Gaylord Entertainment Reports a Net Loss for the 1st Qtr 2010

Compared to Net Income of $3.52 million in the Year-ago Quarter;RevPAR Decreased 0.6%

. May 05, 2010

MAY 3, 2010

Hotel Operating Statistics
NASHVILLE, TN - May 3, 2010 - Gaylord Entertainment Co. (NYSE: GET) today reported its financial results for the first quarter of 2010. Highlights from the first quarter include:

Consolidated revenue increased 2.1 percent to $216.7 million in the first quarter of 2010 from $212.3 million in the same period last year. Hospitality segment total revenue increased 1.5 percent to $203.7 million in the first quarter of 2010 compared to $200.6 million in the prior-year quarter.
Gaylord Hotels revenue per available room1 (“RevPAR”) decreased 0.6 percent and total revenue per available room2 (“Total RevPAR”) increased 1.5 percent in the first quarter of 2010 compared to the first quarter of 2009. Total RevPAR for the first quarter of 2010 includes attrition and cancellation fees of approximately $3.0 million collected during the quarter compared to $7.6 million in fees for the prior-year quarter.
Loss from continuing operations was $1.9 million, or a loss of $0.04 per diluted share (based on 47,011,000 weighted average shares outstanding), in the first quarter of 2010 compared to income from continuing operations of $3.5 million, or $0.09 per diluted share, in the prior-year quarter (based on 41,122,000 weighted average shares outstanding). The decrease is due primarily to an approximate $1.2 million pre-tax net gain in the first quarter of 2010 on the repurchase of a portion of our senior notes as compared to an approximate $16.6 million pre-tax net gain on these types of repurchases in the first quarter of 2009. Income from continuing operations in the first quarter of 2009 also included $4.5 million in severance costs associated with the Company's cost containment initiatives and $1.8 million of costs associated with the resolution of a potential proxy contest.
Adjusted EBITDA3 was $41.9 million in the first quarter of 2010 compared to $36.1 million in the prior-year quarter.
Consolidated Cash Flow4 (“CCF”) increased 12.7 percent to $44.1 million in the first quarter of 2010 compared to $39.1 million in the same period last year. CCF results for the first quarter of 2009 included approximately $6.3 million of expenses related to severance costs and costs associated with the resolution of a potential proxy contest as noted above.
Gaylord Hotels gross advance group bookings in the first quarter of 2010 for all future years was 523,071 room nights, an increase of 53.2 percent when compared to the same period last year. Net of attrition and cancellations, advance bookings in the first quarter for all future periods were 360,314 room nights, an increase of 267.5 percent when compared to the same period last year.

“Our business performed solidly this quarter, and we were encouraged by the improvement and the pace of advance bookings as well as the positive spending trends we observed group customers exhibit across our properties,” said Colin V. Reed, chairman and chief executive officer of Gaylord Entertainment. “We posted a solid 27.1 percent CCF margin4 in our hotels brand, driven by growth in Total RevPAR and our continued focus on cost discipline. Total RevPAR grew as the increase in group occupancy fueled year-over-year revenue growth at our outside the room offerings and further underscored the uniqueness of our business model. Our profitability performance was particularly encouraging given a rate environment in the first quarter that remained under pressure for short-term bookings.”

“Advance group bookings in the first quarter of 2010 were up significantly year-over-year and were roughly in line with historical pre-recession levels. We booked more than 360,000 net room nights in the quarter, which means that we now have over 5.1 million net room nights on the books for all future years. This is an encouraging sign that groups are returning to our properties as economic pressures appear to ease. We continue to maintain a disciplined approach to group room rate pricing and are encouraged by the growth in rate that we are seeing in our bookings for 2011 and beyond. Additionally, we drove an approximate nine percent increase in transient occupied room nights in the first quarter of 2010 when compared to the first quarter of 2009 as marketing efforts we initiated last year to focus more sharply on this side of our business continued to pay dividends.”

