Raises Full-Year 2011 Earnings Guidance - Q1 Adjusted EBITDA Increases 19.6%
Great Wolf Resorts, Inc. (NASDAQ: WOLF), North America’s largest family of indoor waterpark resorts, reported results today for the first quarter ended March 31, 2011.
“For Great Wolf Resorts, 2011 has kicked off with strength, even as the economy is still trying to find sustainable stable footing”
First Quarter 2011 Highlights
For the first quarter ended March 31, 2011, the Company reported a net loss of $(6.0) million, or $(0.19) per share, compared to a net loss of $(8.1) million, or $(0.26) per share, for the same period a year earlier. The results for the 2011 first quarter include the effects of the Company’s sale of its Blue Harbor Resort in Sheboygan, Wisconsin, including a $6.7 million gain on sale of the property and a $4.8 million charge to income tax expense due to an increase in the valuation allowance on deferred tax assets.
“For Great Wolf Resorts, 2011 has kicked off with strength, even as the economy is still trying to find sustainable stable footing,” said Kim Schaefer, chief executive officer. “By providing our guests with a fun family destination at a great value, we continue to attract both new and repeat guests to our resorts, driving solid RevPAR growth. The growth is even more pronounced, up approximately 10%, when looking at results on a four-month basis (that is, January through April) to normalize the shift in Easter and spring break in the calendars on a year-over-year basis. This RevPAR growth, when combined with the operating leverage in our business model, translates into substantial earnings growth. This momentum seems to be continuing and we are therefore increasing our RevPAR and earnings guidance for full year 2011.”
Operating Results
Total revenues increased 4.4 percent to $71.9 from $68.8 million in the first quarter of 2010, due primarily to increased demand at the Company’s resorts. Adjusted EBITDA in the quarter increased 19.6 percent to $18.5 million from $15.4 million in the first quarter of 2010.
As a percentage of total revenue, Adjusted EBITDA was 25.7 percent, up 326 basis points from 22.4 percent in the first quarter of 2010. As a percentage of total revenues, resort departmental expenses, property operating costs and SG&A costs combined decreased 232 basis points in the 2011 first quarter as compared to the 2010 period.
Brand Results
Same store RevPAR in the first quarter of 2011 was up 5.2 percent (4.6 percent increase using constant dollars, which normalizes the foreign currency translation effect on operating statistics of the Company’s Canadian resort). Same store occupancy was up 210 basis points. Same store ADR increased 1.7 percent (1.1 percent increase using constant dollars) compared to the 2010 quarter. Total same store revenue per occupied room (Total RevPOR), which includes revenue from rooms, food and beverage, and other amenities, increased 1.0 percent (0.4 percent increase using constant dollars).
On a year-over-year basis the Company’s results were impacted by the timing of the Easter holiday and many schools' spring break periods, both of which are traditionally strong demand generators, which fell in the second quarter of 2011. 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 same-store 2011 RevPAR increased over the prior year by approximately 10 percent.
Same store RevPAR for Great Wolf’s Generation II resorts, which are generally larger resorts that better represent the Company's current resort development model and contribute about 80 percent of the Company’s Adjusted EBITDA, increased 4.1 percent (3.3 percent increase using constant dollars) in the 2011 first quarter versus 2010. Same store occupancy increased 120 basis points and same store ADR increased 2.2 percent (1.5 percent using constant dollars), while same store Total RevPOR for Generation II resorts increased 1.5 percent (0.7 percent using constant dollars) compared to the 2010 quarter.
Over the four-month period ended April 30, the Company's Generation II resorts' 2011 same-store RevPAR increased over the prior year by approximately 10 percent.
Balance Sheet and Liquidity
The Company has no debt maturities until April 2012 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. The Company has reduced its ratio of net debt (defined as total debt less unrestricted cash) to trailing twelve-month Adjusted EBITDA to 6.8 times as of March 31, 2011 as compared to 7.8 times as of March 31, 2010.
As of March 31, 2011, the Company had:
Unrestricted cash and cash equivalents: $46.9 million
Total debt: $540.0 million
Total secured debt: $459.5 million
Total unsecured debt: $80.5 million
Weighted average cost of total debt: 8.5 percent
Weighted average debt maturity: 6.7 years
Portfolio Activity
During the first quarter the Company completed the sale of its Blue Harbor Resort in Sheboygan, Wisconsin. The 182-room resort was sold to Claremont New Frontier Resort LLC for $4.2 million.
As part of the sales transaction, the Company also made a payment of $2.5 million to the City of Sheboygan. This payment relieved the Company of all obligations under the terms of its original agreements with the City, consisting of minimum guaranteed amounts of room tax payments to be made through 2028, and real and personal property tax payments to be made through 2018. The carrying value of the liabilities associated with those minimum payment obligations was $11.6 million as of the sale date of the property.
