MADISON, Wis., Feb. 22, 2006 - Great Wolf Resorts, Inc. (Nasdaq: WOLF):
Fourth Quarter Highlights:
-
Reported Adjusted EBITDA of $3.7 million, total revenues of $27.4 million
and Adjusted net loss per share of $(.08).
-
Entered into a joint-venture agreement with CNL Income Properties that
purchased the Great Wolf Lodge resorts in Wisconsin Dells, Wis. and Sandusky,
Ohio.
-
Opened the 401-suite Great Wolf Lodge resort in the Pocono Mountains, Pa.
-
Conducted pre-opening hard hat tour for Great Wolf Lodge resort under construction
in Niagara Falls, Ontario, Canada.
Great Wolf Resorts, Inc., 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 fourth quarter
and full year ended December 31, 2005.
For the fourth quarter, the company had a net loss of $(38.0) million
and net loss per diluted share of $(1.26). The net loss for the quarter
included the impact of the write-off of $43.2 million of goodwill in connection
with the sale of 70% interests of the company's Wisconsin Dells and Sandusky
Great Wolf Lodge resorts to the CNL joint venture. This one-time, non-cash
charge resulted in a GAAP net loss for the period, which also included
the effect of income tax expense due to the non-deductibility of the goodwill
charge for income tax purposes. Excluding the goodwill adjustments, the
CNL transaction valued the joint-venture assets at $114.5 million, which
was $25.9 million in excess of the historical cost carrying value of the
properties' fixed assets.
"We had a strong fourth quarter and achieved adjusted EBITDA and adjusted
earnings per share within our earnings guidance," said John Emery, chief
executive officer. "The quarter was highlighted by the opening of our second
resort in 2005, which is located in the Pocono Mountains near New York
and Philadelphia. Our booking pace in 2006 is strong, particularly in the
Eastern markets, creating a positive outlook for 2006. Importantly, our
recently- opened properties in Poconos and Williamsburg both appear to
be on track to achieve mid-teen or better unlevered returns, calculated
as property EBITDA divided by historical gross cost of property and equipment."
Operating Results
"Our new Poconos resort is off to a great start," Emery noted. "The
2006 booking trends continue to exceed our expectations and year-to-date
lead all of our properties. In fact, with over 50,000 room nights reserved
to date, booking patterns at our Poconos resort are two to three times
higher at this stage of the ramp-up phase than any property opened in recent
years. We continue to look for ways to respond to our customers' needs;
as an example, we are adding a full-service Starbucks Retail Coffee Store
in the resort's lobby area, which will open shortly, a first for any of
our properties.
"Our Kansas City resort also performed very well, showing continued
strength after its ramp-up period," he commented. "Our Williamsburg resort
also continues to ramp-up well. We soon will break ground on an $18 million
expansion of the resort that will add 100 suites, a substantial waterpark
addition and 5,000 square feet of new meeting space. Our Wisconsin Dells
property also has performed satisfactorily in a very competitive market.
The current booking pace for the property is 20 percent ahead of 2005,
and we have a highly anticipated opening of our 38,000-square-foot waterpark
expansion in the first quarter of 2006.
"Our Michigan and Ohio properties continue to be affected by the regional
economic issues in the Midwest," Emery said. "Over the near term, we expect
that these properties will operate below historical levels of rate and
occupancy. However, over the long-term, we believe these properties will
rebound to much stronger operating levels. We believe we have a good grasp
of the current market conditions and are monitoring any changes in trends
very closely. We have factored into our estimates the effect of the regional
economic issues in setting our 2006 guidance."
"We also have further sharpened our focus on the Blue Harbor Resort
in Sheboygan, Wis. We intend to increase our emphasis on group business
to build mid-week revenues, and recently hired a new general manager who
has significant experience in that market segment. Although the ramp-up
for this property will continue slowly, we feel optimistic about its longer-term
prospects," Emery said.
"For our portfolio of all properties, ADR, RevPAR, Total RevPOR and
Total RevPAR increased year-over-year in the fourth quarter," said Emery.
"On a same store basis year-over-year for the fourth quarter, ADR and Total
RevPOR increased while occupancy, RevPAR, and Total RevPAR decreased, predominantly
due to the markets in northern Ohio and Michigan.
