Financial

Great Wolf Resorts Reports 2009 First Quarter Results

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.

Great Wolf Resorts Great Wolf Resorts, Inc. (NASDAQ:WOLF) , North America's leading family of indoor waterpark resorts, reported results today 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.

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Brand Results

First quarter operating statistics for the company's portfolio of Great Wolf Lodge resorts were as follows:

                        Great Wolf Lodge Brand - Same Store Comparison (a)
---------------------------------------------------
Q1 Q1 Increase (Decrease)
2009 2008 $ %
-------- -------- -------- -----------
Occupancy 61.5% 65.2% N/A (370) bps
ADR $248.60 $269.94 $(21.34) (7.9)%
RevPAR $152.86 $176.04 $(23.18) (13.2)%
Total RevPOR $377.04 $406.13 $(29.09) (7.2)%
Total RevPAR $231.84 $264.85 $(33.01) (12.5)%



Great Wolf Lodge Brand - Generation II Resorts Only -
Same Store Comparison (b)
-----------------------------------------------------
Q1 Q1 Increase (Decrease)
2009 2008 $ %
-------- -------- -------- -----------
Occupancy 66.9% 68.6% N/A (170) bps
ADR $276.65 $308.03 $(31.38) (10.2)%
RevPAR $185.02 $211.41 $(26.39) (12.5)%
Total RevPOR $418.10 $462.60 $(44.50) (9.6)%
Total RevPAR $279.62 $317.50 $(37.88) (11.9)%


(a) Same store comparison includes only Great Wolf Lodge resorts
that were open for all of both Q1 2009 and Q1 2008 (that is, the
company's Wisconsin Dells, Sandusky, Traverse City, Kansas City,
Williamsburg, Pocono Mountains, Niagara Falls and Mason resorts).
Note that same store comparison excludes the company's Grapevine
resort, due to the resort's 200-suite expansion that opened in
December 2008.
(b) Generation II Resorts same store comparison includes Great Wolf Lodge
resorts of approximately 400 rooms or more that were open for all of
both Q1 2009 and Q1 2008 (that is, the company's Williamsburg, Pocono
Mountains, Niagara Falls and Mason resorts). Note that same store
comparison excludes the company's Grapevine resort, due to the
resort's 200-suite expansion that opened in December 2008.


"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 2009.

"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 million.

- 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."

The company provides the following outlook and earnings guidance for the second 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 May 4, 2009. The company may update any portion of its business outlook at any time as conditions dictate:
                                         Q2 2009         Full year 2009
-------------------------------------
Low High Low High
------- ------- -------- --------
Net income (loss) $(6,900) $(5,700) $(25,590) $(20,790)
Net income (loss) per diluted
share $(0.22) $(0.18) $(0.82) $(0.66)
Adjusted EBITDA (a) $14,000 $16,000 $58,600 $66,600
Adjusted net income (loss) (a) $(6,060) $(4,860) $(21,420) $(16,620)
Adjusted net income (loss) per
diluted share $(0.19) $(0.16) $(0.68) $(0.53)



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