Great Wolf Resorts Reports 2009 Third Quarter Results

http://www.businesswire.com/news/home/20091104005398/en

-Adjusted EBITDA of $24.8 million Exceeds Top End of Guidance-
MADISON, Wis.--(Business Wire)--
Great Wolf Resorts, Inc. (NASDAQ: WOLF), North America`s leading family of
indoor waterpark resorts, reported results today for the third quarter ended
September 30, 2009.

Third Quarter 2009 Highlights

* Adjusted EBITDA increases 7.7% to $24.8 million, over the third quarter of
2008.
* Same store RevPAR for Generation II resorts declined 4.0 percent on a constant
dollar basis as compared to the third quarter of 2008, substantially better than
industry average decline of 16.9 percent.

For the third quarter ended September 30, 2009, the Company reported net loss of
$(42.1) million, or $(1.35) per diluted share, compared to net income of $2.2
million, or $0.07 per diluted share for the same period a year earlier. The 2009
results include (1) a non-cash charge of $28.5 million to establish a valuation
allowance against its deferred tax assets, and (2) a non-cash impairment charge
of $24.0 million related to the Company`s Blue Harbor Resort & Conference Center
in Sheboygan, Wisconsin.

"Adjusted EBITDA in the third quarter of 2009 was the highest in the Company`s
history, driven by our industry-leading RevPAR performance combined with our
resort-level cost controls," said Kim Schaefer, chief executive officer. "Our
third quarter, which includes the summer vacation months, is dominated by
leisure travelers, who have continued to seek out the high value family vacation
that Great Wolf`s resorts offer. From an operating perspective, our third
quarter results were encouraging and underscore the relative strength of our
brand."

Ms. Schaefer concluded, "We believe we have growth opportunities ahead as we
employ a disciplined capital allocation strategy, focusing on licensing
arrangements and joint ventures in order to expand the geographic reach of our
brand. With meaningful improvements to our operations and our balance sheet the
last 18 months, we are now positioned for the near and long-term with a lower
cost structure, improved liquidity position, and a capable management team."

Operating Results

In the third quarter of 2009, adjusted EBITDA increased 7.7 percent to $24.8
million from $23.0 million in the third quarter of 2008. Total revenues
increased 10.7 percent to $76.8 million from $69.4 million in the third quarter
of 2008.

In light of the challenging economic environment, the Company remained focused
on minimizing controllable costs. The three categories that make up the majority
of controllable costs are resort departmental expenses, selling, general and
administrative (SG&A) costs and property operating costs. As a percentage of
revenues, these costs were 61.9 percent compared to 59.1 percent in the 2008
third quarter. The slight year over year increase in costs was primarily due to
less capitalized labor and overhead costs for construction projects in 2009 as
compared to 2008, and the effect of the ramping up of operations at the
Company`s Concord, North Carolina resort that opened in March 2009.

Brand Results

Same store revenue per available room (RevPAR) in the third quarter of 2009 was
down 5.5 percent (4.7 percent using constant dollars, which normalizes the
foreign currency translation effect on operating statistics of the Company`s
Canadian resort), compared to the 16.9 percent RevPAR decline for the overall
U.S. hotel industry according to Smith Travel Research data. Same-store
occupancy was down 190 basis points. In the third quarter of 2009, approximately
93 percent of the Company`s system-wide room revenue was from leisure guests.
Same store average daily rate (ADR) declined 2.9 percent (2.2 percent using
constant dollars). Total same store revenue per occupied room (Total RevPOR),
which includes revenue from rooms, food and beverage, and other amenities,
decreased 2.3 percent (1.6 percent using constant dollars).

Same store RevPAR for Great Wolf`s Generation II resorts, whichare generally
larger resorts that better represent the Company's current resort development
model and contribute more than 80 percent of the Company`s Adjusted EBITDA, was
down 5.0 percent (4.0 percent using constant dollars) versus 2008. Same store
occupancy was down 160 basis points, with group occupancy up slightly, offset by
a larger decline in leisure occupancy. Same store ADR declined 2.9 percent (1.9
percent using constant dollars), while total RevPOR for Generation II resorts
decreased 2.4 percent (1.4 percent using constant dollars).

The Company`s third quarter 2009 same store operating statistics do not reflect
the results of two Generation II resorts:

* Grapevine, Texas, which underwent a significant expansion completed early in
first quarter 2009.
* Concord, North Carolina, which opened at the end of first quarter 2009.