Segment Operating Results

Hospitality

Key components of the Company's hospitality segment performance in the first quarter of 2010 include:

RevPAR for the quarter decreased 0.6 percent to $112.62 compared to $113.32 in the prior-year quarter. Total RevPAR for the quarter increased 1.5 percent to $279.59 compared to $275.41 in the prior-year quarter.
Hospitality segment CCF increased 5.0 percent to $55.3 million for the first quarter compared to $52.6 million in the prior-year quarter. Hospitality segment CCF margin increased 90 basis points to 27.1 percent compared to 26.2 percent in the first quarter of 2009. Hospitality segment CCF results for the first quarter of 2009 included approximately $2.9 million of expense related to severance costs.
Attrition that occurred for groups that traveled in the first quarter of 2010 was 10.6 percent of the agreed-upon room block compared to 17.0 percent for the same period in 2009 and 11.7 percent in the fourth quarter of 2009. In-the-year, for-the-year cancellations in the first quarter of 2010 totaled approximately 21,818 room nights compared to 78,803 in the first quarter of 2009 and 28,908 in the first quarter of 2008. Gaylord Hotels attrition and cancellation fee collections totaled $3.0 million in the first quarter of 2010 compared to $7.6 million for the same period in 2009 and $7.6 million in the fourth quarter of 2009.

Reed continued, “We continued to see attrition and cancellation levels normalize in the first quarter. The 10.6 percent attrition level improved 640 basis points year-over-year and 110 basis points compared to the fourth quarter of 2009. Cancellations declined by more than 50,000 room nights from the same period last year. Although attrition and cancellation levels in the first quarter of 2010 were down year-over-year, resulting in a significant decline in attrition and cancellation revenue, we were still able to drive solid profitability, confirmation that our business works well in both good and bad economic periods.”

At the property level, Gaylord Opryland generated revenue of $54.7 million in the first quarter of 2010, a 0.3 percent increase compared to $54.5 million in the prior-year quarter, due primarily to an increase in occupancy and improved food and beverage revenue. Occupancy for the quarter increased 4.4 percentage points compared to the prior-year quarter. First quarter RevPAR decreased 1.1 percent to $89.67 compared to $90.64 in the same period last year. Total RevPAR increased 0.3 percent to $210.99 in the first quarter of 2010 compared to $210.42 in the prior-year quarter, driven by an increase in food and beverage revenue. CCF increased 37.6 percent to $12.8 million for the first quarter, versus $9.3 million in the prior-year quarter, driven by increased food and beverage revenue associated with increased occupancy, improved year-over-year operating efficiencies and the impact of $1.4 million of expense related to severance costs incurred in the first quarter of 2009. For the quarter, CCF margin increased 640 basis points over the prior-year quarter to 23.4 percent.

Gaylord Palms posted revenue of $43.3 million in the first quarter of 2010, a 5.6 percent decrease compared to $45.9 million in the prior-year quarter, driven primarily by a decrease in group Average Daily Rate (“ADR”). ADR in the Orlando market has been under significant pressure as approximately 2,400 rooms have been added into the market since September 2009. Absorption of this new supply has been slow as a result of the challenging economic environment. Occupancy for the first quarter of 2010 was up 5.4 percentage points compared to the prior-year quarter and was driven primarily by an increase in association group room nights. First quarter RevPAR decreased 3.5 percent to $131.24 compared to $135.95 in the prior-year quarter. Total RevPAR in the first quarter decreased 5.6 percent to $342.31 compared to $362.77 in the prior-year quarter. As a result of the decline in ADR, CCF in the first quarter decreased to $14.6 million compared to $16.0 million in the prior-year quarter, resulting in a CCF margin of 33.7 percent, a 110 basis point decrease compared to 34.8 percent in the prior-year quarter. CCF in the first quarter of 2009 included $0.7 million of expense related to severance costs.

Gaylord Texan revenue was $46.9 million in the first quarter of 2010, an increase of 10.6 percent from $42.4 million in the prior-year quarter, driven primarily by an increase in occupancy and outside the room revenue. Occupancy for the first quarter was up 11.6 percentage points compared to the first quarter of 2009 and was driven by a significant increase in corporate group room nights. RevPAR in the first quarter increased 8.3 percent to $122.78 when compared to $113.38 in the prior-year quarter due to the increase in occupancy. Total RevPAR increased 10.6 percent to $344.67 compared to $311.76 in the prior-year quarter, driven by an increase in food and beverage revenue. CCF increased 29.1 percent to $16.0 million in the first quarter of 2010, versus $12.4 million in the prior-year quarter, driven by increased group occupancy, most notably with corporate groups and increased food and beverage spend by groups. The resulting CCF margin of 34.1 percent represents a 490 basis point increase from the prior-year quarter. CCF in the first quarter of 2009 included $0.5 million of expense related to severance costs.

