-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G1aQpXCtvwHS+l5w3AVXU1cgCZH+3HtkK6jyLV0Xtdh4YLutiYtkNhJD4PAZI9sv y5fUDUnVBpLvEEbh66GpJw== 0000950144-99-010328.txt : 19990817 0000950144-99-010328.hdr.sgml : 19990817 ACCESSION NUMBER: 0000950144-99-010328 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GAYLORD ENTERTAINMENT CO /DE CENTRAL INDEX KEY: 0001040829 STANDARD INDUSTRIAL CLASSIFICATION: TELEVISION BROADCASTING STATIONS [4833] IRS NUMBER: 730664379 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13079 FILM NUMBER: 99691636 BUSINESS ADDRESS: STREET 1: ONE GAYLORD DR CITY: NASHVILLE STATE: TN ZIP: 37214 BUSINESS PHONE: 6153166000 FORMER COMPANY: FORMER CONFORMED NAME: NEW GAYLORD ENTERTAINMENT CO DATE OF NAME CHANGE: 19970611 10-Q 1 GAYLORD ENTERTAINMENT COMPANY 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 June 30, 1999 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 July 31, 1999 ----- ------------------------------- Common Stock, $.01 par value 32,833,665 shares 2 GAYLORD ENTERTAINMENT COMPANY FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999 INDEX
PAGE NO. -------- Part I - Financial Information Item 1. Financial Statements Condensed Consolidated Statements of Income - For the Three Months Ended June 30, 1999 and 1998 3 Condensed Consolidated Statements of Income - For the Six Months Ended June 30, 1999 and 1998 4 Condensed Consolidated Balance Sheets - June 30, 1999 and December 31, 1998 5 Condensed Consolidated Statements of Cash Flows - For the Six Months Ended June 30, 1999 and 1998 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk 15 Part II - Other Information Item 1. Legal Proceedings 16 Item 2. Changes in Securities and Use of Proceeds 16 Item 3. Defaults Upon Senior Securities 16 Item 4. Submission of Matters to a Vote of Security Holders 16 Item 5. Other Information 16 Item 6. Exhibits and Reports on Form 8-K 16
2 3 PART I - FINANCIAL INFORMATION ITEM 1. - FINANCIAL STATEMENTS GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998 (UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
1999 1998 --------- --------- Revenues $ 128,362 $ 126,963 Operating expenses: Operating costs 81,763 73,431 Selling, general and administrative 30,800 29,922 Depreciation and amortization 12,374 10,600 --------- --------- Operating income 3,425 13,010 Interest expense (3,870) (7,661) Interest income 947 6,524 Other gains and losses 569 34 --------- --------- Income before provision for income taxes 1,071 11,907 Provision for income taxes 413 4,585 --------- --------- Net income $ 658 $ 7,322 ========= ========= Net income per share $ 0.02 $ 0.22 ========= ========= Net income per share - assuming dilution $ 0.02 $ 0.22 ========= ========= Dividends per share $ 0.20 $ 0.15 ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 4 GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
1999 1998 --------- --------- Revenues $ 241,501 $ 234,984 Operating expenses: Operating costs 156,254 139,787 Selling, general and administrative 62,072 61,295 Depreciation and amortization 24,398 20,430 --------- --------- Operating income (loss) (1,223) 13,472 Interest expense (7,018) (14,557) Interest income 1,394 12,944 Other gains and losses 130,268 3,362 --------- --------- Income before provision for income taxes 123,421 15,221 Provision for income taxes 42,971 5,860 --------- --------- Net income $ 80,450 $ 9,361 ========= ========= Net income per share $ 2.45 $ 0.29 ========= ========= Net income per share - assuming dilution $ 2.43 $ 0.28 ========= ========= Dividends per share $ 0.40 $ 0.30 ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 5 GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS JUNE 30, 1999 AND DECEMBER 31, 1998 (UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
JUNE 30, DEC. 31, 1999 1998 ----------- ----------- ASSETS Current assets: Cash $ 11,255 $ 18,746 Trade receivables, less allowance of $5,173 and $5,517, respectively 89,931 94,429 Inventories 28,743 27,018 Other assets 45,255 49,009 ----------- ----------- Total current assets 175,184 189,202 ----------- ----------- Property and equipment, net of accumulated depreciation 597,328 586,898 Intangible assets, net of accumulated amortization 117,302 117,529 Investments 82,570 78,140 Long-term notes receivable 36,768 9,015 Other assets 36,759 31,208 ----------- ----------- Total assets $ 1,045,911 $ 1,011,992 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 1,125 $ 6,269 Accounts payable and accrued liabilities 93,138 115,837 ----------- ----------- Total current liabilities 94,263 122,106 ----------- ----------- Long-term debt 272,011 276,712 Deferred income taxes 51,146 52,747 Other liabilities 33,620 33,039 Minority interest 2,294 2,228 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, 32,826 and 32,808 shares issued and outstanding, respectively 328 328 Additional paid-in capital 500,608 500,434 Retained earnings 94,022 26,699 Other stockholders' equity (2,381) (2,301) ----------- ----------- Total stockholders' equity 592,577 525,160 ----------- ----------- Total liabilities and stockholders' equity $ 1,045,911 $ 1,011,992 =========== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 6 GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (UNAUDITED) (AMOUNTS IN THOUSANDS)
1999 1998 --------- -------- Cash Flows from Operating Activities: Net income $ 80,450 $ 9,361 Amounts to reconcile net income to net cash flows used in operating activities: Depreciation and amortization 24,398 20,430 Deferred income taxes (1,601) 387 Gain on equity participation rights (129,875) -- Noncash interest income -- (12,470) Gain on sale of investments -- (19,155) Write-off of Z Music note receivable -- 23,616 Changes in: Trade receivables 4,498 (5,351) Accounts payable and accrued liabilities (19,820) (25,741) Other assets and liabilities (1,830) (10,176) --------- -------- Net cash flows used in operating activities (43,780) (19,099) --------- -------- Cash Flows from Investing Activities: Purchases of property and equipment (29,957) (21,279) Proceeds from equity participation rights 130,000 -- Acquisition of businesses, net of cash acquired -- (22,462) Proceeds from sale of property and equipment -- 6,113 Proceeds from sale of investments -- 20,130 Investments in, advances to and distributions from affiliates (34,274) (9,691) Other investing activities (6,630) (4,376) --------- -------- Net cash flows provided by (used in) investing activities 59,139 (31,565) --------- -------- Cash Flows from Financing Activities: Repayment of debt (8,850) (984) Proceeds from issuance of debt 500 500 Net (repayments) borrowings under revolving credit agreements (1,495) 62,095 Proceeds from exercise of stock options 122 294 Dividends paid (13,127) (9,849) --------- -------- Net cash flows provided by (used in) financing activities (22,850) 52,056 --------- -------- Net change in cash (7,491) 1,392 Cash, beginning of period 18,746 8,712 --------- -------- Cash, end of period $ 11,255 $ 10,104 ========= ========
The accompanying notes are an integral part of these condensed consolidated financial statements. 6 7 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, 1998, 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:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, --------------------------- ------------------------- 1999 1998 1999 1998 ------ ------ ------ ------ Weighted average shares outstanding 32,817 32,806 32,813 32,802 Effect of dilutive stock options 343 448 300 425 ------ ------ ------ ------ Weighted average shares outstanding - assuming dilution 33,160 33,254 33,113 33,227 ====== ====== ====== ======
