e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2011
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 000-51064
GREAT WOLF RESORTS, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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51-0510250 |
(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.) |
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525 Junction Road, Suite 6000 South
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53717 |
Madison, Wisconsin 53717
(Address of principal executive offices)
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(Zip Code) |
(608) 662-4700
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
(Do not check if a smaller reporting company)
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Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
The number
of shares outstanding of the issuers common stock was
32,566,895 as of August 5, 2011.
Great Wolf Resorts, Inc.
Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 2011
INDEX
2
FORWARD-LOOKING STATEMENTS
Some of the statements contained or that may be included in this report or in information
we file with the Securities and Exchange Commission, or the SEC, are or may be deemed to be
forward-looking statements within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor
created by the Private Securities Litigation Act of 1995. All statements, other than statements
of historical facts, including, among others, statements regarding our future financial results
or position, business strategy, projected levels of growth, projected costs and projected
financing needs, are forward-looking statements. Those statements include statements regarding
our intent, belief or current expectations and those of the members of our 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, might, will, could, plan, objective, predict, project,
potential, continue, ongoing, 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 our ability to control or predict. Such factors include, but are not limited
to, competition in our market, changes in family vacation patterns and consumer spending habits,
regional or national economic downturns or other economic disruptions, our ability to attract a significant number of guests
from our target markets, economic conditions in our target markets, the impact of fuel costs and
other operating costs, our ability to develop new resorts in desirable markets or further
develop existing resorts on a timely and cost efficient basis, our ability to manage growth,
including the expansion of our infrastructure and systems necessary to support growth, our
ability to manage cash and obtain additional cash required for growth, the general tightening in
the U.S. lending markets, potential accidents or injuries at our resorts, decreases in travel
due to pandemic or other widespread illness, our ability to achieve or sustain profitability,
downturns in our industry segment and extreme weather conditions, reductions in the availability
of credit to indoor waterpark resorts generally or to us and our subsidiaries, increases in
operating costs and other expense items and costs, uninsured losses or losses in excess of our
insurance coverage, our ability to protect our intellectual property, trade secrets and the
value of our brands, and current and possible future legal restrictions and requirements.
Further descriptions of these risks, uncertainties, and other matters can be found in our annual
report and other reports filed from time to time with the SEC, including but not limited to our
Annual Report on Form 10-K for the year ended December 31, 2010. We caution that the foregoing
list of important factors is not complete, and we assume no obligation to update any
forward-looking statement that we may make.
We believe 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 us or persons acting on our behalf
are qualified in their entirety by these cautionary statements. Further, forward-looking
statements speak only as of the date they are made, and we undertake 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. Past financial or operating performance is not necessarily a reliable indicator of
future performance and you should not use our historical performance to anticipate results or
future period trends.
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS |
GREAT WOLF RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share data)
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June 30, |
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December 31, |
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2011 |
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2010 |
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(Unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
38,332 |
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$ |
36,988 |
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Escrows |
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2,979 |
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1,283 |
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Accounts receivable, net of allowance for doubtful accounts of $4 and $13 |
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4,428 |
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3,278 |
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Accounts receivable affiliates |
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3,427 |
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3,764 |
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Inventory |
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8,342 |
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6,871 |
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Other current assets |
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8,297 |
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4,619 |
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Total current assets |
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65,805 |
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56,803 |
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Property and equipment, net |
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596,445 |
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623,958 |
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Investments in and advances to affiliates |
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24,818 |
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25,131 |
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Other assets |
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30,704 |
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38,649 |
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Intangible assets |
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26,698 |
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26,697 |
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Total assets |
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$ |
744,470 |
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$ |
771,238 |
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LIABILITIES AND EQUITY |
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Current liabilities: |
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Current portion of long-term debt |
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$ |
88,542 |
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$ |
70,083 |
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Accounts payable |
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3,963 |
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8,499 |
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Accounts payable affiliates |
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9 |
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4 |
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Accrued interest payable |
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7,711 |
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8,085 |
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Accrued expenses |
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20,419 |
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20,434 |
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Advance deposits |
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13,375 |
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7,472 |
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Other current liabilities |
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5,484 |
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7,416 |
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Total current liabilities |
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139,503 |
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121,993 |
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Mortgage debt |
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369,177 |
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390,289 |
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Other long-term debt |
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80,545 |
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91,926 |
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Deferred compensation liability |
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1,683 |
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1,260 |
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Total liabilities |
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590,908 |
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605,468 |
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Commitments and contingencies |
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Great Wolf Resorts stockholders equity: |
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Common stock, $0.01 par value; 250,000,000 shares authorized;
32,567,090 and 32,339,125 shares issued and outstanding |
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326 |
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323 |
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Preferred stock, $0.01 par value, 10,000,000 shares authorized, no
shares issued or outstanding |
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Additional paid-in-capital |
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403,582 |
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402,952 |
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Accumulated deficit |
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(250,101 |
) |
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(237,296 |
) |
Deferred compensation |
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(200 |
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(200 |
) |
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Total Great Wolf Resorts, Inc. stockholders equity |
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153,607 |
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165,779 |
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Noncontrolling interest |
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(45 |
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(9 |
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Total equity |
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153,562 |
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165,770 |
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Total liabilities and equity |
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$ |
744,470 |
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$ |
771,238 |
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See accompanying notes to the condensed consolidated financial statements.
4
GREAT WOLF RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; dollars in thousands, except share and per share data)
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Three months ended |
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Six months ended |
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June 30, |
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June 30, |
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2011 |
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2010 |
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2011 |
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2010 |
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Revenues: |
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Rooms |
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$ |
44,831 |
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$ |
38,428 |
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$ |
87,018 |
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$ |
79,199 |
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Food and beverage |
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11,989 |
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11,125 |
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23,191 |
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22,392 |
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Other |
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11,539 |
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9,920 |
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22,718 |
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19,659 |
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Management and other fees |
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654 |
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559 |
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1,407 |
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1,194 |
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Management and other fees affiliates |
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1,024 |
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960 |
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2,027 |
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1,980 |
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70,037 |
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60,992 |
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136,361 |
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124,424 |
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Other revenue from managed properties |
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2,945 |
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2,854 |
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5,782 |
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5,571 |
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Other revenue from managed properties affiliates |
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2,743 |
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2,759 |
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5,467 |
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5,453 |
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Total revenues |
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75,725 |
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|
66,605 |
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147,610 |
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135,448 |
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Operating expenses by department: |
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Rooms |
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6,576 |
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5,770 |
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|
12,623 |
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11,556 |
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Food and beverage |
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9,289 |
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|
8,426 |
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17,749 |
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|
16,653 |
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Other |
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9,145 |
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|
8,224 |
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|
|
18,562 |
|
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|
16,274 |
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Other operating expenses: |
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Selling, general and administrative |
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16,924 |
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13,951 |
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33,905 |
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32,128 |
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Property operating costs |
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|
8,856 |
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7,788 |
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17,280 |
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|
16,412 |
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Depreciation and amortization |
|
|
13,315 |
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|
|
17,018 |
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|
26,563 |
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|
31,164 |
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Loss on disposition of assets |
|
|
1,038 |
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9 |
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|
1,038 |
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19 |
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|
|
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|
|
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|
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|
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|
65,143 |
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61,186 |
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|
127,720 |
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|
124,206 |
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Other expenses from managed properties |
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2,945 |
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2,854 |
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5,782 |
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|
5,571 |
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Other expenses from managed properties affiliates |
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|
2,743 |
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2,759 |
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5,467 |
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5,453 |
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Total operating expenses |
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70,831 |
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|
66,799 |
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138,969 |
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135,230 |
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Net operating income (loss) |
|
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4,894 |
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|
(194 |
) |
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|
8,641 |
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|
218 |
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Investment income affiliates |
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(220 |
) |
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(276 |
) |
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|
(462 |
) |
|
|
(565 |
) |
Interest income |
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|
(51 |
) |
|
|
(178 |
) |
|
|
(106 |
) |
|
|
(430 |
) |
Interest expense |
|
|
12,108 |
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|
|
11,997 |
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|
|
24,205 |
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|
21,104 |
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Loss from continuing operations before income taxes
and equity in income of unconsolidated affiliates |
|
|
(6,943 |
) |
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|
(11,737 |
) |
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|
(14,996 |
) |
|
|
(19,891 |
) |
Income tax expense |
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|
134 |
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178 |
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5,136 |
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|
359 |
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Equity in (income) loss of unconsolidated affiliates,
net of tax |
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(332 |
) |
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210 |
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(483 |
) |
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(23 |
) |
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Net loss from continuing operations |
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(6,745 |
) |
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|
(12,125 |
) |
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|
(19,649 |
) |
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(20,227 |
) |
Discontinued operations, net of tax |
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|
107 |
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|
595 |
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(6,809 |
) |
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|
558 |
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|
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|
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Net loss |
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(6,852 |
) |
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|
(12,720 |
) |
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|
(12,840 |
) |
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|
(20,785 |
) |
Net (income) loss attributable to noncontrolling
interest, net of tax |
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(21 |
) |
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40 |
|
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|
(35 |
) |
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|
40 |
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|
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Net loss attributable to Great Wolf Resorts, Inc. |
|
$ |
(6,831 |
) |
|
$ |
(12,760 |
) |
|
$ |
(12,805 |
) |
|
$ |
(20,825 |
) |
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Loss per share of common stock basic and diluted: |
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Loss from continuing operations, net of net income
attributable to noncontrolling interest, net of tax |
|
$ |
(0.22 |
) |
|
$ |
(0.39 |
) |
|
$ |
(0.63 |
) |
|
$ |
(0.65 |
) |
(Loss) income from discontinued operations, net of tax |
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|
0.00 |
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|
$ |
(0.02 |
) |
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$ |
0.22 |
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|
$ |
(0.02 |
) |
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|
Basic and diluted loss per common share |
|
$ |
(0.22 |
) |
|
$ |
(0.41 |
) |
|
$ |
(0.41 |
) |
|
$ |
(0.67 |
) |
|
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Weighted average common shares outstanding: |
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Basic and diluted |
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|
31,330,726 |
|
|
|
31,000,179 |
|
|
|
31,262,813 |
|
|
|
30,919,023 |
|
See accompanying notes to the condensed consolidated financial statements.
5
GREAT WOLF RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; dollars in thousands)
|
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Six months ended |
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|
June 30, |
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|
|
2011 |
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|
2010 |
|
Operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(12,840 |
) |
|
$ |
(20,785 |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
26,664 |
|
|
|
31,130 |
|
Bad debt expense |
|
|
25 |
|
|
|
193 |
|
Non-cash employee compensation and professional fees expense |
|
|
1,130 |
|
|
|
1,061 |
|
Loss on disposition of assets |
|
|
1,038 |
|
|
|
19 |
|
Gain on disposition of property included in discontinued operations |
|
|
(6,667 |
) |
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|
Equity in income of unconsolidated affiliates |
|
|
(494 |
) |
|
|
(22 |
) |
Deferred tax expense (benefit) |
|
|
4,589 |
|
|
|
(224 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable and other assets |
|
|
(4,893 |
) |
|
|
(3,482 |
) |
Accounts payable, accrued expenses and other liabilities |
|
|
(3,826 |
) |
|
|
10,380 |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
4,726 |
|
|
|
18,270 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
Capital expenditures for property and equipment |
|
|
(5,174 |
) |
|
|
(6,229 |
) |
Loan repayment from unconsolidated affiliates |
|
|
807 |
|
|
|
490 |
|
Investment in affiliate |
|
|
|
|
|
|
(10 |
) |
Investment in development |
|
|
(168 |
) |
|
|
(358 |
) |
Proceeds from the sale of a discontinued operation |
|
|
4,200 |
|
|
|
|
|
Proceeds from sale of assets |
|
|
|
|
|
|
15 |
|
Cash acquired in acquisition of Creative Kingdoms, LLC |
|
|
|
|
|
|
324 |
|
(Increase) decrease in restricted cash |
|
|
(335 |
) |
|
|
3,161 |
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(670 |
) |
|
|
(2,607 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
Principal payments on long-term debt |
|
|
(2,471 |
) |
|
|
(215,941 |
) |
Proceeds from issuance of long-term debt |
|
|
|
|
|
|
219,337 |
|
Payment of loan costs |
|
|
(241 |
) |
|
|
(9,562 |
) |
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(2,712 |
) |
|
|
(6,166 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
1,344 |
|
|
|
9,497 |
|
Cash and cash equivalents, beginning of period |
|
|
36,988 |
|
|
|
20,913 |
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
38,332 |
|
|
$ |
30,410 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information: |
|
|
|
|
|
|
|
|
Cash paid for interest, net of capitalized interest |
|
$ |
24,657 |
|
|
$ |
16,543 |
|
Cash paid for income taxes, net of refunds |
|
$ |
591 |
|
|
$ |
404 |
|
Non-cash items: |
|
|
|
|
|
|
|
|
Loan cost accruals |
|
$ |
|
|
|
$ |
1,076 |
|
Conversion of note receivable and accrued interest to equity investment |
|
$ |
|
|
|
$ |
9,963 |
|
Transfer of fixed assets to inventory |
|
$ |
1,883 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the condensed consolidated financial statements.
6
GREAT WOLF RESORTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; dollars in thousands, except share and per share amounts)
1. ORGANIZATION
The terms Great Wolf Resorts, us, we and our are used in this report to refer to Great
Wolf Resorts, Inc. and its consolidated subsidiaries.
Business Summary
We are a family entertainment resort company that provides our guests with a high quality
vacation at an affordable price. We are the largest owner, licensor, operator and developer in
North America of drive-to, destination family resorts featuring indoor waterparks and other
family-oriented entertainment activities based on the number of resorts in operation. Each of our
resorts features approximately 300 to 600 family suites, each of which sleeps from six to ten
people and includes a wet bar, microwave oven, refrigerator and dining and sitting area. We provide
a full-service entertainment resort experience to our target customer base: families with children
ranging in ages from 2 to 14 years old that live within a convenient driving distance of our
resorts. Our resorts are open year-round and provide a consistent, comfortable environment where
our guests can enjoy our various amenities and activities. We operate and license resorts under
our Great Wolf Lodge® brand name. We have entered into licensing and management
arrangements with third parties relating to the operation of resorts under the Great Wolf Lodge
brand name.
We provide our guests with a self-contained vacation experience and focus on capturing a
significant portion of their total vacation spending. We earn revenues through the sale of rooms
(which includes admission to our indoor waterpark), and other revenue-generating resort amenities.
Each of our resorts features a combination of the following revenue-generating amenities: themed
restaurants, ice cream shop and confectionery, full-service adult spa, kid spa, game arcade, gift
shop, miniature golf, interactive game attraction, family tech center and meeting space. We also
generate revenues from licensing fees, management fees and other fees with respect to our operation
or development of properties owned in whole or in part by third parties.
The
following table presents an overview of our portfolio of resorts. As of June 30, 2011, we
operated, managed and/or had licensing arrangements relating to the operation of 11
Great Wolf Lodge resorts (our signature Northwoods-themed resorts). We anticipate that most of our
future resorts will be licensed and/or developed under our Great Wolf Lodge brand, but we may
operate and/or enter into licensing arrangements with other resorts using different brands in
appropriate markets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
of |
|
|
Indoor |
|
|
|
Ownership |
|
|
|
|
|
|
Guest |
|
|
Condo |
|
|
Entertainment |
|
|
|
Percentage |
|
|
Opened |
|
|
Suites |
|
|
Units (1) |
|
|
Area (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(approx. sq. ft.) |
|
Wisconsin Dells, WI (3) |
|
|
|
|
|
|
1997 |
|
|
|
308 |
|
|
|
77 |
|
|
|
102,000 |
|
Sandusky, OH (3) |
|
|
|
|
|
|
2001 |
|
|
|
271 |
|
|
|
|
|
|
|
41,000 |
|
Traverse City, MI |
|
|
100 |
% |
|
|
2003 |
|
|
|
280 |
|
|
|
|
|
|
|
57,000 |
|
Kansas City, KS |
|
|
100 |
% |
|
|
2003 |
|
|
|
281 |
|
|
|
|
|
|
|
57,000 |
|
Williamsburg, VA (4) |
|
|
100 |
% |
|
|
2005 |
|
|
|
405 |
|
|
|
|
|
|
|
87,000 |
|
Pocono Mountains, PA (4) |
|
|
100 |
% |
|
|
2005 |
|
|
|
401 |
|
|
|
|
|
|
|
101,000 |
|
Niagara Falls, ONT (5) |
|
|
|
|
|
|
2006 |
|
|
|
406 |
|
|
|
|
|
|
|
104,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mason, OH (4) |
|
|
100 |
% |
|
|
2006 |
|
|
|
401 |
|
|
|
|
|
|
|
105,000 |
|
Grapevine, TX (4) |
|
|
100 |
% |
|
|
2007 |
|
|
|
605 |
|
|
|
|
|
|
|
110,000 |
|
Grand Mound, WA (6) |
|
|
49 |
% |
|
|
2008 |
|
|
|
398 |
|
|
|
|
|
|
|
74,000 |
|
Concord, NC (4) |
|
|
100 |
% |
|
|
2009 |
|
|
|
402 |
|
|
|
|
|
|
|
97,000 |
|
7
(1) |
|
Condominium units are individually owned by third parties and are managed by us. |
|
(2) |
|
Our indoor entertainment areas generally include our indoor waterpark, game
arcade, childrens activity room, family tech center, MagiQuest® (an
interactive game attraction) and fitness room, as well as our spa in the
resorts that have such amenities. |
|
(3) |
|
These properties are owned by CNL Lifestyle Properties, Inc. (CNL), a real
estate investment trust focused on leisure and lifestyle properties. We
currently manage both properties and license the Great Wolf Lodge brand to
these resorts. |
|
(4) |
|
Five of our properties (Great Wolf Lodge resorts in Williamsburg, VA; Pocono
Mountains, PA; Mason, OH; Grapevine, TX and Concord, NC) each had a book value
of fixed assets equal to ten percent or more of our total assets as of June 30,
2011 and each of those five properties had total revenues equal to ten percent
or more of our total revenues for the three and six months ended June 30, 2011. |
|
(5) |
|
An affiliate of Ripley Entertainment, Inc. (Ripley), our licensee, owns this
resort. We have granted Ripley a license to use the Great Wolf Lodge name for
this resort through April 2016. |
|
(6) |
|
This property is owned by a joint venture. The Confederated Tribes of the
Chehalis Reservation (Chehalis) owns a 51% interest in the joint venture, and
we own a 49% interest. We operate the property and license the Great Wolf Lodge
brand to the joint venture under long-term agreements through April 2057,
subject to earlier termination in certain situations. The joint venture leases
the land for the resort from the United States Department of the Interior,
which is trustee for Chehalis. |
On March 24, 2011 we sold our Blue Harbor Resort in Sheboygan, WI. We continue to license the
Blue Harbor Resort and related trade names to the buyer at no fee. As of March 24, 2011, we no
longer operated this resort or managed the condominium units there.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General We have prepared these unaudited condensed consolidated interim financial
statements according to the rules and regulations of the Securities and Exchange Commission (SEC).