Operating statistics for the company's portfolio of resorts for the
2005 fourth quarter were as follows:
All
Properties All Properties Same Store
Comparison (a)
Q4 Q4
Q4
Increase (Decrease)
2005 2005
2004
All Same
Store
Properties Properties
Occupancy 50.2%
47.4% 53.3%
(3.1)% (5.9)%
ADR
$223.70 $195.87
$195.56 $28.14
$0.31
RevPAR
$112.25 $92.81
$104.30 $7.95
$(11.49)
Total RevPOR $348.92
$305.25 $296.84
$52.08 $8.41
Total RevPAR $175.09
$144.63 $158.32
$16.77 $(13.69)
(a) Same store comparison includes only properties
that were open for the full periods in both 2004 and 2005.
CNL Joint Venture Update
During the 2005 fourth quarter, Great Wolf Resorts sold into the CNL
joint venture the 309-suite Great Wolf Lodge - Wisconsin Dells, Wis., and
the 271- suite Great Wolf Lodge - Sandusky, Ohio. Great Wolf Resorts owns
30 percent of the joint venture and retained 25-year licensing and management
contracts on the properties.
The transaction occurred in several phases. Once the final phase is
complete in the first quarter of 2006, the company will have received approximately
$98 million in cash from the transaction.
"From time to time, we intend to monetize the value of our more mature
assets, and use the proceeds to fund new development and for other corporate
purposes," Emery said. "This strategy efficiently recycles our investment
capital to our future development program and allows us to retain a substantial
ownership stake and establish a more stable income stream of licensing
and management fees."
Development Update
Great Wolf Resorts opened two resorts and expanded another during 2005.
The new resorts include the 401-suite Pocono Mountains Great Wolf Lodge,
opened in late October; the 301-suite Williamsburg, Va., Great Wolf Lodge,
opened in March; and a 77-condominium addition at the Wisconsin Dells this
past summer.
The company also is wrapping up a $14.5 million waterpark expansion
to the Wisconsin Dells property, which now is owned by the CNL joint venture.
The waterpark will nearly double in size to 80,000 square feet, including
many new rides and waterpark amenities. "We expect to open the expansion
next month," Emery said. "Combined with our high service standards and
guest satisfaction, we believe the property will be in its strongest competitive
position since significant new competition entered the market several years
ago.
"In addition, two Great Wolf Lodge resorts are scheduled to open in
2006," he said. The first opening will be a 406-suite property with a 94,000-square-
foot indoor entertainment area in Niagara Falls, Ontario, Canada, which
is being built and will be owned by an affiliate of Ripley Entertainment,
Inc. The property will be licensed and operated by Great Wolf Resorts,
and is expected to open in April 2006.
The second opening is projected for late 2006. The resort is being built
by the company's joint venture project with Paramount Parks, Inc. The 401-
suite resort with a 92,000-square-foot entertainment area and 40,000-square-
foot conference center will be adjacent to Paramount's Kings Island, one
of the nation's top seasonal theme parks, in Mason, Ohio, a suburb of Cincinnati.
Great Wolf Resorts will operate the resort and will maintain an 84 % equity
position in the joint venture.
The company expects to break ground in 2006 on two previously announced
resorts, both of which are expected to open in 2007, as well as the expansion
at the Williamsburg resort. Those two resorts are:
-
A Great Wolf Lodge resort in Grapevine, Texas. The resort will include
400 suites and an 80,000-square-foot indoor entertainment area. The
site is centrally located just north of Dallas and Fort Worth and adjacent
to the DFW Airport, directly across from the Gaylord Texan Resort and Convention
Center.
-
A 317-suite Great Wolf Lodge resort in Chehalis, Washington to be built
by a joint venture between Great Wolf Resorts and The Confederated Tribes
of the Chehalis Reservation. This resort will include a 65,000- square-foot
entertainment area with a 30,000-square-foot conference center. Great
Wolf Resorts will operate and license the resort.
"With the opening of these developments, we will have more than doubled
the size of our operating resort portfolio in about three years," Emery
said. "With the cash we recently received from the sale of two resorts
to the joint venture with CNL and our strong operating cash flow, we are
well-positioned to stay on track to begin at least two new projects a year,
as well as selectively add condominiums and/or additional rooms and expanded
facilities at existing resorts," he commented.
