Restoring Gaylord’s Flooded Nashville Properties to Cost $215 Million

Gaylord Entertainment Co. says it expects the total remediation and rebuild cost for its properties in Nashville, Tennessee damaged by early May’s record flooding to be between $215 million and $225 million.

The costs include approximately $165 to $172 million for Gaylord Opryland, $16 to $17 million for the Grand Ole Opry, $7 million to $8 million for attractions, $7 million to $8 million for administrative buildings and $20 million for contingencies.

Offsetting these costs are business interruption and property insurance proceeds of $50 million and a federal tax refund of approximately $30 million.

Since the hotel is located in a federal disaster area, the company will be permitted to amend its 2009 federal tax return and carry-back the flood casualty loss against its taxable income in 2007. Additionally, the company said it continues to work with the state and local government on other potential tax relief.

The estimated net cash impact of the flood, including all project costs, offsetting items, and $20 million in contingencies is approximately $169-$179 million. This excludes the cost of pre-flood planned enhancement projects.

The company does not expect to reopen Opryland until November. It expects to reopen The Grand Ole Opry in October.

The company said it would cut more than 1,700 jobs at its Opryland hotel due to the long restoration process. It expects to begin rehiring employees at the Opryland six to eight weeks before it reopens in November.

The company will fund the restoration of its damaged assets through available cash, borrowings and cash flow generated by its three remaining hotels.

“We have made significant progress in our work to assess and repair the damage inflicted by the historic flooding,” said Colin V. Reed, chairman and chief executive officer of Gaylord Entertainment. “Our Nashville-area assets have been stabilized and we have a large group of contractors and experts working diligently alongside our management team to get us back to business as soon as possible.

“Flood damage requires an extraordinarily complicated repair process,” he said. “We have had to manually test every aspect of our mechanical, electrical, information technology, and power generating systems in order to understand what works, what needs to be repaired, and what needs to be replaced. There is an entire city of infrastructure which operates under the Gaylord Opryland campus, the majority of which was fully under water, and thus the assessment process has been extensive. ”

Employment Strategy

Since May 3, 2010, Gaylord has been providing its Gaylord Opryland employees with full pay and benefits. However, as a result of the timeline associated with the reopening of the resort, the company said it will be releasing 1,743 employees, effective June 12, 2010.

Gaylord will continue to make healthcare benefits available at the same cost to employees through September. Additionally, Gaylord will provide affected employees with two weeks of pay, plus payment for any unused vacation days. Gaylord is also organizing an event to help employees with this transition.

In the meantime, Gaylord Opryland will continue to employ 919 employees throughout the restoration process. These employees are employed primarily in the areas of reservations, accounting, sales, IT, engineering, horticulture, and security.

“We are deeply sorry to have to make this incredibly difficult decision, as our employees are and have always been the driving force behind the success of our business,” said Reed. “The cost of this disaster has meant that we have to balance the future of our business and our fiduciary duty to our shareholders with the duty we have to our employees.”