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Great Wolf Resorts Reports Fourth Quarter 2008 Results Exceed Consensus Estimates


Company Beats Top End of Guidance for Adjusted EBITDA

Great Wolf Resorts, Inc. (NASDAQ:WOLF) , North America’s leading family of indoor waterpark resorts, today reported results for the fourth quarter and year ended December 31, 2008.


Achieved 2008 fourth quarter Adjusted EBITDA of $11.1 million, which was significantly above consensus analysts’ estimates of $8.6 million and above the company’s previously issued fourth quarter guidance range of $6.6 – $10.6 million.  Adjusted EBITDA for the full year 2008 was $67.6 million, also above consensus estimates and guidance.

Reported a 7.9 percent decline in 2008 fourth quarter Great Wolf Lodge(R) brand same store revenue per available room (RevPAR),  compared to a hotel industry average decline of 9.8 percent, according to Smith Travel Research data.  The company’s same store RevPAR for the full year was up 0.8 percent, compared to an industry decline of 1.9 percent.

Elected Kim Schaefer, chief executive officer, to the company’s board of directors in February 2009.

Negotiated an extension of the maturity date to November 30, 2009 on the $76.8 million mortgage loan on the company’s Mason, Ohio resort property.

Opened in December 2008, a 203-suite addition and 20, 000 square feet of meeting space at the Great Wolf Lodge — Grapevine, Texas resort.

The company reported 2008 fourth quarter net loss of $(36.5) million, or $(1.18) per diluted share, compared to net loss of $(7.7) million, or $(0.25) per diluted share for the same period a year earlier. Fourth quarter 2008 operating results include the impact of previously announced pre-tax impairment charges of $17.4 million for goodwill and $18.8 million for the company’s investment in one of its joint ventures, and the related effect on income taxes of the non-deductibility of a majority of the goodwill impairment charge for income tax purposes.

Operating Results

"Our resorts performed relatively well in the fourth quarter, despite a difficult macroeconomic and consumer spending environment, " said Kim Schaefer, chief executive officer. "In the current challenging operating environment, we have moved quickly to point out to the consumer the excellent value, convenience and quality of a stay at our resorts. We achieved operating results during the fourth quarter that were better than the overall hotel industry. Our Generation II properties, which are our newer, larger resorts, reflect the broad range of guest amenities we seek to incorporate into our future development properties, and contribute over 80 percent of our Adjusted EBITDA, posted operating statistics in the fourth quarter better than the overall hotel industry. These properties had a same-store RevPAR decline of 4.9 percent in the quarter, or about half the decline reported for the overall hotel industry during the period.

For the full year 2008, same-store RevPAR for all Great Wolf Lodge brand resorts increased 0.8 percent, led by a 3.9 percent increase at the company’s Generation II properties. This compares to a 1.9 percent RevPAR decline for the overall hotel industry.

"We believe that, despite the current economic climate, families will continue to appreciate and seek opportunities to spend time together in a fun, safe and convenient location, " Schaefer said. "We believe our resorts can be a terrific option for families that want to focus on taking shorter, closer-to-home trips. We believe such ‘stay-cations’ may become even more common in 2009 and that our properties are well positioned to take advantage of that trend.

"Our Great Wolf Lodge brand same store RevPAR increased 1.4 percent in January. This was significantly better than the overall hotel industry, which reported double-digit January RevPAR declines. Although January is normally the lightest operating month in our first quarter, we are encouraged by this relatively strong early 2009 operating performance as we prepare to enter the traditionally busy Spring break period."

The company increased its focus on cost control during the 2008 fourth quarter. "Like all companies today, we are stressing careful management of all aspects of our cost structure, including labor, " Schaefer continued. "We have aggressively evaluated the operations at our resorts and made adjustments consistent with changing occupancy projections. Our booking window has remained relatively consistent over the past few months, with about 70 percent of our transient rooms being booked within 21 days of arrival. With this booking timeframe, we will continue to concentrate on proper staffing and other cost levels. Importantly, though, we also maintain a strong emphasis on guest satisfaction. Our guest satisfaction scores have remained high, even as we adjust our overall cost structure at the resorts."