3. COMPREHENSIVE INCOME: In June 1997, the Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income," effective for fiscal years beginning after December 15, 1997. SFAS No. 130 requires that changes in the amounts of certain items, including gains and losses on certain securities, be shown in the financial statements. The Company adopted the provisions of SFAS No. 130 on January 1, 1998. The Company's comprehensive income is substantially equivalent to net income for the three month and six month periods ended June 30, 1999 and 1998. 7 8 4. OTHER GAINS AND LOSSES: The Company recognized a pretax gain of $129,875 during the first six months of 1999 related to the collection of $130,000 in proceeds from the redemption of certain equity participation rights in cable television systems which the Company sold during 1995. The Company recognized a current provision for income taxes of $45,456 related to the gain during the first six months of 1999. 5. LONG-TERM NOTES RECEIVABLE: The Company owns a minority limited partnership interest in Bass Pro, L.P. ("Bass Pro"). During the first six months of 1999, the Company advanced $28,080 to Bass Pro under an unsecured note agreement which bears interest at 8% annually and is due in 2003. Interest under the note agreement is payable annually. 6. FINANCIAL REPORTING BY BUSINESS SEGMENTS:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, ---------------------------- ---------------------------- 1999 1998 1999 1998 --------- --------- --------- --------- Revenues: Hospitality and attractions $ 74,318 $ 75,599 $ 141,719 $ 137,040 Broadcasting and music 53,240 50,455 97,973 93,895 Cable networks 804 909 1,809 4,049 --------- --------- --------- --------- Total $ 128,362 $ 126,963 $ 241,501 $ 234,984 ========= ========= ========= ========= Depreciation and amortization: Hospitality and attractions $ 7,511 $ 7,043 $ 15,276 $ 13,730 Broadcasting and music 2,911 1,948 5,552 3,589 Cable networks 484 443 961 884 Corporate 1,468 1,166 2,609 2,227 --------- --------- --------- --------- Total $ 12,374 $ 10,600 $ 24,398 $ 20,430 ========= ========= ========= ========= Operating income (loss): Hospitality and attractions $ 10,090 $ 14,421 $ 13,449 $ 18,185 Broadcasting and music 2,835 7,233 3,468 12,696 Cable networks (2,564) (2,613) (4,450) (5,671) Corporate (6,936) (6,031) (13,690) (11,738) --------- --------- --------- --------- Total $ 3,425 $ 13,010 $ (1,223) $ 13,472 ========= ========= ========= =========
8 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS BUSINESS SEGMENTS The Company operates in the following business segments: hospitality and attractions; broadcasting and music; and cable networks. The hospitality and attractions segment primarily consists of the Opryland Hotel located in Nashville, Tennessee and the Company's Nashville-based attractions. The broadcasting and music segment includes the Company's television station; radio stations; music publishing business; Word Entertainment ("Word"), the Company's contemporary Christian music company; and 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 cable networks segment consists primarily of CMT International, a country music video cable network operated in Latin America and the Pacific Rim. The Company's unallocated corporate expenses are reported separately. PENDING SALE OF KTVT During April 1999, the Company announced it had entered into an agreement to sell its television station KTVT in Dallas-Ft. Worth to CBS Corporation in exchange for $485 million of CBS common stock and other consideration. The transaction is anticipated to close during the third quarter of 1999 and result in a gain of approximately $280 million, net of deferred taxes. GET DIGITALMEDIA During July 1999, the Company announced the creation of GET digitalmedia, a new division formed to initiate a focused Internet strategy, and the acquisition of a 51% equity interest in two online operations, Musicforce.com and Lightsource.com, for $15 million in cash. The parties have entered into option agreements regarding the additional equity interests in the online operations. The acquisition was financed through borrowings under a revolving credit agreement and will be accounted for using the purchase method of accounting. The Company expects that GET digitalmedia will have operating losses of $15 million to $20 million (excluding goodwill amortization) over the next eighteen months. 9 10 RESULTS OF OPERATIONS The following table contains unaudited selected summary financial data for the three month and six month periods ended June 30, 1999 and 1998 (amounts in thousands). The table also shows the percentage relationships to total revenues and, in the case of segment operating income, its relationship to segment revenues.
Three Months Ended Six Months Ended June 30, June 30, ---------------------------------------- --------------------------------------- 1999 % 1998 % 1999 % 1998 % --------- ----- -------- ----- -------- ----- -------- ------ Revenues: Hospitality and attractions $ 74,318 57.9 $ 75,599 59.5 $141,719 58.7 $137,040 58.3 Broadcasting and music 53,240 41.5 50,455 39.8 97,973 40.6 93,895 40.0 Cable networks 804 0.6 909 0.7 1,809 0.7 4,049 1.7 --------- ----- -------- ----- -------- ----- -------- ------ Total revenues 128,362 100.0 126,963 100.0 241,501 100.0 234,984 100.0 --------- ----- -------- ----- -------- ----- -------- ------ Operating expenses: Operating costs 81,763 63.7 73,431 57.8 156,254 64.7 139,787 59.5 Selling, general & administrative 30,800 24.0 29,922 23.6 62,072 25.7 61,295 26.1 Depreciation and amortization: Hospitality and attractions 7,511 7,043 15,276 13,730 Broadcasting and music 2,911 1,948 5,552 3,589 Cable networks 484 443 961 884 Corporate 1,468 1,166 2,609 2,227 --------- ----- -------- ----- -------- ----- -------- ------ Total depreciation and amortization 12,374 9.6 10,600 8.4 24,398 10.1 20,430 8.7 --------- ----- -------- ----- -------- ----- -------- ------ Total operating expenses 124,937 97.3 113,953 89.8 242,724 100.5 221,512 94.3 --------- ----- -------- ----- -------- ----- -------- ------ Operating income (loss): Hospitality and attractions 10,090 13.6 14,421 19.1 13,449 9.5 18,185 13.3 Broadcasting and music 2,835 5.3 7,233 14.3 3,468 3.5 12,696 13.5 Cable networks (2,564) -- (2,613) -- (4,450) -- (5,671) -- Corporate (6,936) -- (6,031) -- (13,690) -- (11,738) -- --------- ----- -------- ----- -------- ----- -------- ------ Total operating income $ 3,425 2.7 $ 13,010 10.2 $ (1,223) -- $ 13,472 5.7 ========= ===== ======== ===== ======== ===== ======== ======
10 11 PERIODS ENDED JUNE 30, 1999 COMPARED TO PERIODS ENDED JUNE 30, 1998 Revenues Total Revenues - Total revenues increased $1.4 million, or 1.1%, to $128.4 million in the second quarter of 1999, and increased $6.5 million, or 2.8%, to $241.5 million in the first six months of 1999. The increase for the first six months of 1999 results primarily from increased revenues in the hospitality and attractions segment, principally the Opryland Hotel, and increases in the broadcasting and music segment, principally from Word, offset in part by decreased revenues in the cable networks segment as a result of CMT International ceasing its European operations effective March 31, 1998. Hospitality and Attractions - Revenues in the hospitality and attractions segment decreased $1.3 million, or 1.7%, to $74.3 million in the second quarter of 1999, and increased $4.7 million, or 3.4%, to $141.7 million in the first six months of 1999. Opryland Hotel revenues increased $4.2 million, or 4.0%, to $109.8 million in the first six months of 1999. The hotel's occupancy rate increased to 78.1% in the first six months of 1999 compared to 76.3% in the first six months of 1998. The hotel sold 392,300 rooms in the first six months of 1999 compared to 383,900 rooms sold in the same period of 1998, reflecting a 2.2% increase from 1998. The hotel's average guest room rate decreased to $135.74 in the first six months of 1999 from $139.17 in the first six months of 1998. The increase in revenues for the first six months of 1999 is also due to revenues from the Wildhorse Saloon in Orlando, Florida, which opened in April 1998, of $2.3 million. These increases are partially offset by a decrease related to the Company's investment in Bass Pro, L.P. ("Bass Pro") of $1.2 million. Broadcasting and Music - Revenues in the broadcasting and music segment increased $2.8 million, or 5.5%, to $53.2 million in the second quarter of 1999, and increased $4.1 million, or 4.3%, to $98.0 million in the first six months of 1999. The increase for the first six months of 1999 is primarily due to an increase in revenues of Word of $3.2 million and Pandora, which was acquired in July 1998, of $3.4 million. This increase is partially offset by a decrease in KTVT's revenues of $3.5 million. The decrease in KTVT revenues is primarily related to the carriage of the 1998 Winter Olympics. Revenues for KTVT for the first six months of 1999 were $24.0 million. Cable Networks - Revenues in the cable networks segment decreased $0.1 million, or 11.6%, to $0.8 million in the second quarter of 1999, and decreased $2.2 million, or 55.3%, to $1.8 million in the first six months of 1999. The decrease for the first six months of 1999 is primarily the result of CMT International ceasing its European operations effective March 31, 1998. Operating Expenses Total Operating Expenses - Total operating expenses increased $11.0 million, or 9.6%, to $124.9 million in the second quarter of 1999, and increased $21.2 million, or 9.6%, to $242.7 million in the first six months of 1999. Operating costs, as a percentage of revenues, increased to 64.7% during the first six months of 1999 as compared to 59.5% during the first six months of 1998. Selling, general and administrative expenses, as a percentage of revenues, decreased to 25.7% during the first six months of 1999 as compared to 26.1% during the first six months of 1998. 