Accordingly, we have omitted certain information and footnote disclosures that are normally
included in annual financial statements prepared in accordance with accounting principles generally
accepted in the United States (GAAP). The December 31, 2010 consolidated balance sheet data was
derived from audited financial statements, but does not include all disclosures required by GAAP.
These interim financial statements should be read in conjunction with the financial statements,
accompanying notes and other information included in our Annual Report on Form 10-K for the year
ended December 31, 2010.
The accompanying unaudited condensed consolidated interim financial statements reflect all
adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the
financial condition and results of operations and cash flows for the periods presented. The
preparation of financial statements in accordance with GAAP requires us to make estimates and
assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities,
as well as the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Our
actual results could differ from those estimates. The results of operations for the interim periods
are not necessarily indicative of the results to be expected for the entire year.
Certain 2010 amounts have been reclassified to conform to the 2011 presentation.
|
|
|
On our condensed consolidated balance sheet, we have reclassified and presented as a
separate line item accrued interest payable, which was previously included with accrued
expenses;
|
8
|
|
|
As a result of the sale of our Blue Harbor Resort, we have included the operations
and gain on sale of this resort in discontinued operations in our condensed consolidated
statements of operations; and |
|
|
|
|
On our condensed consolidated statement of cash flows, we have reclassified the
change in escrows to present them as a part of the change in restricted cash, where
before we presented that change in escrows as a separate line item. |
Principles of Consolidation The accompanying condensed consolidated financial statements
include all of the accounts of Great Wolf Resorts, Inc. and our consolidated subsidiaries. All
significant intercompany balances and transactions have been eliminated in the consolidated
financial statements.
Goodwill The excess of the purchase price of entities that are considered to be purchases
of businesses over the estimated fair value of tangible and identifiable intangible assets acquired
is recorded as goodwill. We are required to assess goodwill for impairment annually, or more
frequently if circumstances indicate impairment may have occurred. We assess goodwill for such
impairment by comparing the carrying value of our reporting units to their fair values. We
determine our reporting units fair values using a discounted cash flow model.
In connection with the acquisition of the majority interest in Creative Kingdoms, LLC (CK) in
2010 we have recorded $1,366 of goodwill. Goodwill is included within intangible assets on our
condensed consolidated balance sheet.
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2011 |
|
|
2010 |
|
Goodwill related to the acquisition of the majority interest in CK |
|
$ |
1,366 |
|
|
$ |
1,366 |
|
|
|
|
|
|
|
|
|
|
$ |
1,366 |
|
|
$ |
1,366 |
|
|
|
|
|
|
|
|
Noncontrolling Interests We record the non-owned equity interests of our consolidated
subsidiaries as a separate component of our consolidated equity on our condensed consolidated
balance sheet. The net earnings attributable to the controlling and noncontrolling interests are
included on the face of our statements of operations. Due to our acquisition of CK in 2010 we have
a consolidated subsidiary with a noncontrolling interest.
Discontinued Operations We record the results of the operations of an entity that has been
disposed of as a discontinued operation in the consolidated statements of operations when the
operations and cash flows of the entity have been eliminated from the ongoing operations and we do
not have any significant continuing involvement in the operations of the entity after the disposal
transaction. During the three months ended March 31, 2011 we disposed of our Blue Harbor Resort
property and have included that propertys operations and gain on sale in discontinued operations
for all periods presented. The operations of Blue Harbor Resort were formerly included in our
Resort Ownership/Operation segment.
Income Taxes At the end of each interim reporting period, we estimate the effective tax
rate expected to be applicable for the full fiscal year. We use that estimated effective tax rate
in providing for income taxes on a year-to-date basis. We account for the tax effect of significant
unusual or extraordinary items in the period in which they occur. We account for major changes in
our valuation allowance within continuing operations in the period in which they occur. During the
six months ended June 30, 2011, we increased our valuation allowance by $4,772 as a result of the
sale of our Blue Harbor Resort in Sheboygan, Wisconsin. The increase was due to uncertainties
related to our ability to utilize some of our deferred tax assets generated as a result of that
sale, primarily consisting of certain net operating loss carryforwards, before they expire.
Segments We are organized into a single operating division. Within that
operating division, we have two reportable segments:
9
|
|
Resort ownership/operation-revenues derived from our consolidated owned resorts; and |
|
|
|
Resort third-party management/licensing-revenues derived from management, license and
other related fees from unconsolidated managed resorts. |
The following summarizes significant financial information regarding our segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resort |
|
|
|
|
|
|
|
|
|
|
Resort |
|
|
Third-Party |
|
|
|
|
|
|
Totals per |
|
|
|
Ownership/ |
|
|
Management |
|
|
|
|
|
|
Financial |
|
|
|
Operation |
|
|
/License |
|
|
Other |
|
|
Statements |
|
Three months ended June 30,
2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
67,208 |
|
|
$ |
7,366 |
|
|
$ |
1,151 |
|
|
$ |
75,725 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
(12,554 |
) |
|
|
|
|
|
|
(761 |
) |
|
|
(13,315 |
) |
Net operating income (loss) |
|
|
3,606 |
|
|
|
1,679 |
|
|
|
(391 |
) |
|
|
4,894 |
|
Investment income affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(220 |
) |
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(51 |
) |
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing
operations before income
taxes and equity in income of
unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(6,943 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to long-lived assets |
|
|
4,367 |
|
|
|
|
|
|
|
106 |
|
|
$ |
4,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resort |
|
|
|
|
|
|
|
|
|
|
Resort |
|
|
Third-Party |
|
|
|
|
|
|
Totals per |
|
|
|
Ownership/ |
|
|
Management |
|
|
|
|
|
|
Financial |
|
|
|
Operation |
|
|
/License |
|
|
Other |
|
|
Statements |
|
Six months ended June 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
130,461 |
|
|
$ |
14,683 |
|
|
$ |
2,466 |
|
|
$ |
147,610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
(25,038 |
) |
|
|
|
|
|
|
(1,525 |
) |
|
|
(26,563 |
) |
Net operating income (loss) |
|
|
7,843 |
|
|
|
3,435 |
|
|
|
(2,637 |
) |
|
|
8,641 |
|
Investment income affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(462 |
) |
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(106 |
) |
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,205 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing
operations before income
taxes and equity in income of
unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(14,996 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to long-lived assets |
|
|
4,962 |
|
|
|
|
|
|
|
212 |
|
|
$ |
5,174 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
620,802 |
|
|
|
1,719 |
|
|
|
121,949 |
|
|
$ |
744,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resort |
|
|
|
|
|
|
|
|
|
|
Resort |
|
|
Third-Party |
|
|
|
|
|
|
Totals per |
|
|
|
Ownership/ |
|
|
Management |
|
|
|
|
|
|
Financial |
|
|
|
Operation |
|
|
/License |
|
|
Other |
|
|
Statements |
|
Three months ended June 30,
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
58,605 |
|
|
$ |
7,132 |
|
|
$ |
868 |
|
|
$ |
66,605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
(16,324 |
) |
|
|
|
|
|
|
(694 |
) |
|
|
(17,018 |
) |
Net operating income (loss) |
|
|
(1,444 |
) |
|
|
1,518 |
|
|
|
(268 |
) |
|
|
(194 |
) |
Investment income affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(276 |
) |
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(178 |
) |
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing
operations before income
taxes and equity in income of
unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(11,737 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to long-lived assets |
|
|
1,961 |
|
|
|
|
|
|
|
487 |
|
|
$ |
2,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resort |
|
|
|
|
|
|
|
|
|
|
Resort |
|
|
Third-Party |
|
|
|
|
|
|
Totals per |
|
|
|
Ownership/ |
|
|
Management |
|
|
|
|
|
|
Financial |
|
|
|
Operation |
|
|
/License |
|
|
Other |
|
|
Statements |
|
Six months ended June 30, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
120,382 |
|
|
$ |
14,198 |
|
|
$ |
868 |
|
|
$ |
135,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
(30,305 |
) |
|
|
|
|
|
|
(859 |
) |
|
|
(31,164 |
) |
Net operating income (loss) |
|
|
(517 |
) |
|
|
3,174 |
|
|
|
(2,439 |
) |
|
|
218 |
|
Investment income affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(565 |
) |
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(430 |
) |
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing
operations before income
taxes and equity in income of
unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(19,891 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to long-lived assets |
|
|
5,790 |
|
|
|
|
|
|
|
439 |
|
|
$ |
6,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
685,381 |
|
|
|
3,565 |
|
|
|
116,926 |
|
|
$ |
805,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Other column in the table includes items that do not constitute a reportable segment and
represent corporate-level activities and the activities of other operations not included in the
Resort Ownership/Operation or Resort Third-Party Management/License segments. Total assets at the
corporate level primarily consist of cash, our investment in affiliates, and intangibles.
Recent Accounting Pronouncements In July 2010, the FASB issued guidance on
disclosures about the credit quality of financing receivables and the allowance for credit losses.
The guidance requires new disclosures that will require companies to provide more information about
the credit quality of their financing receivables in the disclosures to the financial statements
including, but not limited to, significant purchases and sales of financing receivables, aging
information and credit quality indicators. This guidance is effective for interim or annual
financial reporting periods beginning after December 15, 2010. The adoption of this guidance did
not have a material impact on our condensed consolidated financial statements.
In December 2010, the FASB issued guidance which (1) does not prescribe a specific method of
calculating the carrying value of a reporting unit in the performance of step 1 of the goodwill
impairment test and (2) requires entities with a zero or negative carrying value to assess,
considering certain qualitative factors, whether it is more likely than not that a goodwill
impairment exists. If an entity concludes that it is more likely than not that a goodwill
impairment exists, the entity must perform step 2 of the goodwill impairment test. This guidance
is effective for impairment tests performed during fiscal years (and interim periods within those
years) that begin after December 15, 2010. The adoption of this guidance did not have a material
impact on our condensed consolidated financial statements.
11
In December 2010, the FASB issued guidance to address differences in the ways entities have
interpreted disclosures about pro forma revenue and earnings in a business combination. This
guidance states that if a public entity presents comparative financial statements, the entity
should disclose revenue and earnings of the combined entity as though the business combination that
occurred during the current year had occurred as of the beginning of the comparable prior annual
reporting period only. This guidance is effective prospectively for business combinations whose
acquisition date is at or after the beginning of the first annual reporting period on or after
December 15, 2010. The adoption of this guidance did not have a material impact on our condensed
consolidated financial statements.
In May 2011, the FASB issued guidance that clarifies and changes the application of
various fair value measurement principles and disclosure requirements. This guidance is
effective for interim and annual periods beginning after December 15, 2011. We do not expect
the adoption of this guidance to have a material impact on our consolidated financial statements.
3. INVESTMENT IN AFFILIATES
Our joint venture with The Confederated Tribes of the Chehalis Reservation owns the Great Wolf
Lodge resort and conference center on a 39-acre land parcel in Grand Mound, Washington. This
resort opened in March 2008. This joint venture is a limited liability company. We are a member
of that limited liability company with a 49% ownership interest. At June 30, 2011, the joint
venture had aggregate outstanding indebtedness to third parties of $96,750. As of June 30, 2011,
we have made combined loan and equity contributions, net of loan repayments, of $27,179 to the
joint venture to fund a portion of construction costs of the resorts.
Summary financial data for this joint venture is as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
Balance sheet data: |
|
2011 |
|
|
2010 |
|
Total assets |
|
$ |
140,315 |
|
|
$ |
142,329 |
|
Total liabilities |
|
$ |
109,182 |
|
|
$ |
112,307 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
Operating data: |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Revenue |
|
$ |
11,440 |
|
|
$ |
10,563 |
|
|
$ |
22,665 |
|
|
$ |
21,776 |
|
Operating expenses |
|
$ |
(9,552 |
) |
|
$ |
(10,957 |
) |
|
$ |
(19,239 |
) |
|
$ |
(20,381 |
) |
Net income |
|
$ |
759 |
|
|
$ |
(457 |
) |
|
$ |
1,111 |
|
|
$ |
60 |
|
We have a receivable from the joint venture of $3,427 and $3,764 that relates primarily to
accrued preferred equity returns and management fees as of June 30, 2011 and December 31, 2010,
respectively. We had a payable to the joint venture of $9 and $4 as of June 30, 2011 and December
31, 2010, respectively.
4. VARIABLE INTEREST ENTITIES
In accordance with the guidance for the consolidation of variable interest entities, we
analyze our variable interests, including equity investments and management agreements, to
determine if an entity in which we have a variable
12
interest, is a variable interest entity. Our analysis includes both quantitative and
qualitative reviews. We base our quantitative analysis on the forecasted cash flows of the entity,
and our qualitative analysis on our review of the design of the entity, its organization structure
including decision-making ability, and relevant financial agreements. We also use our qualitative
analyses to determine if we must consolidate a variable interest entity as the primary beneficiary.
The following summarizes our analyses of entities in which we have a variable interest and
that we have concluded are variable interest entities:
|
|
|
We have an equity investment in the joint venture that owns the Great Wolf Lodge
resort in Grand Mound, Washington. We manage that resort and we have concluded that
the joint venture is a variable interest entity because the management fees we
receive represent a variable interest. The management contract, however, does not
provide us with power to direct the activities that most significantly impact the
economic performance of the joint venture. As we lack the ability to direct the
activities that most significantly affect the resorts performance, we are not the
primary beneficiary of the joint venture and, therefore, we do not consolidate this
entity at June 30, 2011. During the three and six months ended June 30, 2011 and
2010, we did not provide any support to this entity that we were not contractually
obligated to do so. Our maximum exposure to loss related to our involvement with
this entity as of June 30, 2011 is limited to the carrying value of our equity
investments in the joint venture as of that date. The total carrying values of
those items on our balance sheet as of June 30, 2011 is $24,818. |
|
|
|
|
We have equity investments in two subsidiaries which are Delaware statutory
trusts, both of which were used to issue trust preferred securities through private
offerings. We have concluded that both of these trusts are variable interest
entities. As we lack the ability to direct the activities that most significantly
impact the trusts performance, we are not the primary beneficiary and
therefore, we do not consolidate these entities at June 30, 2011. During the three
and six months ended June 30, 2011 and 2010, we did not provide any support to these
entities that we were not contractually obligated to do so. Our maximum exposure to
loss related to our involvement with these entities as of June 30, 2011 is limited
to the carrying value of our equity investments in the entities as of that date.
The total carrying values of those items on our balance sheet as of June 30, 2011 is
$2,420. |
5. ACQUISITION OF CREATIVE KINGDOMS
In June 2010, we acquired a 62.4% equity interest in Creative Kingdoms (CK) in exchange for
all of the convertible indebtedness owed to us by CK. CK is a developer of experiential gaming
products including MagiQuest®, an interactive game attraction available at nine of our resorts. CK
also owns or has sold to other parties several stand-alone MagiQuest facilities or similar
attractions.
We have consolidated CK as we have a majority ownership interest in CK. We accounted for this
business combination using the acquisition method of accounting, which requires us to measure the
identifiable assets acquired, the liabilities assumed, and any noncontrolling interest at the
acquisition-date fair value. We have recorded the identifiable assets acquired, the liabilities
assumed and the noncontrolling interest at amounts that approximate fair value. We have recorded
$1,366 of goodwill, which represents the excess of (a) the consideration transferred and the fair
value of any noncontrolling interest in the acquiree over (b) the net of the acquisition date fair
values of the assets acquired and the liabilities assumed, less amounts established as a deferred
tax asset.
6. SHARE-BASED COMPENSATION
We recognized share-based compensation expense of $547 and $1,130, net of estimated
forfeitures, for the three and six months ended June 30, 2011, respectively. The total income tax
expense recognized related to share-based compensation was $12 and $25 for the three and six months
ended June 30, 2011, respectively.
13
We recognized share-based compensation expense of $516 and $1,061, net of estimated
forfeitures, for the three and six months ended June 30, 2010, respectively. The total income tax
expense recognized related to share-based compensation was $9 and $19 for the three and six months
ended June 30, 2010, respectively.
We recognize compensation expense on grants of share-based compensation awards on a
straight-line basis over the requisite service period of each award recipient. As of June 30, 2011,
total unrecognized compensation cost related to share-based compensation awards was $2,542, which
we expect to recognize over a weighted average period of approximately 2.8 years.
The Great Wolf Resorts 2004 Incentive Stock Plan (the Plan) authorizes us to grant up to
3,380,740 options, stock appreciation rights or shares of our common stock to employees and
directors. At June 30, 2011, there were 325,896 shares available for future grants under the Plan.
We anticipate having to issue new shares of our common stock for stock option exercises.
Stock Options
We have granted non-qualified stock options to purchase our common stock under the Plan at
prices equal to the fair market value of the common stock on the grant dates. The exercise price
for options granted under the plans may be paid in cash, shares of common stock or a combination of
cash and shares. Stock options expire ten years from the grant date and vest ratably over three
years.
