<PAGE> 1
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 September 30, 1996
Commission file number 1-10881
GAYLORD ENTERTAINMENT COMPANY
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 73-0383730
- ------------------------------------------- ------------------------------
(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 October 31, 1996
----- ----------------------------------
Class A Common Stock, $.01 par value 44,684,269 shares
Class B Common Stock, $.01 par value 51,764,916 shares
<PAGE> 2
GAYLORD ENTERTAINMENT COMPANY
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Part I - Financial Information
Item 1. Financial Statements 3
Condensed Consolidated Statements of Income -
For the Three Months Ended September 30, 1996 and 1995 4
Condensed Consolidated Statements of Income -
For the Nine Months Ended September 30, 1996 and 1995 5
Condensed Consolidated Balance Sheets -
September 30, 1996 and December 31, 1995 6
Condensed Consolidated Statements of Cash Flows -
For the Nine Months Ended September 30, 1996 and 1995 7
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II - Other Information
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
2
<PAGE> 3
Part I - Financial Information
Item 1. Financial Statements
GAYLORD ENTERTAINMENT COMPANY
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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, 1995, 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 periods are not
necessarily indicative of the results for the full year.
3
<PAGE> 4
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Revenues $ 205,011 $ 195,170
Operating expenses:
Operating costs 125,972 136,980
Selling, general and administrative 33,645 28,688
Depreciation and amortization 13,942 10,662
--------- ---------
Operating income 31,452 18,840
Interest expense (6,021) (163)
Interest income 5,771 538
Other gains (losses) (704) (697)
--------- ---------
Income from continuing operations before provision for income taxes 30,498 18,518
Provision for income taxes 10,065 7,129
--------- ---------
Income from continuing operations 20,433 11,389
Discontinued operations, net of taxes -- 42,998
--------- ---------
Net income $ 20,433 $ 54,387
========= =========
Income per share:
Income from continuing operations $ 0.21 $ 0.12
Discontinued operations, net of taxes -- 0.44
--------- ---------
Net income $ 0.21 $ 0.56
========= =========
Weighted average shares outstanding, including equivalent shares 97,951 97,769
========= =========
Dividends per share $ 0.090 $ 0.076
========= =========
</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 INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Revenues $ 553,148 $ 532,782
Operating expenses:
Operating costs 333,432 344,477
Selling, general and administrative 96,384 87,380
Depreciation and amortization 35,228 28,017
--------- ---------
Operating income 88,104 72,908
Interest expense (13,574) (1,356)
Interest income 17,039 1,438
Other gains (losses) 72,178 (3,028)
--------- ---------
Income from continuing operations before provision for income taxes 163,747 69,962
Provision for income taxes 60,028 26,935
--------- ---------
Income from continuing operations 103,719 43,027
Discontinued operations, net of taxes -- 42,998
--------- ---------
Net income $ 103,719 $ 86,025
========= =========
Income per share:
Income from continuing operations $ 1.06 $ 0.44
Discontinued operations, net of taxes -- 0.44
--------- ---------
Net income $ 1.06 $ 0.88
========= =========
Weighted average shares outstanding, including equivalent shares 97,911 97,630
========= =========
Dividends per share $ 0.261 $ 0.221
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
<PAGE> 6
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
ASSETS 1996 1995
------------- ------------
<S> <C> <C>
Current assets:
Cash $ 14,983 $ 12,062
Trade receivables, less allowance of $3,138 and $3,297, respectively 115,619 105,898
Program rights 13,292 26,583
Other assets 54,825 53,639
------------- ------------
Total current assets 198,719 198,182
------------- ------------
Program rights 19,990 37,641
Property and equipment, net of accumulated depreciation 633,646 571,551
Intangible assets, net of accumulated amortization 37,986 36,935
Investments 66,737 64,985
Long-term notes and interest receivable 198,289 176,356
Other assets 18,128 10,162
------------- ------------
Total assets $ 1,173,495 $ 1,095,812
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 37,350 $ 37,400
Accounts payable and accrued liabilities 106,729 115,664