11 12 Operating Costs - Operating costs increased $8.3 million, or 11.3%, to $81.8 million in the second quarter of 1999, and increased $16.5 million, or 11.8%, to $156.3 million in the first six months of 1999. The increase in the first six months of 1999 is primarily attributable to increased operating costs of Word of $3.1 million related to increased revenues. The operating costs of Pandora, which was acquired in July 1998, were $3.2 million in the first six months of 1999. Additionally, operating costs of the Wildhorse Saloon in Orlando, Florida, which opened in April 1998, increased $1.9 million in the first six months of 1999. The operating costs of the Opryland Hotel increased $1.8 million in the first six months of 1999. Costs associated with the growth strategy of CMT International and Z Music increased operating costs of the cable networks segment by $1.6 million in the first six months of 1999. Selling, General and Administrative - Selling, general and administrative expenses increased $0.9 million, or 2.9%, to $30.8 million in the second quarter of 1999, and increased $0.8 million, or 1.3%, to $62.1 million in the first six months of 1999. The increase in the first six months of 1999 is primarily attributable to lower selling, general and administrative expenses of the European operations of CMT International, which ceased operations on March 31, 1998, of $1.6 million and the recognition of a valuation reserve of $2.6 million on a long-term note receivable from Z Music, Inc. during the first six months of 1998. These decreases are partially offset by an increase of $2.6 million in selling, general and administrative expenses of Word in the first six months of 1999. Depreciation and Amortization - Depreciation and amortization increased $1.8 million, or 16.7%, to $12.4 million in the second quarter of 1999, and increased $4.0 million, or 19.4%, to $24.4 million in the first six months of 1999. The increase is primarily attributable to the depreciation expense of acquisitions and capital expenditures made in 1998. Depreciation and amortization for KTVT for the first six months of 1999 was $1.3 million. Operating Income Total Operating Income - Total operating income decreased $9.6 million to $3.4 million in the second quarter of 1999, and decreased $14.7 million to an operating loss of $1.2 million in the first six months of 1999. Operating income in the hospitality and attractions segment decreased $4.7 million during the first six months of 1999 as a result of lower earnings from the Company's investment in Bass Pro partially offset by increased operating income of the Opryland Hotel. Broadcasting and music segment operating income decreased $9.2 million during the first six months of 1999 primarily due to a decrease at KTVT and Word. The operating income of KTVT for the first six months of 1999 was $6.4 million. Operating losses of the cable networks segment decreased $1.2 million during the first six months of 1999 primarily as a result of CMT International ceasing its European operations effective March 31, 1998. Corporate operating losses increased $2.0 million during the first six months of 1999 as a result of increased administrative costs. Interest Expense Interest expense decreased $3.8 million to $3.9 million in the second quarter of 1999, and decreased $7.5 million to $7.0 million in the first six months of 1999. The decrease in the first six months of 1999 is primarily attributable to lower average borrowing levels during the first six months of 1999 than in the first six months of 1998. The Company's weighted average interest rate on its borrowings was 6.3% in the first six months of 1999 compared to 6.7% in the first six months of 1998. Interest Income Interest income decreased $5.6 million to $0.9 million in the second quarter of 1999, and decreased $11.6 million to $1.4 million in the first six months of 1999. The decrease in the first six months of 1999 relates to the December 1998 collection of a long-term note receivable which originated from the sale of the Company's cable television systems. 12 13 Other Gains and Losses During the first six 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 $4.2 million to $0.4 million in the second quarter of 1999, and increased $37.1 million to $43.0 million in the first six months of 1999. The effective tax rate on income before provision for income taxes was 34.8% for the first six months of 1999 compared to 38.5% for the first six months of 1998. 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 The Company has an unsecured revolving loan (the "Revolver") which provides for borrowings of up to $600 million until its maturity in July 2002. At July 31, 1999, the Company had approximately $322 million in available borrowing capacity under the Revolver. The terms and conditions of the Revolver require the Company to maintain certain financial ratios and minimum stockholders' equity levels and subject the Company to limitations on, among other things, mergers and sales of assets, additional indebtedness, capital expenditures, investments, acquisitions, liens, and transactions with affiliates. The $130 million proceeds from the equity participation rights were used to reduce outstanding indebtedness under the Revolver. Acquisitions and operating losses of GET digitalmedia, the Company's new Internet division, of approximately $35 million will be financed through borrowings under the Revolver. The Company currently projects capital expenditures of approximately $55 million for 1999, of which $30 million had been spent as of June 30, 1999. Depending upon the financing structure of the development of the Opryland Hotel - Florida and the Opryland Hotel - Texas, capital expenditures for 1999 could increase by approximately $50 million. The Company's management believes that the net cash flows from operations, together with the amount expected to be available for borrowing under the Revolver, will be sufficient to satisfy anticipated future cash requirements of the Company on both a short-term and long-term basis. YEAR 2000 Without programming modifications or embedded technology replacements, certain computer systems (hardware, software and equipment) will not operate properly when using the two digits used in date calculations for the year 2000. These computer systems interpret the "00" used in date calculations to represent the year 1900. During 1996, the Company formed an internal task force responsible for assessing, testing and correcting the Company's information technology and systems risks associated with the year 2000. The task force has completed its assessment of the Company's systems, has identified the Company's hardware, software and equipment that will not operate properly in the year 2000, and is taking the appropriate action to ensure compliance. In certain instances, hardware, software and equipment that will not operate properly in the year 2000 are being replaced. As of July 31, 1999, the task force has determined and confirmed through testing that approximately 90% of the Company's systems, in certain circumstances following completed programming changes or replacements, will operate properly in the year 2000. As of July 31, 1999, all of the Company's internally developed software applications are considered year 2000 compliant. 