We recorded no stock option expense for the three and
six months ended June 30, 2011 or 2010.
There were no stock options granted during the three and six months ended June 30, 2011 or 2010.
During the six months ended June 30, 2011, certain employees surrendered and cancelled 5,500
previously granted stock options.
A summary of stock option activity during the six months ended June 30, 2011 is:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Weighted |
|
|
Average |
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
|
|
|
|
|
Exercise |
|
|
Contractual |
|
|
|
Shares |
|
|
Price |
|
|
Life |
|
Number of shares under option: |
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at beginning of period |
|
|
36,000 |
|
|
$ |
19.03 |
|
|
4.15 years |
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(5,500 |
) |
|
$ |
18.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of period |
|
|
30,500 |
|
|
$ |
19.19 |
|
|
3.68 years |
Exercisable at end of period |
|
|
30,500 |
|
|
$ |
19.19 |
|
|
3.68 years |
At June 30, 2011 and 2010, the exercise prices of all of our outstanding and exercisable stock
options were above our stock price. Therefore, there was no intrinsic value for our outstanding
and exercisable stock options at June 30, 2011 or 2010.
Market Condition Share Awards
Certain employees are eligible to receive shares of our common stock in payment of market
condition share awards granted to them in accordance with the terms thereof.
We granted 444,002 and 515,986 market condition share awards during the six months ended June
30, 2011 and 2010, respectively. We recorded share-based compensation expense of $183 and $388 for
the three and six months ended June
14
30, 2011, respectively. We recorded share-based compensation expense of $178 and $387 for the
three and six months ended June 30, 2010, respectively.
Of the 2011 market condition shares granted:
|
|
|
277,894 were based on our common stocks performance in 2011 relative to a stock index,
as designated by the Compensation Committee of the Board of Directors. These shares vest
ratably over a three-year period, 2011-2013. The per share fair value of these market
condition shares was $2.35 as of the grant date. |
The fair value of these market condition shares was determined using a Monte Carlo
simulation and the following assumptions:
|
|
|
|
|
Dividend yield |
|
|
|
|
Weighted average, risk free interest rate |
|
|
0.25 |
% |
Expected stock price volatility |
|
|
64.73 |
% |
Expected stock price volatility (small-cap stock index) |
|
|
29.39 |
% |
We used an expected dividend yield of 0%, as we do not currently pay a dividend and do not
contemplate paying a dividend in the foreseeable future. The weighted average, risk free interest
rate was based on the 10.6-month treasury constant maturity. Our expected stock price volatility
and the expected stock price volatility for the small cap stock index was estimated using daily
returns data of our stock and the index for the period February 11, 2009 through February 10,
2011.
|
|
|
83,054 were based on our common stocks absolute performance during the three-year period
2010-2012. For shares that are earned, half of the shares vest on December 31, 2012, and
the other half vest on December 31, 2013. The per share fair value of these market
condition shares was $2.15 as of the grant date. |
The fair value of these market condition shares was determined using a Monte Carlo
simulation and the following assumptions:
|
|
|
|
|
Dividend yield |
|
|
|
|
Weighted average, risk free interest rate |
|
|
0.58 |
% |
Expected stock price volatility |
|
|
64.73 |
% |
We used an expected dividend yield of 0%, as we do not currently pay a dividend and do not
contemplate paying a dividend in the foreseeable future. The weighted average, risk free interest
rate was based on the 1.89-year treasury constant maturity. Our expected stock price volatility
was estimated using daily returns data of our stock for the period February 11, 2009 through
February 10, 2011.
|
|
|
83,054 were based on our common stocks performance in 2010-2012 relative to a stock
index, as designated by the Compensation Committee of the Board of Directors. For shares
that are earned, half of the shares vest on December 31, 2012, and the other half vest on
December 31, 2013. The per share fair value of these market condition shares was $2.19 as
of the grant date. |
The fair value of these market condition shares was determined using a Monte Carlo
simulation and the following assumptions:
|
|
|
|
|
Dividend yield |
|
|
|
|
Weighted average, risk free interest rate |
|
|
0.58 |
% |
Expected stock price volatility |
|
|
64.73 |
% |
Expected stock price volatility (small-cap stock index) |
|
|
29.39 |
% |
15
We used an expected dividend yield of 0%, as we do not currently pay a dividend and do not
contemplate paying a dividend in the foreseeable future. The weighted average, risk free interest
rate was based on the 1.89-year treasury constant maturity. Our expected stock price volatility
and the expected stock price volatility for the small cap stock index was estimated using daily
returns data of our stock and the index for the period February 11, 2009 through February 10,
2011.
Of the 2010 market condition shares granted:
|
|
|
333,060 were based on our common stocks performance in 2010 relative to a stock index,
as designated by the Compensation Committee of the Board of Directors. These shares vest
ratably over a three-year period, 2010-2012. The per share fair value of these market
condition shares was $2.43 as of the grant date. |
The fair value of these market condition shares was determined using a Monte Carlo
simulation and the following assumptions:
|
|
|
|
|
Dividend yield |
|
|
|
|
Weighted average, risk free interest rate |
|
|
0.26 |
% |
Expected stock price volatility |
|
|
108.06 |
% |
Expected stock price volatility (small-cap stock index) |
|
|
40.92 |
% |
We used an expected dividend yield of 0%, as we do not currently pay a dividend and do not
contemplate paying a dividend in the foreseeable future. The weighted average, risk free interest
rate was based on the 9-month treasury constant maturity. Our expected stock price volatility was
estimated using daily returns data of our stock for a two-year period ending on the grant date.
The expected stock price volatility for the small cap stock index was estimated using daily
returns data for a two-year period ending on the grant date.
The market condition for these shares was not met and therefore no shares related to this
grant were issued.
|
|
|
91,463 were based on our common stocks absolute performance during the three-year period
2010-2012. For shares that are earned, half of the shares vest on December 31, 2012, and
the other half vest on December 31, 2013. The per share fair value of these market
condition shares was $2.53 as of the grant date. |
The fair value of these market condition shares was determined using a Monte Carlo
simulation and the following assumptions:
|
|
|
|
|
Dividend yield |
|
|
|
|
Weighted average, risk free interest rate |
|
|
1.27 |
% |
Expected stock price volatility |
|
|
95.21 |
% |
We used an expected dividend yield of 0%, as we do not currently pay a dividend and do not
contemplate paying a dividend in the foreseeable future. The weighted average, risk free interest
rate was based on the 2.75-year treasury constant maturity. Our expected stock price volatility
was estimated using daily returns data of our stock for the period June 29, 2007 through March
30, 2010.
|
|
|
91,463 were based on our common stocks performance in 2010-2012 relative to a stock
index, as designated by the Compensation Committee of the Board of Directors. For shares
that are earned, half of the shares vest on December 31, 2012, and the other half vest on
December 31, 2013. The per share fair value of these market condition shares was $2.61 as
of the grant date. |
16
The fair value of these market condition shares was determined using a Monte Carlo
simulation and the following assumptions:
|
|
|
|
|
Dividend yield |
|
|
|
|
Weighted average, risk free interest rate |
|
|
1.27 |
% |
Expected stock price volatility |
|
|
95.21 |
% |
Expected stock price volatility (small-cap stock index) |
|
|
37.51 |
% |
We used an expected dividend yield of 0%, as we do not currently pay a dividend and do not
contemplate paying a dividend in the foreseeable future. The weighted average, risk free interest
rate was based on the 2.75-year treasury constant maturity. Our expected stock price volatility
and the expected stock price volatility for the small cap stock index was estimated using daily
returns data of our stock for the period June 29, 2007 through March 30, 2010.
Of the 2009 market condition shares granted:
|
|
|
541,863 were based on our common stocks performance in 2009 relative to a stock index,
as designated by the Compensation Committee of the Board of Directors. These shares vest
ratably over a three-year period, 2009-2011. The per share fair value of these market
condition shares was $1.26 as of the grant date. |
The fair value of these market condition shares was determined using a Monte Carlo
simulation and the following assumptions:
|
|
|
|
|
Dividend yield |
|
|
|
|
Weighted average, risk free interest rate |
|
|
0.62 |
% |
Expected stock price volatility |
|
|
96.51 |
% |
Expected stock price volatility (small-cap stock index) |
|
|
37.89 |
% |
We used an expected dividend yield of 0%, as we do not currently pay a dividend and do not
contemplate paying a dividend in the foreseeable future. The weighted average, risk free interest
rate was based on the one-year T-bill rate. Our expected stock price volatility was estimated
using daily returns data of our stock for a two-year period ending on the grant date. The
expected stock price volatility for the small cap stock index was estimated using daily returns
data for a two-year period ending on the grant date.
Based on our common stock performance in 2009, employees earned all of these market
condition shares.
Performance Share Awards
Certain employees are eligible to receive shares of our common stock in payment of performance
share awards granted to them. Grantees of performance shares are eligible to receive shares of our
common stock based on the achievement of certain individual and departmental performance criteria
during the calendar year in which the shares were granted. We granted 92,633 and 111,020
performance shares during the six months ended June 30, 2011 and 2010, respectively. Shares
granted in 2011 vest over a three year period, 2011-2013; and shares granted in 2010 vest over a
three year period, 2010-2012.
The per share fair value of performance shares granted during the six months ended June 30,
2011 and 2010 was $3.23 and $3.18, respectively, which represents the fair value of our common
stock on the grant date. We recorded share-based compensation expense of $71 and $142 for the three
and six months ended June 30, 2011, respectively. We recorded share-based compensation expense of
$61 and $122 for the three and six months ended June 30, 2010, respectively. Since all shares
originally granted were not earned, we recorded a reduction in expense of $16 and $9 during the six
months ended June 30, 2011 and 2010, respectively, related to the shares not issued.
17
Based on their achievement of certain individual and departmental performance goals:
|
|
|
Employees earned and were issued 96,305 performance shares in February 2011 related to
the 2010 grants and |
|
|
|
|
Employees earned and were issued 162,559 performance shares in March 2010 related to
2009 grants. |
Deferred Compensation Awards
Pursuant to their employment arrangements, certain executives received bonuses upon completion
of our initial public offering. Executives receiving bonus payments totaling $2,200 elected to
defer those payments pursuant to our deferred compensation plan. To satisfy this obligation, we
contributed 129,412 shares of our common stock to the trust that holds the assets to pay
obligations under our deferred compensation plan. The fair value of that stock at the date of
contribution was $2,200. We have recorded the fair value of the shares of common stock, at the date
the shares were contributed to the trust, as a reduction of our stockholders equity. In 2008, one
of the executives who had deferred a bonus payment resigned from our company. As a result, we have
reclassified $2,000 previously recorded as deferred compensation to additional paid-in-capital.
We account for the change in fair value of the shares held in the trust as a charge to
compensation cost. We recorded share-based compensation expense of $11 and $5, for the three and
six months ended June 30, 2011, respectively. We recorded negative share-based compensation expense
of $13 and $3, for the three and six months ended June 30, 2010, respectively.
Non-vested Shares
We have granted non-vested shares as follows:
|
|
|
We have granted non-vested shares to certain employees and our directors. These shares
vest over time periods between three and five years. We valued these non-vested shares at
the closing market value of our common stock on the date of grant. |
|
|
|
|
We have granted non-vested shares to certain employees for shares earned under the
Market Condition Share Awards as described above. These shares vest ratably over a
three-year period. We valued the non-vested shares related to Market Condition Shares
using a Monte Carlo simulation as described above. |
|
|
|
|
We have granted non-vested shares to certain employees for shares earned under the
Performance Share Awards as described above. These shares vest ratably over a three-year
period. We valued the non-vested shares related to Performance Share Awards at the closing
market value of our common stock on the date of grant of the Performance Share Awards. |
A summary of non-vested shares activity for the six months ended June 30, 2011 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
Grant Date |
|
|
|
Shares |
|
|
Fair Value |
|
Non-vested shares balance at beginning of period |
|
|
1,163,379 |
|
|
$ |
3.12 |
|
Granted |
|
|
292,365 |
|
|
$ |
2.41 |
|
Forfeited |
|
|
(42,000 |
) |
|
$ |
4.67 |
|
Vested |
|
|
(230,057 |
) |
|
$ |
3.65 |
|
|
|
|
|
|
|
|
|
Non-vested shares balance at end of period |
|
|
1,183,687 |
) |
|
$ |
3.11 |
|
|
|
|
|
|
|
|
|
18
We recorded share-based compensation expense related to non-vested shares of $260 and $588 for
the three and six months ended June 30, 2011, respectively. We recorded share-based compensation expense
related to non-vested shares of $290 and $544 for the three and six ended June 30, 2010,
respectively.
Our non-vested shares had an intrinsic value of $631 and $353 at June 30, 2011 and 2010,
respectively.
Vested Shares
We have an annual short-term incentive plan for certain employees, in which they are provided
the potential to earn cash bonus payments. In 2010 and 2009, certain of these employees had the
option to elect to have some or all of their annual bonus compensation paid in the form of shares
of our common stock rather than cash. Employees making this election received shares having a
market value equal to 125% of the cash they would otherwise receive. Shares issued in lieu of cash
bonus payments are fully vested upon issuance.
|
|
|
In connection with the elections related to 2010 bonus amounts, we issued 33,545 shares
in February 2011. We valued these shares at $96 based on the closing market value of our
common stock on the date of the grant. |
|
|
|
There were no shares issued in the six months ended June 30, 2010 related to 2009 bonus
amounts. |
In 2011 and 2010, our directors had the option to elect to have some or the entire cash
portion of their annual fees paid in the form of shares of our common stock rather than cash.
Directors making this election received shares having a market value equal to 125% of the cash they
would otherwise receive. Shares issued in lieu of cash fee payments are fully vested upon issuance.
We recorded non-cash professional fees expense of $22 for the six months ended June 30, 2011,
related to these elections to receive shares in lieu of cash. We recorded non-cash professional
fees expense of $20 for the six months ended June 30, 2010, related to these elections to receive
shares in lieu of cash. We issued 10,118 and 7,574 shares in the six months ended June 30, 2011
and 2010, respectively, related these elections.
7. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
|
|
|
2011 |
|
|
December 31, 2010 |
|
Land and improvements |
|
$ |
57,665 |
|
|
$ |
57,665 |
|
Building and improvements |
|
|
417,376 |
|
|
|
420,316 |
|
Furniture, fixtures and equipment |
|
|
340,684 |
|
|
|
341,741 |
|
Construction in process |
|
|
822 |
|
|
|
623 |
|
|
|
|
|
|
|
|
|
|
|
816,547 |
|
|
|
820,345 |
|
Less accumulated depreciation |
|
|
(220,102 |
) |
|
|
(196,387 |
) |
|
|
|
|
|
|
|
Property and equipment, net |
|
$ |
596,445 |
|
|
$ |
623,958 |
|
|
|
|
|
|
|
|
Depreciation expense for continuing operations was $12,234 and $12,320 for the three months ended
June 30, 2011 and 2010, respectively. Depreciation expense for continuing operations was $24,397 and
$24,578 for the six months ended June 30, 2011 and 2010, respectively.
19
8. LONG-TERM DEBT
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2011 |
|
|
2010 |
|
Long-Term Debt: |
|
|
|
|
|
|
|
|
Traverse City/Kansas City mortgage loan |
|
$ |
66,421 |
|
|
$ |
67,236 |
|
Pocono Mountains mortgage loan |
|
|
93,646 |
|
|
|
94,274 |
|
Concord mortgage loan |
|
|
76,433 |
|
|
|
78,147 |
|
First mortgage notes (net of discount of $8,812 and $9,578) |
|
|
221,188 |
|
|
|
220,422 |
|
Junior subordinated debentures |
|
|
80,545 |
|
|
|
80,545 |
|
Other Long-Term Debt: |
|
|
|
|
|
|
|
|
City of Sheboygan bonds |
|
|
|
|
|
|
8,573 |
|
City of Sheboygan loan |
|
|
|
|
|
|
3,054 |
|
Other |
|
|
31 |
|
|
|
47 |
|
|
|
|
|
|
|
|
|
|
|
538,264 |
|
|
|
552,298 |
|
Less current portion of long-term debt |
|
|
(88,542 |
) |
|
|
(70,083 |
) |
|
|
|
|
|
|
|
Total long-term debt |
|
$ |
449,722 |
|
|
$ |
482,215 |
|
|
|
|
|
|
|
|
Traverse City/Kansas City Mortgage Loan This non-recourse loan is secured by our Traverse
City and Kansas City resorts. The loan bears interest at a fixed rate of 6.96%, is subject to a
25-year principal amortization schedule, and matures in January 2015. The loan has customary
financial and operating debt compliance covenants. The loan also has customary restrictions on our
ability to prepay the loan prior to maturity. We were in compliance with all covenants under this
loan at June 30, 2011.
While recourse under the loan is limited to the property owners interest in the mortgaged
property, we have provided limited guarantees with respect to certain customary non-recourse
provisions and environmental indemnities relating to the loan.
The loan also contains limitations on our ability, without lenders consent, to (i) make
payments to our affiliates if a default exists; (ii) enter into transactions with our affiliates;
(iii) make loans or advances; or (iv) assume, guarantee or become liable in connection with any
other obligations.
The loan requires us to maintain a minimum debt service coverage ratio (DSCR) of 1.35,
calculated on a quarterly basis. This ratio is defined as the two collateral properties combined
trailing twelve-month net operating income divided by the greater of (i) the loans twelve-month
debt service requirements and (ii) 8.5% of the amount of the outstanding principal indebtedness
under the loan. Failure to meet the minimum DSCR is not an event of default and does not
accelerate the due date of the loan. Not meeting the minimum DSCR, however, subjects the two
properties to a lock-box cash management arrangement, at the discretion of the loans servicer.
