
Interactive media 1,997 1,187
Corporate and other 1,620 1,366
--------- ----- -------- -----
Total depreciation and amortization 13,509 12.8 12,024 10.6
--------- ----- -------- -----
Total operating expenses 124,245 117.5 117,787 104.1
--------- ----- -------- -----
Operating income (loss):
Hospitality and attractions 4,759 8.8 7,718 12.8
Creative content (7,366) (15.8) (5,718) (14.8)
Interactive media (7,351) (141.1) 1,237 8.3
Corporate and other (8,563) -- (7,885) --
--------- ----- -------- -----
Total operating income (loss) $ (18,521) (17.5) $ (4,648) (4.1)
========= ===== ======== =====
</TABLE>
10
<PAGE> 11
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Revenues
Total Revenues - Total revenues decreased $7.4 million, or 6.6%, to $105.7
million in the first three months of 2000. The decrease results primarily from
the divestiture of KTVT in 1999. Excluding the revenues of KTVT from the first
three months of 1999, total revenues increased $3.9 million, or 3.8%, in the
first three months of 2000. This increase results primarily from increased
revenues in the creative content segment, principally from Word, partially
offset by decreases in the hospitality and attractions segment, principally from
the Opryland Hotel Nashville.
Hospitality and Attractions - Revenues in the hospitality and attractions
segment decreased $6.3 million, or 10.5%, to $54.0 million in the first three
months of 2000. Opryland Hotel Nashville revenues decreased $6.8 million, or
11.8%, to $50.8 million in the first three months of 2000. The Opryland Hotel
Nashville's occupancy rate decreased to 72.0% in the first three months of 2000
compared to 81.4% in the first three months of 1999. The hotel sold 181,700
rooms in the first three months of 2000 compared to 203,200 rooms sold in the
same period of 1999, reflecting a 10.6% decrease from 1999. The hotel's results
during the first three months of 1999 reflected unusually high group revenues
because of a number of corporate groups in the first quarter of 1999 that did
not repeat in 2000. The hotel's average daily rate increased to $133.43 in the
first three months of 2000 from $126.84 in the first three months of 1999.
Creative Content - Revenues in the creative content segment increased $7.9
million, or 20.5%, to $46.6 million in the first three months of 2000. This
increase is primarily due to an increase in revenues of Word of $5.2 million due
to an increase in sales of distributed products and an increase of $1.2 million
from the Company's live entertainment business. The increase in revenues is also
due to the March 2000 acquisition of Corporate Magic Inc., a company
specializing in the production of creative events in the corporate entertainment
marketplace, which had revenues subsequent to its March 2000 acquisition of $1.1
million.
Interactive Media - Revenues in the interactive media segment decreased $9.7
million, or 65.0%, to $5.2 million in the first three months of 2000. The
decrease results primarily from the divestiture of KTVT in 1999. Excluding the
revenues of KTVT from the first three months of 1999, revenues in the
interactive media segment increased $1.6 million, or 45.4%, in the first three
months of 2000. The increase is primarily the result of revenues of $1.2 million
from Gaylord Digital.
Corporate and Other - Corporate and other segment revenues in the first three
months of 1999 consisted primarily of losses from the Company's investment in
Bass Pro of $2.0 million partially offset by consulting and other services
revenues related to the Opry Mills partnership of $1.3 million.
Operating Expenses
Total Operating Expenses - Total operating expenses increased $6.5 million, or
5.5%, to $124.2 million in the first three months of 2000. Operating costs, as a
percentage of revenues, increased to 71.6% during the first three months of 2000
as compared to 65.9% during the first three months of 1999, as discussed below.
Selling, general and administrative expenses, as a percentage of revenues,
increased to 33.1% during the first three months of 2000 as compared to 27.6%
during the first three months of 1999.
11
<PAGE> 12
Operating Costs - Operating costs increased $1.3 million, or 1.7%, to $75.8
million in the first three months of 2000. Excluding the operating costs of KTVT
in the first three months of 1999, operating costs increased $7.0 million, or
10.2%. The increase is primarily attributable to increased operating costs of
Word during the first three months of 2000 of $5.7 million related to increased
royalties and other costs of lower-margin distributed products. Operating costs
of Gaylord Digital were $2.7 million in the first three months of 2000 related
to Internet development initiatives. These increases were partially offset
during the first three months of 2000 by a decrease in operating costs of the
Opryland Hotel Nashville of $3.2 million related to lower revenues, as discussed
above.