Income taxes payable 8,664 14,131
Program contracts payable 16,094 23,574
------------- ------------
Total current liabilities 168,837 190,769
------------- ------------
Long-term debt 335,866 302,644
Program contracts payable 18,739 34,058
Deferred income taxes 113,782 117,361
Other liabilities 21,469 18,866
Minority interest 14,404 13,008
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 100,000 shares authorized, no shares
issued or outstanding -- --
Class A common stock, $.01 par value, 300,000 and 150,000 shares
authorized, 45,308 and 41,301 shares issued and outstanding,
respectively 453 413
Class B common stock, $.01 par value, 150,000 and 65,000 shares
authorized, 51,368 and 53,608 shares issued, 51,368 and 50,498
shares outstanding, respectively 514 536
Additional paid-in capital 483,628 414,458
Retained earnings 21,686 68,353
Unearned restricted stock compensation (5,883) (2,798)
Treasury stock -- (61,856)
------------- ------------
Total stockholders' equity 500,398 419,106
------------- ------------
Total liabilities and stockholders' equity $ 1,173,495 $ 1,095,812
============= ============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
6
<PAGE> 7
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 103,719 $ 86,025
Amounts to reconcile net income to net cash flows
provided by operating activities:
Depreciation and amortization 35,228 28,017
Deferred income taxes (3,490) (3,012)
Write-down of television program rights -- 13,302
Noncash interest income (14,912) --
Discontinued operations, net of taxes -- (42,998)
Gain on sale of television station (73,850) --
Changes in:
Trade receivables (15,831) (14,552)
Program rights and program contracts payable (1,176) 9,990
Accounts payable and accrued liabilities (6,265) 11,715
Other, net (7,772) (3,312)
------------- ------------
Net cash flows provided by operating activities 15,651 85,175
------------- ------------
Cash Flows from Investing Activities:
Proceeds from sale of television station, net of selling costs paid 98,544 --
Proceeds from sale of discontinued operations, net of selling costs paid -- 192,267
Purchase of minority interest in discontinued operations -- (10,585)
Purchases of property and equipment, net (96,643) (119,638)
Payment upon disposal of Fiesta Texas partnership interest (12,976) --
Investments in, advances to and distributions from affiliates, net (5,699) (3,445)
Other, net (5,052) (3,034)
------------- ------------
Net cash flows provided by (used in) investing activities (21,826) 55,565
------------- ------------
Cash Flows from Financing Activities:
Repayment of long-term debt (37,838) (603)
Proceeds from issuance of long-term debt -- 400
Net borrowings (repayments) under revolving credit agreement 71,010 (124,054)
Proceeds from exercise of stock options, net 1,231 --
Dividends paid (25,307) (21,341)
------------- ------------
Net cash flows provided by (used in) financing activities 9,096 (145,598)
------------- ------------
Cash Flows from Discontinued Operations:
Operating activities -- 16,758
Investing activities -- (12,985)
Decrease in cash balance -- 2,856
------------- ------------
Net cash flows provided by discontinued operations -- 6,629
------------- ------------
Net change in cash 2,921 1,771
Cash, beginning of period 12,062 6,575
------------- ------------
Cash, end of period $ 14,983 $ 8,346
============= ============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
7
<PAGE> 8
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
1. INCOME PER SHARE
The computations of income per share are based on the weighted average number
of common and equivalent (stock options) shares assumed to be outstanding
during the periods. The share amounts used in the computation of income per
share for the quarters ended September 30, 1996 and 1995 were 97,951,000 and
97,769,000, respectively, and for the nine months ended September 30, 1996 and
1995 were 97,911,000 and 97,630,000, respectively. Income per share has been
restated to reflect the effects of the stock dividend discussed in Note 2.
2. STOCK DIVIDEND
A 5% stock dividend was paid by the Company on June 18, 1996 to stockholders of
record as of June 4, 1996. Income per share and dividends per share in the
condensed consolidated statements of income have been restated to reflect the
effects of the stock dividend. Retained earnings was reduced by $125,078 as a
result of the stock dividend, in which approximately 4,742,000 additional
shares of the Company's common stock were issued.