Outlook and Guidance
The Company is introducing the following outlook and earnings guidance for the second quarter and is increasing its outlook for full year 2011. Based on its current operating outlook, the Company is increasing the midpoint of its guidance for full year Adjusted EBITDA from $73.5 million to $76.5 million. The outlook and earnings guidance information is based on the Company’s current assessment of business conditions, including a forecast of 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) | Q2 2011 | Full year 2011 | ||||||
| Low | High | Low | High | |||||
| Net income (loss) | $(8.9) | $(6.9) | $(31.3) | $(26.3) | ||||
| Net income (loss) per diluted share | $(0.28) | $(0.22) | $(0.99) | $(0.83) | ||||
| Adjusted EBITDA (a) | $18.0 | $20.0 | $74.0 | $79.0 | ||||
The forecast above projects second quarter 2011 same store RevPAR growth in the range of approximately 13 percent to 15 percent in constant dollars versus second quarter 2010 and full year 2011 same store RevPAR growth in the range of approximately 6 percent to 10 percent.
Adjusted EBITDA is a non-GAAP financial measure. See the discussion below in the “Non-GAAP Financial Measure” section of this press release. A reconciliation of net income (loss) to Adjusted EBITDA is provided in the tables of this press release.
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® brand. 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.
The Company’s resorts are family-oriented destination facilities that generally feature 300 to 600 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 rooms, themed restaurants, spas, supervised children’s activities and other amenities. The Company’s consolidated subsidiary, Creative Kingdoms, LLC, is a developer and operator of technology-based, interactive quest adventure experiences such as MagiQuest®.
Additional information may be found on the Company’s Web site at www.greatwolf.com.
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. Condensed Consolidated Statements of Operations |
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| (Unaudited; dollars in thousands, except per share amounts) | ||||||||
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Three Months Ended March 31, 2011 |
Three Months Ended March 31, 2010 |
||||||
| Revenues: | ||||||||
| Rooms | $ | 42,187 | $ | 40,771 | ||||
| Food and beverage | 11,202 | 11,267 | ||||||
| Other | 11,179 | 9,739 | ||||||
| Management and other fees | 1,756 | 1,655 | ||||||
| 66,324 | 63,432 | |||||||
| Other revenue from managed properties | 5,561 | 5,411 | ||||||
| Total revenues | 71,885 | 68,843 | ||||||
| Operating expenses: | ||||||||
| Resort departmental expenses | 23,924 | 22,063 | ||||||
| Selling, general and administrative | 16,398 | 17,597 | ||||||
| Property operating costs | 8,424 | 8,624 | ||||||
| Non-cash employee and director compensation | 583 | 545 | ||||||
| Environmental liability costs | - | 35 | ||||||
| Depreciation and amortization | 13,248 | 14,146 | ||||||
| Loss on disposition of property | - | 10 | ||||||
| 62,577 | 63,020 | |||||||
| Other expenses from managed properties | 5,561 | 5,411 | ||||||
| Total operating expenses | 68,138 | 68,431 | ||||||
| Operating income | 3,747 | 412 | ||||||
| Investment income | (242 | ) | (289 | ) | ||||
| Interest income | (55 | ) | (252 | ) | ||||
| Interest expense | 12,097 | 9,107 | ||||||
| Loss from continuing operations before income taxes and equity in income of unconsolidated affiliates | (8,053 | ) | (8,154 | ) | ||||
| Income tax expense | 5,002 | 181 | ||||||
| Equity in income of unconsolidated affiliates, net of tax | (151 | ) | (233 | ) | ||||
| Net loss from continuing operations | (12,904 | ) | (8,102 | ) | ||||
| Discontinued operations, net of tax | (6,917 | ) | (37 | ) | ||||
| Net loss | (5,987 | ) | (8,065 | ) | ||||
| Net loss attributable to noncontrolling interest, net of tax | (13 | ) | - | |||||
| Net loss attributable to Great Wolf Resorts, Inc. | $ | (5,974 | ) | $ | (8,065 | ) | ||
| Net loss per share: | ||||||||
| Basic | $ | (0.19 | ) | $ | (0.26 | ) | ||
| Diluted | $ | (0.19 | ) | $ | (0.26 | ) | ||
| Weighted average common shares outstanding: | ||||||||
| Basic | 31,195 | 30,838 | ||||||
| Diluted | 31,195 | 30,838 | ||||||
| Great Wolf Resorts, Inc. Reconciliations of Non-GAAP Financial Measures (Unaudited; dollars in thousands, except per share amounts) |
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|
Three Months Ended March 31, 2011 |
Three Months Ended March 31, 2010 |
|||||||
| Net loss attributable to Great Wolf Resorts, Inc. | $ | (5,974 | ) | $ | (8,065 | ) | ||
| Adjustments: | ||||||||