13 14 As to the approximately 10% of systems not currently determined to be year 2000 compliant, the Company is currently replacing or repairing hardware, software and equipment that it anticipates will not work properly in the year 2000. The Company expects that replacements and repairs of hardware, software and equipment for systems that are not currently considered year 2000 compliant will be completed during August 1999. The Company is testing all of its systems to ensure their proper operation upon the arrival of the year 2000. The Company expects that the testing phase of its year 2000 remediation effort will be completed during August 1999. The Company has requested written documentation from vendors and suppliers with whom the Company has a material relationship regarding their ability to operate properly in the year 2000. In many cases, the Company is considering alternatives related to vendors and suppliers that do not confirm their year 2000 readiness. There can be no assurance that the Company's significant vendors and suppliers will have remedied their year 2000 issues in a timely manner. The failure of a significant supplier to remedy its year 2000 issues could have a material adverse effect on the Company's operations, financial position or liquidity. The Company will continue to monitor its significant vendors and suppliers to mitigate its risks. Contingency plans are being developed for vendors and suppliers that are deemed critical to the Company's operations. Based upon the Company's current estimates, the costs of the Company's year 2000 remediation efforts are between $7 million and $9 million. Included in the Company's cost estimates are the costs of replacing hardware and software of approximately $6 million, which are capitalized and amortized over their estimated useful lives. Certain software replacements included in these cost estimates were planned prior to the assessment of the year 2000 issue and were accelerated as part of the Company's year 2000 remediation effort. The remaining costs are expensed as incurred. These projected costs are based upon management's best estimates, which were derived utilizing numerous assumptions of future events. There can be no guarantee, however, that these cost estimates will be achieved and actual results could differ materially. Management's estimate of the Company's most reasonably likely worst case scenario involves the replacement of hardware, software or equipment during the third and fourth quarters of 1999 that is determined during the testing phase of the remediation effort to not be correctable. The foregoing notwithstanding, management does not currently believe that the costs of assessment, remediation or replacement of the Company's systems, or the potential failure of third parties' systems, will have a material adverse effect on the Company's business, financial condition, results of operations or liquidity. SEASONALITY Certain of the Company's operations are subject to seasonal fluctuation. The first calendar quarter is the weakest quarter for most television and radio broadcasters, including the Company, as advertising revenues are lower in the post-Christmas period. Revenues in the music business are typically weakest in the first calendar quarter following the Christmas buying season. 14 15 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 growth in the popularity of country music and country lifestyles; growth in the popularity of Christian music and family values lifestyles; the ability to control costs relating to the development of the Opry Mills retail complex; the ability to integrate acquired operations into the Company's businesses; the ability of the Company to implement successfully its focused Internet strategy; the ability of the Opryland Hospitality Group to develop successfully hotel properties in other markets; the advertising market in the United States in general and in the Company's Dallas television and Nashville radio markets in particular; the perceived attractiveness of Nashville, Tennessee and the Company's properties as convention and tourist destinations; consumer tastes and preferences for the Company's programming and other entertainment offerings; competition; the impact of weather on construction schedules; the ability of the Company to avoid operational problems associated with year 2000 compliance; 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 on the Company's overall market interest rate and foreign currency exchange rate exposure at June 30, 1999, the Company believes that the effect, if any, of reasonably possible near-term changes in interest rates or fluctuation in foreign currency exchange rates on the Company's financial position, results of operations or cash flows would not be material. 15 16 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 The Company held its Annual Meeting of Stockholders on May 13, 1999 (the "Annual Meeting"). At the Annual Meeting, the stockholders of the Company voted to elect three Class II directors, Martin C. Dickinson, Christine Gaylord Everest, and Howard L. Wood, for three-year terms and until their successors are duly elected and qualified. The following table sets forth the number of votes cast for and withheld/abstained with respect to each of the nominees:
Withheld/ Nominee For Abstained ------- ---------- --------- Martin C. Dickinson 26,227,814 60,371 Christine Gaylord Everest 26,226,352 61,833 Howard L. Wood 26,251,637 36,548
The stockholders of the Company also voted to amend the Company's Amended and Restated 1997 Stock Option and Incentive Plan to increase the number of shares authorized for grant and issuance pursuant thereto. A total of 22,238,482 votes were cast for such proposal, 2,051,524 votes were cast against such proposal, and 12,018 votes abstained with respect to such proposal. There were 1,986,161 broker nonvotes with respect to the proposal. The third proposal submitted to the stockholders of the Company was the approval and adoption of the Company's Employee Stock Purchase Plan. A total of 24,202,231 votes were cast for such proposal, 87,032 votes were cast against such proposal, and 12,761 votes abstained with respect to such proposal. There were 1,986,161 broker nonvotes with respect to the proposal. The fourth proposal submitted to the stockholders of the Company was the ratification of the appointment of Arthur Andersen LLP as the independent public accountants for the Company in 1999. A total of 26,269,235 votes were cast for such proposal, 5,388 votes were cast against such proposal, and 13,562 votes abstained with respect to such proposal. There were no broker nonvotes with respect to the proposal. Item 5. OTHER INFORMATION Inapplicable Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) See Index to Exhibits following the Signatures page. (b) A Current Report on Form 8-K, dated April 19, 1999, reporting the Company's execution of a definitive agreement to sell its ownership in KTVT-TV located in Dallas-Fort Worth to CBS Corporation was filed with the Securities and Exchange Commission. 16 17 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: August 16, 1999 By: /s/ Joseph B. Crace --------------- ----------------------------------------- Joseph B. Crace Executive Vice President, Chief Operating Officer, and Chief Financial Officer 17 18 INDEX TO EXHIBITS 10.1 Gaylord Entertainment Company 1997 Stock Option and Incentive Plan Amended and Restated as of May 13, 1999. 27 Financial Data Schedule (for SEC use only). 18 EX-10.1 2 1997 STOCK OPTION AND INCENTIVE PLAN 1 EXHIBIT 10.1 GAYLORD ENTERTAINMENT COMPANY 1997 STOCK OPTION AND INCENTIVE PLAN AMENDED AND RESTATED AS OF MAY 13, 1999 1. PURPOSE; TYPES OF AWARDS; CONSTRUCTION. The purpose of this Amended and Restated 1997 Stock Option and Incentive Plan of Gaylord Entertainment Company (the "Plan") is to afford an incentive to officers, directors, key employees, consultants and advisors of Gaylord Entertainment Company (the "Company"), or any Subsidiary (as defined herein) which now exists or hereafter is organized or acquired by the Company, to acquire a proprietary interest in the Company, to continue as officers, directors, employees, consultants and advisors, to increase their efforts on behalf of the Company and to promote the success of the Company's business. It is further intended that options granted by the Compensation or other Committee (the "Committee") of the Board of Directors of the Company (the "Board") pursuant to Section 8 of the Plan shall constitute "incentive stock options" ("Incentive Stock Options") within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and options granted by the Committee pursuant to Section 7 of the Plan shall constitute "nonqualified stock options" ("Nonqualified Stock Options"). The Committee may also grant stock appreciation rights ("Stock Appreciation Rights" or "SARs") pursuant to Section 9 of the Plan and shares of restricted stock ("Restricted Stock") pursuant to Section 10 of the Plan. The provisions of the Plan are intended to satisfy the requirements of Section 16(b) of the Securities Exchange Act of 1934, and shall be interpreted in a manner consistent with the requirements thereof, as now or hereafter construed, interpreted, and applied by regulations, rulings, and cases. The Plan is also designated so that awards granted hereunder intended to comply with the requirements for "performance-based" compensation under Section 162(m) of the Code may comply with such requirements. The creation and implementation of the Plan shall not diminish or prejudice other compensation plans or programs approved from time to time by the Board. 2. DEFINITIONS. As used in this Plan, the following words and phrases shall have the meanings indicated: (a) "Common Stock" shall mean shares of Common Stock, par value $.01 per share, of the Company. (b) "Disability" shall mean a Grantee's (as defined in Section 3 hereof) inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than twelve (12) months. 