The loan also contains a similar lock-box requirement if we open any Great Wolf Lodge or Blue
Harbor Resort within 100 miles of either resort, and the two collateral properties combined
trailing twelve-month net operating income is not at least equal to 1.8 times 8.5% of the amount of
the outstanding principal indebtedness under the loan. For the twelve-month period ended June 30,
2011, the DSCR for this loan was 1.08, and the DSCR for this loan has been below 1.35 since the
second quarter of 2007.
In
September 2010, the loans master servicer implemented the lock-box cash management
arrangement. That lock-box cash management arrangement requires substantially all cash
receipts for the two resorts to be moved each day to a lender-controlled bank account, which the
loan servicer then uses monthly to fund debt service and operating expenses for the two resorts,
with excess cash flow being deposited in a reserve account and held as additional collateral for
the loan. We believe that this arrangement constitutes a traditional lock-box
arrangement as discussed in authoritative accounting guidance. Based on that guidance, since the
loans master servicer has now implemented a lock-box arrangement, we have classified the entire outstanding principal balance of the loan as a
current liability as of June 30, 2011, since the lock-box arrangement requires us to use the
properties working capital to service the loan, and we do not presently have the ability to
refinance this loan to a new, long-term loan. Although the entire principal balance of the loan is
classified as a current liability as of June 30, 2011, the loan is not in default and the
principal balance is not due currently.
20
At our request, in October 2010 the loan was transferred to its special servicer. We informed
the special servicer that, given the current and expected performance at that time of the two
properties securing this loan, we might elect to cease the subsidization of debt service on this
non-recourse loan. If we were to elect to cease the subsidization of debt service, that may result
in a default under the loan agreement. We believe the combined market value of the two properties
securing this loan is now significantly less than the principal amount of the loan. The properties
had a combined net book value of $40,456 as of June 30, 2011, which includes the effect of an
impairment charge we recorded in 2010 to adjust the carrying value of the properties to their
estimated fair value, and the amount of debt outstanding under the loan was $66,421 as of June 30,
2011.
Through March 2011, we worked with the special servicer to discuss a potential modification of
this loan. Those discussions proved unsuccessful and the special servicer has transferred the loan
back to the master servicer, where the lock-box arrangement as described above remains in place.
Given improved operating trends and performance at the properties during the three and six
months ended June 30, 2011, we currently expect the properties to generate sufficient cash flow so
that our subsidization of debt service, if any, for 2011 will be insignificant to our overall
operations. As a result, we currently believe the most likely course of action for 2011 is to
continue to operate these properties, assuming these trends continue.
Pocono Mountains Mortgage Loan This loan is secured by a mortgage on our Pocono Mountains
resort. The loan bears interest at a fixed rate of 6.10% and matures in January 2017. The loan is
currently subject to a 30-year principal amortization schedule. The loan has customary covenants
associated with an individual mortgaged property. The loan also has customary restrictions on our
ability to prepay the loan prior to maturity. We were in compliance with all covenants under this
loan at June 30, 2011.
The loan requires us to maintain a minimum DSCR of 1.25, calculated on a quarterly basis.
Subject to certain exceptions, the DSCR is increased to 1.35 if we open up a waterpark resort
within 75 miles of the property or incur mezzanine debt secured by the resort. This ratio is
defined as the propertys combined trailing twelve-month net operating income divided by the
greater of (i) the loans twelve-month debt service requirements and (ii) 7.25% of the amount of
the outstanding principal indebtedness under the loan. Failure to meet the minimum DSCR is not an
event of default and does not accelerate the due date of the loan. Not meeting the minimum DSCR,
however, subjects the property to a lock-box cash management arrangement, at the discretion of the
loans servicer. We believe that lock-box arrangement would require substantially all cash
receipts for the resort to be moved each day to a lender-controlled bank account, which the loan
servicer would then use to fund debt service and operating expenses for the resort, with excess
cash flow being deposited in a reserve account and held as additional collateral for the loan.
While recourse under the loan is limited to the property owners interest in the mortgage property,
we have provided limited guarantees with respect to certain customary non-recourse provisions and
environmental indemnities relating to the loan.
The loan also contains limitations on our ability, without lenders consent, to (i) make
payments to our affiliates if a default exists; (ii) enter into transactions with our affiliates;
(iii) make loans or advances; or (iv) assume, guarantee or become liable in connection with any
other obligations.
21
Concord Mortgage Loan This loan is secured by our Concord resort. The loan bears interest
at a floating annual rate of LIBOR plus a spread of 310 basis points, with a minimum rate of 6.50%
per annum (effective rate of 6.50% as of June 30, 2011). This loan matures in April 2012 and
requires interest only payments until the one-year anniversary of the conversion date of the
property and then requires monthly principal payments based on a 25-year amortization schedule.
However, if the resort owners net income available to pay debt service on this loan for four
consecutive quarters is less than $10,000, or if maximum principal amount of the loan exceeds 75%
of the fair market value of the property, then the lender may require us to post cash collateral or
partially repay the loan in an amount sufficient to remedy such deficiency. This loan has
customary financial and operating debt compliance covenants associated with an individual mortgaged
property, including a minimum consolidated tangible net worth provision. We were in compliance with
all covenants under this loan at June 30, 2011.
On July
15, 2011, we repaid $20,433 of the amounts outstanding under the above-described loan using
cash on hand and refinanced the remaining $56,000 outstanding with a new loan secured by our
Concord resort due in 2014. See Subsequent Event footnote.
First Mortgage Notes In April 2010, we completed a private placement of $230,000 in
aggregate principal amount of our 10.875% first mortgage notes (the Notes) due April 2017. The
Notes were sold at a discount that provides an effective yield of 11.875% before transaction costs.
We are amortizing the discount over the life of the Notes using the straight-line method, which
approximates the effective interest method. The proceeds of the Notes were used to retire the
outstanding mortgage debt on our Mason, Williamsburg, and Grapevine properties and for general
corporate purposes.
The Notes are senior obligations of GWR Operating Partnership,
L.L.L.P. and Great Wolf Finance
Corp (Issuers). The Notes are guaranteed by Great Wolf Resorts and by our subsidiaries that
own three of our resorts and those guarantees are secured by first priority mortgages on those
three resorts. The Notes are also guaranteed by certain of our other subsidiaries on a senior
unsecured basis.
The
Notes require that we satisfy certain tests in order to among other
things: (i) incur additional indebtedness; (ii) make distributions from GWR Operating Partnership, L.L.L.P. to Great Wolf Resorts, Inc.;
(iii) repurchase the equity interests in GWR Operating Partnership, L.L.L.P. or to prepay the subordinated debt of
GWR Operating Partnership, L.L.L.P. or its subsidiaries; (iv) make investments,
(v) enter into affiliate transactions, (vi) sell assets other than in the ordinary course
of business or (vii) merge. We are currently
restricted from these activities with certain carve-outs, as provided
in the indenture.
Junior Subordinated Debentures In March 2005 we completed a private offering of $50,000 of
trust preferred securities (TPS) through Great Wolf Capital Trust I (Trust I), a Delaware statutory
trust which is our subsidiary. The securities pay holders cumulative cash distributions at an
annual rate which is fixed at 7.80% through March 2015 and then floats at LIBOR plus a spread of
310 basis points thereafter. The securities mature in March 2035 and are callable at no premium
after March 2010. In addition, we invested $1,500 in Trust Is common securities, representing 3%
of the total capitalization of Trust I.
Trust I used the proceeds of the offering and our investment to purchase from us $51,550 of
junior subordinated debentures with payment terms that mirror the distribution terms of the TPS.
The indenture governing the debentures contains limitations on our ability, without the consent of
the holders of the debentures to make payments to our affiliates or for our affiliates to make
payments to us, if a default exists. The costs of the TPS offering totaled $1,600, including
$1,500 of underwriting commissions and expenses and $100 of costs incurred directly by Trust I.
Trust I paid these costs utilizing an investment from us. These costs are being amortized over a
30-year period. The proceeds from our debentures sale, net of the costs of the TPS offering and our
investment in Trust I, were $48,400. We used the net proceeds to retire a construction loan.
In June 2007 we completed a private offering of $28,125 of TPS through Great Wolf Capital
Trust III (Trust III), a Delaware statutory trust which is our subsidiary. The securities pay
holders cumulative cash distributions at an annual rate which is fixed at 7.90% through June 2012
and then floats at LIBOR plus a spread of 300 basis points thereafter. The securities mature in
June 2017 and are callable at no premium after June 2012. In addition, we invested $870 in the
Trusts common securities, representing 3% of the total capitalization of Trust III.
22
Trust III used the proceeds of the offering and our investment to purchase from us $28,995 of
junior subordinated debentures with payment terms that mirror the distribution terms of the trust
securities. The costs of the TPS offering totaled $932, including $870 of underwriting commissions
and expenses and $62 of costs incurred directly by Trust III. Trust III paid these costs utilizing
an investment from us. These costs are being amortized over a 10-year period. The proceeds from
these debentures sales, net of the costs of the TPS offering and our investment in Trust III, were
$27,193. We used the net proceeds for development costs.
Issue trusts, like Trust I and Trust III (collectively, the Trusts), are generally variable
interests. We have determined that we are not the primary beneficiary under the Trusts, and
accordingly we do not include the financial statements of the Trusts in our consolidated financial
statements.
Our consolidated financial statements present the
debentures issued to the Trusts as long-term debt. Our investments in the Trusts are accounted as
cost investments and are included in other assets on our consolidated balance sheets. For financial
reporting purposes, we record interest expense on the corresponding notes in our condensed
consolidated statements of operations.
City of Sheboygan Bonds The City of Sheboygan bonds represented the face amount of bond
anticipation notes (BANs) issued by the City in November 2003 in conjunction with the construction
of the Blue Harbor Resort in Sheboygan, Wisconsin. In March 2011, we sold the Blue Harbor Resort.
In connection with the sale of the property, we were released from our obligations under the BANs.
City of Sheboygan Loan The City of Sheboygan loan amount represented a loan made by the
City in 2004 in conjunction with the construction of the Blue Harbor Resort in Sheboygan,
Wisconsin. In March 2011, we sold the Blue Harbor Resort. In connection with the sale of the
property, we were released from our obligations under the loan.
Future Maturities Future principal requirements on long-term debt are as follows:
|
|
|
|
|
Through |
|
|
|
|
June 30, |
|
|
|
|
2012 |
|
$ |
23,809 |
|
2013 |
|
|
4,449 |
|
2014 |
|
|
4,915 |
|
2015 |
|
|
115,403 |
|
2016 |
|
|
1,646 |
|
Thereafter |
|
|
396,854 |
|
|
|
|
|
Total |
|
$ |
547,076 |
|
|
|
|
|
As discussed above, the Traverse City/Kansas City mortgage loan is classified as a current
liability as of June 30, 2011, due to the implementation of a traditional lock-box arrangement,
although the loan is not in default and the full principal balance of the loan is not due
currently. The future maturities table above reflects future cash principal repayments currently
required under the provisions of that loan of $1,688 in 2012, $1,819 in 2013, $1,947 in 2014,
$60,967 in 2015.
Due to the refinancing of our Concord mortgage loan subsequent to June 30, 2011, we have not
included the balance of the mortgage loan in the future maturities due through June 30, 2012,
except for the principal payments due under the refinanced loan through June 30, 2012 and a
principal pay down on the existing loan of $20,433 that was made as part of the refinancing of the
Concord mortgage loan.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value is defined as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date
(an exit price). GAAP outlines a valuation framework and creates a fair value hierarchy in order to
increase the consistency and comparability of fair value measurements and
23
the related disclosures. Certain assets and liabilities must be measured at fair value, and
disclosures are required for items measured at fair value.
We measure our financial instruments using inputs from the following three levels of the fair
value hierarchy. The three levels are as follows:
Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities
that we have the ability to access at the measurement date.
Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted
prices for identical or similar assets or liabilities in markets that are not active, inputs other
than quoted prices that are observable for the asset or liability (that is, interest rates, yield
curves, etc.), and inputs that are derived principally from or corroborated by observable market
data by correlation or other means (market corroborated inputs).
Level 3 includes unobservable inputs that reflect our assumptions about the assumptions that
market participants would use in pricing the asset or liability. We develop these inputs based on
the best information available, including our own data.
As of June 30, 2011, we estimate the total fair value of our long-term debt to be $56,789 less
than its total carrying value due to the terms of the existing debt being different than those
terms currently available to us for indebtedness with similar risks and remaining maturities.
We estimate our fair value using Level 2 inputs such as quoted market prices or prices quoted from third-party financial institutions. These fair value estimates have not been comprehensively revalued for purposes of these
consolidated financial statements since that date, and current estimates of fair values may differ
significantly.
The carrying amounts for cash and cash equivalents, other current assets, escrows, accounts
payable, gift certificates payable and accrued expenses approximate fair value because of the
short-term nature of these instruments.
10. EARNINGS PER SHARE
We calculate our basic earnings per common share by dividing net loss available to common
shareholders by the weighted average number of shares of common stock outstanding excluding
non-vested shares. Our diluted earnings per common share assume the issuance of common stock for
all potentially dilutive stock equivalents outstanding using the treasury stock method. In periods
in which we incur a net loss, we exclude potentially dilutive stock equivalents from the
computation of diluted weighted average shares outstanding as the effect of those potentially
dilutive items is anti-dilutive.
The trust that holds the assets to pay obligations under our deferred compensation plan has
11,765 shares of our common stock. We treat those shares of common stock as treasury stock for
purposes of our earnings per share computations and therefore we exclude them from our basic and
diluted earnings per share calculations.
Options to purchase 30,500 shares of common stock were not included in the computations of
diluted earnings per share for the three and six months ended June 30, 2011, because the exercise
prices of the options were greater than the average market price of the common shares during that
period. There were 719,561 shares of common stock that were not included in the computation of
diluted earnings per share for the three and six months ended June 30, 2011, because the market
and/or performance criteria related to these shares had not been met at June 30, 2011.
24
Basic and diluted earnings per common share are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Loss from continuing operations, net of net income
attributable to noncontrolling interest, net of tax |
|
$ |
(6,724 |
) |
|
$ |
(12,165 |
) |
|
$ |
(19,614 |
) |
|
$ |
(20,267 |
) |
(Loss) income from discontinued operations, net of tax |
|
|
(107 |
) |
|
|
(595 |
) |
|
|
6,809 |
|
|
|
(558 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Great Wolf Resorts, Inc. |
|
$ |
(6,831 |
) |
|
$ |
(12,760 |
) |
|
$ |
(12,805 |
) |
|
$ |
(20,825 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding basic
and diluted |
|
|
31,330,726 |
|
|
|
31,000,179 |
|
|
|
31,262,813 |
|
|
|
30,919,023 |
|
Loss attributable to loss from continuing operations,
net of net income attributable to noncontrolling
interest, net of tax per shares basis and diluted |
|
$ |
(0.22 |
) |
|
$ |
(0.39 |
) |
|
$ |
(0.63 |
) |
|
$ |
(0.65 |
) |
(Loss) income attributable to discontinued
operations, net of tax basic and diluted |
|
|
0.00 |
|
|
$ |
(0.02 |
) |
|
$ |
0.22 |
|
|
$ |
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Great Wolf Resorts, Inc. per
share basic and diluted |
|
$ |
(0.22 |
) |
|
$ |
(0.41 |
) |
|
$ |
(0.41 |
) |
|
$ |
(0.67 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
11. DISCONTINUED OPERATIONS
On March 24, 2011, we sold our Blue Harbor Resort in Sheboygan, Wisconsin to Claremont New
Frontier Resort LLC (Claremont) for a purchase price of $4,200, less a $540 credit for purposes of
real estate property tax payments to be made by Claremont for periods after the closing. We paid
$2,000 to the City of Sheboygan with respect to real estate taxes relating to the Sheboygan
property and contributed $300 toward a lease termination fee payable to a tenant at the property.
In connection with the construction of the Blue Harbor Resort, we had entered into agreements
with the City of Sheboygan and the Redevelopment Authority of the City of Sheboygan whereby the
City funded certain costs of construction. In exchange, we guaranteed certain levels of real and
personal property tax payments, as well as room tax payments, from Blue Harbor Resort.
In connection with the closing, the existing agreements with the City of Sheboygan and the
Redevelopment Authority were terminated, and we were released from all of our obligations under
these agreements.
As a result of the sale, we have included the operations of the Blue Harbor Resort in
discontinued operations for all periods presented.
The operation of the Blue Harbor Resort was included in our Resort ownership/operation segment.
A summary of balance sheet data and operating activity related to discontinued operations is
as follows:
|
|
|
|
|
|
|
|
|
|
|
March 23, |
|
|
December 31, |
|
Balance sheet data: |
|
2011 |
|
|
2010 |
|
Total assets |
|
$ |
6,463 |
|
|
$ |
8,742 |
|
Total liabilities |
|
$ |
13,587 |
|
|
$ |
14,121 |
|
Included in total assets at December 31, 2010 is $5,775 of property and equipment. Included
in total liabilities at December 31, 2010 is $11,627 of other long-term debt. As part of the sales
transaction on March 23, 2011, we wrote off $5,699 of property and equipment and $11,563 of other
long-term debt.
|
|
|
|
|
|
|
|
|
|
|
Six months ended |
|
|
|
June 30, |
|
|
|
2011 |
|
|
2010 |
|
Revenues |
|
$ |
1,578 |
|
|
$ |
3,659 |
|
Operating expenses |
|
|
(1,360 |
) |
|
|
(3,655 |
) |
Gain on sale |
|
|
6,667 |
|
|
|
|
|
Interest expense, net of interest income |
|
|
(76 |
) |
|
|
(552 |
) |
Income tax expense |
|
|
|
|
|
|
(10 |
) |
|
|
|
|
|
|
|
Income
(loss) from discontinued operations, net of tax |
|
$ |
6,809 |
|
|
$ |
(558 |
) |
|
|
|
|
|
|
|
25
12. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
In
April 2010, our subsidiaries, GWR Operating Partnership, L.L.L.P and Great Wolf Finance Corp.
were co-issuers (the Issuer) with respect to $230,000 in principal amount of 10.875% first mortgage
notes. In connection with the issuance, certain of our subsidiaries (the Subsidiary Guarantors)
have guaranteed the first mortgage notes. Certain of our other subsidiaries (the Non-Guarantor
Subsidiaries) have not guaranteed the first mortgage notes.