3. TREASURY STOCK
During the third quarter of 1996, the Company's Board of Directors retired the
Class B common shares held in treasury. The cost of the treasury stock in
excess of par value has been charged to additional paid-in capital.
8
<PAGE> 9
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS SEGMENTS
Gaylord Entertainment Company operates in the following business segments:
entertainment, cable networks and broadcasting.
RESULTS OF OPERATIONS
The following table contains selected summary financial data for the three
month and nine month periods ended September 30, 1996 and 1995 (in thousands,
except operating data):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, % September 30, %
--------------------- ---------------------
1996 1995 change 1996 1995 change
----- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Entertainment $ 104,678 $ 92,213 13.5 $ 244,762 $ 222,118 10.2
Cable networks 80,514 69,386 16.0 247,487 212,457 16.5
Broadcasting 19,819 33,571 (41.0) 60,899 98,207 (38.0)
----------- ---------- ------ ---------- ---------- ------
TOTAL REVENUES $ 205,011 $ 195,170 5.0 $ 553,148 $ 532,782 3.8
=========== ========== ====== ========== ========== ======
Operating cash flow:*
Entertainment $ 20,850 $ 17,735 17.6 $ 44,988 $ 36,011 24.9
Cable networks 21,156 18,817 12.4 66,816 60,833 9.8
Broadcasting 3,388 (7,050) -- 11,528 4,081 182.5
----------- ---------- ------- ---------- ---------- ------
TOTAL OPERATING CASH FLOW $ 45,394 $ 29,502 53.9 $ 123,332 $ 100,925 22.2
=========== ========== ======= ========== ========== ======
Operating income:
Entertainment $ 11,301 $ 10,767 5.0 $ 22,394 $ 18,165 23.3
Cable networks 17,804 16,128 10.4 57,179 53,519 6.8
Broadcasting 2,347 (8,055) -- 8,531 1,224 597.0
----------- ---------- ------- ---------- ---------- ------
TOTAL OPERATING INCOME $ 31,452 $ 18,840 66.9 $ 88,104 $ 72,908 20.8
=========== ========== ======= ========== ========== ======
Operating data:
Entertainment:
Opryland Hotel:
Occupancy rate 83.8% 86.4%
Average guest room rate $ 129.31 $ 131.60 (1.7)
Opryland theme park:
Attendance (in thousands) 1,583 1,728 (8.4)
Revenue per guest $ 29.07 $ 29.41 (1.2)
Cable networks:
Number of U.S. subscribers (in thousands):
The Nashville Network 67,041 63,383 5.8
Country Music Television 35,906 30,589 17.4
</TABLE>
* Operating income plus depreciation and amortization. Operating cash flow
represents an alternative method of measuring cash flows and is not intended
to represent cash available for dividends, reinvestment, or other
discretionary uses. Operating cash flow is not adjusted for noncash expenses
or changes in working capital and is not derived pursuant to generally
accepted accounting principles.
9
<PAGE> 10
PERIODS ENDED SEPTEMBER 30, 1996 COMPARED TO PERIODS ENDED SEPTEMBER 30, 1995
REVENUES
Total Revenues - Total revenues increased $9.8 million, or 5.0%, to $205.0
million in the third quarter of 1996, and increased $20.4 million, or 3.8%, to
$553.1 million in the first nine months of 1996. The increases are primarily
attributable to continued growth in the cable networks segment and increased
revenues in the entertainment segment resulting from the expansion of the
Opryland Hotel. These increases were partially offset by a decrease in revenues
from the broadcasting segment, which decrease was due to the sale of a
television station in January 1996 and a decline in revenues at the Company's
two remaining television stations.