1 2 (c) "Fair Market Value" per share of Common Stock as of a particular date shall mean (i) the closing sales price per share of Common Stock on the national securities exchange on which the Common Stock is principally traded, for the last preceding date on which there was a sale of such Common Stock on such exchange, or (ii) if the shares of Common Stock are then traded in an over-the-counter market, the average of the closing bid and asked prices for the shares of Common Stock in such over-the-counter market for the last preceding date on which there was a sale of such Common Stock in such market, or (iii) if the shares of Common Stock are not then listed on a national securities exchange or traded in an over-the-counter market, such value as the Committee, in its sole discretion, shall determine. (d) "Immediate Family" shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister- in-law, and shall include adoptive relationships. (e) "Option" or "Options" shall mean a grant to a Grantee of an option or options to purchase shares of Common Stock. Options granted by the Committee pursuant to the Plan shall constitute either Incentive Stock Options or Nonqualified Stock Options. (f) "Parent" shall mean any company (other than the Company) in an unbroken chain of companies ending with the Company if, at the time of granting an Option, each of the companies other than the Company owns stock or equity interests (including partnership interests) possessing fifty percent (50%) or more of the total combined voting power of all classes of stock or equity interests in one of the other companies in such chain. (g) "Performance Goals" means performance goals based on one or more of the following criteria: (i) pre-tax income or after-tax income; (ii) operating cash flow; (iii) operating profit; (iv) return on equity, assets, capital, or investment; (v) earnings or book value per share; (vi) sales or revenues; (vii) operating expenses; (viii) cost of capital; (ix) Common Stock price appreciation; and (x) implementation or completion of critical projects or processes. Where applicable, the Performance Goals may be expressed in terms of attaining a specified level of the particular criteria or the attainment of a percentage increase or decrease in the particular criteria, and may be applied to one or more of the Company or any Subsidiary, or a division or strategic business unit of the Company, or may be applied to the performance of the Company relative to a market index, a group of other companies, or a combination thereof, all as determined by the Committee. The Performance Goals may include a threshold level of performance below which no payment will be made (or no vesting will occur), levels of performance at which specified payments will be made (or specified vesting will occur), and a maximum level of performance above which no additional payment will be made (or at which full vesting will occur). Each of the foregoing Performance Goals shall be determined, to the extent applicable, in accordance with generally accepted accounting principles and shall be subject to certification by the Committee; provided, that the Committee shall have the authority to make equitable adjustments to the Performance Goals in recognition of unusual or non-recurring events affecting the Company or any Subsidiary or the financial statements of the Company or any Subsidiary, in response to changes in applicable laws or regulations, or to account for items of gain, loss, or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of business or related to a change in accounting principles. (h) "Subsidiary" shall mean any company (other than the Company) in an unbroken chain of companies beginning with the Company if, at the time of granting an Option, each of the companies other than the last company in the unbroken chain owns stock or equity interests (including partnership interests) possessing fifty percent (50%) or more of the total combined voting power of all classes of stock or equity interests in one of the other companies in such chain. (i) "Ten Percent Stockholder" shall mean a Grantee who, at the time an Incentive Stock Option is granted, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary. 2 3 (j) "Retirement" means retirement by an employee from active employment with the Company or any Subsidiary (i) on or after attaining age 65, or (ii) with the express written consent of the Company on or after attaining age 55. (k) "Voting Trust" shall mean the trust created by that certain Voting Trust Agreement, dated as of October 3, 1990, as amended October 7, 1991, and as may be amended hereafter from time to time, and "Voting Trustees" shall mean the trustees of the Voting Trust. 3. ADMINISTRATION. The Plan shall be administered by the Committee, which will be comprised solely of "Non-Employee Directors" within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or by the Board if for any reason the Committee is not so comprised, in which case all references herein to the Committee shall refer to the Board. The Committee shall have the authority in its discretion, subject to and not inconsistent with the express provisions of the Plan, to administer the Plan and to exercise all the powers and authorities either specifically granted to it under the Plan or necessary or advisable in the administration of the Plan, including, without limitation, the authority to grant Options, SARs, and Restricted Stock; to determine which Options shall constitute Incentive Stock Options and which Options shall constitute Nonqualified Stock Options and whether such Options will be accompanied by Stock Appreciation Rights; to determine the purchase price of the shares of Common Stock covered by each Option (the "Option Price") and SARs, the kind of consideration payable (if any) with respect to awards, and the various methods for payment; to determine the period during which Options may be exercised and during which Restricted Stock shall be subject to restrictions, and whether in whole or in installments; to determine the persons to whom, and the time or times at which awards shall be granted (such persons are referred to herein as "Grantees"); to determine the number of shares to be covered by each award; to determine the terms, conditions, and restrictions of any Performance Goals and the number of Options, SARs, or shares of Restricted Stock subject thereto; to interpret the Plan; to prescribe, amend, and rescind rules and regulations relating to the Plan; to determine the terms and provisions of the agreements (which need not be identical) entered into in connection with awards granted under the Plan (the "Agreements"); to cancel or suspend awards, as necessary; and to make all other determinations deemed necessary or advisable for the administration of the Plan. The Committee may delegate to one or more of its members or to one or more agents such administrative duties as it may deem advisable, and the Committee or any person to whom it has delegated duties as aforesaid may employ one or more persons to render advice with respect to any responsibility the Committee or such person may have under the Plan. All decisions, determinations, and interpretations of the Committee shall be final and binding on all Grantees of any awards under this Plan. The Board shall fill all vacancies, however caused, in the Committee. The Board may from time to time appoint additional members to the Committee, and may at any time remove one or more Committee members and substitute others. One member of the Committee shall be selected by the Board as chairman. The Committee shall hold its meetings at such times and places as it shall deem advisable. All determinations of the Committee shall be made by a majority of its members either present in person or participating by conference telephone at a meeting or by written consent. The Committee may appoint a secretary and make such rules and regulations for the conduct of its business as it shall deem advisable, and shall keep minutes of its meetings. No members of the Board or Committee shall be liable for any action taken or determination made in good faith with respect to the Plan or any award granted hereunder. 