Selling, General and Administrative - Selling, general and administrative
expenses increased $3.7 million, or 11.8%, to $35.0 million in the first three
months of 2000. Excluding the selling, general and administrative expenses of
KTVT in the first three months of 1999, selling, general and administrative
expenses increased $5.9 million, or 20.4%. The increase in the first three
months of 2000 is primarily attributable to selling, general and administrative
expenses of Gaylord Digital of $2.2 million primarily related to promotional and
advertising costs. Hotel development and marketing efforts of the Opryland
Hospitality Group primarily related to hotel developments in Florida and Texas
increased selling, general and administrative expenses $1.5 million during the
first three months of 2000. Corporate selling, general and administrative
expenses, consisting primarily of senior management salaries and benefits,
legal, human resources, accounting, and other administrative costs, increased
$1.3 million in the first three months of 2000, including $0.8 million of
expense associated with the naming rights agreement entered into during the
third quarter of 1999 for the Gaylord Entertainment Center. Additionally,
development expenses associated with the creation of country and pop record
labels were $1.0 million in the first three months of 2000. These increases were
partially offset by decreased selling, general and administrative expenses of
the Opryland Hotel Nashville of $1.5 million in the first three months of 2000.
Depreciation and Amortization - Depreciation and amortization increased $1.5
million, or 12.4%, to $13.5 million in the first three months of 2000. Excluding
the depreciation and amortization of KTVT from 1999, depreciation and
amortization increased $2.1 million, or 18.4%. This increase is primarily
attributable to the depreciation expense of capital expenditures and the
amortization expense of intangible assets, primarily goodwill, associated with
recent acquisitions.
Operating Income (Loss)
Operating Income (Loss) - Total operating loss increased $13.9 million to an
operating loss of $18.5 million in the first three months of 2000. Operating
income in the hospitality and attractions segment decreased $3.0 million during
the first three months of 2000 as a result of expenses associated with the
Opryland Hospitality Group hotel developments and lower earnings from the
Opryland Hotel Nashville. Creative content segment operating loss increased $1.6
million during the first three months of 2000 primarily due to development
expenses associated with the start-up of country and pop record labels and
decreased operating income at Word from lower-margin distributed products.
Operating income (loss) of the interactive media segment decreased $8.6 million
during the first three months of 2000 primarily as a result of the divestiture
of KTVT in 1999. Excluding the operating income of KTVT from the 1999 results,
operating loss of the interactive media segment increased $5.9 million in the
first three months of 2000 as a result of the operating losses of Gaylord
Digital. Operating loss of the corporate and other segment increased $0.7
million during the first three months of 2000 as a result of increased corporate
costs partially offset by the 1999 inclusion of the losses from the Company's
investment in Bass Pro.
Operating expenses associated with the Company's development plans related to
hotel expansion projects, Gaylord Digital, and record labels are expected to
significantly impact the Company's results of operations during 2000. Currently,
the Company is expecting net losses for the year ended December 31, 2000,
excluding any nonrecurring items, in the range of $48 million to $50 million, or
$1.43 to $1.50 per diluted share.
12
<PAGE> 13
Interest Expense
Interest expense increased $2.5 million to $5.6 million in the first three
months of 2000. The increase is primarily attributable to higher average
borrowing levels and higher weighted average interest rates during the first
three months of 2000 than in the first three months of 1999. The Company's
weighted average interest rate on its borrowings was 7.2% in the first three
months of 2000 compared to 6.7% in the first three months of 1999.
Other Gains and Losses
During the first three months of 1999, the Company recognized a pretax gain of
$129.9 million related to the collection of $130 million in proceeds from the
redemption of certain equity participation rights in cable television systems
which the Company sold during 1995.
Income Taxes
The provision for income taxes decreased $50.5 million to an income tax benefit
of $7.9 million in the first three months of 2000. The effective tax rate on
income (loss) before provision (benefit) for income taxes was 34.5% for the
first three months of 2000 compared to 34.8% for the first three months of 1999.
During the first three months of 1999, the Company recognized a current
provision for income taxes of $45.5 million related to the non-recurring gain
from the equity participation rights discussed above.
LIQUIDITY AND CAPITAL RESOURCES
In August 1997, the Company entered into a revolving credit facility (the "1997
Credit Facility") and utilized the proceeds to retire outstanding indebtedness.
The lenders under the 1997 Credit Facility are a syndicate of banks with Bank of
America, N.A. acting as agent (the "Agent"). The 1997 Credit Facility was
amended during the first three months of 2000. As amended, the maximum amount
that can be borrowed under the 1997 Credit Facility is $525 million with a final
maturity of July 31, 2000. As amended, the 1997 Credit Facility is secured by
the Viacom Inc. Series C preferred stock acquired in the KTVT divestiture and is
guaranteed by certain of the Company's subsidiaries. At April 30, 2000, the
Company had approximately $127 million of available borrowing capacity under the
1997 Credit Facility.
The 1997 Credit Facility, as amended, subjects the Company to limitations on,
among other things, mergers and sales of assets, additional indebtedness,
capital expenditures, investments, acquisitions, liens, and transactions with
affiliates. As of March 31, 2000, the Company was in compliance with all
financial covenants under the 1997 Credit Facility, as amended.
