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Waterparks: Great Wolf Resorts Reports 2009 First Quarter Results


Great Wolf Resorts, Inc. (NASDAQ:WOLF) , North America’s leading family of indoor waterpark resorts, reported results for the first quarter ended March 31, 2009.

  First Quarter Highlights
  —  Reported 2009 first quarter Adjusted EBITDA of $15.1 million, which
      was above the company’s previously issued guidance of $12.4 to $14.4
      million and higher than consensus analyst estimates.

  —  Opened the new 402-suite Great Wolf Lodge-Concord, N.C., and a
      20, 000-square-foot conference center expansion at the company’s
      existing Great Wolf Lodge-Grapevine, Texas resort.

For the first quarter ended March 31, 2009, the company reported a net loss of $(5.6) million, or $(0.18) per diluted share, compared to a net loss of $(2.3) million, or $(0.08) per diluted share for the same period a year earlier.

"Our resorts continued to perform well relative to the overall hotel industry in this extremely challenging economy, " said Kim Schaefer, chief executive officer. "Same store revenue per available room (RevPAR) for our Generation II resorts, which contribute more than 80 percent of our Adjusted EBITDA, was down 12.5 percent (8.2 percent using constant dollars, which normalizes the foreign currency translation effect on operating statistics of our Canadian resort), compared to the 17.7 percent decline in the overall U.S. hotel industry according to Smith Travel Research data. We believe these results are reasonable, especially given that the Easter holiday and many schools’ spring break periods, both of which are traditionally strong demand generators for our resorts in the first four months of the year, fell in the second quarter in 2009."

To normalize for the shift in Easter and spring break in the calendars, the company believes looking at year-over-year RevPAR results for the four months ended April 30 is meaningful. Over that four-month period, the company’s Generation II resorts’ same-store RevPAR declined approximately 6.0 percent using constant dollars, and overall same-store RevPAR declined about 7.5 percent using constant dollars.

The company’s first quarter 2009 and January-April 2009 same store operating statistics do not reflect the results of three Generation II resorts:

  —  Grapevine, Texas, which underwent a significant expansion that was
      completed early in first quarter 2009.
  —  Grand Mound, Washington, which opened late in first quarter 2008.

  —  Concord, North Carolina, which opened at the end of first quarter

"Both the Grapevine and Grand Mound resorts had strong operations in the first quarter, exceeding our budgeted Adjusted EBITDA at both locations, " Schaefer said. "The Concord resort opened at the end of the first quarter, slightly ahead of schedule, and we held a grand opening event for the community in late April. As we have expanded our geographic reach into the Southeast and Northwest U.S. over the past 18 months, we have been particularly gratified with the acceptance of our brand and our drive-to, family resort concept. We believe this acceptance underscores the strength of our brand and underlying business model."

With the opening of its newest resort, the company expects to benefit from brand marketing synergies all along the eastern corridor as the company’s resorts now extend from Niagara Falls in Canada down to North Carolina. "Based on past experience, we expect many guests who have stayed at one of our resorts will visit others, " Schaefer said. "While our resorts share the same core attributes, each is slightly different and offers its own unique guest experience.

"Recent consumer research conducted on behalf of our company points to a new paradigm for our guests, " she continued. "While families clearly still value their vacations, many are choosing to forego resort destinations that require expensive air travel. Instead, they are choosing to stay closer to home and drive to their vacation destinations. These trips are generally more convenient and less costly. With our high perceived value and memorable guest experience, we believe this trend should continue."

In April 2009, the company announced that all of its U.S. properties had achieved Green Seal(TM) Silver certification for the lodging part of their operations, making Great Wolf Lodge brand resorts the first and only national hotel chain to earn that distinction. "We are proud to be on the forefront of the emerging green tourism travel trend, " Schaefer noted.

Operating Results

The company had Adjusted EBITDA of $15.1 million for the 2009 first quarter, above the $14.4 million top end of the company’s previously issued earnings guidance for the period. "In a challenging economic environment, we were able to achieve better-than-projected operating results due to the strength of our business model, coupled with our success in controlling and reducing variable costs, " Schaefer commented.

In an environment marked by declining RevPAR, the company achieved substantial cost reductions for the 2009 first quarter. "We literally have evaluated every position and expense at each of our resorts, with an approach designed to find ways to maximize the efficiency of our labor and other operating costs, " Schaefer said. "While we remain highly focused on cost control, we have not compromised guest satisfaction or our emphasis on quality and safety at our resorts. Our high guest satisfaction scores remain consistent with historic levels."

Capital Structure and Liquidity

"With the completion of the expansion at our Grapevine resort and the opening of our Concord resort in the first quarter of 2009, we currently have minimal remaining construction-related payments, " said James A. Calder, chief financial officer. "We have no significant long-term capital commitments for construction or development of new properties. Over the near term, we intend to utilize all free cash flow to manage our balance sheet leverage.

"As is the case with many companies with significant real estate holdings, we are focused on strategies to extend our debt maturities and maintain adequate liquidity while the capital markets remain disrupted, " Calder continued. "The most effective tool we have available to support these strategies is to continue to produce strong operating results at our resorts. We do not plan to make any material capital commitments or begin construction on future development projects until we have both the debt and equity capital fully committed."

Key Financial Data

  As of March 31, 2009, Great Wolf Resorts had:

  —  Total unrestricted cash and cash equivalents of $18.2 million.
  —  Total secured debt of $454.3 million.
  —  Total unsecured debt (junior subordinated debentures) of $80.5
  —  Weighted average cost of total debt of 6.2 percent.

  —  Weighted average debt maturity of 6.2 years.

Growth Strategies

Schaefer said the company currently does not expect to begin construction on any new projects in 2009, but is engaged in identifying potential opportunities for joint venture and licensing arrangements. "For example, with a signed 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, we can look to begin construction once the required capital is in place. As we have stated previously, in order to use our capital efficiently to grow our brand going forward, we expect our near-term development plans to concentrate exclusively on licensing arrangements and joint ventures."

Outlook and Guidance

"In the second quarter this year, we have two busy periods, spring break and the last two weeks of June when the summer vacation season begins, " Schaefer noted. "Consistent with what we have seen recently, our booking window remains relatively stable, with about 70 percent of our transient rooms being booked within 28 days of arrival. We have not seen any trends recently that we believe will substantially change this booking window pattern. Given this booking window timeframe, we expect to continue to focus our ongoing marketing strategies to present the value and convenience of a Great Wolf Lodge family vacation experience."

Conference Call

Great Wolf Resorts will hold a 2009 first quarter results conference call today at 9 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,, or, or may call (877) 941-1465, reference number 4063446. A recording of the call will be available by telephone until midnight on Tuesday, May 12, 2009, by dialing (800) 406-7235, reference number 4063446. A replay of the call will be posted on the company’s Web site through June 5, 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, 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 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 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(TM), the company is the first and only national hotel chain to have all US properties Green Seal(TM) 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

See also:
Great Wolf Resorts Honored as First National Hotel Chain to Have All U.S. Properties Green Seal-Certified
Great Wolf Resorts to Present at Raymond James Conference on Monday, March 9
Great Wolf Resorts Reports Fourth Quarter 2008 Results Exceed Consensus Estimates

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