4. ELIGIBILITY. Directors, officers, key employees, consultants and advisors of the Company or any Subsidiary shall be eligible to receive awards hereunder; provided, however, that only consultants or advisors who have rendered bona fide services to the Company or any Subsidiary in connection with its business operations, and not in 3 4 connection with the offer or sale of securities in capital-raising transactions, shall be eligible to receive awards hereunder. In determining the persons to whom awards shall be granted and the number of shares to be covered by each award, the Committee, in its sole discretion, shall take into account the contribution by the eligible participants to the management, growth, and profitability of the business of the Company and such other factors as the Committee shall deem relevant. 5. STOCK. The maximum number of shares of Common Stock reserved for the grant of awards under the Plan shall be 4,250,000 (including shares of Common Stock reserved for the grant of awards issued in connection with the Distribution Agreement (as defined below)), subject to adjustment as provided in Section 11 hereof. Such shares may, in whole or in part, be authorized but unissued shares or shares that shall have been or may be reacquired by the Company. If any outstanding award under the Plan should, for any reason, expire or be canceled, forfeited, or terminated, without having been exercised in full, the shares of Common Stock allocable to the unexercised, canceled, forfeited, or terminated portion of such award shall (unless the Plan shall have been terminated) become available for subsequent grants of awards under the Plan. The maximum number of shares of Common Stock with respect to which awards (including Options, SARs, and Restricted Stock) may be granted under the Plan to any eligible employee during any consecutive three-year period shall be 500,000, subject to adjustment as provided in Section 11 hereof. Notwithstanding the foregoing, shares of Common Stock issued or issuable to any person in connection with the Agreement and Plan of Distribution, dated as of September 30, 1997, between the Company and Gaylord Entertainment Company, a Delaware corporation (the "Distribution Agreement") shall not be counted for purposes of the maximum number of shares limitation in the preceding sentence. 6. TERMS AND CONDITIONS OF OPTIONS. Each Option granted pursuant to the Plan shall be evidenced by a written agreement between the Company and the Grantee (the "Option Agreement"), in such form as the Committee shall from time to time approve, which Option Agreement shall comply with and be subject to the following terms and conditions: (a) Number of Shares. Each Option Agreement shall state the number of shares of Common Stock to which the Option relates. (b) Type of Option. Each Option Agreement shall specifically state that the Option constitutes an Incentive Stock Option or a Nonqualified Stock Option. (c) Option Price. Each Option Agreement shall state the Option Price, which, in the case of an Incentive Stock Option, shall not be less than one hundred percent (100%) of the Fair Market Value of the shares of Common Stock covered by the Option on the date of grant. The Option Price shall be subject to adjustment as provided in Section 11 hereof. Unless otherwise stated in the resolution, the date on which the Committee adopts a resolution expressly granting an Option shall be considered the day on which such Option is granted. (d) Medium and Time of Payment. The Option Price shall be paid in full, at the time of exercise, in any manner that the Committee shall deem appropriate or that the Option Agreement shall provide for, including, in cash, in shares of Common Stock having a Fair Market Value equal to such Option Price, in cash provided through a broker-dealer sale and remittance procedure, approved by the Committee, in a combination of cash and Common Stock, or in such other manner as the Committee shall determine. (e) Term and Exercisability of Options. Each Option shall be exercisable at such times and under such conditions as the Committee, in its discretion, shall determine; provided, however, that in the case of an Incentive Stock Option, such exercise period shall not exceed ten (10) years from the date of grant of 4 5 such Option. The exercise period shall be subject to earlier termination as provided in Section 6(f) hereof. An Option may be exercised, as to any or all full shares of Common Stock as to which the Option has become exercisable, by giving written notice of such exercise to the Committee or its designated agent. (f) Termination of Employment. (i) Generally. Except as otherwise provided herein or as determined by the Committee, an Option may not be exercised unless the Grantee is then in the service or employ of the Company or a Parent or Subsidiary (or a company or a parent or subsidiary company of such company issuing or assuming the Option in a transaction to which Section 424(a) of the Code applies), and unless the Grantee has remained continuously in such service or employ since the date of grant of the Option. Unless otherwise determined by the Committee at or after the date of grant, in the event that the employment of a Grantee or the service provided to the Company by the Grantee terminates (other than by reason of death, Disability, Retirement, or for Cause) all Options that are exercisable at the time of such termination may be exercised for a period of 90 days from the date of such termination or until the expiration of the stated term of the Option, whichever period is shorter. For purposes of interpreting this Section 6(f) only, the service of a director as a non-employee member of the Board shall be deemed to be employment by the Company. (ii) Death or Disability. If a Grantee's employment with, or service to, the Company or a Parent or Subsidiary terminates by reason of death, or if the Grantee's employment or service terminates by reason of Disability, all Options theretofore granted to such Grantee will become fully vested and exercisable (notwithstanding any terms of the Options providing for delayed exercisability) and may be exercised by the Grantee, by the legal representative of the Grantee's estate, or by the legatee under the Grantee's will at any time until the expiration of the stated term of the Option. In the event that an Option granted hereunder is exercised by the legal representative of a deceased or disabled Grantee, written notice of such exercise must be accompanied by a certified copy of letters testamentary or equivalent proof of the right of such legal representative or legatee to exercise such Option. (iii) Retirement. If a Grantee's employment with, or service to, the Company or a Parent or Subsidiary terminates by reason of Retirement, any Option held by the Grantee may thereafter be exercised, to the extent it was exercisable at the time of such Retirement or on such accelerated basis as the Committee may determine at or after the date of grant (but before the date of such Retirement), at any time until the expiration of the stated term of the Option. (iv) Cause. If a Grantee's employment with, or service to, the Company or a Parent or Subsidiary terminates for "Cause" (as determined by the Committee in its sole discretion) the Option, to the extent not theretofore exercised, shall terminate on the date of termination of employment. (v) Committee Discretion. Notwithstanding the provisions of subsections (i) through (iv) above, the Committee may, in its sole discretion, at or after the date of grant (but before the date of termination), establish different terms and conditions pertaining to the effect on any Option of termination of a Grantee's employment with, or service to, the Company or a Parent or Subsidiary, to the extent permitted by applicable federal and state law. (g) Other Provisions. The Option Agreements evidencing Options under the Plan shall contain such other terms and conditions, not inconsistent with the Plan, as the Committee may determine. 7. NONQUALIFIED STOCK OPTIONS. Options granted pursuant to this Section 7 are intended to constitute Nonqualified Stock Options and shall be subject only to the general terms and conditions specified in Section 6 hereof. 5 6 8. INCENTIVE STOCK OPTIONS. Options granted pursuant to this Section 8 are intended to constitute Incentive Stock Options and shall be subject to the following special terms and conditions, in addition to the general terms and conditions specified in Section 6 hereof (a) Value of Shares. The aggregate Fair Market Value (determined as of the date the Incentive Stock Option is granted) of the shares of equity securities of the Company with respect to which Incentive Stock Options granted under this Plan and all other option plans of any Parent or Subsidiary become exercisable for the first time by each Grantee during any calendar year shall not exceed $100,000. To the extent such $100,000 limit has been exceeded with respect to any Options first becoming exercisable, including acceleration upon a Change in Control, and notwithstanding any statement in the Option Agreement that it constitutes an Incentive Stock Option, the portion of such Option(s) that exceeds such $100,000 limit shall be treated as a Nonqualified Stock Option. (b) Ten Percent Stockholder. In the case of an Incentive Stock Option granted to a Ten Percent Stockholder, (i) the Option Price shall not be less than one hundred ten percent (110%) of the Fair Market Value of the shares of Common Stock on the date of grant of such Incentive Stock Option, and (ii) the exercise period shall not exceed five (5) years from the date of grant of such Incentive Stock Option. 