Similar to leisure trends in the fourth quarter, the company saw group business also decline during the period. "Our same store number of group rooms was down 8 percent, or about 1, 250 rooms, during the fourth quarter, " Schaefer commented. "We believe this is primarily due to the widespread economic shifts that started in September 2008. For the full year 2008, our same store group rooms were up more than 29 percent. As a result, we believe the long-term trends in this business can be favorable for us and will remain an important part of our plan to increase our mid-week business."

Fourth quarter operating statistics for the company’s portfolio of Great Wolf Lodge resorts were: See Here

Capital Structure and Liquidity

The company recently completed negotiations on an extension of the maturity date to November 30, 2009 for the $76.8 million mortgage loan on its Mason, Ohio resort. As part of the extension transaction, the company provided the Mason mortgage loan lenders with a partial corporate guaranty and a cross-collateralization on the Grapevine, Texas Great Wolf Lodge resort property; the partial guaranty and cross-collateralization will remain in place until the company makes a $15.0 million principal reduction of the Mason loan over the remaining term of the loan.

"Excluding the Mason mortgage loan, we do not expect to have any significant debt maturities until mid-2011, " said James A. Calder, chief financial officer. "This gives us a cushion to wait for some stabilization in the currently disrupted capital markets. On the Mason loan, we believe we can satisfy the required $15.0 million principal reduction through cash available from operations in 2009.

"Going forward, we have no significant long-term capital commitments for construction or development of new properties, " Calder continued. "Our largest remaining capital commitment currently is for the completion of the construction of the new Concord, N.C. resort, which opens next month. We expect that all remaining construction costs of that resort will be funded from the construction loan in place for that property.

"Looking forward, the current outlook for the future availability of capital for development is uncertain. As we have stated previously, we do not plan to make any material commitments or to begin construction on future development projects until we have both the debt and equity capital fully committed. We still expect our near-term development plans to focus exclusively on licensing arrangements and joint ventures. That strategy should allow us to use capital most effectively as we look to continue to grow our brand."

Construction and Development Update

The company opened a 203-suite and 20, 000-square-foot expansion to the Grapevine, Texas resort in mid-December. "We have had a positive response to the resort and the expansion generated strong occupancy during the December holiday season, " Schaefer noted. "We believe the combination of additional rooms and meeting space will allow us to capitalize on this strong leisure and group business market."

Great Wolf Resorts conducted a hard-hat tour in December at the 402-suite Great Wolf Lodge resort currently under construction in Concord, N.C. for more than 500 dignitaries, media and targeted guest representatives. The development costs for the property remain on budget. The property is expected to have its soft opening in late March, prior to spring break. "The nearby Lowe’s Motor Speedway recently completed a major expansion which will accommodate a larger number of major new family-oriented events that we believe will positively impact the area and the potential of our new resort, " Schaefer commented.

As previously announced, the company has signed a letter of intent with the Mashantucket Pequot Tribal Nation to develop a Great Wolf Lodge resort on tribal-owned land near its southeast Connecticut reservation and Foxwoods Resort Casino. "As we have indicated previously, we will make no material development commitments until we have debt and equity capital in place, " Schaefer said. "The timing of this project, as a result, is contingent upon a change in status of the capital markets. We will, however, continue to move forward on the design and permitting activities so that we can get the project underway rapidly when the capital markets begin to rebound.

"If there is an opportunity in the current credit crunch, it is that virtually all indoor waterpark resort development by our competitors has come to a halt, " she noted. "We believe a challenging environment in our business sector will ultimately benefit nationally-focused companies with a strong brand and the best people and resources available – in other words, companies like us. We intend to take advantage of our place as the industry leader by positioning ourselves both to increase efficiencies at our existing resorts and to plan effectively for our future growth. We remain optimistic about the long-term prospects for the company."

Key Financial Data

As of December 31, 2008, Great Wolf Resorts had:

Total unrestricted cash and cash equivalents of $14.2 million.
Total secured debt of $414.5 million.
Total unsecured debt (junior subordinated debentures) of $80.5 million.
Weighted average cost of total debt of 6.1 percent.
Weighted average debt maturity of 6.6 years.
Total construction in progress for consolidated resorts and other projects currently under construction but not yet opened of $117.1 million.

