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Great Wolf Q3 RevPAR Up 9.1%

2011-11-02

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Great Wolf Resorts For the third quarter ended September 30, 2011, the Company reported net income of $1.5 million, or $0.05 per share, compared to a net loss of $(1.0) million, or $(0.03) per share, for the same period a year earlier. The year over year improvement was due primarily to higher overall revenues, along with ongoing expense discipline.

~ Raises Full-Year 2011 Earnings Guidance ~

~ Q3 Adjusted EBITDA Increases 13% ~

Great Wolf Resorts, Inc. (NASDAQ: WOLF), North America’s largest family of indoor waterpark resorts, reported results today for the third quarter ended September 30, 2011.

Third Quarter 2011 Highlights

Adjusted EBITDA increased 12.7 percent to $28.9 million from the prior year quarter.
Same store revenue per available room (RevPAR) increased 9.1 percent and total revenue per available room (Total RevPAR) increased 7.9 percent over the prior year quarter, and same store RevPAR increased 10.1 percent for the nine months ended September 30, 2011 as compared to the prior year period.
Same store occupancy increased by 330 basis points and average daily rate (ADR) increased 4.2 percent as compared to the prior year quarter.

For the third quarter ended September 30, 2011, the Company reported net income of $1.5 million, or $0.05 per share, compared to a net loss of $(1.0) million, or $(0.03) per share, for the same period a year earlier. The year over year improvement was due primarily to higher overall revenues, along with ongoing expense discipline.

Kim Schaefer, chief executive officer, commented, “We delivered a quarter of outstanding results as we maintained our focus on operational excellence. As we continue to advance our Great Wolf Lodge® brand through our sales and marketing strategies, we are driving strong organic revenue growth at our resorts. Through our efforts we are attracting more new guests to our resorts, improving our booking pace and steering more customers to engage and book with us through our website. With these steps, we are well positioned to continue to outperform. Also, we are pleased with our progress on balance sheet improvements over the past two years, where we have meaningfully reduced our leverage level and eliminated our near-term debt maturities. While we remain focused on unlocking further value embedded in our operating resorts, we are confident there are exciting opportunities to capitalize on the platform we have developed.”

Operating Results

Total revenues increased 7.2 percent to $83.6 from $77.9 million in the third quarter of 2010, due primarily to increased demand at the Company’s resorts. Adjusted EBITDA in the 2011 third quarter increased 12.7 percent to $28.9 million from $25.7 million in the third quarter of 2010.

As a percentage of total revenue, Adjusted EBITDA was 34.6 percent, up 167 basis points from 33.0 percent in the third quarter of 2010. As a percentage of total revenues, resort departmental expenses, property operating costs and SG&A costs combined decreased 240 basis points in the 2011 third quarter as compared to the 2010 period.

Brand Results

Same store RevPAR in the third quarter of 2011 was up 9.1 percent (8.3 percent increase using constant dollars, which normalizes the foreign currency translation effect on operating statistics of the Company’s Canadian resort) compared to the 2010 quarter. Same store occupancy was up 330 basis points compared to the prior year quarter. Same store ADR increased 4.2 percent (3.3 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 3.0 percent (2.1 percent increase using constant dollars) compared to the prior year quarter.

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 10.4 percent (9.2 percent increase using constant dollars) in the 2011 third quarter versus 2010. Same store occupancy increased 370 basis points and same store ADR increased 4.8 percent (3.7 percent using constant dollars), and same store Total RevPOR for Generation II resorts increased 3.5 percent (2.4 percent using constant dollars) compared to the 2010 quarter.

Balance Sheet and Liquidity

The Company continues to enhance its balance sheet and liquidity position. With the refinancing of its Concord, North Carolina property completed in July 2011, it has no debt maturities until July 2014 and no significant long-term capital commitments for construction or development of new properties. Over the near term, the Company intends to utilize a 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 6.1 times as of September 30, 2011 as compared to 8.0 times as of December 31, 2009.