9. STOCK APPRECIATION RIGHTS. The Committee is authorized to grant SARs to Grantees on the following terms and conditions: (a) In General. Unless the Committee determines otherwise, an SAR (i) granted in tandem with a Nonqualified Stock Option may be granted at the time of grant of the related Nonqualified Stock Option or at any time thereafter, and (ii) granted in tandem with an Incentive Stock Option may only be granted at the time of grant of the related Incentive Stock Option. An SAR granted in tandem with an Option shall be exercisable only to the extent the underlying Option is exercisable and shall terminate when the underlying Option terminates. (b) SARs. An SAR shall confer on the Grantee a right to receive an amount with respect to each share subject thereto, upon exercise thereof, equal to the excess of (i) the Fair Market Value of one share of Common Stock on the date of exercise over (ii) the grant price of the SAR (which in the case of an SAR granted in tandem with an Option shall be equal to the exercise price of the underlying Option, and which in the case of any other SAR shall be such price as the Committee may determine). (c) Performance Goals. The Committee may condition the exercise of any SAR upon the attainment of specified Performance Goals, in its sole discretion. 10. RESTRICTED STOCK. The Committee may award shares of Restricted Stock to any eligible employee or director. Each award of Restricted Stock under the Plan shall be evidenced by an instrument, in such form as the Committee shall from time to time approve (the "Restricted Stock Agreement"), and shall comply with the following terms and conditions (and with such other terms and conditions not inconsistent with the terms of this Plan as the Committee, in its discretion, shall establish including, without limitation, the requirement that a Grantee provide consideration for Restricted Stock upon the lapse of restrictions): (a) The Committee shall determine the number of shares of Common Stock to be issued to the Grantee pursuant to the award. (b) Shares of Restricted Stock may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of, except by will or the laws of descent and distribution, for such period as the Committee shall determine from the date on which the award is granted (the "Restricted Period"). The Committee may impose such other restrictions and conditions on the shares as it deems appropriate including the satisfaction of Performance Goals. Certificates for shares of stock issued pursuant to 6 7 Restricted Stock awards shall bear an appropriate legend referring to such restrictions, and any attempt to dispose of any such shares of stock in contravention of such restrictions shall be null and void and without effect. During the Restricted Period, such certificates shall be held in escrow by an escrow agent appointed by the Committee. In determining the Restricted Period of an award, the Committee may provide that the foregoing restrictions lapse at such times, under such circumstances, and in such installments, as the Committee may determine. (c) Subject to such exceptions as may be determined by the Committee, if the Grantee's continuous employment with the Company or any Parent or Subsidiary shall terminate for any reason prior to the expiration of the Restricted Period of an award, any shares remaining subject to restrictions (after taking into account the provisions of Subsection (f) of this Section 10.) shall thereupon be forfeited by the Grantee and transferred to, and reacquired by, the Company or a Parent or Subsidiary at no cost to the Company or such Parent or Subsidiary. (d) During the Restricted Period the Grantee shall possess all incidents of ownership of such shares, subject to Subsection (b) of this Section 10, including the right to receive cash dividends with respect to such shares and to vote such shares; provided, that shares of Common Stock distributed in connection with a stock split or stock dividend shall be subject to restriction and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such shares are distributed. (e) Upon the occurrence of any of the events described in Section 11(c), all restrictions then outstanding with respect to shares of Restricted Stock awarded hereunder shall automatically expire and be of no further force or effect. (f) The Committee shall have the authority (and the Restricted Stock Agreement may so provide) to cancel all or any portion of any outstanding restrictions prior to the expiration of the Restricted Period with respect to any or all of the shares of Restricted Stock awarded on such terms and conditions as the Committee shall deem appropriate. 11. EFFECT OF CERTAIN CHANGES. (a) If there is any change in the shares of Common Stock through the declaration of extraordinary cash dividends, stock dividends, recapitalization, stock splits, or combinations or exchanges of such shares, or other similar transactions, the number of shares of Common Stock available for awards (both the maximum number of shares issuable under the Plan as a whole and the maximum number of shares issuable on a per-employee basis, each as set forth in Section 5 hereof), the number of such shares covered by outstanding awards, the Performance Goals, and the price per share of Options or SARs shall be proportionately adjusted by the Committee to reflect such change in the issued shares of Common Stock; provided, that any fractional shares resulting from such adjustment shall be eliminated; and provided, further, that, with respect to Incentive Stock Options, such adjustment shall be made in accordance with Section 424(h) of the Code. (b) In the event of the dissolution or liquidation of the Company; in the event of any corporate separation or division, including but not limited to, split-up, split-off or spin-off; or in the event of other similar transactions, the Committee may, in its sole discretion, provide that either: (i) the Grantee of any award hereunder shall have the right to exercise an Option (at its then Option Price) and receive such property, cash, securities, or any combination thereof upon such exercise as would have been received with respect to the number of shares of Common Stock for which such Option might have been exercised immediately prior to such dissolution, liquidation, or corporate separation or division; or (ii) each Option shall terminate as of a date to be fixed by the Committee and that not less than thirty (30) days' written notice of the date so fixed shall be given to each Grantee, who shall have the right, during the period of thirty (30) days preceding such termination, to exercise all or part of such Option. 7 8 In the event of a proposed sale of all or substantially all of the assets of the Company or the merger of the Company with or into another corporation, any award then outstanding shall be assumed or an equivalent award shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation, unless such successor corporation does not agree to assume the award or to substitute an equivalent award, in which case the Committee shall, in lieu of such assumption or substitution, provide for the realization of such outstanding awards in the manner set forth in Section 11(b)(i) or 11(b)(ii) above. (c) If, while any awards remain outstanding under the Plan, any of the following events shall occur (which events shall constitute a "Change in Control" of the Company): (i) the "beneficial ownership," as defined in Rule 13d-3 under the Exchange Act, of securities representing more than a majority of the combined voting power of the Company are acquired by any "person" as defined in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, (C) the Voting Trust and the Voting Trustees, (D) Edward L. Gaylord or any member of his Immediate Family, or any "person" controlled by, controlling or under common control with Edward L. Gaylord or any member of his Immediate Family; or (E) any corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company); or (ii) the shareholders of the Company approve a definitive