MADISON, Wis. - Nov. 2, 2005 -- Great Wolf Resorts, Inc. (NASDAQ: WOLF),
the nation's largest owner, operator and developer of drive-to family resorts
featuring indoor waterparks and other family-oriented entertainment activities,
today reported results for the third quarter ended September 30, 2005.
For the quarter ended September 30, 2005, the company reported (amounts
in thousands, except per share data):
Net income
$7,180
-----------------------------------------------------------------
Net income per diluted share
$0.24
-----------------------------------------------------------------
Adjusted EBITDA
$20,311
-----------------------------------------------------------------
Adjusted net income
$7,744
-----------------------------------------------------------------
Adjusted net income per diluted share
$0.26
-----------------------------------------------------------------
Revenues
$33,150
-----------------------------------------------------------------
"Our third quarter results are comfortably within our current earnings
guidance, and we are adjusting our fourth quarter earnings guidance by
increasing Adjusted net income and net income per share and decreasing
Adjusted EBITDA to reflect the effect of our new joint venture with CNL
Income Properties," said John Emery, chief executive officer. "The new
Adjusted EBITDA guidance reflects the expected removal of the Wisconsin
Dells and Sandusky properties from consolidation. Going forward, we expect
that our share of earnings from these two properties will be reflected
in the equity in earnings (loss) of affiliates line item on our statement
of operations."
Adjusted EBITDA and Adjusted net income are non-GAAP financial measures
within the meaning of the Securities and Exchange Commission (SEC) regulations.
See the discussion below in the "Non-GAAP Financial Measures" section of
this press release. Reconciliations of Adjusted EBITDA and Adjusted net
income are provided in the tables of this press release.
Operating statistics for the company's portfolio of resorts for the
2005 third quarter were as follows:
All Properties Same Store Comparison
(a)
-------------------------------------------------------
Q3 Q3
Q3 Increase (Decrease)
2005 2005
2004 --------------------
$ %
----------------------------------------------------------------------
Occupancy
67.3% 67.0%
74.3% N/A (9.8)%
----------------------------------------------------------------------
ADR
$223.19 $217.88 $224.56
$(6.68) (3.0)%
----------------------------------------------------------------------
RevPAR
$150.13 $145.89 $166.76
$(20.87) (12.5)%
----------------------------------------------------------------------
Total RevPOR $327.60
$318.80 $321.94 $(3.14) (1.0)%
----------------------------------------------------------------------
Total RevPAR $220.37
$213.46 $239.07 $(25.61) (10.7)%
----------------------------------------------------------------------
(a) Same store comparison includes properties that were open for the
ull periods in 2004 and 2005
"We faced difficult operating conditions in both Michigan and Ohio,"
Emery continued. "We believe that the many of the primary markets for our
Traverse City and Sandusky properties have been adversely affected by economic
concerns stemming from automotive and related industries. The state of
Michigan experienced the lowest hotel occupancy in the country year-to-date
through August 2005, according to the Michigan Economic Development Corporation,
and the east north central region (which includes both Michigan and Ohio)
had the highest unemployment rate of any region in the country in July
and August 2005. Our Traverse City property was affected by these economic
fundamentals. Our Sandusky property also saw the effect of additional competition
in the marketplace. Although these markets will remain challenging in the
short-term, we are implementing specific plans at each property to focus
on both short- and long-term positive results."
"Our Kansas City, Wisconsin Dells and Williamsburg properties continued
to perform well. The reception of the Williamsburg property has been particularly
encouraging as it is our first property opened outside of the Midwest.
Our Kansas City property, after experiencing a longer than expected ramp-up,
is now a well recognized product in the market and has shown strong year-over-year
revenue growth. We also completed the construction and sale of 77 condominiums
at our Wisconsin Dells resort during the quarter, resulting in a $9.1 million
gain in the quarter. With the added capacity from condominium expansion
during the quarter, our Wisconsin Dells resort saw an increase in year-over-year
revenue during the third quarter.