As of September 30, 2011, the Company had:

Outlook and Guidance

The Company is introducing the following outlook and earnings guidance for the fourth 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 by $1.5 million from $77.5 million to $79.0 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)	Q4 2011						Full year 2011
	Low			High			Low			High
Net income (loss)	$	(16.8	)	$	(14.8	)	$	(28.6	)	$	(26.6	)
Net income (loss) per diluted share	$	(0.53	)	$	(0.47	)	$	(0.91	)	$	(0.85	)
Adjusted EBITDA (a)	$	10.5		$	12.5		$	78.0		$	80.0

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

The forecast above projects fourth quarter 2011 same store RevPAR growth in the range of approximately 6 percent to 8 percent in constant dollars versus fourth quarter 2010 and full year 2011 same store RevPAR growth in the range of approximately 8 percent to 10 percent.

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®.

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

	Three Months Ended September 30, 2011			Three Months Ended September 30, 2010			Nine Months Ended September 30, 2011			Nine Months Ended September 30, 2010

Revenues:
Rooms	$	50,340		$	45,643		$	137,358		$	124,842
Food and beverage		12,829			12,023			36,020			34,415
Other		12,920			12,726			35,638			32,385
Management and other fees		1,869			1,817			5,303			4,991
		77,958			72,209			214,319			196,633
Other revenue from managed properties		5,593			5,709			16,842			16,733
Total revenues		83,551			77,918			231,161			213,366

Operating expenses:
Resort departmental expenses		25,737			24,055			74,671			68,538
Selling, general and administrative		14,853			15,297			47,627			47,326
Property operating costs		8,544			8,336			25,824			24,741
Opening costs for projects under development		-			149			-			156
Non-cash employee and director compensation		503			545			1,634			1,606
Environmental liability costs		-			(41	)		-			(1,268	)
Depreciation and amortization		12,949			13,715			39,512			41,381
Debt extinguishment costs		1,850			-			1,850			3,498
Acquisition-related expenses		-			32			-			297
Loss on disposition of assets		330			-			1,368			19
		64,766			62,088			192,486			186,294
Other expenses from managed properties		5,593			5,709			16,842			16,733
Total operating expenses		70,359			67,797			209,328			203,027

Operating income		13,192			10,121			21,833			10,339

Investment income		(220	)		(267	)		(682	)		(832	)
Interest income		(50	)		(58	)		(156	)		(488	)
Interest expense		11,969			12,228			36,174			33,332

Income (loss) from continuing operations before income taxes and equity in income of unconsolidated affiliates		1,493			(1,782	)		(13,503	)		(21,673	)

Income tax expense		39			62			5,175			421
Equity in income of unconsolidated affiliates, net of tax		(184	)		(46	)		(667	)		(69	)

Net income (loss) from continuing operations		1,638			(1,798	)		(18,011	)		(22,025	)

Discontinued operations, net of tax		105			(740	)		(6,704	)		(182	)

Net income (loss)		1,533			(1,058	)		(11,307	)		(21,843	)

Net loss (income) attributable to noncontrolling interest, net of tax		18			(65	)		(17	)		(25	)

Net income (loss) attributable to Great Wolf Resorts, Inc.	$	1,515		$	(993	)	$	(11,290	)	$	(21,818	)


Net loss per share:
Basic	$	0.05		$	(0.03	)	$	(0.36	)	$	(0.70	)
Diluted	$	0.05		$	(0.03	)	$	(0.36	)	$	(0.70	)

Weighted average common shares outstanding:
Basic		31,372			31,035			31,299			30,958
Diluted		32,276			31,035			31,299			30,958


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

		Three Months Ended September 30, 2011			Three Months Ended September 30, 2010			Nine Months Ended September 30, 2011			Nine Months Ended September 30, 2010

Net income (loss) attributable to Great Wolf Resorts, Inc.		$	1,515		$	(993	)	$	(11,290	)	$	(21,818	)

