Commitments and Contingencies

6 Months Ended

Jun. 30, 2012

Commitments and Contingencies [Abstract]

COMMITMENTS AND CONTINGENCIES

11. COMMITMENTS AND CONTINGENCIES:

The Company and its newly formed, wholly-owned subsidiary, Granite, have filed a registration statement on Form S-4 with the SEC. The registration statement contains a preliminary proxy statement/prospectus of Gaylord that describes the Company’s plans to qualify as a REIT for federal income tax purposes following the consummation of the Company’s previously announced transaction with Marriott International, Inc., and the contemplated merger between Granite and Gaylord to facilitate the REIT election.

The Company’s board of directors has approved a plan to restructure the Company’s business operations to facilitate the qualification of Granite, as the successor to the Company’s assets and business operations following the completion of the merger, as a REIT for federal income tax purposes. In connection therewith, on May 31, 2012, the Company announced its agreement to sell the Gaylord Hotels brand and rights to manage its Gaylord Hotels properties to Marriott for $210 million in cash. The closing of the Marriott sale transaction is subject to the satisfaction of certain conditions, including the Company’s stockholders’ adoption of the merger agreement. The Company expects the consummation of the Marriott sale transaction to occur promptly after its stockholders adopt the merger agreement. Upon consummation of the Marriott sale transaction, Marriott will manage the day-to-day operations of the Gaylord Hotels properties pursuant to management agreements to be entered into upon the closing of the Marriott sales transaction, and the Company anticipates that this management transition will be complete by January 1, 2013, when the Company anticipates that its election to become a REIT will be effective. In addition, prior to the completion of the REIT conversion, the Company will identify and engage a third-party hotel manager to operate and manage the Radisson Hotel at Opryland.

The Company currently estimates that it will incur approximately $55 million in one-time costs related to the REIT conversion. These costs include investment banking fees, legal fees, consulting fees, severance and retention costs, and conversion costs. The Company also anticipates that it will incur federal income taxes associated with the receipt of the purchase price in the Marriott sale transaction and other transactions related to the REIT conversion, net of remaining net operating losses, of approximately $43 million to $53 million. In addition, the Company will be required to issue a special earnings and profits distribution (as more fully described in the Granite registration statement on Form S-4).

The merger, Marriott sales transaction, special earnings and profits distribution, and other restructuring transactions are designed to enable Granite, as the business successor of Gaylord, to hold its assets and business operations in a manner that will enable the Company to elect to be treated as a REIT for federal income tax purposes. If Granite qualifies as a REIT, it generally will not be subject to federal corporate income taxes on that portion of its capital gain or ordinary income from its REIT operations that is distributed to its stockholders. This treatment would substantially eliminate the federal “double taxation” on earnings from REIT operations, or taxation once at the corporate level and again at the stockholder level, that generally results from investment in a regular C- corporation. As explained more fully in the registration statement, to comply with certain REIT qualification requirements, the Company must engage third-party managers to operate and manage its hotel properties. Additionally, non-REIT operations, which consist of the activities of taxable REIT subsidiaries that will act as lessees of the Company’s hotels, as well as the businesses within the Company’s Opry and Attractions segment, would continue to be subject, as applicable, to federal and state corporate income taxes.

Upon completion of the REIT conversion, the Company will no longer view independent, large-scale development of resort and convention hotels as a means of its growth. As a result, the Company will not proceed with its previously announced Aurora, Colorado, Mesa, Arizona, and other potential development projects in the form previously anticipated. The Company will reexamine how the Aurora or Mesa projects could be completed with minimal financial commitment, although it may not identify such opportunity.

In January 2012, the Company announced that it had entered into a memorandum of understanding for a 50/50 joint venture with the Dollywood Company to develop a family entertainment zone adjacent to Gaylord Opryland on land that the Company currently owns. The Dollywood Company will operate the park, and the Company will contribute both land and cash to represent its 50 percent share of the venture. Phase one of the project is a yet to be named approximately $50 million water and snow park, which the Company believes will be the first of its kind in the U.S. A 2013 groundbreaking date is expected with the park opening slated for summer 2014. The project is contingent upon finalizing agreements with governmental authorities pertaining to the construction of the necessary infrastructure. At this time, the Company has not made any material financial commitments in connection with this development.

Through joint venture arrangements with two private real estate funds, the Company previously invested in two joint ventures which were formed to own and operate hotels in Hawaii. As part of the joint venture arrangements, the Company entered into contribution agreements with the majority owners, which owners had guaranteed certain recourse liabilities under third-party loans to the joint ventures. The guarantees of the joint venture loans guaranteed each of the subsidiaries’ obligations under its third party loans for as long as those loans remain outstanding (i) in the event of certain types of fraud, breaches of environmental representations or warranties, or breaches of certain “special purpose entity” covenants by the subsidiaries, or (ii) in the event of bankruptcy or reorganization proceedings of the subsidiaries. The Company agreed that, in the event a majority owner is required to make any payments pursuant to the terms of these guarantees of joint venture loans, it will contribute to the majority owner an amount based on its proportional commitment in the applicable joint venture. The Company estimates that the maximum potential amount for which the Company could be liable under the contribution agreements is $16.9 million, which represents its pro rata share of the $86.4 million of total debt that is subject to the guarantees. As of June 30, 2012, the Company had not recorded any liability in the condensed consolidated balance sheet associated with the contribution agreements.

The Company has purchased stop-loss coverage in order to limit its exposure to any significant levels of claims relating to workers’ compensation, employee medical benefits and general liability for which it is self-insured.

The Company has entered into employment agreements with certain officers, which provide for severance payments upon certain events, including certain terminations in connection with a change of control.

The Company, in the ordinary course of business, is involved in certain legal actions and claims on a variety of matters. It is the opinion of management that such legal actions will not have a material effect on the results of operations, financial condition or liquidity of the Company.