Entertainment - Revenues in the entertainment segment increased $12.5 million,
or 13.5%, to $104.7 million in the third quarter of 1996, and increased $22.6
million, or 10.2%, to $244.8 million in the first nine months of 1996. Opryland
Hotel revenues increased $29.3 million, or 27.0%, to $137.7 million in the
first nine months of 1996, principally because of the hotel expansion. The
hotel's occupancy rate decreased to 83.8% in the first nine months of 1996
compared to 86.4% in the first nine months of 1995 because of the additional
rooms available in 1996. The hotel sold 560.7 thousand rooms in the first nine
months of 1996 compared to 418.6 thousand rooms sold in the same period of 1995
reflecting a 33.9% increase over 1995. The hotel's average guest room rate
also declined to $129.31 in the first nine months of 1996 from $131.60 in the
first nine months of 1995. At September 30, 1996, the hotel's advanced bookings
were in excess of $1 billion of future revenues at current rates with a
significant portion of these advanced bookings relating to the next three
years. Opryland theme park revenues decreased $5.3 million in the first nine
months of 1996 due primarily to an 8.4% decrease in theme park attendance as
compared with 1995.
Cable Networks - Revenues increased $11.1 million, or 16.0%, to $80.5 million
in the third quarter of 1996, and increased $35.0 million, or 16.5%, to $247.5
million in the first nine months of 1996. Advertising revenues increased 22.0%
during the third quarter of 1996 and increased 20.7% in the first nine months
of 1996 at The Nashville Network ("TNN"). Subscriber revenues at TNN increased
9.4% in the third quarter of 1996 and increased 9.6% in the first nine months
of 1996 as the number of U.S. subscribers increased to 67.0 million in
September 1996 from 63.4 million in September 1995. Revenues related to the
United States distribution of Country Music Television ("CMT") increased 18.7%
in the third quarter of 1996 and increased 22.3% in the first nine months of
1996 due to growth in both advertising and subscriber revenues. CMT subscribers
increased to 35.9 million in September 1996 from 30.6 million in September
1995.
Broadcasting - Revenues decreased $13.8 million, or 41.0%, to $19.8 million in
the third quarter of 1996, and decreased $37.3 million, or 38.0%, to $60.9
million in the first nine months of 1996. Broadcasting revenues were impacted
by the Company's sale of the assets of KHTV, a Houston, Texas, television
station, in January 1996. Excluding the operations of KHTV from both periods,
broadcasting revenues decreased 21.0% in the third quarter of 1996 and
decreased 17.0% in the first nine months of 1996. The decline in broadcasting
revenues reflects a decrease in advertising inventory available for sale at the
Company's Dallas and Seattle-area television stations due to their affiliation
with the CBS television network. The affiliation with CBS was effective on
March 13, 1995 in Tacoma-Seattle and on July 2, 1995 in Ft. Worth-Dallas.
Advertising revenues at KSTW, the Company's Tacoma-Seattle television station,
also decreased in the first nine months of 1996 as its ratings declined. In
October 1996, the Company announced its intention to seek a buyer for KSTW.
10
<PAGE> 11
OPERATING EXPENSES
Total Operating Expenses - Total operating expenses decreased $2.8 million, or
1.6%, to $173.6 million in the third quarter of 1996, and increased $5.2
million, or 1.1%, to $465.0 million in the first nine months of 1996. Operating
costs, as a percentage of revenues, decreased to 60.3% during the first nine
months of 1996 as compared to 64.7% during the first nine months of 1995.
Selling, general and administrative expenses, as a percentage of revenues,
increased to 17.4% in the first nine months of 1996 from 16.4% in the first
nine months of 1995. Total operating expenses for 1995 include the operating
expenses of KHTV.
Operating Costs - Operating costs decreased $11.0 million, or 8.0%, to $126.0
million in the third quarter of 1996, and decreased $11.0 million, or 3.2%, to
$333.4 million in the first nine months of 1996. Excluding the operating costs
of KHTV and the effect of the $13.3 million write-down of television program
rights included in 1995, operating costs increased by $8.7 million, or 7.4%, in
the third quarter of 1996, and increased $20.0 million, or 6.4%, in the first
nine months of 1996. The increases in the first nine months of 1996 are
primarily attributable to the continued growth in the cable networks segment,
including an $8.4 million increase in Group W Television, Inc. commissions at
TNN, a $6.5 million increase in programming costs at TNN, and a $2.5 million
increase in operating costs related to the expansion of CMT International. In
addition, operating costs increased by $13.4 million during the first nine
months of 1996 at the Opryland Hotel, primarily as a result of the hotel
expansion. These increases were partially offset by a $11.0 million decrease in
operating costs during the first nine months of 1996 at the Company's two
remaining television stations due to lower programming costs resulting from
their affiliations with CBS, a $2.8 million decrease in operating costs at the
Opryland theme park, and a $2.1 million decrease in operating costs of the
Nashville On Stage concert series.