The following tables present the condensed consolidating balances sheets of the Company
(Parent), the Issuers, the Subsidiary Guarantors and the Non-Guarantor Subsidiaries as of June 30,
2011 and December 31, 2010, the condensed consolidating statements of operations for the three and
six months ended June 30, 2011 and 2010 and the condensed consolidating statements of cash flows
for the six months ended June 30, 2011 and 2010.
The accompanying condensed consolidating financial information has been prepared and presented
pursuant to SEC Regulation S-X Rule 3-10, Financial statements of guarantors and issuers of
guaranteed securities registered or being registered. Each of the Subsidiary Guarantors is 100%
owned, directly or indirectly, by Great Wolf Resorts, Inc. There are significant restrictions on
the Subsidiary Guarantors ability to pay dividends or obtain loans or advances. The Companys and
the Issuers investments in their consolidated subsidiaries are presented under the equity method
of accounting.
26
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
June 30, 2011
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary |
|
|
Non Guarantor |
|
|
Consolidating |
|
|
|
|
|
|
Parent |
|
|
Issuers |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Consolidated |
|
ASSETS |
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
10,025 |
|
|
$ |
26,476 |
|
|
$ |
(2,274 |
) |
|
$ |
4,105 |
|
|
$ |
|
|
|
$ |
38,332 |
|
Escrows |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,979 |
|
|
|
|
|
|
|
2,979 |
|
Accounts receivable |
|
|
582 |
|
|
|
|
|
|
|
2,337 |
|
|
|
1,509 |
|
|
|
|
|
|
|
4,428 |
|
Accounts receivable affiliates |
|
|
|
|
|
|
|
|
|
|
590 |
|
|
|
2,837 |
|
|
|
|
|
|
|
3,427 |
|
Accounts receivable consolidating entities |
|
|
10,925 |
|
|
|
466,938 |
|
|
|
455,693 |
|
|
|
191,369 |
|
|
|
(1,124,925 |
) |
|
|
|
|
Inventory |
|
|
|
|
|
|
|
|
|
|
2,841 |
|
|
|
5,501 |
|
|
|
|
|
|
|
8,342 |
|
Other current assets |
|
|
1,266 |
|
|
|
|
|
|
|
3,756 |
|
|
|
3,275 |
|
|
|
|
|
|
|
8,297 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
22,798 |
|
|
|
493,414 |
|
|
|
462,943 |
|
|
|
211,575 |
|
|
|
(1,124,925 |
) |
|
|
65,805 |
|
Property and equipment, net |
|
|
|
|
|
|
|
|
|
|
341,733 |
|
|
|
254,712 |
|
|
|
|
|
|
|
596,445 |
|
Investments in consolidating entities |
|
|
206,531 |
|
|
|
267,334 |
|
|
|
|
|
|
|
|
|
|
|
(473,865 |
) |
|
|
|
|
Investments in and advances to affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,818 |
|
|
|
|
|
|
|
24,818 |
|
Other assets |
|
|
12,597 |
|
|
|
7,390 |
|
|
|
7,604 |
|
|
|
3,113 |
|
|
|
|
|
|
|
30,704 |
|
Intangible assets |
|
|
1,365 |
|
|
|
|
|
|
|
4,668 |
|
|
|
20,665 |
|
|
|
|
|
|
|
26,698 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
243,291 |
|
|
$ |
768,138 |
|
|
$ |
816,948 |
|
|
$ |
514,883 |
|
|
$ |
(1,598,790 |
) |
|
$ |
744,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt |
|
$ |
|
|
|
$ |
|
|
|
$ |
31 |
|
|
$ |
88,511 |
|
|
$ |
|
|
|
$ |
88,542 |
|
Accounts payable |
|
|
310 |
|
|
|
|
|
|
|
2,057 |
|
|
|
1,596 |
|
|
|
|
|
|
|
3,963 |
|
Accounts payable affiliates |
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
8 |
|
|
|
|
|
|
|
9 |
|
Accounts payable consolidating entities |
|
|
4,781 |
|
|
|
334,152 |
|
|
|
640,937 |
|
|
|
145,055 |
|
|
|
(1,124,925 |
) |
|
|
|
|
Accrued interest payable |
|
|
723 |
|
|
|
6,253 |
|
|
|
|
|
|
|
735 |
|
|
|
|
|
|
|
7,711 |
|
Accrued expenses |
|
|
505 |
|
|
|
14 |
|
|
|
11,254 |
|
|
|
8,646 |
|
|
|
|
|
|
|
20,419 |
|
Advance deposits |
|
|
|
|
|
|
|
|
|
|
7,245 |
|
|
|
6,130 |
|
|
|
|
|
|
|
13,375 |
|
Other current liabilities |
|
|
2,820 |
|
|
|
|
|
|
|
1,022 |
|
|
|
1,642 |
|
|
|
|
|
|
|
5,484 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
9,139 |
|
|
|
340,419 |
|
|
|
662,547 |
|
|
|
252,323 |
|
|
|
(1,124,925 |
) |
|
|
139,503 |
|
Mortgage debt |
|
|
|
|
|
|
221,188 |
|
|
|
|
|
|
|
147,989 |
|
|
|
|
|
|
|
369,177 |
|
Other long-term debt |
|
|
80,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,545 |
|
Deferred compensation liability |
|
|
|
|
|
|
|
|
|
|
1,683 |
|
|
|
|
|
|
|
|
|
|
|
1,683 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
89,684 |
|
|
|
561,607 |
|
|
|
664,230 |
|
|
|
400,312 |
|
|
|
(1,124,925 |
) |
|
|
590,908 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Great Wolf
Resorts Inc. stockholders equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
326 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
326 |
|
Preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in-capital |
|
|
403,582 |
|
|
|
456,693 |
|
|
|
163,514 |
|
|
|
293,179 |
|
|
|
(913,386 |
) |
|
|
403,582 |
|
Accumulated deficit |
|
|
(250,101 |
) |
|
|
(250,162 |
) |
|
|
(10,796 |
) |
|
|
(178,563 |
) |
|
|
439,521 |
|
|
|
(250,101 |
) |
Deferred compensation |
|
|
(200 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(200 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Great Wolf Resorts, Inc. stockholders
equity |
|
|
153,607 |
|
|
|
206,531 |
|
|
|
152,718 |
|
|
|
114,616 |
|
|
|
(473,865 |
) |
|
|
153,607 |
|
Noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(45 |
) |
|
|
|
|
|
|
(45 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
153,607 |
|
|
|
206,531 |
|
|
|
152,718 |
|
|
|
114,571 |
|
|
|
(473,865 |
) |
|
|
153,562 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
243,291 |
|
|
$ |
768,138 |
|
|
$ |
816,948 |
|
|
$ |
514,883 |
|
|
$ |
(1,598,790 |
) |
|
$ |
744,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
CONSOLIDATING BALANCE SHEET
December 31, 2010
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary |
|
|
Non Guarantor |
|
|
Consolidating |
|
|
|
|
|
|
Parent |
|
|
Issuers |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Consolidated |
|
ASSETS |
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
10,047 |
|
|
$ |
24,168 |
|
|
$ |
(328 |
) |
|
$ |
3,101 |
|
|
$ |
|
|
|
$ |
36,988 |
|
Escrows |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,283 |
|
|
|
|
|
|
|
1,283 |
|
Accounts receivable |
|
|
88 |
|
|
|
|
|
|
|
1,615 |
|
|
|
1,575 |
|
|
|
|
|
|
|
3,278 |
|
Accounts receivable affiliates |
|
|
|
|
|
|
|
|
|
|
1,369 |
|
|
|
2,395 |
|
|
|
|
|
|
|
3,764 |
|
Accounts receivable consolidating entities |
|
|
12,747 |
|
|
|
462,941 |
|
|
|
304,775 |
|
|
|
151,770 |
|
|
|
(932,233 |
) |
|
|
|
|
Inventory |
|
|
|
|
|
|
|
|
|
|
2,593 |
|
|
|
4,278 |
|
|
|
|
|
|
|
6,871 |
|
Other current assets |
|
|
192 |
|
|
|
|
|
|
|
1,512 |
|
|
|
2,915 |
|
|
|
|
|
|
|
4,619 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
23,074 |
|
|
|
487,109 |
|
|
|
311,536 |
|
|
|
167,317 |
|
|
|
(932,233 |
) |
|
|
56,803 |
|
Property and equipment, net |
|
|
|
|
|
|
|
|
|
|
352,689 |
|
|
|
271,269 |
|
|
|
|
|
|
|
623,958 |
|
Investments in consolidating entities |
|
|
210,356 |
|
|
|
257,151 |
|
|
|
|
|
|
|
|
|
|
|
(467,507 |
) |
|
|
|
|
Investments in and advances to affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,131 |
|
|
|
|
|
|
|
25,131 |
|
Other assets |
|
|
17,274 |
|
|
|
7,948 |
|
|
|
7,070 |
|
|
|
6,357 |
|
|
|
|
|
|
|
38,649 |
|
Intangible assets |
|
|
1,365 |
|
|
|
|
|
|
|
4,668 |
|
|
|
20,664 |
|
|
|
|
|
|
|
26,697 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
252,069 |
|
|
$ |
752,208 |
|
|
$ |
675,963 |
|
|
$ |
490,738 |
|
|
$ |
(1,399,740 |
) |
|
$ |
771,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt |
|
$ |
|
|
|
$ |
|
|
|
$ |
33 |
|
|
$ |
70,050 |
|
|
$ |
|
|
|
$ |
70,083 |
|
Accounts payable |
|
|
151 |
|
|
|
|
|
|
|
5,543 |
|
|
|
2,805 |
|
|
|
|
|
|
|
8,499 |
|
Accounts payable affiliates |
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
3 |
|
|
|
|
|
|
|
4 |
|
Accounts payable consolidating entities |
|
|
423 |
|
|
|
314,488 |
|
|
|
510,186 |
|
|
|
107,136 |
|
|
|
(932,233 |
) |
|
|
|
|
Accrued interest payable |
|
|
723 |
|
|
|
6,253 |
|
|
|
|
|
|
|
1,109 |
|
|
|
|
|
|
|
8,085 |
|
Accrued expenses |
|
|
287 |
|
|
|
689 |
|
|
|
11,534 |
|
|
|
7,924 |
|
|
|
|
|
|
|
20,434 |
|
Advance deposits |
|
|
|
|
|
|
|
|
|
|
2,522 |
|
|
|
4,950 |
|
|
|
|
|
|
|
7,472 |
|
Other current liabilities |
|
|
4,161 |
|
|
|
|
|
|
|
1,111 |
|
|
|
2,144 |
|
|
|
|
|
|
|
7,416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
5,745 |
|
|
|
321,430 |
|
|
|
530,930 |
|
|
|
196,121 |
|
|
|
(932,233 |
) |
|
|
121,993 |
|
Mortgage debt |
|
|
|
|
|
|
220,422 |
|
|
|
|
|
|
|
169,867 |
|
|
|
|
|
|
|
390,289 |
|
Other long-term debt |
|
|
80,545 |
|
|
|
|
|
|
|
14 |
|
|
|
11,367 |
|
|
|
|
|
|
|
91,926 |
|
Deferred compensation liability |
|
|
|
|
|
|
|
|
|
|
1,260 |
|
|
|
|
|
|
|
|
|
|
|
1,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
86,290 |
|
|
|
541,852 |
|
|
|
532,204 |
|
|
|
377,355 |
|
|
|
(932,233 |
) |
|
|
605,468 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Great Wolf
Resorts Inc. stockholders equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
323 |
|
Preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in-capital |
|
|
402,952 |
|
|
|
456,693 |
|
|
|
163,514 |
|
|
|
293,179 |
|
|
|
(913,386 |
) |
|
|
402,952 |
|
Accumulated deficit |
|
|
(237,296 |
) |
|
|
(246,337 |
) |
|
|
(19,755 |
) |
|
|
(179,787 |
) |
|
|
445,879 |
|
|
|
(237,296 |
) |
Deferred compensation |
|
|
(200 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(200 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Great Wolf Resorts, Inc. stockholders
equity |
|
|
165,779 |
|
|
|
210,356 |
|
|
|
143,759 |
|
|
|
113,392 |
|
|
|
(467,507 |
) |
|
|
165,779 |
|
Noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9 |
) |
|
|
|
|
|
|
(9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
165,779 |
|
|
|
210,356 |
|
|
|
143,759 |
|
|
|
113,383 |
|
|
|
(467,507 |
) |
|
|
165,770 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
252,069 |
|
|
$ |
752,208 |
|
|
$ |
675,963 |
|
|
$ |
490,738 |
|
|
$ |
(1,399,740 |
) |
|
$ |
771,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Three months ended June 30, 2011
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary |
|
|
Non Guarantor |
|
|
Consolidating |
|
|
|
|
|
|
Parent |
|
|
Issuers |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Consolidated |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms |
|
$ |
|
|
|
$ |
|
|
|
$ |
23,286 |
|
|
$ |
21,545 |
|
|
$ |
|
|
|
$ |
44,831 |
|
Food and beverage |
|
|
|
|
|
|
|
|
|
|
6,546 |
|
|
|
5,443 |
|
|
|
|
|
|
|
11,989 |
|
Other |
|
|
|
|
|
|
|
|
|
|
5,409 |
|
|
|
6,130 |
|
|
|
|
|
|
|
11,539 |
|
Management and other fees |
|
|
128 |
|
|
|
|
|
|
|
5,904 |
|
|
|
6 |
|
|
|
(5,384 |
) |
|
|
654 |
|
Management and other fees affiliates |
|
|
|
|
|
|
|
|
|
|
1,024 |
|
|
|
|
|
|
|
|
|
|
|
1,024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128 |
|
|
|
|
|
|
|
42,169 |
|
|
|
33,124 |
|
|
|
(5,384 |
) |
|
|
70,037 |
|
Other revenue from managed properties |
|
|
|
|
|
|
|
|
|
|
2,945 |
|
|
|
|
|
|
|
|
|
|
|
2,945 |
|
Other revenue from managed properties affiliates |
|
|
|
|
|
|
|
|
|
|
2,743 |
|
|
|
|
|
|
|
|
|
|
|
2,743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
128 |
|
|
|
|
|
|
|
47,857 |
|
|
|
33,124 |
|
|
|
(5,384 |
) |
|
|
75,725 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses by department: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms |
|
|
|
|
|
|
|
|
|
|
3,849 |
|
|
|
3,627 |
|
|
|
(900 |
) |
|
|
6,576 |
|
Food and beverage |
|
|
|
|
|
|
|
|
|
|
5,102 |
|
|
|
4,187 |
|
|
|
|
|
|
|
9,289 |
|
Other |
|
|
|
|
|
|
|
|
|
|
4,378 |
|
|
|
4,767 |
|
|
|
|
|
|
|
9,145 |
|
Other operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
645 |
|
|
|
35 |
|
|
|
12,010 |
|
|
|
8,633 |
|
|
|
(4,399 |
) |
|
|
16,924 |
|
Property operating costs |
|
|
|
|
|
|
|
|
|
|
3,999 |
|
|
|
4,857 |
|
|
|
|
|
|
|
8,856 |
|
Depreciation and amortization |
|
|
39 |
|
|
|
347 |
|
|
|
6,381 |
|
|
|
6,548 |
|
|
|
|
|
|
|
13,315 |
|
Loss on disposition of assets |
|
|
|
|
|
|
|
|
|
|
21 |
|
|
|
1,017 |
|
|
|
|
|
|
|
1,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
684 |
|
|
|
382 |
|
|
|
35,740 |
|
|
|
33,636 |
|
|
|
(5,299 |
) |
|
|
65,143 |
|
Other expenses from managed properties |
|
|
|
|
|
|
|
|
|
|
2,945 |
|
|
|
|
|
|
|
|
|
|
|
2,945 |
|
Other expenses from managed properties affiliates |
|
|
|
|
|
|
|
|
|
|
2,743 |
|
|
|
|
|
|
|
|
|
|
|
2,743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
684 |
|
|
|
382 |
|
|
|
41,128 |
|
|
|
33,636 |
|
|
|
(5,299 |
) |
|
|
70,831 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating (loss) income |
|
|
(556 |
) |
|
|
(382 |
) |
|
|
6,429 |
|
|
|
(512 |
) |
|
|
(85 |
) |
|
|
4,894 |
|
Investment income affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(220 |
) |
|
|
|
|
|
|
(220 |
) |
Interest income |
|
|
(48 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
(51 |
) |
Interest expense |
|
|
1,584 |
|
|
|
6,636 |
|
|
|
1 |
|
|
|
3,887 |
|
|
|
|
|
|
|
12,108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before
income taxes and equity in income of unconsolidated
affiliates |
|
|
(2,092 |
) |
|
|
(7,016 |
) |
|
|
6,428 |
|
|
|
(4,178 |
) |
|
|
(85 |
) |
|
|
(6,943 |
) |
Income tax (benefit) expense |
|
|
(159 |
) |
|
|
|
|
|
|
123 |
|
|
|
170 |
|
|
|
|
|
|
|
134 |
|
Equity in loss (income) of unconsolidated
affiliates, net of tax |
|
|
4,898 |
|
|
|
(2,118 |
) |
|
|
|
|
|
|
(332 |
) |
|
|
(2,780 |
) |
|
|
(332 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income from continuing operations |
|
|
(6,831 |
) |
|
|
(4,898 |
) |
|
|
6,305 |
|
|
|
(4,016 |
) |
|
|
2,695 |
|
|
|
(6,745 |
) |
Discontinued operations, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
192 |
|
|
|
(85 |
) |
|
|
107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
|
(6,831 |
) |
|
|
(4,898 |
) |
|
|
6,305 |
|
|
|
(4,208 |
) |
|
|
2,780 |
|
|
|
(6,852 |
) |
Net income attributable to noncontrolling interest,
net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21 |
) |
|
|
|
|
|
|
(21 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to Great Wolf
Resorts, Inc. |
|
$ |
(6,831 |
) |
|
$ |
(4,898 |
) |
|
$ |
6,305 |
|
|
$ |
(4,187 |
) |
|
$ |
2,780 |
|
|
$ |
(6,831 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Three months ended June 30, 2010
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary |
|
|
Non Guarantor |
|
|
Consolidating |
|
|
|
|
|
|
Parent |
|
|
Issuers |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Consolidated |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms |
|
$ |
|
|
|
$ |
|
|
|
$ |
19,948 |
|
|
$ |
18,480 |
|
|
$ |
|
|
|
$ |
38,428 |
|
Food and beverage |
|
|
|
|
|
|
|
|
|
|
6,026 |
|
|
|
5,099 |
|
|
|
|
|
|
|
11,125 |
|
Other |
|
|
|
|
|
|
|
|
|
|
4,673 |
|
|
|
5,247 |
|
|
|
|
|
|
|
9,920 |
|
Management and other fees |
|
|
108 |
|
|
|
|
|
|
|
5,225 |
|
|
|
|
|
|
|
(4,774 |
) |
|
|
559 |
|
Management and other fees affiliates |
|
|
|
|
|
|
|
|
|
|
960 |
|
|
|
|
|
|
|
|
|
|
|
960 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108 |
