Description

Gaylord Entertainment has a wonderful collection of assets - and very
strong brand names (i.e. The Grand Ole OPry, the Opryland Hotel). Over
the last several years, the company has not been very well managed and the
financial returns have suffered. Ever since the company came public in
1997 and the reigns were handed over to Terry London, the bottom fell out
of Gaylord's financial results.

There was no cohesive strategy, capital was allocated to wherever it was
requested, and the corporation grew without direction. For example, they
made an investment into Jack Nicklaus' golf academy, a feature film
business, and spent $100M on internet ventures (to only name a few).

GET has taken its first step and done the initial restructuring - they
sold off the golf academy, magazines, and other miscellaneous assets -
but there is more to come. Under new CEO Colin Reed and Chairman Mike
Rose further steps will be taken to focus the company and surface value.
On the most recent conference call, Reed stated clearly that businesses
not earning their cost of capital would be disposed of, they would sell
noncore assets and excess real estate, and reduce management layers. We
are seeing signs of these steps now but the clear plan will become
apparent in February 2002 at their analyst meeting in Florida.

The bottom line: GET has never truly been professionally managed since
the early 1990's, the company is entering a new era under Colin Reed and
Mike Rose and going forward GET will be less complex, more profitable,
generating excess cash, and accountable to shareholders. They are
utilizing a ROIC framework in analyzing the businesses. Reed, unlike
his predecessors has no emotional ties to the assets or divisions so
there are no "sacred cows".

Valuing GET is complex and difficult because the true earning power and
cash flows have been obscured by numerous acquisitions, writeoffs, and
poor management of the assets over the last several years. Furthermore,
it is not clear what GET will look like down the road.

Reed and Rose will most likely maintain the hotel/hospitality focus given
their backgrounds and the rest will probably be sold over time.

The valuation work on the company is as follows:

HOSPITALITY AND ATTRACTIONS
Has consistently generated 14% operating margins, 7% ROA
Transactions for hotel properties have typically occurred at 9-9.5x ebitda
Assume $66M ebitda for 2001 (flat with 2000)
Provides value of $594M-$627M.

MUSIC MEDIA AND ENTERTAINMENT
Includes Grand Ole Opry, radio stations, TV stations, publishing
Division hasn't generated an operating profit for 2 years.
Historically, generated 11-22% operating margins, 15-20% ROA
For valuation purposes, assume management gets operating margins to the
historical level of 11%, which on $257.6M in revenues = $28.3M operating.
In 2001, division should generate $53.7M ebitda
Division contains many different businesses, so it is difficult to
determine exact multiple as don't know the exact breakdown.
For arguments sake, it seems reasonable to use 13-15x ebitda considering
that transactions in radio and tv have occurred at higher valuations.
Provides value of $698.1M-$805.5M.

OTHER
Includes miscellaneous assets that have not been factored into the analysis
i.e. Sports teams, Bass Pro Shops, Opry Shopping Complex
These assets could be worth close to $100M

TOTAL VALUATION

Hospitality/Attraction $594-627M
Music/Media/Entertainment $698-805M
Other $100M
Corporate Expense ($125M) $25M@5x multiple
Cash $100M
Debt ($350M)
------------
Total Valuation $1.017B-$1.157B.
Shares 33.5M
Per Share $30.35/sh-34.53/sh

With the stock today at $20, that provides an upside of over 50%.

Catalyst

The Gaylord Family owns 40% of the company and is frustrated by the
valuation in the market. They hired Reed and Rose from the outside and
have given them the authority to take the steps necessary to improve
returns, bring a strategy and focus, and create shareholder value. GET's
stock has done nothing since they came public, they didn't care too much
about investor relations, creating value for shareholders was not a
priority....but now that is changing.

The background on Colin Reed and Mike Rose is interesting and maybe
an indication of what they will do at Gaylord. Mike Rose, who is Chairman
of the Board, has two notable achievements in his management history.
First, he sold Holiday Inns to Bass plc for 14x cash flow several years
ago. Next, he went to Promus which was then merged into Doubletree. He
is well respected and knows how to create value. His compensation is
heavily equity based that includes a kicker for an extra traunche
of restricted stock if the stock price reaches $32/share.

Colin Reed worked at Promus with Rose and then joined Harrah's as the CFO
and part of a 3 person executive team running the company. Harrah's is
considered one of the more financially savvy gaming companies. The only
strike against Reed is that during his tenure HET made two poor
acquisitions that caused them some problems.
Reed's compensation plan:
$650,000 base salary
$500,000 1x signing bonus
$200,000 guaranteed bonus in year one assuming he proposes budget for 2002
500,000 options of stock at $25.25/share vesting over 4 years.
50,000 shares of restricted stock that vests over 4 years.