Selling, General and Administrative - Selling, general and administrative
expenses increased $5.0 million, or 17.3%, to $33.6 million in the third
quarter of 1996, and increased $9.0 million, or 10.3%, to $96.4 million during
the first nine months of 1996. Excluding the selling, general and
administrative expenses of KHTV included in 1995, selling, general and
administrative expenses increased $6.4 million, or 23.4%, in the third quarter
of 1996, and increased $13.6 million, or 16.4%, in the first nine months of
1996. The increases for the nine month period are primarily attributable to
administrative cost increases of $3.5 million at the Opryland Hotel, $2.8
million at TNN and $1.1 million at the Opryland theme park. In addition,
selling and promotion costs at CMT's United States operations and the Company's
two television stations increased $2.8 million and $1.2 million, respectively.
The Company expensed $1.1 million during the third quarter of 1996 related to
its obligations under an employment agreement with its departing chief
operating officer which is included in the increases discussed above.
Management expects to significantly increase marketing expenses related to
CMT's United States operations in 1997 in an attempt to benefit from recent
increases in its distribution and to provide momentum for future growth.
Depreciation and Amortization - Depreciation and amortization increased $3.3
million, or 30.8%, to $13.9 million in the third quarter of 1996, and increased
$7.2 million, or 25.7%, to $35.2 million in the first nine months of 1996. The
increases are primarily attributable to capital improvements at the Opryland
Hotel and growth in the cable networks segment.
11
<PAGE> 12
OPERATING INCOME
Total Operating Income - Total operating income increased $12.6 million, or
66.9%, to $31.5 million in the third quarter of 1996, and increased $15.2
million, or 20.8%, to $88.1 million during the first nine months of 1996. These
increases reflect higher operating income in all segments. The entertainment
segment increase is primarily related to greater operating income generated by
the Opryland Hotel expansion. The cable networks increase is a result of the
continued growth of TNN and CMT offset, in part, by operating losses associated
with CMT International's expansion. The broadcasting segment increase is caused
by the 1995 impact of the write-down of television program rights. Excluding
the impact of this write-down, broadcasting segment operating income decreased
primarily due to the sale of KHTV and the decline in revenues at the Company's
Tacoma-Seattle television station as discussed above.
INTEREST EXPENSE
Interest expense increased $5.9 million to $6.0 million in the third quarter of
1996, and increased $12.2 million to $13.6 million in the first nine months of
1996. A significant portion of the Company's interest expense for 1995 was
attributable to the Company's cable television systems segment (the "Systems")
prior to its sale in September 1995. In accordance with generally accepted
accounting principles, such interest was allocated to the Systems and is
therefore not included in income from continuing operations. The Company's
weighted average interest rate on its bank debt and senior notes combined was
6.9% in the first nine months of 1996 compared to 7.2% in the first nine months
of 1995.
INTEREST INCOME
Interest income increased $5.2 million to $5.8 million in the third quarter of
1996, and increased $15.6 million to $17.0 million in the first nine months of
1996. This increase primarily results from $5.0 million for the third quarter
of 1996, and $14.9 million for the first nine months of 1996, of noncash
interest income recorded on a long-term note receivable from the sale of the
Systems.
OTHER GAINS (LOSSES)
In January 1996, the Company sold its Houston, Texas, television station, KHTV,
for $99.5 million, including certain working capital adjustments of
approximately $6.0 million. The sale resulted in a pretax gain of $73.9 million
which is included in other gains (losses) for the first nine months of 1996.