agreement to merge or consolidate the Company with or into another company (other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) a majority of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation), or to sell or otherwise dispose of all or substantially all of its assets, or adopt a plan of liquidation; or (iii) during any period of two consecutive years, individuals who at the beginning of such period were members of the Board cease for any reason to constitute at least a majority thereof (unless the election, or the nomination for election by the Company's shareholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period); then from and after the date on which any such Change in Control shall have occurred (the "Acceleration Date"), any Option, SAR, and share of Restricted Stock awarded pursuant to this Plan shall be exercisable or otherwise nonforfeitable in full, as applicable, whether or not otherwise exercisable or forfeitable. Following the Acceleration Date, the Committee shall, in the case of a merger, consolidation, or sale or disposition of assets, promptly make an appropriate adjustment to the number and class of shares of Common Stock available for awards, and to the amount and kind of shares or other securities or property receivable upon exercise or other realization of any outstanding awards after the effective date of such transaction, and, if applicable, the price thereof. (d) In the event of a change in the Common Stock of the Company as presently constituted that is limited to a change of all of its authorized shares of Common Stock into the same number of shares with a different par value or without par value, the shares resulting from any such change shall be deemed to be the Common Stock within the meaning of the Plan. (e) Except as herein before expressly provided in this Section 11, the Grantee of an award hereunder shall have no rights by reason of any subdivision or consolidation of shares of stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class or by reason of any dissolution, liquidation, merger, or consolidation or spin-off of assets or stock of another company; and any issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be 8 9 made with respect to, the number or price of shares of Common Stock subject to an award. The grant of an award pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structures or to merge or to consolidate or to dissolve, liquidate, or sell, or transfer all or part of its business or assets or engage in any similar transactions. 12. SURRENDER AND EXCHANGES OF AWARDS. The Committee may permit the voluntary surrender of all or a portion of any Option granted under the Plan or any option granted under any other plan, program, or arrangement of the Company or any Subsidiary ("Surrendered Option"), to be conditioned upon the granting to the Grantee of a new Option for the same number of shares of Common Stock as the Surrendered Option, or may require such voluntary surrender as a condition precedent to a grant of a new Option to such Grantee. Subject to the provisions of the Plan, such new Option (1) may be an Incentive Stock Option or a Nonqualified Stock Option and (2) shall be exercisable at the price, during such period, and on such other terms and conditions as are specified by the Committee at the time the new Option is granted. The Committee may also grant Restricted Stock in exchange for Surrendered Options to any holder of such Surrendered Option. 13. PERIOD DURING WHICH AWARDS MAY BE GRANTED. Awards may be granted pursuant to the Plan from time to time within a period of ten (10) years from the date of the Distribution (as defined in the Distribution Agreement), provided that awards granted prior to such tenth anniversary date may be extended beyond such date. 14. LIMITS ON TRANSFERABILITY OF AWARDS. Awards of Incentive Stock Options (and any SAR related thereto) shall not be transferable otherwise than by will or by the laws of descent and distribution, and all Incentive Stock Options are exercisable during the Grantee's lifetime only by the Grantee. Awards of Nonqualified Stock Options (and any SAR related thereto) shall not be transferable, without the prior written consent of the Committee, other than (i) by will or by the laws of descent and distribution, (ii) by a Grantee to a member of his or her Immediate Family, or (iii) to a trust for the benefit of the Grantee or a member of his or her Immediate Family. Awards of Restricted Stock shall be transferable only to the extent set forth in the Restricted Stock Agreement. 15. EFFECTIVE DATE. The Plan shall be deemed to have taken effect on October 1, 1997. 16. AGREEMENT BY GRANTEE REGARDING WITHHOLDING TAXES. If the Committee shall so require, as a condition of exercise of an Option or SAR or other realization of an award, each Grantee shall agree that no later than the date of exercise or other realization of an award granted hereunder, the Grantee will pay to the Company or make arrangements satisfactory to the Committee regarding payment of any federal, state, or local taxes of any kind required by law to be withheld upon the exercise of an Option or other realization of an award. Alternatively, the Committee may provide that a Grantee may elect, to the extent permitted or required by law, to have the Company deduct federal, state, and local taxes of any kind required by law to be withheld upon the exercise of an Option or realization of any award from any payment of any kind due to the Grantee. The Committee may, in its sole discretion, permit withholding obligations to be satisfied in shares of Common Stock subject to the award. 17. AMENDMENT AND TERMINATION OF THE PLAN. The Board at any time and from time to time may suspend, terminate, modify, or amend the Plan without stockholder approval to the fullest extent permitted by the Exchange Act and the rules and regulations thereunder; provided, however, that no suspension, termination, modification, or amendment of the Plan may adversely affect any award previously granted hereunder, unless the written consent of the Grantee is obtained. 9 10 18. RIGHTS AS A SHAREHOLDER. Except as provided in Section 10(d) hereof, a Grantee or a transferee of an award shall have no rights as a shareholder with respect to any shares covered by the award until the date of the issuance of a stock certificate to him or her for such shares. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities, or other property) or distribution of other rights for which the record date is prior to the date such stock certificate is issued, except as provided in Section 11 hereof. 19. NO RIGHTS TO SERVICE OR EMPLOYMENT. Nothing in the Plan or in any award granted or Agreement entered into pursuant hereto shall confer upon any Grantee the right to continue in the employ of the Company or any Subsidiary or to be entitled to any remuneration or benefits not set forth in the Plan or such Agreement or to interfere with or limit in any way the right of the Company or any such Subsidiary to terminate such Grantee's service to or employment by the Company or such Subsidiary. Awards granted under the Plan shall not be affected by any change in duties or position of a Grantee as long as such Grantee continues to provide service to or is in the employ of the Company or any Subsidiary. 20. BENEFICIARY. A Grantee may file with the Committee a written designation of a beneficiary on such form as may be prescribed by the Committee and may, from time to time, amend or revoke such designation. If no designated beneficiary survives the Grantee, the executor or administrator of the Grantee's estate shall be deemed to be the Grantee's beneficiary. 21. UNFUNDED STATUS OF PLAN. The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Grantee by the Company, nothing contained herein shall give any such Grantee any rights that are greater than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Common Stock or payments in lieu of or with respect to awards hereunder; provided, however, that, unless the Committee otherwise determines with the consent of the affected participant, the existence of such trusts or other arrangements is consistent with the "unfunded" status of the Plan. 22. GOVERNING LAW. The Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of the State of Delaware. 10 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF GAYLORD ENTERTAINMENT COMPANY FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 11,255 0 95,104 5,173 28,743 175,184 597,328 0 1,045,911 94,263 273,136 0 0 328 592,249 1,045,911 241,501 241,501 0 242,724 0 0 7,018 123,421 42,971 80,450 0 0 0 80,450 2.45 2.43
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