Strong Capital Structure
"We have a very solid capital structure, with sufficient cash available
to fund equity in our new development activities," said James A. Calder,
chief financial officer. "More than 80 percent of our long-term debt is
fixed, and our average debt maturity is approximately 14 years. Both of
our new resorts are unencumbered by mortgage debt."
Key Financial Data
As of December 31, 2005, Great Wolf Resorts had:
* Total cash, cash equivalents, and restricted
cash of $58.1 million
* Total secured debt of $104.4 million
* Total unsecured debt of $51.5 million
* Weighted average cost of total debt of 7.6
percent
* Weighted average debt maturity of 14 years
* Total construction in progress for resorts
currently under construction
but not yet opened of approximately
$46.4 million.
Outlook and Guidance
The company provides the following outlook and earnings
guidance for the
first quarter and full year 2006 (amounts in thousands, except per
share
data):
1Q 2006
Full year 2006
Low High
Low High
Net income (loss)
$(1,950) $(750)
$(7,320) $(3,120)
Net income (loss)
per diluted share
$(0.06) $(0.02)
$(0.24) $(0.10)
Adjusted EBITDA (a) $6,000
$8,000 $30,000
$37,000
Adjusted net income
(loss) (a)
$(1,230) $0
$(2,940) $1,260
Adjusted net income
(loss) per diluted
share
$(0.04) $0.00
$(0.10) $0.04
(a) For reconciliations of Adjusted EBITDA and Adjusted
net income (loss),
see the tables accompanying
this press release.
The net income (loss) and adjusted net income (loss) amounts above include
approximately $2.8 million of additional depreciation expense, with an
impact of approximately six cents per share, resulting from the company's
restatement of fixed asset balances of the Williamsburg and Poconos resorts
in the fourth quarter of 2005.
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.
Great Wolf Resorts, Inc.
Consolidated Statements of Operations
(in thousands, except per share amounts)
Three Months Twelve Months
Ended
Ended
December 31, December 31,
2005
2005
------------ -------------
Revenues:
Rooms
$15,648 $73,207
Food and beverage
4,409
18,897
Other resort operations
4,209
17,949
Sales of condominiums
-
25,862
Management and other
fees
585
976
------------ -------------
24,851 136,891
Other revenue from
managed
properties
2,524
2,524
------------ -------------
Total revenues
27,375 139,415
Operating expenses:
Resort departmental
expenses
10,225
42,351
Selling, general
and administrative
7,156
26,894
Property operating
costs
3,780
14,963
Debt extinguishment
costs
854
2,969
Opening costs for
resorts under
development
4,221
9,835
Loss on sale of
property
26,161
26,161
Depreciation and
amortization
5,873
23,279
Cost of sales of
condominiums
-
16,780
------------ -------------
58,270 163,232
Other expenses from
managed properties 2,524
2,524
------------ -------------
Total operating expenses
60,794 165,756
Operating loss
(33,419) (26,341)
Interest income
(656) (1,623)
Interest expense
1,984
6,728
------------ -------------
Loss before minority interests,
equity in unconsolidated affiliates
and income taxes
(34,747) (31,446)
Minority interest expense, net of tax
(2)
(4)
Equity in unconsolidated affiliates,
net of tax
170
170
Income tax expense
3,133
4,463
------------ -------------
Net loss
$(38,048) $(36,075)
============ =============
Net loss per share:
Basic
$(1.26) $(1.20)
Diluted
$(1.26) $(1.20)
Weighted average common shares
outstanding:
Basic
30,138
30,134
Diluted
30,138
30,134
Great Wolf Resorts, Inc.
Reconciliations of Non-GAAP Financial
Measures
(in thousands, except per share amounts)
Three Months Twelve Months
Ended
Ended
December 31, December 31,
2005
2005
------------ -------------
Net loss
$(38,048) $(36,075)
Adjustments:
Interest expense,
net
1,328
5,105
Income tax
expense
3,133
4,463
Depreciation
and amortization
5,873
23,279
Non-cash employee
compensation
(1) (1,554)
Debt extinguishment
costs
854
2,969
Minority interest
expense, net of
tax
(2)
(4)
Equity in
unconsolidated
affiliates,
net of tax
170
170
Loss on sale
of assets
26,161
26,161
Opening costs
for resorts under
development
4,221
9,835
------------ -------------
Adjusted EBITDA (1)
$3,689 $34,349
============ =============
Net loss
$(38,048) $(36,075)
Adjustments to net loss:
Non-cash employee
compensation
(1) (1,554)
Debt extinguishment
costs
854
2,969
Pre-opening
costs for resorts
under
development
4,221
9,835
Loss on sale
of assets
26,161
26,161
Income tax
rate adjustment (2)
4,538
2,077
------------ -------------
Adjusted net income (loss) (1)
$(2,275) $3,413
============ =============
Adjusted net income (loss) per share:
Basic
$(0.08)
$0.11
Diluted
$(0.08)
$0.11
Weighted average shares outstanding:
Basic
30,138
30,134
Diluted
30,138
30,135
Great
Wolf Resorts, Inc.