Balance Sheet and Liquidity

As of the end of the third quarter, the Company has no debt maturities until
July 2011 and no significant long-term capital commitments for construction or
development of new properties. Over the near term, the Company intends to
utilize the substantial portion of its free cash flow to manage its balance
sheet leverage.

As of September 30, 2009, the Company had:

* Unrestricted cash and cash equivalents: $28.0 million
* Total secured debt: $472.5 million
* Total unsecured debt: $80.5 million
* Weighted average cost of total debt: 6.7%
* Weighted average debt maturity: 5.8 years

Outlook and Guidance

The Company provides the following outlook and earnings guidance for the fourth
quarter and updates its full year 2009 guidance. The outlook and earnings
guidance information is based on the Company`s current assessment of business
conditions, including consumer demand and discretionary spending trends. The
Company may update any portion of its business outlook at any time as conditions
dictate:

(amounts in millions, except per share data) Q4 2009 Full year 2009
Low High Low High
Net income (loss) $(20.2) $(17.2) $(73.8) $(70.8)
Net income (loss) per diluted share $(0.65) $(0.55) $(2.36) $(2.26)
Adjusted EBITDA (a) $7.0 $10.0 $64.2 $67.2

(a) For reconciliations of Adjusted EBITDA, see tables accompanying this press release.

The forecast above assumes fourth quarter 2009 same store RevPAR declines of 2
percent to 4 percent in constant dollars versus fourth quarter 2008.

Adjusted EBITDA is a non-GAAP financial measure within the meaning of the
Securities and Exchange Commission (SEC) regulations. See the discussion below
in the "Non-GAAP Financial Measure" section of this press release. A
reconciliation of Adjusted EBITDA is provided in the tables of this press
release.

Conference Call

Great Wolf Resorts will hold a 2009 third quarter results conference call today
at 9:00 a.m. ET, hosted by Chief Executive Officer Kim Schaefer and Chief
Financial Officer Jim Calder. Stockholders and other interested parties may
listen to a simultaneous webcast of the conference call on the Internet by
logging onto the Company`s Web site, www.greatwolf.com, and clicking on
"Corporate Site" at the bottom of the page. . Interested parties may also call
1-877-407-9039, or for international callers 1-201-689-8470. A recording of the
call will be available by telephone until midnight on November 11, 2009 by
dialing 1-877-660-6853, or for international callers 1-201-612-7415, using
account number 3055 along with the conference ID 335547.

Non-GAAP Financial Measure

Included in this press release is a "non-GAAP financial measure," which is a
measure of the Company`s historical or future performance that is different from
measures calculated and presented in accordance with GAAP, within the meaning of
applicable SEC rules, that Great Wolf Resorts believes is useful to investors.
The following discussion defines Adjusted EBITDA and presents the reasons the
Company believes it is a useful measure of the Company`s performance. Great Wolf
Resorts defines Adjusted EBITDA as net income (loss) plus (a) interest expense,
net, (b) income taxes, (c) depreciation and amortization, (d) non-cash employee
compensation and professional fees, (e) costs associated with early
extinguishment of debt or postponement of debt offerings, (f) opening costs of
resorts under development, (g) equity in earnings (loss) of unconsolidated
related parties, (h) loss on disposition of property, (i) other unusual or
non-recurring items, and (j) minority interests. Adjusted EBITDA as calculated
by the Company is not necessarily comparable to similarly titled measures by
other companies. In addition, Adjusted EBITDA (a) does not represent net income
or cash flows from operations as defined by GAAP, (b) is not necessarily
indicative of cash available to fund the Company`s cash flow needs, and (c)
should not be considered as an alternative to net income, operating income, cash
flows from operating activities or the Company`s other financial information as
determined under GAAP.

Management believes Adjusted EBITDA is useful to an investor in evaluating the
Company`s operating performance because a significant portion of its assets
consists of property and equipment that are depreciated over their remaining
useful lives in accordance with GAAP. Because depreciation and amortization are
non-cash items, management believes that presentation of Adjusted EBITDA is a
useful measure of the Company`s operating performance. Also, management believes
measures such as Adjusted EBITDA are widely used in the hospitality and
entertainment industries to measure operating performance.