|
|
|
|
|
|
|
36,832 |
|
|
|
28,826 |
|
|
|
(4,774 |
) |
|
|
60,992 |
|
Other revenue from managed properties |
|
|
|
|
|
|
|
|
|
|
2,854 |
|
|
|
|
|
|
|
|
|
|
|
2,854 |
|
Other revenue from managed properties affiliates |
|
|
|
|
|
|
|
|
|
|
2,759 |
|
|
|
|
|
|
|
|
|
|
|
2,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
108 |
|
|
|
|
|
|
|
42,445 |
|
|
|
28,826 |
|
|
|
(4,774 |
) |
|
|
66,605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses by department: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms |
|
|
|
|
|
|
|
|
|
|
3,389 |
|
|
|
3,152 |
|
|
|
(771 |
) |
|
|
5,770 |
|
Food and beverage |
|
|
|
|
|
|
|
|
|
|
4,583 |
|
|
|
3,843 |
|
|
|
|
|
|
|
8,426 |
|
Other |
|
|
|
|
|
|
|
|
|
|
4,013 |
|
|
|
4,211 |
|
|
|
|
|
|
|
8,224 |
|
Other operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
994 |
|
|
|
41 |
|
|
|
10,612 |
|
|
|
6,210 |
|
|
|
(3,906 |
) |
|
|
13,951 |
|
Property operating costs |
|
|
|
|
|
|
|
|
|
|
3,866 |
|
|
|
3,922 |
|
|
|
|
|
|
|
7,788 |
|
Loss on disposition of property |
|
|
39 |
|
|
|
295 |
|
|
|
10,034 |
|
|
|
6,650 |
|
|
|
|
|
|
|
17,018 |
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,033 |
|
|
|
336 |
|
|
|
36,497 |
|
|
|
27,997 |
|
|
|
(4,677 |
) |
|
|
61,186 |
|
Other expenses from managed properties |
|
|
|
|
|
|
|
|
|
|
2,854 |
|
|
|
|
|
|
|
|
|
|
|
2,854 |
|
Other expenses from managed properties affiliates |
|
|
|
|
|
|
|
|
|
|
2,759 |
|
|
|
|
|
|
|
|
|
|
|
2,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
1,033 |
|
|
|
336 |
|
|
|
42,110 |
|
|
|
27,997 |
|
|
|
(4,677 |
) |
|
|
66,799 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating (loss) income |
|
|
(925 |
) |
|
|
(336 |
) |
|
|
335 |
|
|
|
829 |
|
|
|
(97 |
) |
|
|
(194 |
) |
Investment income affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(276 |
) |
|
|
|
|
|
|
(276 |
) |
Interest income |
|
|
(180 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
|
|
4 |
|
|
|
|
|
|
|
(178 |
) |
Interest expense |
|
|
1,584 |
|
|
|
6,194 |
|
|
|
250 |
|
|
|
3,969 |
|
|
|
|
|
|
|
11,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before
income taxes and equity in income of unconsolidated
affiliates |
|
|
(2,329 |
) |
|
|
(6,529 |
) |
|
|
86 |
|
|
|
(2,868 |
) |
|
|
(97 |
) |
|
|
(11,737 |
) |
Income tax expense |
|
|
3 |
|
|
|
|
|
|
|
171 |
|
|
|
|
|
|
|
4 |
|
|
|
178 |
|
Equity in loss (income) of unconsolidated
affiliates, net of tax |
|
|
10,428 |
|
|
|
3,899 |
|
|
|
|
|
|
|
210 |
|
|
|
(14,327 |
) |
|
|
210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income from continuing operations |
|
|
(12,760 |
) |
|
|
(10,428 |
) |
|
|
(85 |
) |
|
|
(3,078 |
) |
|
|
14,226 |
|
|
|
(12,125 |
) |
Discontinued operations, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
696 |
|
|
|
(101 |
) |
|
|
595 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
|
(12,760 |
) |
|
|
(10,428 |
) |
|
|
(85 |
) |
|
|
(3,774 |
) |
|
|
14,327 |
|
|
|
(12,720 |
) |
Net loss attributable to noncontrolling interest,
net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to Great Wolf
Resorts, Inc. |
|
$ |
(12,760 |
) |
|
$ |
(10,428 |
) |
|
$ |
(85 |
) |
|
$ |
(3,814 |
) |
|
$ |
14,327 |
|
|
$ |
(12,760 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Six months ended June 30, 2011
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary |
|
|
Non Guarantor |
|
|
Consolidating |
|
|
|
|
|
|
Parent |
|
|
Issuers |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Consolidated |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms |
|
$ |
|
|
|
$ |
|
|
|
$ |
43,428 |
|
|
$ |
43,590 |
|
|
$ |
|
|
|
$ |
87,018 |
|
Food and beverage |
|
|
|
|
|
|
|
|
|
|
12,067 |
|
|
|
11,124 |
|
|
|
|
|
|
|
23,191 |
|
Other |
|
|
|
|
|
|
|
|
|
|
10,350 |
|
|
|
12,368 |
|
|
|
|
|
|
|
22,718 |
|
Management and other fees |
|
|
283 |
|
|
|
|
|
|
|
11,632 |
|
|
|
24 |
|
|
|
(10,532 |
) |
|
|
1,407 |
|
Management and other fees affiliates |
|
|
|
|
|
|
|
|
|
|
2,027 |
|
|
|
|
|
|
|
|
|
|
|
2,027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
283 |
|
|
|
|
|
|
|
79,504 |
|
|
|
67,106 |
|
|
|
(10,532 |
) |
|
|
136,361 |
|
Other revenue from managed properties |
|
|
|
|
|
|
|
|
|
|
5,782 |
|
|
|
|
|
|
|
|
|
|
|
5,782 |
|
Other revenue from managed properties affiliates |
|
|
|
|
|
|
|
|
|
|
5,467 |
|
|
|
|
|
|
|
|
|
|
|
5,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
283 |
|
|
|
|
|
|
|
90,753 |
|
|
|
67,106 |
|
|
|
(10,532 |
) |
|
|
147,610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses by department: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms |
|
|
|
|
|
|
|
|
|
|
7,249 |
|
|
|
7,121 |
|
|
|
(1,747 |
) |
|
|
12,623 |
|
Food and beverage |
|
|
|
|
|
|
|
|
|
|
9,370 |
|
|
|
8,379 |
|
|
|
|
|
|
|
17,749 |
|
Other |
|
|
|
|
|
|
|
|
|
|
8,342 |
|
|
|
10,220 |
|
|
|
|
|
|
|
18,562 |
|
Other operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
1,538 |
|
|
|
68 |
|
|
|
24,489 |
|
|
|
16,427 |
|
|
|
(8,617 |
) |
|
|
33,905 |
|
Property operating costs |
|
|
|
|
|
|
|
|
|
|
8,112 |
|
|
|
9,168 |
|
|
|
|
|
|
|
17,280 |
|
Depreciation and amortization |
|
|
77 |
|
|
|
673 |
|
|
|
12,734 |
|
|
|
13,079 |
|
|
|
|
|
|
|
26,563 |
|
Loss on disposition of property |
|
|
|
|
|
|
|
|
|
|
21 |
|
|
|
1,017 |
|
|
|
|
|
|
|
1,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,615 |
|
|
|
741 |
|
|
|
70,317 |
|
|
|
65,411 |
|
|
|
(10,364 |
) |
|
|
127,720 |
|
Other expenses from managed properties |
|
|
|
|
|
|
|
|
|
|
5,782 |
|
|
|
|
|
|
|
|
|
|
|
5,782 |
|
Other expenses from managed properties affiliates |
|
|
|
|
|
|
|
|
|
|
5,467 |
|
|
|
|
|
|
|
|
|
|
|
5,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
1,615 |
|
|
|
741 |
|
|
|
81,566 |
|
|
|
65,411 |
|
|
|
(10,364 |
) |
|
|
138,969 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating (loss) income |
|
|
(1,332 |
) |
|
|
(741 |
) |
|
|
9,187 |
|
|
|
1,695 |
|
|
|
(168 |
) |
|
|
8,641 |
|
Investment income affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(462 |
) |
|
|
|
|
|
|
(462 |
) |
Interest income |
|
|
(97 |
) |
|
|
(5 |
) |
|
|
|
|
|
|
(4 |
) |
|
|
|
|
|
|
(106 |
) |
Interest expense |
|
|
3,168 |
|
|
|
13,272 |
|
|
|
1 |
|
|
|
7,764 |
|
|
|
|
|
|
|
24,205 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss (income) from continuing operations before income
taxes and equity in income of unconsolidated affiliates |
|
|
(4,403 |
) |
|
|
(14,008 |
) |
|
|
9,186 |
|
|
|
(5,603 |
) |
|
|
(168 |
) |
|
|
(14,996 |
) |
Income tax expense |
|
|
4,577 |
|
|
|
|
|
|
|
227 |
|
|
|
332 |
|
|
|
|
|
|
|
5,136 |
|
Equity in loss (income) of unconsolidated affiliates, net
of tax |
|
|
3,825 |
|
|
|
(10,183 |
) |
|
|
|
|
|
|
(483 |
) |
|
|
6,358 |
|
|
|
(483 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income from continuing operations |
|
|
(12,805 |
) |
|
|
(3,825 |
) |
|
|
8,959 |
|
|
|
(5,452 |
) |
|
|
(6,526 |
) |
|
|
(19,649 |
) |
Discontinued operations, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,641 |
) |
|
|
(168 |
) |
|
|
(6,809 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
|
(12,805 |
) |
|
|
(3,825 |
) |
|
|
8,959 |
|
|
|
1,189 |
|
|
|
(6,358 |
) |
|
|
(12,840 |
) |
Net loss attributable to noncontrolling interest, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(35 |
) |
|
|
|
|
|
|
(35 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to Great Wolf Resorts, Inc. |
|
$ |
(12,805 |
) |
|
$ |
(3,825 |
) |
|
$ |
8,959 |
|
|
$ |
1,224 |
|
|
$ |
(6,358 |
) |
|
$ |
(12,805 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Six months ended June 30, 2010
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Issuers |
|
|
Subsidiary Guarantors |
|
|
Guarantor Subsidiaries |
|
|
Consolidating Adjustments |
|
|
Consolidated |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms |
|
$ |
|
|
|
$ |
|
|
|
$ |
39,062 |
|
|
$ |
40,137 |
|
|
$ |
|
|
|
$ |
79,199 |
|
Food and beverage |
|
|
|
|
|
|
|
|
|
|
11,688 |
|
|
|
10,704 |
|
|
|
|
|
|
|
22,392 |
|
Other |
|
|
|
|
|
|
|
|
|
|
9,469 |
|
|
|
10,190 |
|
|
|
|
|
|
|
19,659 |
|
Management and other fees |
|
|
225 |
|
|
|
|
|
|
|
10,766 |
|
|
|
12 |
|
|
|
(9,809 |
) |
|
|
1,194 |
|
Management and other fees affiliates |
|
|
|
|
|
|
|
|
|
|
1,980 |
|
|
|
|
|
|
|
|
|
|
|
1,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
225 |
|
|
|
|
|
|
|
72,965 |
|
|
|
61,043 |
|
|
|
(9,809 |
) |
|
|
124,424 |
|
Other revenue from managed properties |
|
|
|
|
|
|
|
|
|
|
5,571 |
|
|
|
|
|
|
|
|
|
|
|
5,571 |
|
Other revenue from managed properties
affiliates |
|
|
|
|
|
|
|
|
|
|
5,453 |
|
|
|
|
|
|
|
|
|
|
|
5,453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
225 |
|
|
|
|
|
|
|
83,989 |
|
|
|
61,043 |
|
|
|
(9,809 |
) |
|
|
135,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses by department: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms |
|
|
|
|
|
|
|
|
|
|
6,658 |
|
|
|
6,487 |
|
|
|
(1,589 |
) |
|
|
11,556 |
|
Food and beverage |
|
|
|
|
|
|
|
|
|
|
8,815 |
|
|
|
7,838 |
|
|
|
|
|
|
|
16,653 |
|
Other |
|
|
|
|
|
|
|
|
|
|
7,958 |
|
|
|
8,316 |
|
|
|
|
|
|
|
16,274 |
|
Other operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
1,709 |
|
|
|
80 |
|
|
|
23,935 |
|
|
|
14,429 |
|
|
|
(8,025 |
) |
|
|
32,128 |
|
Property operating costs |
|
|
|
|
|
|
|
|
|
|
7,971 |
|
|
|
8,441 |
|
|
|
|
|
|
|
16,412 |
|
Depreciation and amortization |
|
|
77 |
|
|
|
295 |
|
|
|
17,636 |
|
|
|
13,156 |
|
|
|
|
|
|
|
31,164 |
|
Loss on disposition of property |
|
|
|
|
|
|
|
|
|
|
10 |
|
|
|
9 |
|
|
|
|
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,786 |
|
|
|
375 |
|
|
|
72,983 |
|
|
|
58,676 |
|
|
|
(9,614 |
) |
|
|
124,206 |
|
Other expenses from managed properties |
|
|
|
|
|
|
|
|
|
|
5,571 |
|
|
|
|
|
|
|
|
|
|
|
5,571 |
|
Other expenses from managed properties
affiliates |
|
|
|
|
|
|
|
|
|
|
5,453 |
|
|
|
|
|
|
|
|
|
|
|
5,453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
1,786 |
|
|
|
375 |
|
|
|
84,007 |
|
|
|
58,676 |
|
|
|
(9,614 |
) |
|
|
135,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating (loss) income |
|
|
(1,561 |
) |
|
|
(375 |
) |
|
|
(18 |
) |
|
|
2,367 |
|
|
|
(195 |
) |
|
|
218 |
|
Investment income affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(565 |
) |
|
|
|
|
|
|
(565 |
) |
Interest income |
|
|
(431 |
) |
|
|
(2 |
) |
|
|
(1 |
) |
|
|
4 |
|
|
|
|
|
|
|
(430 |
) |
Interest expense |
|
|
3,162 |
|
|
|
6,194 |
|
|
|
3,850 |
|
|
|
7,898 |
|
|
|
|
|
|
|
21,104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before
income taxes and equity in income of
unconsolidated affiliates |
|
|
(4,292 |
) |
|
|
(6,567 |
) |
|
|
(3,867 |
) |
|
|
(4,970 |
) |
|
|
(195 |
) |
|
|
(19,891 |
) |
Income tax (benefit) expense |
|
|
(190 |
) |
|
|
|
|
|
|
286 |
|
|
|
259 |
|
|
|
4 |
|
|
|
359 |
|
Equity in loss (income) of unconsolidated
affiliates, net of tax |
|
|
16,723 |
|
|
|
10,156 |
|
|
|
|
|
|
|
(23 |
) |
|
|
(26,879 |
) |
|
|
(23 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income from continuing operations |
|
|
(20,825 |
) |
|
|
(16,723 |
) |
|
|
(4,153 |
) |
|
|
(5,206 |
) |
|
|
26,680 |
|
|
|
(20,227 |
) |
Discontinued operations, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
757 |
|
|
|
(199 |
) |
|
|
558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
|
(20,825 |
) |
|
|
(16,723 |
) |
|
|
(4,153 |
) |
|
|
(5,963 |
) |
|
|
26,879 |
|
|
|
(20,785 |
) |
Net loss attributable to noncontrolling
interest, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to Great
Wolf Resorts, Inc. |
|
$ |
(20,825 |
) |
|
$ |
(16,723 |
) |
|
$ |
(4,153 |
) |
|
$ |
(6,003 |
) |
|
$ |
26,879 |
|
|
$ |
(20,825 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Six months ended June 30, 2011
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Issuers |
|
|
Subsidiary Guarantors |
|
|
Guarantor Subsidiaries |
|
|
Consolidating Adjustments |
|
|
Consolidated |
|
Operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(12,805 |
) |
|
$ |
(3,825 |
) |
|
$ |
8,959 |
|
|
$ |
1,189 |
|
|
$ |
(6,358 |
) |
|
$ |
(12,840 |
) |
Adjustment to reconcile net (loss) income to
net cash (used in) provided by operating
activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
77 |
|
|
|
673 |
|
|
|
12,734 |
|
|
|
13,180 |
|
|
|
|
|
|
|
26,664 |
|
Bad debt expense |
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
24 |
|
|
|
|
|
|
|
25 |
|
Non-cash employee compensation and
professional fees expense |
|
|
|
|
|
|
|
|
|
|
1,130 |
|
|
|
|
|
|
|
|
|
|
|
1,130 |
|
Loss on disposition of assets |
|
|
|
|
|
|
|
|
|
|
21 |
|
|
|
1,017 |
|
|
|
|
|
|
|
1,038 |
|
Gain on disposition of property included in
discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,667 |
) |
|
|
|
|
|
|
(6,667 |
) |
Equity in loss (income) of unconsolidated
affiliates |
|
|
3,825 |
|
|
|
(10,183 |
) |
|
|
|
|
|
|
(494 |
) |
|
|
6,358 |
|
|
|
(494 |
) |
Deferred tax expense |
|
|
4,589 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,589 |
|
Changes in operating assets and liabilities |
|
|
(838 |
) |
|
|
(675 |
) |
|
|
(2,399 |
) |
|
|
(4,807 |
) |
|
|
|
|
|
|
(8,719 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating
activities |
|
|
(5,152 |
) |
|
|
(14,010 |
) |
|
|
20,446 |
|
|
|
3,442 |
|
|
|
|
|
|
|
4,726 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures for property and equipment |
|
|
|
|
|
|
|
|
|
|
(2,041 |
) |
|
|
(3,133 |
) |
|
|
|
|
|
|
(5,174 |
) |
Loan repayment from unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
807 |
|
|
|
|
|
|
|
807 |
|
Investment in development |
|
|
|
|
|
|
|
|
|
|
(168 |
) |
|
|
|
|
|
|
|
|
|
|
(168 |
) |
Proceeds from sale of a discontinued operation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,200 |
|
|
|
|
|
|
|
4,200 |
|
(Increase) decrease in restricted cash |
|
|
(1,000 |
) |
|
|
|
|
|
|
|
|
|
|
665 |
|
|
|
|
|
|
|
(335 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided in investing
activities |
|
|
(1,000 |
) |
|
|
|
|
|
|
(2,209 |
) |
|
|
2,539 |
|
|
|
|
|
|
|
(670 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments on long-term debt |
|
|
|
|
|
|
766 |
|
|
|
(16 |
) |
|
|
(3,221 |
) |
|
|
|
|
|
|
(2,471 |
) |
Payment of loan costs |
|
|
(50 |
) |
|
|
(115 |
) |
|
|
|
|
|
|
(76 |
) |
|
|
|
|
|
|
(241 |
) |
Advances from consolidating entities, net |
|
|
6,180 |
|
|
|
15,667 |
|
|
|
(20,167 |
) |
|
|
(1,680 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing
activities |
|
|
6,130 |
|
|
|
16,318 |
|
|
|
(20,183 |
) |
|
|
(4,977 |
) |
|
|
|
|
|
|
(2,712 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash
equivalents |
|
|
(22 |
) |
|
|
2,308 |
|
|
|
(1,946 |
) |
|
|
1,004 |
|
|
|
|
|
|
|
1,344 |
|
Cash and cash equivalents, beginning of period |
|
|
10,047 |
|
|
|
24,168 |
|
|
|
(328 |
) |
|
|
3,101 |
|
|
|
|
|
|
|
36,988 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
10,025 |
|
|
$ |
26,476 |
|
|
$ |
(2,274 |
) |
|
$ |
4,105 |
|
|
$ |
|
|
|
$ |