Adjustments:
	Opening costs for projects under development		-			149			-			156
	Non-cash employee and director compensation		503			545			1,634			1,606
	Depreciation and amortization		12,949			13,715			39,512			41,381
	Interest expense, net		11,919			12,170			36,018			32,844
	Separation payments		-			-			385			-
	Loss on disposition of assets		330			-			1,368			19
	Gain on disposition of property included in discontinued operations		-			-			(6,667	)		-
	Environmental liability costs		-			(41	)		-			(1,268	)
	Debt extinguishment and other offering costs		1,850			-			1,850			3,498
	Acquisition-related expenses		-			32			-			297
	Equity in income of unconsolidated affiliates, net of tax		(184	)		(46	)		(667	)		(69	)
	Net loss (income) attributable to noncontrolling interest, net of tax		18			(65	)		(17	)		(25	)
	Income tax expense		39			62			5,175			421
	Other Adjusted EBITDA adjustments included in discontinued operations		-			161			176			688

Adjusted EBITDA (1)		$	28,939		$	25,689		$	67,477		$	57,730


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



		Three Months Ended September 30,						Nine Months Ended September 30,
		2011			2010			2011			2010

Great Wolf Lodge Brand Properties - Same Store
	Occupancy		71.8	%		68.5	%		66.9	%		62.9	%
	ADR	$	265.83		$	255.22		$	261.36		$	252.79
	RevPAR	$	190.86		$	174.87		$	174.93		$	158.95
	Total RevPOR	$	397.32		$	385.85		$	395.74		$	387.53
	Total RevPAR	$	285.27		$	264.37		$	264.88		$	243.67

Great Wolf Lodge Brand Properties - Consolidated (2)
	Occupancy		71.4	%		67.3	%		66.6	%		62.2	%
	ADR	$	276.03		$	265.68		$	272.25		$	264.94
	RevPAR	$	197.18		$	178.78		$	181.31		$	164.79
	Total RevPOR	$	406.83		$	395.51		$	405.64		$	399.67
	Total RevPAR	$	290.62		$	266.15		$	270.15		$	248.60


Great Wolf Lodge Brand - Generation I Resorts - Same Store (3)
	Occupancy		68.9	%		66.7	%		61.1	%		56.9	%
	ADR	$	203.17		$	201.04		$	202.21		$	199.73
	RevPAR	$	140.02		$	134.03		$	123.54		$	113.56
	Total RevPOR	$	298.37		$	296.97		$	302.57		$	300.79
	Total RevPAR	$	205.63		$	197.99		$	184.86		$	171.02

Great Wolf Lodge Brand - Generation II Resorts - Same Store (4)
	Occupancy		72.9	%		69.2	%		69.1	%		65.2	%
	ADR	$	288.24		$	274.96		$	281.15		$	270.32
	RevPAR	$	210.09		$	190.31		$	194.39		$	176.14
	Total RevPOR	$	432.72		$	418.23		$	426.92		$	416.17
	Total RevPAR	$	315.39		$	289.48		$	295.18		$	271.17

Great Wolf Lodge Brand - Properties Securing First Mortgage Notes (5)
	Occupancy		71.3	%		67.9	%		65.6	%		61.3	%
	ADR	$	285.03		$	272.34		$	276.29		$	267.22
	RevPAR	$	203.28		$	185.01		$	181.24		$	163.75
	Total RevPOR	$	424.46		$	409.41		$	416.08		$	408.05
	Total RevPAR	$	302.71		$	278.12		$	272.95		$	250.05


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 Ending December 31, 2011			Year Ending December 31, 2011

Net loss		$	(15,830	)	$	(27,650	)

Adjustments:
	Non-cash employee and director compensation		830			2,500
	Depreciation and amortization		13,600			53,300
	Interest expense, net		12,200			48,300
	Separation payments		-			400
	Gain on disposition of property included in discontinued operations		-			(6,700	)
	Loss on disposition of property		-			1,400
	Debt extinguishment costs		-			1,900
	Equity in income of unconsolidated affiliates		500			(200	)
	Noncontrolling interest		-			(50	)
	Income tax expense		200			5,800

Adjusted EBITDA (1)		$	11,500		$	79,000


Net loss per share:
	Basic	$	(0.50	)	$	(0.88	)
	Diluted	$	(0.50	)	$	(0.88	)

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 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.