Therefore, the Company presents Adjusted EBITDA because it may help investors to
compare Great Wolf Resorts` ongoing performance before the effect of various
items that do not directly affect the Company`s ongoing operating performance.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the
federal securities laws. All statements, other than statements of historical
facts, including, among others, statements regarding Great Wolf Resorts' future
financial position, business strategy, projected levels of growth, projected
costs and projected performance and financing needs, are forward-looking
statements. Those statements include statements regarding the intent, belief or
current expectations of Great Wolf Resorts, Inc. and members of its management
team, as well as the assumptions on which such statements are based, and
generally are identified by the use of words such as "may," "will," "seeks,"
"anticipates," "believes," "estimates," "expects," "plans," "intends," "should"
or similar expressions. Forward-looking statements are not guarantees of future
performance and involve risks and uncertainties that actual results may differ
materially from those contemplated by such forward-looking statements. Many of
these factors are beyond the Company's ability to control or predict. Such
factors include, but are not limited to, competition in the Company`s markets,
changes in family vacation patterns and consumer spending habits, regional or
national economic downturns, the Company`s ability to attract a significant
number of guests from its target markets, economic conditions in its target
markets, the impact of fuel costs and other operating costs, the Company`s
ability to develop new resorts in desirable markets or further develop existing
resorts on a timely and cost efficient basis, the Company's ability to manage
growth, including the expansion of the Company`s infrastructure and systems
necessary to support growth, the Company`s ability to manage cash and obtain
additional cash required for growth, the general tightening in the U.S. lending
markets, potential accidents or injuries at its resorts, decreases in travel due
to pandemic or other widespread illness, its ability to achieve or sustain
profitability, downturns in its industry segment and extreme weather conditions,
increases in operating costs and other expense items and costs, uninsured losses
or losses in excess of the Company's insurance coverage, the Company's ability
to protect its intellectual property, trade secrets and the value of its brands,
current and possible future legal restrictions and requirements. A further
description of these risks, uncertainties and other matters can be found in the
Company`s annual report and other reports filed from time to time with the
Securities and Exchange Commission, including but not limited to the Company`s
Annual Report on Form 10-K for the year ended December 31, 2008, and Quarterly
Report on Form 10-Q for the quarter ended September 30, 2009, both filed with
the Securities and Exchange Commission. Great Wolf Resorts cautions that the
foregoing list of important factors is not complete and assumes no obligation to
update any forward-looking statement that it may make.

Management believes these forward-looking statements are reasonable; however,
undue reliance should not be placed on any forward-looking statements, which are
based on current expectations. All written and oral forward-looking statements
attributable to Great Wolf Resorts or persons acting on its behalf are qualified
in their entirety by these cautionary statements. Further, forward-looking
statements speak only as of the date they are made, and the Company undertakes
no obligation to update or revise forward-looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes to future
operating results over time unless otherwise required by law.

About Great Wolf Resorts, Inc.

Great Wolf Resorts, Inc.® (NASDAQ: WOLF), Madison, Wis., is North America`s
largest family of indoor waterpark resorts, and, through its subsidiaries and
affiliates, owns, licenses and/or operates its family resorts under the Great
Wolf Lodge® and Blue Harbor Resort™ brands. Great Wolf Resorts is a fully
integrated resort company with Great Wolf Lodge locations in: Wisconsin Dells,
Wis.; Sandusky, Ohio; Traverse City, Mich.; Kansas City, Kan.; Williamsburg,
Va.; the Pocono Mountains, Pa.; Niagara Falls, Ontario; Mason, Ohio; Grapevine,
Texas; Grand Mound, Wash.; and Concord, N.C.; and Blue Harbor Resort &
Conference Center in Sheboygan, Wis. Through Great Wolf Resorts` environmental
sustainability program, Project Green Wolf™, the Company is the first and only
national hotel chain to have all US properties Green Seal™ Certified - Silver.

The Company`s resorts are family-oriented destination facilities that generally
feature 300 - 600 rooms and a large indoor entertainment area measuring 40,000 -
100,000 square feet. The all-suite properties offer a variety of room styles,
arcade/game rooms, fitness rooms, themed restaurants, spas, supervised
children`s activities and other amenities. Additional information may be found
on the Company`s Web site at www.greatwolf.com.