"During the third quarter of 2004, our Blue Harbor Resort in Sheboygan,
Wis. had the added demand of the PGA golf tournament, so we expected a
decline in ADR and occupancy in 2005. We were pleased with the solid ADR
and Total RevPOR results for the property in the third quarter in 2005
but remain focused on increasing awareness to improve on less than satisfactory
occupancy. We believe the long-term outlook for the property is positive,
although the ramp-up time will be significantly longer than for our other
properties."
CNL Joint Venture
On October 12, 2005, Great Wolf Resorts announced the formation of a
joint venture with CNL Income Properties. The joint venture acquired from
Great Wolf Resorts the 309-suite Great Wolf Lodge - Wisconsin Dells, Wis.,
and the 271-suite Great Wolf Lodge - Sandusky, Ohio. Under the joint venture,
CNL will purchase a 70 percent equity interest in the joint venture, with
Great Wolf Resorts retaining the remaining 30 percent. Great Wolf Resorts
will receive approximately $80 million in proceeds from CNL for their purchase
of the 70 percent joint venture interest during the 2005 fourth quarter,
and Great Wolf Resorts expects to receive a distribution of approximately
$18 million from the joint venture upon the placement of mortgage financing
on the joint venture's two resorts in the fourth quarter.
The joint venture valued the two properties at $114.5 million. Great
Wolf Resorts' historical book value of the two properties, assuming the
completion of the waterpark expansion currently underway at the Wisconsin
Dells property, was approximately $88 million.
Great Wolf Resorts will continue to operate the properties and license
the Great Wolf Lodge brand to the joint venture under 25-year agreements.
Additionally, Great Wolf Resorts may receive additional sales proceeds
of up to $3 million per property, if the resorts achieve certain financial
performance goals during 2007 and 2008.
"This transaction allows us to monetize a majority interest in our two
most mature assets and use the proceeds for new development," Emery said.
"At the same time, the joint venture allows us to maintain a substantial
minority ownership position in the two resorts and create a more predictable,
long-term income stream through our management and licensing contracts.
We view the transaction as a strong validation of both the value of our
real estate assets and the value of our management and branding."
Development Update
Great Wolf Resorts opened its first property in the Northeast, the 401-suite
Great Wolf Lodge resort in the Poconos on October 26, 2005. The property
has a 91,000-square-foot indoor entertainment area featuring a 78,000 square
foot indoor waterpark, believed to be the first of its kind in the region.
It is the first major resort to be opened in the Poconos in nearly 30 years
and has a potential market of 44 million people who live in a 180-mile
radius, including such major cities as New York City, Philadelphia and
Baltimore.
The Great Wolf Lodge resort in Niagara Falls, Ontario, which is being
built by an affiliate of Ripley Entertainment, Inc. and will be licensed
from and operated by Great Wolf Resorts, remains on schedule to open in
spring 2006. The 404-suite property will feature a 94,000 square foot indoor
entertainment area.
In the third quarter, Great Wolf Resorts began construction on the Great
Wolf Lodge resort and 40,000-square-foot conference center at Paramount's
Kings Island, in Mason, Ohio. Great Wolf Resorts will operate the resort
and will maintain the majority equity position in the joint venture project
with Paramount's Kings Island. The property is expected to open in late
2006.
In late June, Great Wolf Resorts announced a joint venture with The
Confederated Tribes of the Chehalis Reservation to develop a 39-acre, $80-plus
million Great Wolf Lodge resort and conference center in Chehalis, Washington.
The property will be the first family destination vacation resort with
an indoor waterpark in the Pacific Northwest. Great Wolf Resorts will operate
the property, The Confederated Tribes of the Chehalis Reservation will
contribute the land needed for the resort into trust, and both parties
will maintain equity positions in the joint venture.