| Non-cash employee and director compensation | 583 | 545 | ||||||
| Depreciation and amortization | 13,248 | 14,146 | ||||||
| Interest expense, net | 12,042 | 8,855 | ||||||
| Separation payments | 385 | - | ||||||
| Loss on disposition of property | - | 10 | ||||||
| Gain on disposition of property included in discontinued operations | (6,667 | ) | - | |||||
| Environmental liability costs | - | 35 | ||||||
| Equity in loss of unconsolidated affiliates, net of tax | (151 | ) | (233 | ) | ||||
| Noncontrolling interest, net of tax | (13 | ) | - | |||||
| Income tax expense | 5,002 | 181 | ||||||
| Other Adjusted EBITDA adjustments included in discontinued operations | 5 | (36 | ) | |||||
| Adjusted EBITDA (1) | $ | 18,460 | $ | 15,438 | ||||
| Great Wolf Resorts, Inc. Operating Statistics - Great Wolf Lodge Resorts |
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|
Three Months Ended March 31, |
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| 2011 | 2010 | |||||||||||||
| Great Wolf Lodge Brand Properties - Same Store | ||||||||||||||
| Occupancy | 62.5 | % | 60.4 | % | ||||||||||
| ADR | $ | 265.12 | $ | 260.75 | ||||||||||
| RevPAR | $ | 165.60 | $ | 157.39 | ||||||||||
| Total RevPOR | $ | 406.33 | $ | 402.28 | ||||||||||
| Total RevPAR | $ | 253.80 | $ | 242.82 | ||||||||||
| Great Wolf Lodge Brand Properties - Consolidated (2) | ||||||||||||||
| Occupancy | 60.6 | % | 59.4 | % | ||||||||||
| ADR | $ | 278.67 | $ | 274.74 | ||||||||||
| RevPAR | $ | 168.92 | $ | 163.25 | ||||||||||
| Total RevPOR | $ | 417.83 | $ | 416.30 | ||||||||||
| Total RevPAR | $ | 253.27 | $ | 247.36 | ||||||||||
| Great Wolf Lodge Brand - Generation I Resorts - Same Store (3) | ||||||||||||||
| Occupancy | 56.8 | % | 52.3 | % | ||||||||||
| ADR | $ | 210.78 | $ | 208.14 | ||||||||||
| RevPAR | $ | 119.76 | $ | 108.84 | ||||||||||
| Total RevPOR | $ | 322.27 | $ | 319.95 | ||||||||||
| Total RevPAR | $ | 183.11 | $ | 167.30 | ||||||||||
| Great Wolf Lodge Brand - Generation II Resorts - Same Store (4) | ||||||||||||||
| Occupancy | 64.6 | % | 63.4 | % | ||||||||||
| ADR | $ | 283.28 | $ | 277.21 | ||||||||||
| RevPAR | $ | 183.02 | $ | 175.81 | ||||||||||
| Total RevPOR | $ | 434.43 | $ | 428.04 | ||||||||||
| Total RevPAR | $ | 280.66 | $ | 271.47 | ||||||||||
| Great Wolf Lodge Brand - Properties Securing First Mortgage Notes (5) | ||||||||||||||
| Occupancy | 56.6 | % | 55.3 | % | ||||||||||
| ADR | $ | 280.43 | $ | 272.39 | ||||||||||
| RevPAR | $ | 158.61 | $ | 150.52 | ||||||||||
| Total RevPOR | $ | 426.10 | $ | 421.42 | ||||||||||
| Total RevPAR | $ | 241.00 | $ | 232.87 | ||||||||||
| 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. |
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| Great Wolf Resorts, Inc. Reconciliations of Outlook Financial Information (6) (in thousands, except per share amounts) |
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|
Three Months Ending June 30, 2011 |
Year Ending December 31, 2011 |
|||||||
| Net loss | $ | (7,900 | ) | $ | (28,800 | ) | ||
| Adjustments: | ||||||||
| Non-cash employee and director compensation | 800 | 3,100 | ||||||
| Depreciation and amortization | 13,500 | 54,300 | ||||||
| Interest expense, net | 12,600 | 49,100 | ||||||
| Separation payments | - | 400 | ||||||
| Gain on disposition of property included in discontinued operations | - | (6,700 | ) | |||||
| Equity in loss in unconsolidated affiliates | (200 | ) | (200 | ) | ||||
| Noncontrolling interest | - | (100 | ) | |||||
| Income tax expense | 200 | 5,400 | ||||||
| Adjusted EBITDA (1) | $ | 19,000 | $ | 76,500 | ||||
| Net loss per share: | ||||||||
| Basic | $ | (0.25 | ) | $ | (0.91 | ) | ||
| Diluted | $ | (0.25 | ) | $ | (0.91 | ) | ||
| Weighted average shares outstanding: | ||||||||
| Basic | 31,500 | 31,500 | ||||||
| Diluted | 31,500 | 31,500 | ||||||
| (1) | See discussion of Adjusted EBITDA located in the "Non-GAAP Financial Measure" section of this press release. |
| (2) | 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). |
| (3) | Generation I properties same store comparison includes only Great Wolf Lodge resorts of approximately 300 rooms or less that were open for the same periods in 2011 and 2010. |
| (4) | Generation II properties same store comparison includes only Great Wolf Lodge resorts of approximately 400 rooms or more that were open for the same periods with a comparable number of available rooms in 2011 and 2010. |
| (5) | The properties securing First Mortgage Notes are the company's Williamsburg, Mason and Grapevine resorts. |
| (6) | The company's outlook reconciliations use the mid-points of its estimates of Adjusted EBITDA. |