During February 2000, the Company's Board of Directors voted to discontinue the
payment of dividends on its common stock. The Company paid common stock
dividends of $26.4 million in 1999. The Company currently projects capital
expenditures for 2000 of approximately $260 million, which includes
approximately $200 million related to the Company's hotel expansion projects in
Florida and Texas.
The Company is currently negotiating with its lenders and others regarding the
Company's future financing arrangements, which may include the monetization of
the Viacom Inc. preferred stock acquired as part of the KTVT divestiture.
Management expects that a new financing structure will be finalized prior to the
expiration of the 1997 Credit Facility at July 31, 2000. The Company's
management believes that the net cash flows from operations, together with the
amount expected to be available for borrowing under the 1997 Credit Facility and
the Company's future financing arrangements, will be sufficient to satisfy
anticipated future cash requirements, including its projected capital
expenditures, of the Company on both a short-term and long-term basis.
13
<PAGE> 14
SEASONALITY
Certain of the Company's operations are subject to seasonal fluctuation.
Revenues in the music business are typically weakest in the first calendar
quarter following the Christmas buying season.
NEWLY ISSUED ACCOUNTING STANDARD
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities", effective, as amended, for fiscal years
beginning after June 15, 2000. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments and hedging activities. SFAS No. 133
requires all derivatives to be recognized in the statement of financial position
and to be measured at fair value. The Company anticipates adopting the
provisions of SFAS No. 133 effective April 1, 2000 and is continuing to
determine the effects of SFAS No. 133 on the Company's financial statements.
FORWARD-LOOKING STATEMENTS/RISK FACTORS
This report contains certain forward-looking statements regarding, among other
things, the anticipated financial and operating results of the Company. In
connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company cautions investors that future
financial and operating results may differ materially from those projected in
forward-looking statements made by, or on behalf of, the Company. Such
forward-looking statements involve known and unknown risks, uncertainties, and
other factors that may cause the actual results, performance, or achievements of
the Company to be materially different from any future results, performance, or
achievements expressed or implied by such forward-looking statements. The
Company's future operating results depend on a number of factors which were
derived utilizing numerous assumptions and other important factors that, if
altered, could cause actual results to differ materially from those projected in
forward-looking statements. These factors, many of which are beyond the
Company's control, include the level of popularity of country and Christian
music; the ability to integrate the operations of acquired businesses into the
Company's operations; the advertising market in the United States in general and
in the Company's local radio markets in particular; the perceived attractiveness
of Nashville, Tennessee and the Company's properties as a convention and tourist
destination; the ability of the Opryland Hospitality Group to successfully
finance, develop and operate hotel properties in other markets; consumer tastes
and preferences for the Company's programming and other entertainment offerings;
competition; the impact of weather on construction schedules; and consolidation
in the broadcasting and cable distribution industries.
In addition, investors are cautioned not to place undue reliance on
forward-looking statements contained in this report because they speak only as
of the date hereof. The Company undertakes no obligation to release publicly any
modifications or revisions to forward-looking statements contained in this
report to reflect events or circumstances occurring after the date hereof or to
reflect the occurrence of unanticipated events.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Based upon the Company's overall market risk exposures at March 31, 2000, the
Company believes that the effects of changes in the stock price of Viacom Inc.
common stock or interest rates on the Company's consolidated financial position,
results of operations or cash flows could be material. However, the Company
believes that fluctuations in foreign currency exchange rates on the Company's
consolidated financial position, results of operations or cash flows will not be
material.
14
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Inapplicable
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Inapplicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Inapplicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Inapplicable
ITEM 5. OTHER INFORMATION
Inapplicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) See Index to Exhibits following the Signatures page.
(b) No reports on Form 8-K were filed during the quarter ended
March 31, 2000.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GAYLORD ENTERTAINMENT COMPANY
Date: May 12, 2000 By: /s/ Denise Wilder Warren
------------------- -----------------------------------------
Denise Wilder Warren
Senior Vice President and Chief Financial
Officer
16
<PAGE> 17
INDEX TO EXHIBITS
27 Financial Data Schedule (for SEC use only)
17
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 17,373
<SECURITIES> 0
<RECEIVABLES> 99,176
<ALLOWANCES> 7,398
<INVENTORY> 29,405
<CURRENT-ASSETS> 185,790
<PP&E> 627,299
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,711,702
<CURRENT-LIABILITIES> 494,565
<BONDS> 382,029
0
0
<COMMON> 333
<OTHER-SE> 900,921
<TOTAL-LIABILITY-AND-EQUITY> 1,711,702
<SALES> 105,724
<TOTAL-REVENUES> 105,724
<CGS> 0
<TOTAL-COSTS> 124,245
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,618
<INCOME-PRETAX> (22,964)
<INCOME-TAX> (7,923)
<INCOME-CONTINUING> (15,041)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,041)
<EPS-BASIC> (0.45)
<EPS-DILUTED> (0.45)
</TABLE>