Great Wolf Resorts, Inc.
Consolidated Statements of Operations
(Unaudited; dollars in thousands, except per share amounts)

Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2009 2008 2009 2008

Revenues:
Rooms $ 46,214 $ 40,994 $ 122,869 $ 115,801
Food and beverage 11,877 10,088 33,084 30,751
Other hotel operations 11,333 9,759 30,458 28,439
Management and other fees 1,828 2,630 5,253 6,655
71,252 63,471 191,664 181,646
Other revenue from managed properties 5,575 5,942 16,095 14,993
Total revenues 76,827 69,413 207,759 196,639

Operating expenses:
Resort departmental expenses 24,484 21,415 67,433 62,711
Selling, general and administrative 14,886 11,339 45,276 41,431
Property operating costs 8,192 8,239 24,065 24,206
Opening costs for resorts under development 34 403 6,858 4,350
Depreciation and amortization 15,136 11,995 42,352 34,755
Loss on disposition of property 11 317 202 317
Asset impairment loss 24,000 - 24,000 -
86,743 53,708 210,186 167,770
Other expenses from managed properties 5,575 5,942 16,095 14,993
Total operating expenses 92,318 59,650 226,281 182,763

Operating (loss) income (15,491 ) 9,763 (18,522 ) 13,876

Gain on sale of investment (962 ) - (962 ) -
Investment income (310 ) (625 ) (1,030 ) (1,629 )
Interest income (131 ) (279 ) (467 ) (1,178 )
Interest expense 9,671 6,808 24,715 20,599

(Loss) income before equity in loss of unconsolidated affiliates and income taxes (23,759 ) 3,859 (40,778 ) (3,916 )

Income tax expense (benefit) 18,267 1,755 11,484 (1,282 )
Equity in loss (income) of unconsolidated affiliates, net of tax 122 (67 ) 1,237 1,612

Net (loss) income $ (42,148 ) $ 2,171 $ (53,499 ) $ (4,246 )

Net (loss) income per share:
Basic $ (1.35 ) $ 0.07 $ (1.72 ) $ (0.14 )
Diluted $ (1.35 ) $ 0.07 $ (1.72 ) $ (0.14 )

Weighted average common shares outstanding:
Basic 31,291 30,841 31,179 30,794
Diluted 31,291 30,841 31,179 30,794

Great Wolf Resorts, Inc.
Reconciliations of Non-GAAP Financial Measures
(Unaudited; dollars in thousands, except per share amounts)

Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2009 2008 2009 2008

Net (loss) income $ (42,148 ) $ 2,171 $ (53,499 ) $ (4,246 )

Adjustments:
Opening costs for resorts under development 34 403 6,858 4,350
Non-cash employee compensation and professional fees 359 (97 ) 828 (7 )
Separation payments 467 - 467 1,258
Environmental liability costs (10 ) 30 22 262
Depreciation and amortization 15,136 11,995 42,352 34,755
Loss on disposition of property 11 317 202 317
Asset impairment loss 24,000 - 24,000 -
Gain on sale of investment (962 ) - (962 ) -
Interest expense, net 9,540 6,529 24,248 19,421
Equity in loss (income) of unconsolidated affiliates, net of tax 122 (67 ) 1,237 1,612
Income tax expense (benefit) 18,267 1,755 11,484 (1,282 )

Adjusted EBITDA (1) $ 24,816 $ 23,036 $ 57,237 $ 56,440

Great Wolf Resorts, Inc.
Operating Statistics - Great Wolf Lodge Resorts

Three Months Ended September 30, Nine Months Ended September 30,
2009 2008 2009 2008

Great Wolf Lodge Brand Properties - All
Occupancy 69.4 % 72.6 % 64.2 % 68.6 %
ADR $ 249.64 $ 259.29 $ 245.88 $ 256.61
RevPAR $ 173.30 $ 188.27 $ 157.86 $ 175.95
Total RevPOR $ 377.55 $ 388.43 $ 376.70 $ 390.62
Total RevPAR $ 262.09 $ 282.04 $ 241.84 $ 267.83

Great Wolf Lodge Brand Properties - Same Store (2)
Occupancy 70.4 % 72.3 % 64.5 % 67.4 %
ADR $ 243.83 $ 251.19 $ 239.39 $ 250.70
RevPAR $ 171.70 $ 181.61 $ 154.40 $ 168.99
Total RevPOR $ 367.45 $ 376.21 $ 361.83 $ 376.28
Total RevPAR $ 258.75 $ 272.00 $ 233.37 $ 253.63

Great Wolf Lodge Brand Properties - Consolidated (3)
Occupancy 67.9 % 72.4 % 63.6 % 69.0 %
ADR $ 259.91 $ 270.67 $ 261.94 $ 271.59
RevPAR $ 176.55 $ 196.01 $ 166.66 $ 187.30
Total RevPOR $ 387.66 $ 397.80 $ 394.74 $ 406.86
Total RevPAR $ 263.33 $ 288.07 $ 251.15 $ 280.58