Outlook and Guidance

"Similar to many other companies, our near-term outlook for the economy is uncertain, " Schaefer said. "We believe, however, that our business model can continue to outperform the overall hotel industry through this current downturn. Compared to other alternatives, we can provide a great guest experience with high value, convenient, drive-to locations, and a strong and growing brand. We expect to open the North Carolina resort in about 30 days, which will tap into new markets and further geographically extend our brand. As we grow, though, we are focused on increasing efficiencies within our portfolio, thereby building and preserving capital until future opportunities are available."

The company provides the following outlook and earnings guidance for the first quarter and full year 2009 (amounts in thousands, except per share data). The outlook and earnings guidance information is based on the company’s current assessment of business conditions, including consumer demand and discretionary spending trends, as of February 24, 2009. The company may update any portion of its business outlook at any time as conditions dictate: 
See Here

Great Wolf Resorts, Inc. will hold a conference call to discuss its fourth quarter and full year 2008 results today, February 25, at 10 a.m. ET to discuss its results. 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,, or, or may call (800) 218-4007, reference number 11125895. A recording of the call will be available by telephone until midnight on Wednesday, March 4, 2009, by dialing (800) 405-2236, reference number 11125895. A replay of the call will be posted on the company’s Web site through March 25, 2009.

Non-GAAP Financial Measures

Included in this press release are certain "non-GAAP financial measures, " which are measures of the company’s historical or future performance that are different from measures calculated and presented in accordance with GAAP, within the meaning of applicable SEC rules, that Great Wolf Resorts believes are useful to investors. They are as follows: (i) Adjusted EBITDA and (ii) Adjusted net income (loss). The following discussion defines these terms and presents the reasons the company believes they are useful measures of its 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. The company defines Adjusted net income (loss) as net income (loss) without the effects of (a) non-cash employee compensation and professional fees, (b) costs associated with early extinguishment of debt or postponement of debt offerings, (c) opening costs of resorts under development (including costs incurred by unconsolidated joint ventures), (d) loss on disposition of property, (e) other unusual or non-recurring items, and (f) non-normalized income tax expense.

Adjusted EBITDA and Adjusted net income (loss) as calculated by the company are 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. Also, Adjusted net income does not represent net income as defined by 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.

Similarly, management believes Adjusted net income (loss) is a useful performance measure because certain items included in the calculation of net income may either mask or exaggerate trends in the company’s ongoing operating performance. Furthermore, performance measures that include these types of items may not be indicative of the continuing performance of the company’s underlying business. Therefore, the company presents Adjusted EBITDA and Adjusted net income (loss) because they 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 as a result of the subprime loan crisis, potential accidents or injuries at its resorts, 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, 2007 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.(R) (NASDAQ:WOLF) , Madison, Wis., is North America’s largest family of indoor waterpark resorts, and, through its subsidiaries and affiliates, owns and operates its family resorts under the Great Wolf Lodge(R) and Blue Harbor Resort(TM) brands. Great Wolf Resorts is a fully integrated resort company and owns and/or manages 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 Blue Harbor Resort & Conference Center in Sheboygan, Wis. A Great Wolf Lodge currently is under construction in Concord, N.C.

The company’s resorts are family-oriented destination facilities that generally feature 300 to 400 rooms and a large indoor entertainment area measuring 40, 000 to 100, 000 square feet. The all-suite properties offer a variety of room styles, arcade/game rooms, fitness centers, themed restaurants, spas, supervised children’s activities and other amenities. Additional information may be found on the company’s Web site at

Great Wolf Resorts, Inc.
Consolidated Statements of Operations
(in thousands, except per share amounts) See Here

Investors: Alex Lombardo, +1-703-573-9317; 
Media: Steve Shattuck, +1-608-661-4731, both of Great Wolf Resorts, Inc.

See Also: Waterparks: Great Wolf Resorts, Inc. Provides Update on Fourth-Quarter 2008 Operating Results 
Great Wolf Resorts, Inc. to Hold Fourth-Quarter 2008 Earnings Call on February 25  
Great Wolf Resorts and Pampers Splashers Getting Along Swimmingly


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