Gaylord National generated revenue of $57.5 million in the first quarter of 2010, a 2.6 percent increase when compared to the prior-year quarter of $56.1 million, due to an increase in occupancy. Occupancy for the first quarter was up 8.7 points to 70.5 percent when compared to 61.8 in the prior-year quarter and was driven by an overall increase in group room nights. RevPAR in the first quarter decreased 2.6 percent to $135.77 when compared to $139.33 in the prior-year quarter. Total RevPAR increased 2.6 percent to $320.21 in the first quarter when compared to $312.24 in the prior-year quarter. CCF decreased 20.4 percent to $11.7 million in the first quarter when compared to $14.8 million in the prior-year quarter, driven primarily by a decline in ADR, increased union labor costs and unexpected snow removal costs. CCF margin declined 590 basis points to 20.4 percent in the first quarter when compared to the prior-year quarter. CCF in the first quarter of 2009 included $0.3 million of expense related to severance costs.

Reed continued, “The Gaylord National performed well from a revenue perspective this quarter, despite a difficult comparison to the first quarter of 2009 with the inauguration last year. CCF was negatively impacted by the anticipated increase in labor costs associated with the union contracts at the property as well as substantial unexpected expenses related to the heavy snowfalls and thus business interruption in February. We continue to refine our operations and believe we will see improved profitability from this property throughout the rest of 2010. Customer interest in the property continued to grow as we booked over 168,000 net advance room nights for all future periods during the first quarter of 2010, which equated to our third highest room night production quarter ever at the property. Our ability to attract transient customers continues to grow, and we believe we will see transient bookings growth in 2010 as we continue to develop awareness and attractiveness as a local and regional leisure transient destination.”

Development Update

Gaylord Entertainment's planned resort and convention hotel in Mesa, Arizona remains in the very early stages of planning, and specific details of the property and budget have not yet been determined. The Company anticipates that any expenditure associated with the project will not have a material financial impact in the near-term.

Opry and Attractions

Opry and Attractions segment revenue increased 11.4 percent to $13.0 million in the first quarter of 2010, compared to $11.6 million in the year-ago quarter. The segment's CCF increased to $0.6 million in the first quarter of 2010 from a loss of $1.3 million in the prior-year quarter. CCF in the first quarter of 2009 included the effect of $0.4 million of expense related to severance costs associated with the Attractions.

Corporate and Other

Corporate and Other operating loss totaled $14.5 million in the first quarter of 2010 compared to an operating loss of $15.6 million in the same period last year. Corporate and Other CCF in the first quarter of 2010 improved 4.0 percent to a loss of $11.7 million compared to a loss of $12.2 million in the same period last year. For the quarter, the difference between Corporate and Other operating loss and Corporate and Other CCF was primarily due to depreciation and amortization expense and non-cash stock option expense. Additionally, first quarter 2009 CCF included approximately $1.2 million in expense associated with severance costs and $1.8 million in costs associated with the resolution of a potential proxy contest.

Liquidity

As of March 31, 2010, the Company had long-term debt outstanding, including current portion, of $1,154.6 million and unrestricted and restricted cash of $180.6 million. At the end of the first quarter of 2010, $300 million of borrowings were undrawn under the Company's $1.0 billion credit facility, and the lending banks had issued $8.9 million in letters of credit, which left $291.1 million of availability under the credit facility.

During the first quarter of 2010, Gaylord Entertainment recorded a pre-tax gain of $1.2 million as a result of the repurchase of $26.5 million in aggregate principal amount of its outstanding 6.75 percent senior notes for $25.1 million. The Company used available cash to finance the purchases and will consider additional repurchases of its senior notes from time to time depending on market conditions.

Outlook

The following business performance outlook is based on current information as of May 3, 2010. The Company does not expect to update guidance before next quarter's earnings release. However, the Company may update its full business outlook or any portion thereof at any time for any reason.

Reed concluded, “Looking ahead, we are encouraged by the signs of stabilization we have seen in the market as attrition and cancellation rates continued to normalize, advance bookings momentum continued to build and advance bookings lead volume continued to increase. The increase in occupancy, as well as outside the room spending, suggests that meeting planner confidence is growing, groups are returning to our properties and they are spending on dining and entertainment. Based on these positive trends, we were prepared to raise our 2010 RevPAR, Total RevPAR, and CCF guidance. Unfortunately, due to the flood damage experienced at the Gaylord Opryland in the last 24 hours, the Company has decided that it is prudent to withdraw its 2010 financial guidance, as it is likely that financial results for Gaylord Opryland and thus Gaylord Entertainment will be impacted for the next two quarters. While it is too early to determine how long the hotel will be closed, it is reasonable to conclude that the hotel will likely be closed for several months. We are working to assess the damage and will update shareholders and other constituents frequently as more information becomes available."

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