38,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Six months ended June 30, 2010
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Issuers |
|
|
Subsidiary Guarantors |
|
|
Guarantor Subsidiaries |
|
|
Consolidating Adjustments |
|
|
Consolidated |
|
Operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(20,825 |
) |
|
$ |
(16,723 |
) |
|
$ |
(4,153 |
) |
|
$ |
(5,963 |
) |
|
$ |
26,879 |
|
|
$ |
(20,785 |
) |
Adjustment to reconcile net loss to net cash
provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
77 |
|
|
|
295 |
|
|
|
17,636 |
|
|
|
13,122 |
|
|
|
|
|
|
|
31,130 |
|
Bad debt expense |
|
|
|
|
|
|
|
|
|
|
162 |
|
|
|
31 |
|
|
|
|
|
|
|
193 |
|
Non-cash employee compensation and
professional fees expense |
|
|
|
|
|
|
|
|
|
|
1,061 |
|
|
|
|
|
|
|
|
|
|
|
1,061 |
|
Loss on disposition of property |
|
|
|
|
|
|
|
|
|
|
10 |
|
|
|
9 |
|
|
|
|
|
|
|
19 |
|
Equity in losses (income) of unconsolidated
affiliates |
|
|
16,723 |
|
|
|
10,156 |
|
|
|
|
|
|
|
(22 |
) |
|
|
(26,879 |
) |
|
|
(22 |
) |
Deferred tax benefit |
|
|
(224 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(224 |
) |
Changes in operating assets and liabilities |
|
|
(1,015 |
) |
|
|
4,719 |
|
|
|
828 |
|
|
|
2,366 |
|
|
|
|
|
|
|
6,898 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating
activities |
|
|
(5,264 |
) |
|
|
(1,553 |
) |
|
|
15,544 |
|
|
|
9,543 |
|
|
|
|
|
|
|
18,270 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures for property and equipment |
|
|
|
|
|
|
|
|
|
|
(2,306 |
) |
|
|
(3,923 |
) |
|
|
|
|
|
|
(6,229 |
) |
Loan repayment from unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
490 |
|
|
|
|
|
|
|
490 |
|
Investment in affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10 |
) |
|
|
|
|
|
|
(10 |
) |
Investment in development |
|
|
|
|
|
|
|
|
|
|
(358 |
) |
|
|
|
|
|
|
|
|
|
|
(358 |
) |
Proceeds from sale of assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 |
|
|
|
|
|
|
|
15 |
|
Cash acquired in acquisition of Creative
Kingdoms, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
324 |
|
|
|
|
|
|
|
324 |
|
Increase in restricted cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
(3 |
) |
Decrease (increase) in escrows |
|
|
|
|
|
|
|
|
|
|
4,430 |
|
|
|
(1,266 |
) |
|
|
|
|
|
|
3,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)investing
activities |
|
|
|
|
|
|
|
|
|
|
1,766 |
|
|
|
(4,373 |
) |
|
|
|
|
|
|
(2,607 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments on long-term debt |
|
|
|
|
|
|
358 |
|
|
|
(214,849 |
) |
|
|
(1,450 |
) |
|
|
|
|
|
|
(215,941 |
) |
Proceeds from issuance of long-term debt |
|
|
|
|
|
|
219,298 |
|
|
|
|
|
|
|
39 |
|
|
|
|
|
|
|
219,337 |
|
Payment of loan costs |
|
|
57 |
|
|
|
(7,771 |
) |
|
|
(1,836 |
) |
|
|
(12 |
) |
|
|
|
|
|
|
(9,562 |
) |
Advances from consolidating entities, net |
|
|
10,214 |
|
|
|
(209,378 |
) |
|
|
202,752 |
|
|
|
(3,588 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing
activities |
|
|
10,271 |
|
|
|
2,507 |
|
|
|
(13,933 |
) |
|
|
(5,011 |
) |
|
|
|
|
|
|
(6,166 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
5,007 |
|
|
|
954 |
|
|
|
3,377 |
|
|
|
159 |
|
|
|
|
|
|
|
9,497 |
|
Cash and cash equivalents, beginning of period |
|
|
5,023 |
|
|
|
14,538 |
|
|
|
(1,590 |
) |
|
|
2,942 |
|
|
|
|
|
|
|
20,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
10,030 |
|
|
$ |
15,492 |
|
|
$ |
1,787 |
|
|
$ |
3,101 |
|
|
$ |
|
|
|
$ |
30,410 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13. SUBSEQUENT EVENT
On July 15, 2011, we entered into a loan agreement to refinance our Concord mortgage loan.
The principal amount of the refinanced loan is $56,000. This loan is secured by our Concord resort
and loan bears interest at a floating rate of 30-day LIBOR plus a spread of 500 basis points with a
minimum rate of 6.00% per annum. This loan matures in July 2014 and has a one-year extension
available at our option, assuming the property meets certain operating performance thresholds. The
lender has a $25,000 loan principal guarantee from Great Wolf Resorts.
In
connection with this transaction, we wrote-off approximately $1,850
of unamortized
debt issuance costs related to the Concord loan that was refinanced in July 2011.
|
|
|
ITEM 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
This Managements Discussion and Analysis of Financial condition and Results of
Operations is a discussion and analysis of the financial condition, results of operations and
liquidity and capital resources. The following discussion
34
should be read in conjunction with the financial statements and notes thereto appearing
elsewhere in this report. We make statements in this section that are forward-looking statements
within the meaning of the federal securities laws. For a complete discussion of forward-looking
statements, see the Forward-Looking Statements section that immediately follows the table of
contents. All dollar amounts in this discussion, except for per share data and operating
statistics, are in thousands.
Overview
The terms Great Wolf Resorts, us, we and our used in this Managements Discussion and
Analysis of Financial Condition and Results of Operations refer to Great Wolf Resorts, Inc. and its
consolidated subsidiaries.
Business. We are a family entertainment resort company that provides our guests with a
high-quality vacation at an affordable price. We are the largest owner, operator and developer in
North America of drive-to, destination family resorts featuring indoor waterparks and other
family-oriented entertainment activities based on the number of resorts in operation. Each of our
resorts features approximately 300 to 600 family suites, each of which sleeps from six to ten
people and includes a wet bar, microwave oven, refrigerator and dining and sitting area. We provide
a full-service entertainment resort experience to our target customer base: families with children
ranging in ages from 2 to 14 years old that live within a convenient driving distance of our
resorts. Our resorts are open year-round and provide a consistent, comfortable environment where
our guests can enjoy our various amenities and activities. We operate and license resorts under
our Great Wolf Lodge brand name. We have entered into licensing and management arrangements with
third parties relating to the operation of resorts under the Great Wolf Lodge brand name.
We provide our guests with a self-contained vacation experience and focus on capturing a
significant portion of their total vacation spending. We earn revenues through the sale of rooms
(which includes admission to our indoor waterpark), and other revenue-generating resort amenities.
Each of our resorts features a combination of the following revenue-generating amenities: themed
restaurants and snack bars, ice cream shop and confectionery, full-service adult spa, kid spa, game
arcade, gift shop, miniature golf, interactive game attraction, family tech center and meeting
space. We also generate revenues from licensing arrangements, management fees and other fees with
respect to our operation or development of properties owned in whole or in part by third parties.
Each of our Great Wolf Lodge resorts has a Northwoods lodge theme, designed in a Northwoods
cabin motif with exposed timber beams, massive stone fireplaces, Northwoods creatures including
mounted wolves and an animated two-story Clock Tower that provides theatrical entertainment for
younger guests. All of our guest suites are themed luxury suites, ranging in size from
approximately 385 square feet to 1,970 square feet.
The indoor waterparks in our Great Wolf Lodge resorts range in size from approximately 34,000
to 84,000 square feet and include decorative rockwork and plantings. The focus of each Great Wolf
Lodge waterpark is our signature 12-level treehouse water fort, an interactive water experience for
the entire family that features over 60 water effects and is capped by an oversized bucket that
dumps between 700 and 1,000 gallons of water every five minutes. Our waterparks also feature a
combination of high-speed body slides and inner tube waterslides, smaller and lower speed slides
for younger children, zero-depth water activity pools with geysers, a water curtain, fountains and
tumble buckets, a lazy river, additional activity pools for basketball, open swimming and other
water activities and large free-form hot tubs, including hot tubs for adults only.
On March 24, 2011, we sold our Blue Harbor Resort in Sheboygan, Wisconsin to Claremont New
Frontier Resort LLC (Claremont) for a purchase price of $4,200, less a $540 credit for purposes of
real estate property tax payments to be made by Claremont for periods after the closing. We paid
$2,000 to the City of Sheboygan with respect to real estate taxes relating to the Sheboygan
property and contributed $300 toward a lease termination fee payable to a tenant at the property.
We continue to license the Blue Harbor Resort and related trade names to Claremont at no fee. As
of March 24, 2011, we no longer operated this resort or managed the condominium units there.
35
The following table presents an overview of our portfolio of resorts. As of June 30, 2011, we
operated, managed and/or had licensing arrangements relating to the operation of 11
Great Wolf Lodge resorts (our signature Northwoods-themed resorts). We anticipate that most of our
future resorts will be licensed and/or developed under our Great Wolf Lodge brand, but we may
operate and/or enter into licensing arrangements with other resorts using different brands in
appropriate markets.
|
|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indoor |
|
|
|
Ownership |
|
|
|
|
|
|
Number of |
|
|
Number of |
|
|
Entertainment |
|
|
|
Percentage |
|
|
Opened |
|
|
Guest Suites |
|
|
Condo Units (1) |
|
|
Area (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(approx. sq. ft.) |
|
Wisconsin Dells, WI (3) |
|
|
|
|
|
|
1997 |
|
|
|
308 |
|
|
|
77 |
|
|
|
102,000 |
|
Sandusky, OH (3) |
|
|
|
|
|
|
2001 |
|
|
|
271 |
|
|
|
|
|
|
|
41,000 |
|
Traverse City, MI |
|
|
100 |
% |
|
|
2003 |
|
|
|
280 |
|
|
|
|
|
|
|
57,000 |
|
Kansas City, KS |
|
|
100 |
% |
|
|
2003 |
|
|
|
281 |
|
|
|
|
|
|
|
57,000 |
|
Williamsburg, VA (4) |
|
|
100 |
% |
|
|
2005 |
|
|
|
405 |
|
|
|
|
|
|
|
87,000 |
|
Pocono Mountains, PA (4) |
|
|
100 |
% |
|
|
2005 |
|
|
|
401 |
|
|
|
|
|
|
|
101,000 |
|
Niagara Falls, ONT (5) |
|
|
|
|
|
|
2006 |
|
|
|
406 |
|
|
|
|
|
|
|
104,000 |
|
Mason, OH (4) |
|
|
100 |
% |
|
|
2006 |
|
|
|
401 |
|
|
|
|
|
|
|
105,000 |
|
Grapevine, TX (4) |
|
|
100 |
% |
|
|
2007 |
|
|
|
605 |
|
|
|
|
|
|
|
110,000 |
|
Grand Mound, WA (6) |
|
|
49 |
% |
|
|
2008 |
|
|
|
398 |
|
|
|
|
|
|
|
74,000 |
|
Concord, NC (4) |
|
|
100 |
% |
|
|
2009 |
|
|
|
402 |
|
|
|
|
|
|
|
97,000 |
|
|
|
|
(1) |
|
Condominium units are individually owned by third parties and are managed by us. |
|
(2) |
|
Our indoor entertainment areas generally include our indoor waterpark, game
arcade, childrens activity room, family tech center, MagiQuest® (an
interactive game attraction) and fitness room, as well as our spa in the
resorts that have such amenities. |
|
(3) |
|
These properties are owned by CNL Lifestyle Properties, Inc. (CNL), a real
estate investment trust focused on leisure and lifestyle properties. We
currently manage both properties and license the Great Wolf Lodge brand to
these resorts. |
|
(4) |
|
Five of our properties (Great Wolf Lodge resorts in Williamsburg, VA; Pocono
Mountains, PA; Mason, OH; Grapevine, TX and Concord, NC) each had a book value
of fixed assets equal to ten percent or more of our total assets as of June 30,
2011 and each of those five properties had total revenues equal to ten percent
or more of our total revenues for the three months ended June 30, 2011. |
|
(5) |
|
An affiliate of Ripley Entertainment, Inc. (Ripley), our licensee, owns this
resort. We have granted Ripley a license to use the Great Wolf Lodge name for
this resort through April 2016. |
|
(6) |
|
This property is owned by a joint venture. The Confederated Tribes of the
Chehalis Reservation (Chehalis) owns a 51% interest in the joint venture, and
we own a 49% interest. We operate the property and license the Great Wolf Lodge
brand to the joint venture under long-term agreements through April 2057,
subject to earlier termination in certain situations. The joint venture leases
the land for the resort from the United States Department of the Interior,
which is trustee for Chehalis. |
Industry Trends. We operate in the family entertainment resort segment of the travel and
leisure industry. The concept of a family entertainment resort with an indoor waterpark was first
introduced to the United States in Wisconsin Dells, Wisconsin, and has evolved since 1987. In an
effort to boost occupancy and daily rates, as well as capture off-season demand, hotel operators in
the Wisconsin Dells market began expanding indoor pools and adding waterslides and other
water-based attractions to existing hotels and resorts. The success of these efforts prompted
several local operators to build new, larger destination resorts based primarily on the concept.
36
We believe that these resorts have proven popular because of several factors, including the
ability to provide a year-round vacation destination without weather-related risks, the wide appeal
of water-based recreation and the favorable trends in leisure travel discussed below. No operator
or developer other than Great Wolf Resorts has established a national portfolio of destination
family entertainment resorts featuring indoor waterparks.
While no standard industry definition for a family entertainment resort featuring an indoor
waterpark has developed, we generally consider resorts with at least 200 rooms featuring indoor
waterparks larger than 25,000 square feet, as well as a variety of water slides and other
water-based attractions, to be competitive with our resorts. A Hotel & Leisure Advisors, LLC
(H&LA) survey as of June 2010 indicates that there are 144 open indoor waterpark resort properties
in the United States and Canada. Of the total, 51 are considered indoor waterpark destination
resorts offering more than 30,000 square feet of indoor waterpark space. Of these 51 properties,
11 are Great Wolf Lodges.
We believe recent vacation trends favor drive-to family entertainment resorts featuring indoor
waterparks, as the number of families choosing to take shorter, more frequent vacations that they
can drive to have increased in recent years. We believe these trends will continue. We believe
indoor waterpark resorts are generally relatively less affected by
changes in economic cycles than more expensive vacation options, as drive-to
destinations are generally less expensive and more convenient than destinations that require air
travel.