Great Wolf Lodge Brand Properties - Consolidated - Same Store
Occupancy 68.9 % 71.8 % 65.0 % 68.6 %
ADR $ 254.78 $ 258.86 $ 261.28 $ 266.13
RevPAR $ 175.50 $ 185.91 $ 169.96 $ 182.61
Total RevPOR $ 374.63 $ 378.14 $ 388.79 $ 394.66
Total RevPAR $ 258.06 $ 271.57 $ 252.90 $ 270.80

Great Wolf Lodge Brand - Generation I Resorts - Same Store (4)
Occupancy 65.5 % 67.8 % 57.7 % 62.1 %
ADR $ 195.54 $ 202.13 $ 192.66 $ 198.72
RevPAR $ 128.05 $ 137.14 $ 111.12 $ 123.45
Total RevPOR $ 287.79 $ 295.10 $ 288.78 $ 295.27
Total RevPAR $ 188.46 $ 200.21 $ 166.56 $ 183.42

Great Wolf Lodge Brand - Generation II Resorts - Same Store (5)
Occupancy 73.2 % 74.8 % 69.3 % 71.1 %
ADR $ 268.37 $ 276.47 $ 266.94 $ 282.73
RevPAR $ 196.50 $ 206.88 $ 185.07 $ 201.12
Total RevPOR $ 407.93 $ 417.99 $ 404.90 $ 426.20
Total RevPAR $ 298.68 $ 312.78 $ 280.72 $ 303.17

The company defines its operating statistics as follows:
Occupancy is calculated by dividing total occupied rooms by total available rooms.

Average daily rate (ADR) is the average daily room rate charged and is calculated by dividing total rooms revenue by total occupied rooms.
Revenue per available room (RevPAR) is the product of (a) occupancy and (b) ADR.
Total revenue per occupied room (Total RevPOR) is calculated by dividing total resort revenue (including revenue from rooms, food and beverage, and other amenities) by total occupied rooms.
Total revenue per available room (Total RevPAR) is the product of (a) occupancy and (b) Total RevPOR.

Great Wolf Resorts, Inc.
Reconciliations of Outlook Financial Information (6)
(in thousands, except per share amounts)

Three Months Year Ending

Ending December 31,

December 31,
2009

2009

Net loss $ (18,700 ) $ (72,300 )

Adjustments:
Opening costs of resorts under development - 6,900
Non-cash employee compensation and professional fees 400 1,200
Separation payments - 500
Environmental liability costs - 50
Depreciation and amortization 15,400 57,700
Loss on disposition of property - 210
Asset impairment loss - 24,000
Gain on sale of investment - (960 )
Interest expense, net 9,700 33,900
Equity in loss in unconsolidated affiliates 1,500 2,500
Income tax expense 200 12,000

Adjusted EBITDA (1) $ 8,500 $ 65,700

Net loss per share:
Basic $ (0.60 ) $ (2.31 )
Diluted $ (0.60 ) $ (2.31 )

Weighted average shares outstanding:
Basic 31,300 31,300
Diluted 31,300 31,300

(1) See discussion of Adjusted EBITDA located in the "Non-GAAP Financial Measures" section of this press release.

(2) Same store properties comparison includes Great Wolf Lodge resorts that were open for the full periods in both 2009 and 2008 (excludes the company's Grapevine resort, due to a significant expansion that opened at that resort in December 2008).

(3) Consolidated properties comparison includes Great Wolf Lodge resorts that are consolidated for financial reporting purposes (that is, the company's Traverse City, Kansas City, Williamsburg, Pocono Mountains, Mason, Grapevine and Concord resorts).

(4) Generation I properties same store comparison includes only Great Wolf Lodge resorts of approximately 300 rooms or less that were open for all of both Q3 2009 and Q3 2008.

(5) Generation II properties same store comparison includes only Great Wolf Lodge resorts of approximately 400 rooms or more that were open for all of both Q3 2009 and Q3 2008 (excludes the company's Grapevine resort, due to a significant expansion that opened at that resort in December 2008).

(6) The company's outlook reconciliations use the mid-points of its estimates of Adjusted EBITDA.

Great Wolf Resorts, Inc.
Investors:
Alex Lombardo or Nikki Sacks
608-661-4791
or
Media:
Liz Brady, 646-277-1226

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