INCOME TAXES
The Company's provision for income taxes was $10.1 million for the third
quarter of 1996 compared to $7.1 million for the third quarter of 1995, and
$60.0 million for the first nine months of 1996 compared to $26.9 million for
the first nine months of 1995. The Company's effective tax rate on its income
from continuing operations before provision for income taxes was 33.0% for the
third quarter of 1996 compared to 38.5% for the third quarter of 1995, and
36.7% for the first nine months of 1996 compared to 38.5% for the first nine
months of 1995.
12
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
The Company currently projects capital expenditures of approximately $130
million for 1996, approximately $97 million of which had been spent as of
September 30, 1996. In addition to normal upkeep of the Company's properties,
this amount includes the completion of the Opryland Hotel expansion and the
opening of four racing-themed retail stores. The Company believes that the
funds generated from its operations will exceed the amount required to fund its
operations, debt service, and dividends. The Company has an unsecured revolving
loan (the "Revolver") which provides for borrowings of up to $400 million until
its maturity on December 31, 2000. At October 31, 1996, the Company had
approximately $192 million in available borrowing capacity under the Revolver.
The Company used the cash proceeds from the sale of KHTV to reduce indebtedness
under the Revolver.
In October 1996, the Company's Board of Directors authorized the repurchase of
up to $100 million of the Company's outstanding Class A common stock over the
next three years. The authorization includes both open market purchases and
private transactions and the amount, timing, and pricing of any repurchases is
at management's discretion.
SEASONALITY
Certain of the Company's businesses are subject to seasonal fluctuation. In
general, lower revenues and operating income are generated in the first
quarter, which is the off-peak season for the Company's entertainment and
tourism properties. The Opryland theme park produces most of its revenues and
operating income in the summer months. Revenues from the Company's broadcasting
segment have also been weakest in the first quarter and strongest in the second
and fourth quarters.
FORWARD-LOOKING STATEMENTS / RISK FACTORS
This Form 10-Q contains certain forward-looking statements regarding, among
other things, the anticipated financial and operating results of the Company.
Investors are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. The Company undertakes no
obligation to publicly release any modifications or revisions to these
forward-looking statements to reflect events or circumstances occurring after
the date hereof or to reflect the occurrence of unanticipated events.
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. The Company's
future operating results depend on a number of factors that could cause the
Company's 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 continued growth in the popularity of country
music and country lifestyles; the advertising market in the United States in
general and in the Company's local television markets in particular; the
perceived attractiveness of Nashville, Tennessee as a convention and tourist
destination; consumer tastes and preferences for the Company's programming and
other entertainment offerings; competition; restrictions on TNN's ability to
provide or arrange for programming during the six-hour overnight period; and
consolidation in the broadcasting and cable distribution industries.
13
<PAGE> 14
Part II - Other Information
Item 1. Legal Proceedings
Inapplicable
Item 2. Changes in Securities
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 on page 16.
(b) No reports on Form 8-K were filed during the quarter
ended September 30, 1996.
14
<PAGE> 15
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: November 13, 1996 By: /s/ Terry E. London
------------------ --------------------
Terry E. London
Senior Vice President and Chief Financial
and Administrative Officer
15
<PAGE> 16
INDEX TO EXHIBITS
27 Financial Data Schedule (for SEC use only)
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF GAYLORD ENTERTAINMENT COMPANY FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 14,983
<SECURITIES> 0
<RECEIVABLES> 118,757
<ALLOWANCES> 3,138
<INVENTORY> 0
<CURRENT-ASSETS> 198,719
<PP&E> 633,646
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,173,495
<CURRENT-LIABILITIES> 168,837
<BONDS> 373,216
0
0
<COMMON> 967
<OTHER-SE> 499,431
<TOTAL-LIABILITY-AND-EQUITY> 1,169,728
<SALES> 553,148
<TOTAL-REVENUES> 553,148
<CGS> 0
<TOTAL-COSTS> 465,044
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,574
<INCOME-PRETAX> 163,747
<INCOME-TAX> 60,028
<INCOME-CONTINUING> 103,719
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 103,719
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 0
</TABLE>