In September, the company announced its third new project of the year,
a Great Wolf Lodge resort to be constructed in Grapevine, Texas. The resort
will be an approximate 400-suite resort lodge with an 80,000-square-foot
indoor entertainment area, including an indoor waterpark, Aveda Concept
Spa, and related retail and restaurant facilities. The site is centrally
located between Dallas and Fort Worth and adjacent to the DFW Airport at
the intersection of State Highway 26 and Business 114, directly across
from the Gaylord Texan Resort and Convention Center. Dallas/Ft. Worth is
the 7th largest market area in the U.S., with a larger population within
a 60-mile radius than any existing Great Wolf Lodge resort. Construction
is expected to commence in the spring of 2006.
"Our development activity remains at a high level, and we have a very
active pipeline," Emery said. "The recent addition of cash from the sale
of a majority interest in our Wisconsin Dells and Sandusky properties gives
us significant flexibility in our development. In addition to our goal
of beginning two to three new projects a year, we currently are evaluating
additional condominium and expansion projects at existing resorts."
Capital Structure
"With the influx of cash from the CNL joint venture, our capital structure
is very strong and provides us with significant resources to pursue our
development and growth plans," said James A. Calder, chief financial officer.
"Our average debt maturity is approximately 15 years, and more than 80
percent of our long-term debt has fixed interest rates. Our two newest
resorts in the Poconos and Williamsburg are unencumbered by mortgage debt.
The sale of majority interests in two properties to the CNL joint venture
and related transactions are expected to provide approximately $98 million
in additional cash during the fourth quarter to fund future development
and other corporate activities."
Key Financial Data
As of September 30, 2005, Great Wolf Resorts had:
� Total cash and cash equivalents of $16.6 million
� Total secured debt of $105.0 million
� Total unsecured debt of $51.5 million
� Weighted average cost of total debt of 7.5 percent
� Weighted average debt maturity of 15 years
� Total construction in progress for resorts currently under construction
but not yet opened of approximately $116 million. Approximately $84 million
of this total relates to the Poconos property.
Outlook and Guidance
The company provides the following outlook and earnings guidance for
the fourth quarter and full year 2005 (amounts in thousands, except per
share data):
4Q 2005 Full year 2005
----------------------------------------------------------------------
Low High Low
High
----------------------------------------------------------------------
Net income (loss)
$(3,300) $(2,100) $(1,000) $200
----------------------------------------------------------------------
Net income (loss) per diluted share $(0.11) $(0.07)
$(0.03) $0.01
----------------------------------------------------------------------
Adjusted EBITDA (a)
$3,000 $5,000 $33,600 $35,600
----------------------------------------------------------------------
Adjusted net income (loss) (a) $(2,500)
$(1,300) $3,500 $4,700
----------------------------------------------------------------------
Adjusted net income (loss) per
diluted share
$(0.08) $(0.04) $0.12 $0.16
----------------------------------------------------------------------
(a) For reconciliations of Adjusted EBITDA and Adjusted net income (loss),
see the tables accompanying this press release.
Great Wolf Resorts, Inc.
Consolidated Statements of Operations
(in thousands, except per share amounts)
Three Months Nine Months
Ended Ended
September 30, September 30,
2005 2005
-----------------------------
Revenues:
Rooms
$ 22,459 $
57,559
Food and beverage
5,268 14,487
Other resort operations
5,423 14,132
------------ --------------
Total revenues
33,150 86,178
------------ --------------
Operating expenses:
Resort departmental expenses
11,295 32,126
Selling, general and
administrative
5,173 19,738
Property operating costs
4,146 11,182
Debt extinguishment costs
-
2,116
Pre-opening costs for resorts under
development
2,247
5,615
Depreciation and amortization
6,005 16,821
------------ --------------
Total operating expenses
28,866 87,598
------------ --------------
Operating income (loss)
4,284 (1,420)
Gain on sale of condominiums
(9,082) (9,082)
Interest income
(319)
(967)
Interest expense
1,720
4,744
------------ --------------
Income before minority interests and
income taxes
11,965
3,885
Minority interest expense
(3)
(3)
Income tax expense
4,788
1,565
------------ --------------
Net income
$ 7,180 $
2,323
============ ==============
Net income per share:
Basic
$ 0.24 $
0.08
Diluted
$ 0.24 $
0.08
Weighted average common shares
outstanding:
Basic
30,133 30,133
Diluted
30,133 30,235
Great Wolf Resorts, Inc.