Operating Statistics
Three Months Ended Twelve Months Ended
------------------ -------------------
December 31
December 31
2005 2004
2005 2004
------ ------ ------
------
All Properties
Occupancy
50.2% 53.3%
60.6% 65.3%
ADR
$223.70 $195.56 $213.78
$208.48
RevPAR
$112.25 $104.30 $129.57
$136.04
Total RevPOR
$348.92 $296.84 $322.41
$304.94
Total RevPAR
$175.09 $158.32 $195.40
$198.97
All - Same Store (3)
Occupancy
47.4% 53.3%
62.1% 65.9%
ADR
$195.87 $195.56 $208.77
$209.99
RevPAR
$92.81 $104.30 $129.71
$138.39
Total RevPOR
$305.25 $296.84 $302.41
$299.89
Total RevPAR
$144.63 $158.32 $187.89
$197.64
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 (4)
(in thousands, except per share amounts)
Three Months Year Ending
Ending March 31, December 31,
2006
2006
---------------- ------------
Net income (loss)
$(1,350) $(5,220)
Adjustments:
Interest expense,
net
1,400
6,900
Income tax
expense (benefit)
(900) (3,480)
Depreciation
and amortization
6,600
27,700
Employee stock
option expense
700
2,800
Debt extinguishment
costs
-
-
Minority interest
expense
-
(1,100)
Equity in
unconsolidated affiliates
50
1,400
Opening costs
of resorts
under
development
500
4,500
---------------- ------------
Adjusted EBITDA (1)
$7,000 $33,500
================ ============
Net income (loss)
$(1,350) $(5,220)
Adjustments to net income (loss), net
of income taxes:
Non-cash employee
compensation
420
1,680
Debt extinguishment
costs
-
-
Opening costs
of resorts under
development
300
2,700
---------------- ------------
Adjusted net income (loss) (1)
$(630)
$(840)
================ ============
Net income (loss) per share:
Basic
$(0.04) $(0.17)
Diluted
$(0.04) $(0.17)
Adjusted net income (loss) per share:
Basic
$(0.02) $(0.03)
Diluted
$(0.02) $(0.03)
Weighted average shares outstanding:
Basic
30,300
30,300
Diluted
30,300
30,300
(1) See discussions of Adjusted EBITDA
and Adjusted net income located in
the "Non-GAAP
Financial Measures" section of this press release.
(2) This amount represents an adjustment
to recorded income tax expense
to bring the
overall effective tax rate to an estimated normalized
rate of 40%.
This effective tax rate differs from the effective tax
rates in the
company's historical statements of operations.
(3) Same store comparison includes
properties that were open for the full
periods in
both 2004 and 2005
(4) The company's outlook reconciliations
use the mid-points of its
estimates
of Adjusted EBITDA and Adjusted net income. |
Great Wolf Resorts will hold a conference call to discuss
its fourth- quarter and full year 2005 results today, February 22, 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, http://www.greatwolf.com, or http://www.streetevents.com,
or may call (800) 240-2134, reference number 11052858. A recording of the
call will be available by telephone until midnight on Wednesday, March
1 by dialing (800) 405-2236, reference number 11052858. A replay of the
conference call will be posted on Great Wolf Resorts' Web site through
March 22, 2006.
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 http://www.greatwolf.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) opening costs of resorts under development,
(g) equity in earnings (loss) of affiliates, (h) loss on sale of assets,
and (i) 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, (c) opening costs of
resorts under development, (d) loss on sale of assets, and (e) the effect
of non-normalized income tax expense.
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 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,
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, resolution of recently filed securities
class action litigation against us and other defendants, 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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