Reconciliations of Non-GAAP Financial Measures
(in thousands, except per share amounts)
Three Months Nine Months
Ended Ended
September 30, September 30,
2005 2005
-----------------------------
Net income
$ 7,180 $
2,323
Adjustments:
Interest expense, net
1,401 3,777
Income tax expense
4,788 1,565
Depreciation and amortization
6,005 16,821
Non-cash employee compensation
(1,307) (1,553)
Debt extinguishment costs
- 2,116
Minority interest expense
(3) (3)
Pre-opening costs for resorts under
development
2,247 5,615
-------------- --------------
Adjusted EBITDA (1)
$ 20,311 $
30,661
============== ==============
Net income
$ 7,180 $
2,323
Adjustments to net income, net of income
taxes:
Non-cash employee compensation
(784) (932)
Debt extinguishment costs
- 1,270
Pre-opening costs for resorts under
development
1,348 3,369
-------------- --------------
Adjusted net income (1)
$ 7,744 $
6,030
============== ==============
Adjusted net income per share:
Basic
$ 0.26 $
0.20
Diluted
$ 0.26 $
0.20
Weighted average shares outstanding:
Basic
30,133 30,133
Diluted
30,133 30,235
Great Wolf Resorts, Inc.
Operating Statistics
Three Months Ended Nine Months
Ended
September 30,
September 30,
---------------------------------------------------
2005 2004
2005 2004
----------- ----------- ------------- -------------
Wisconsin Dells:
Occupancy
68.2% 72.8%
62.6% 65.5%
ADR
$ 213.62 $ 219.19 $
192.55 $ 195.84
RevPAR
$ 145.67 $ 159.48 $
120.56 $ 128.33
Total RevPOR $
312.89 $ 293.74 $ 282.04
$ 273.11
Total RevPAR $
213.36 $ 213.73 $ 176.58
$ 178.96
Sandusky:
Occupancy
61.8% 74.8%
62.8% 73.2%
ADR
$ 231.81 $ 245.71 $
224.54 $ 234.02
RevPAR
$ 143.19 $ 183.90 $
141.00 $ 171.26
Total RevPOR $
317.90 $ 333.26 $ 316.66
$ 327.36
Total RevPAR $
196.37 $ 249.42 $ 198.84
$ 239.57
Traverse City:
Occupancy
68.4% 76.1%
72.5% 73.7%
ADR
$ 217.88 $ 236.70 $
215.92 $ 227.34
RevPAR
$ 148.92 $ 180.05 $
156.49 $ 167.57
Total RevPOR $
310.10 $ 331.77 $ 312.20
$ 325.01
Total RevPAR $
211.96 $ 252.37 $ 226.27
$ 239.56
Kansas City:
Occupancy
72.9% 74.8%
69.0% 67.4%
ADR
$ 221.07 $ 202.62 $
212.30 $ 192.14
RevPAR
$ 161.25 $ 151.61 $
146.48 $ 129.42
Total RevPOR $
306.81 $ 287.37 $ 300.36
$ 282.37
Total RevPAR $
223.79 $ 215.03 $ 207.25
$ 190.18
Sheboygan:
Occupancy
61.2% 72.3%
58.3% -
ADR
$ 199.23 $ 216.54 $
171.42 -
RevPAR
$ 121.99 $ 156.50 $
99.95 -
Total RevPOR $
368.07 $ 391.60 $ 338.96
-
Total RevPAR $
225.38 $ 283.03 $ 197.64
-
Williamsburg:
Occupancy
68.6% -
61.7% -
ADR
$ 246.00 -
$ 239.60
-
RevPAR
$ 168.83 -
$ 147.84
-
Total RevPOR $
365.43 -
$ 358.48
-
Total RevPAR $
250.80 -
$ 221.19
-
We define our 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 (2)(3)
(in thousands, except per share amounts)
Three Months Year Ending
Ending December 31,
December 31, 2005
2005
------------------------------
Net income (loss)
$ (2,745) $
(420)
Adjustments:
Interest expense, net
1,500 5,300
Income tax expense (benefit)
(1,830) (250)
Depreciation and amortization
5,300 22,120
Non-cash employee compensation
- (1,550)
Debt extinguishment costs
-
2,100
Equity in loss of affiliates
375
375
Pre-opening costs of resorts under
development
1,400 7,000
-------------- ---------------
Adjusted EBITDA (1)
$ 4,000 $
34,675
============== ===============
Net income (loss)
$ (2,745) $
(420)
Adjustments to net income (loss), net of
income taxes:
Non-cash employee compensation
-
(930)
Debt extinguishment costs
-
1,260
Pre-opening costs of resorts under
development
840 4,200
-------------- ---------------
Adjusted net income (loss) (1)
$ (1,905) $
4,110
============== ===============
Net income (loss) per share:
Basic
$ (0.09) $
(0.01)
Diluted
$ (0.09) $
(0.01)
Adjusted net income (loss) per share:
Basic
$ (0.06) $
0.14
Diluted
$ (0.06) $
0.14
Weighted average shares outstanding:
Basic
30,133 30,133
Diluted
30,133 30,235
(1) See discussions of Adjusted EBITDA and Adjusted net
income located
in the "Non-GAAP Financial Measures"
section of this press
release.
(2) Our outlook reconciliations use the mid-points of
our estimates of
Adjusted EBITDA and Adjusted net income.
(3) Our outlook reconciliations exclude the gain (loss)
associated
with the sale of real estate assets
to the CNL joint venture in
the three months and year ending December
31, 2005.
Great Wolf Resorts will hold a conference call to discuss
its third-quarter results today, November 2, at 10 a.m. Eastern time. Stockholders
and other interested parties may listen to a simultaneous webcast of the
conference call on the Internet by logging onto Great Wolf Resorts' Web
site, www.greatwolfresorts.com, or www.streetevents.com, or may call (800)
218-8862, reference number 11040831. A recording of the call will be available
by telephone until midnight on Wednesday, November 9 by dialing (800),
reference number 11040831. A replay of the conference call will be posted
on Great Wolf Resorts' Web site through December 2, 2005.
About Great Wolf Resorts, Inc.
Great Wolf Resorts is the nation's leader in indoor waterpark
destination resorts and owns and operates family resorts under the Great
Wolf Lodge® and Blue Harbor Resort® brands. The company is a fully
integrated resort company and owns and/or manages Great Wolf Lodge resorts
in: Wisconsin Dells, Wis.; Sandusky, Ohio; Traverse City, Mich.; Kansas
City, Kan; Williamsburg, Va.; the Pocono Mountains, Pa.; and Blue Harbor
Resort & Conference Center in Sheboygan, Wis. Great Wolf Resorts also
has projects currently under construction or in pre-development in: Niagara
Falls, Ontario; Mason, Ohio; Chehalis, Washington; and Grapevine, Texas.
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 - 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 www.greatwolfresorts.com.
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
plus (a) interest expense, net, (b) income taxes, (c) depreciation and
amortization, (d) non-cash employee compensation, (e) costs associated
with early extinguishment of debt, (f) pre-opening costs of resorts under
development, (g) equity in earnings (loss) of affiliates, and (h) minority
interests. The company defines adjusted net income as net income without
the effects of (a) non-cash employee compensation, (b) costs associated
with early extinguishment of debt, and (c) pre-opening costs of resorts
under development.
Adjusted EBITDA and Adjusted net income 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 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 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 financial performance.
Forward-Looking Statements
This press release may contain 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 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, the company's ability to
attract a significant number of guests from its target markets, the company's
ability to develop new resorts or further develop existing resorts on a
timely or cost efficient basis, the company's ability to manage growth,
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, and the company's ability to protect its intellectual property
and the value of its brands.
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. |
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