Outlook. We believe that no other operator or developer other than us has established a
national portfolio of destination family entertainment resorts that feature indoor waterparks. Our
resorts do, however, compete directly with other family entertainment resorts and other family
entertainment attractions in our markets. We intend to continue to expand our portfolio of resorts
throughout the United States and to selectively seek licensing and management opportunities
domestically and internationally.
The resorts we plan to develop, acquire, license and/or operate in the future may require
significant industry knowledge and/or substantial capital resources. Our external growth strategy
going forward is to seek joint venture, licensing and management opportunities. We expect each of
the joint venture arrangements would involve us having a minority or no ownership interest in the
new resort. We believe there are opportunities to capitalize on our existing brand and operational
platforms with lower capital requirements from us than if we were to be a sole or majority owner of
the new resort.
Our primary business objective is to increase long-term stockholder value. We believe we can
increase stockholder value by executing our internal and external growth strategies. Our primary
internal growth strategies are:
|
|
|
leveraging our competitive advantages and increasing domestic geographic
diversification through a licensing-based business model and joint venture investments
in target markets; |
|
|
|
|
expanding our brand footprint internationally; |
|
|
|
|
selective sales/dispositions of ownership interests/recycling of capital; |
|
|
|
|
expanding and enhancing existing resorts; |
|
|
|
|
continuing to innovate; |
|
|
|
|
maximizing total resort revenues; |
|
|
|
|
minimizing total resort costs; |
|
|
|
|
building upon our existing brand awareness and loyalty; and |
|
|
|
|
expanding operations of our majority-owned subsidiary, Creative Kingdoms. |
In attempting to execute our internal and external growth strategies, we are subject to a
variety of business challenges and risks. These include:
|
|
|
attracting suitable joint venture partners; |
|
|
|
|
development, acquisition, conversion and/or licensing of properties; |
37
|
|
|
increases in costs of constructing, operating and maintaining resorts we own or
manage; |
|
|
|
|
competition from other entertainment companies, both within and outside our industry
segment; |
|
|
|
|
external economic risks, including family vacation patterns and trends; and |
|
|
|
|
the other risks described in our annual report on Form 10-K under Item 1A, Risk
Factors. For a complete discussion of forward-looking statements, see the
Forward-Looking Statements section that immediately follows the table of contents. |
We seek to meet these challenges by providing sufficient management oversight to site
selection, development and resort operations; concentrating on growing and strengthening awareness
of our brand and demand for our resorts; and maintaining our focus on safety.
Our business model is highly dependent on consumer spending, because the substantial majority
of our revenues are earned from leisure guests, and a vacation experience at one of our resorts is
a discretionary expenditure for a family. Over the past several years, the slowdown in the U.S.
economy and accompanying economic recession has generally led to a decrease in credit available to
consumers and a related decrease in consumer confidence and consumer discretionary spending. These
trends generally continued through mid-2011 as consumers have experienced several negative economic
impacts over the past few years, including:
|
|
|
continued turbulence in the banking and lending sectors, which has led to a general
lessening of the availability of credit to consumers; |
|
|
|
|
increasing energy and commodity prices (particularly food) in 2010 and 2011; |
|
|
|
|
a high national unemployment rate; |
|
|
|
|
economic uncertainty due to potential sovereign defaults; |
|
|
|
|
a slowdown in economic growth and lack of consistent job creation during 2011; |
|
|
|
|
a continuing decline in the national average of home prices and an increase in the
national home foreclosure rate; and |
|
|
|
|
high volatility in the stock market that led to substantial declines in stock values
and aggregate household savings from 2007 to 2010. |
These and other factors impact the amount of discretionary income for consumers and consumer
sentiment toward discretionary purchases. As a result, these types of items could negatively
impact consumer spending in future periods. While we believe the convenience, quality and overall
affordability of a stay at one of our resorts continues to be an attractive alternative to other
potential family vacations, a sustained decrease in overall consumer discretionary spending could
have a material adverse effect on our overall results.
We develop resorts with expectations of achieving certain financial returns on a resorts
operation. The economic slowdown of the past several years has materially and adversely affected
our ability to achieve the operating results for our resorts that we had expected to achieve when
those resorts were first planned and developed. Also:
|
|
|
We believe that our Traverse City and Sandusky resorts have been and will continue to be
affected by especially adverse general economic circumstances in the Michigan/Northern Ohio
region (such as bankruptcies of several major companies and/or large announced layoffs by
major employers) and increased competition that has occurred in these markets over the past
few years. The Michigan/Northern Ohio region includes cities that have historically been
the Traverse City and Sandusky resorts largest source of customers. We believe the
adverse general economic circumstances in the region have negatively impacted overall
discretionary consumer spending in that region over the past few years and may continue to
do so going forward. Although we have taken steps to reduce our operating costs at these
resorts and regional economic conditions appear to have improved recently, we believe the
general regional economic downturn has and may continue to have an impact on the operating
performance of our Traverse City and Sandusky resorts. |
|
|
|
|
In 2010, the master servicer for our loan that is secured by our Traverse City and
Kansas City resorts implemented a lock-box cash management arrangement due to the
properties not meeting a minimum debt service |
38
|
|
|
coverage ratio test under the loan. The loan is not in default and the outstanding principal
balance is not due currently, but accounting rules require us to classify the entire loan
balance as a current liability as of June 30, 2011. We recorded an $18,741 impairment charge
in 2010 related to our Traverse City and Kansas City resorts to reflect a decline in their
estimated fair value. Although the operating performance of the two properties securing this
loan has improved in 2011, we expect the properties to continue to feel the effects of the
regional economic declines experienced over the past several years and to produce operating
results below what they had produced prior to 2008. |
|
|
|
|
Our Wisconsin Dells property has been significantly impacted by the abundance of
competing indoor waterpark resorts in that market. The Wisconsin Dells market has
approximately 16 indoor waterpark resorts that compete with us. We believe this large
number of competing properties in a relatively small tourist destination location has and
will likely continue to have an adverse impact on the operating performance of our
Wisconsin Dells resort. |
|
|
|
|
We experienced much lower than expected occupancy and lower than expected average daily
room rates at our Sheboygan, Wisconsin property since its opening in 2004. We believe this
operating weakness was primarily attributable to the fact that the overall development of
downtown Sheboygan as a tourist destination lagged materially behind our initial
expectations. We believe this materially impacted the consumer demand for our indoor
waterpark resort in that market and the operations of the resort. We recorded a $24,000
impairment charge in 2009 relating to our Sheboygan resort and, in March 2011, we disposed
of this resort. |
Our external growth strategies are based primarily on:
|
|
|
developing additional indoor waterpark resorts, |
|
|
|
|
converting existing indoor waterpark resorts to our brands (in conjunction with joint
venture partners), or by, |
|
|
|
|
licensing our intellectual property and proprietary management systems to others. |
Developing and building resorts of the size and scope of our family entertainment resorts
generally requires obtaining financing for a significant portion of a projects expected
construction costs. The general tightening in U.S. lending markets has dramatically decreased the
overall availability of financing for ground-up construction. Although the ultimate effect on our
external growth strategy of the current credit environment is difficult to predict with certainty,
we believe that the availability of construction financing to us and other investors and/or
developers may be more restrictive in the future and that terms of construction financing may be
less favorable than was the case through 2008. Although we believe that we and other investors
and/or developers may be able to continue to obtain construction financing sufficient to execute
development strategies, we expect that the more difficult credit market environment is likely to
continue at least through the remainder of 2011.
Revenue and Key Performance Indicators. We seek to generate positive cash flows and maximize
our return on invested capital from each of our owned resorts. Our rooms revenue represents sales
to guests of room nights at our resorts and is the largest contributor to our cash flows and
earnings before interest, taxes, and depreciation and amortization (EBITDA). Rooms revenue
accounted for approximately 67% of our total consolidated resort revenue for the six months ended
June 30, 2011. We employ sales and marketing efforts to increase overall demand for rooms at our
resorts. We seek to optimize the relationship between room rates and occupancies through the use of
yield management techniques that attempt to project demand in order to selectively increase room
rates during peak demand. These techniques are designed to assist us in managing our higher
occupancy nights to achieve maximum rooms revenue and include such practices as:
|
|
|
monitoring our historical trends for occupancy and estimating our high
occupancy nights, |
39
|
|
|
offering the highest discounts to previous guests in off-peak periods to build
customer loyalty and enhance our ability to charge higher rates in peak periods, |
|
|
|
|
structuring rates to allow us to offer our previous guests the best rate while
simultaneously working with a promotional partner or offering internet specials, |
|
|
|
|
monitoring sales of room types daily to evaluate the effectiveness of offered
discounts, and |
|
|
|
|
offering specials on standard suites and yielding better rates on larger
suites when standard suites sell out. |
In addition, we seek to maximize the amount of time and money spent on-site by our guests by
providing a variety of revenue-generating amenities.
We have several key indicators that we use to evaluate the performance of our business. These
indicators include the following:
|
|
|
occupancy; |
|
|
|
|
average daily room rate, or ADR; |
|
|
|
|
revenue per available room, or RevPAR; |
|
|
|
|
total revenue per occupied room, or Total RevPOR; |
|
|
|
|
total revenue per available room, or Total RevPAR; |
|
|
|
|
non-rooms revenue per occupied room; and |
|
|
|
|
earnings before interest, taxes, depreciation and amortization, or EBITDA. |
Occupancy, ADR and RevPAR are commonly used measures within the hospitality industry to
evaluate hotel operations and are defined as follows:
|
|
|
Occupancy is calculated by dividing total occupied rooms by total available
rooms. |
|
|
|
|
ADR is calculated by dividing total rooms revenue by total occupied rooms. |
|
|
|
|
RevPAR is the product of occupancy and ADR. |
|
Total RevPOR, Total RevPAR and Non-rooms revenue per occupied room are defined as follows: |
|
|
|
|
Total RevPOR is calculated by dividing total revenue by total occupied rooms. |
|
|
|
|
Total RevPAR is calculated by dividing total revenue by total available rooms. |
|
|
|
|
Non-rooms revenue per occupied room is calculated by taking the difference
between Total RevPOR and ADR. |
Occupancy allows us to measure the general overall demand for rooms at our resorts and the
effectiveness of our sales and marketing strategies. ADR allows us to measure the effectiveness of
our yield management strategies. While ADR and RevPAR only include rooms revenue, Total RevPOR and
Total RevPAR include both rooms revenue and other revenue derived from food and beverage and other
amenities at our resorts. We consider Total RevPOR and Total RevPAR to be key performance
indicators for our business because we derive a significant portion of our revenue from food and
beverage and other amenities. For the six months ended June 30, 2011, approximately 33% of our
total consolidated resort revenues consisted of non-rooms revenue.
40
We use RevPAR and Total RevPAR to evaluate the blended effect that changes in occupancy, ADR
and Total RevPOR have on our results. We focus on increasing ADR and Total RevPOR because we
believe those increases can have the greatest positive impact on our results. In addition, we seek
to maximize occupancy, as increases in occupancy generally lead to greater total revenues at our
resorts, and we believe maintaining certain occupancy levels is key to covering our fixed costs.
Increases in total revenues as a result of higher occupancy are, however, typically accompanied by
additional incremental costs (including housekeeping services, utilities and room amenity costs).
In contrast, increases in total revenues from higher ADR and Total RevPOR are typically accompanied
by lower incremental costs and result generally, in a greater increase in operating cash flow.
We also use EBITDA as a measure of the operating performance of each of our resorts. EBITDA
is a supplemental financial measure and is not defined by accounting principles generally accepted
in the United States (GAAP). See Non-GAAP Financial Measures below for further discussion of our
use of EBITDA and a reconciliation of net loss.
Critical Accounting Policies and Estimates
This discussion and analysis of our financial condition and results of operations is based on
our condensed consolidated financial statements, which have been prepared in accordance with GAAP.
The preparation of these condensed consolidated financial statements requires management to make
estimates and judgments that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the unconsolidated financial
statements, as well as revenue and expenses during the reporting periods. We evaluate our
estimates and judgments on an ongoing basis. We base our estimates on historical experience and on
various other factors we believe are reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results could therefore differ materially from those
estimates under different assumptions or conditions.
Goodwill The excess of the purchase price of entities that are considered to be purchases
of businesses over the estimated fair value of tangible and identifiable intangible assets acquired
is recorded as goodwill. We are required to assess goodwill for impairment annually, or more
frequently if circumstances indicate impairment may have occurred. We assess goodwill for such
impairment by comparing the carrying value of our reporting units to their fair values. We
determine our reporting units fair values using a discounted cash flow model.
In connection with the acquisition of the majority interest in Creative Kingdoms, LLC (CK) in
2010 we have recorded $1,366 of goodwill. Goodwill is included within intangible assets on our
condensed consolidated balance sheet.
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2011 |
|
|
2010 |
|
Goodwill related to the acquisition of the majority interest in CK |
|
$ |
1,366 |
|
|
$ |
1,366 |
|
|
|
|
|
|
|
|
|
|
$ |
1,366 |
|
|
$ |
1,366 |
|
|
|
|
|
|
|
|
Noncontrolling Interests We record the non-owned equity interests of our consolidated
subsidiaries as a separate component of our consolidated equity on our condensed consolidated
balance sheet. The net earnings attributable to the controlling and noncontrolling interests are
included on the face of our statements of operations. Due to our acquisition of CK in June 2010 we
have a consolidated subsidiary with a noncontrolling interest as of June 30, 2011.
Discontinued Operations We record the results of the operations of an entity that has been
disposed of as a discontinued operation in the consolidated statements of operations when the
operations and cash flows of the entity have been eliminated from the ongoing operations and we do
not have any significant continuing involvement in the operations of the entity after the disposal
transaction. During the three months ended March 31, 2011 we disposed of our Blue
41
Harbor Resort
property and have included that propertys operations and gain on sale in discontinued operations
for all periods presented.
Income Taxes At the end of each interim reporting period, we estimate the effective tax
rate expected to be applicable for the full fiscal year. We use that estimated effective tax rate
in providing for income taxes on a year-to-date basis. We account for the tax effect of significant
unusual or extraordinary items in the period in which they occur. We account for major changes in
our valuation allowance within continuing operations in the period in which they occur. As of June
30, 2011, we increased our valuation allowance by $4,772 as a result of the sale of our Blue Harbor
Resort in Sheboygan, Wisconsin. The increase was due to uncertainties related to our ability to
utilize some of our deferred tax assets generated as a result of that sale, primarily consisting of
certain net operating loss carryforwards, before they expire.
For a description of our critical accounting policies and estimates, please refer to the
Critical Accounting Policies and Estimates section of our Managements Discussion and Analysis
of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for
the year ended December 31, 2010. Except as described above, there have been no material changes
in any of our critical accounting policies since December 31, 2010.
Recent Accounting Pronouncements
In July 2010, the FASB issued guidance on disclosures about the credit quality of financing
receivables and the allowance for credit losses. The guidance requires new disclosures that will
require companies to provide more information about the credit quality of their financing
receivables in the disclosures to the financial statements including, but not limited to,
significant purchases and sales of financing receivables, aging information and credit quality
indicators. This guidance is effective for interim or annual financial reporting periods beginning
after December 15, 2010. The adoption of this guidance did not have a material impact on our
condensed consolidated financial statements.
In December 2010, the FASB issued guidance which (1) does not prescribe a specific method of
calculating the carrying carrying value of a reporting unit in the performance of step 1 of the
goodwill impairment test and (2) requires entities with a zero or negative carrying value to
assess, considering certain qualitative factors, whether it is more likely than not that a goodwill
impairment exists. If an entity concludes that it is more likely than not that a goodwill
impairment exists, the entity must perform step 2 of the goodwill impairment test. This guidance
is effective for impairment tests performed during fiscal years (and interim periods within those
years) that begin after December 15, 2010. The adoption of this guidance did not have a material
impact on our condensed consolidated financial statements.
In December 2010, the FASB issued guidance to address differences in the ways entities have
interpreted disclosures about pro forma revenue and earnings in a business combination. This
guidance states that if a public entity presents comparative financial statements, the entity
should disclose revenue and earnings of the combined entity as though the business combination that
occurred during the current year had occurred as of the beginning of the comparable prior annual
reporting period only. This guidance is effective prospectively for business combinations whose
acquisition date is at or after the beginning of the first annual reporting period on or after
December 15, 2010. The adoption of this guidance did not have a material impact on our condensed
consolidated financial statements.
In May 2011, the FASB issued guidance that clarifies and changes the application of
various fair value measurement principles and disclosure requirements. This guidance is
effective for interim and annual periods beginning after December 15, 2011. We do not expect
the adoption of this guidance to have a material impact on our consolidated financial statements.
42
Non-GAAP Financial Measures
We use EBITDA as a measure of our operating performance. EBITDA is a supplemental non-GAAP
financial measure. EBITDA is commonly defined as net income plus (a) net interest expense from
continuing operations and discontinued operations, (b) income taxes from continuing operations and
discontinued operations, and (c) depreciation and amortization from continuing operations and
discontinued operations.
EBITDA as calculated by us is not necessarily comparable to similarly titled measures
presented by other companies. In addition, 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 our
cash flow needs; and (c) should not be considered as an alternative to net income, operating
income, cash flows from operating activities or our other financial information as determined under
GAAP.
We believe EBITDA is useful to an investor in evaluating our operating performance because:
|
|
|
a significant portion of our 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, we believe that presentation of EBITDA is a useful
measure of our operating performance; |
|
|
|
|
it is widely used in the hospitality and entertainment industries to measure operating
performance without regard to items such as depreciation and amortization; and |
|
|
|
|
we believe it helps investors meaningfully evaluate and compare the results of our
operations from period to period by removing the impact of items directly resulting from our
asset base, primarily depreciation and amortization, from our operating results. |
Our management uses EBITDA:
|
|
|
as a measurement of operating performance because it assists us in comparing our
operating performance on a consistent basis as it removes the impact of items directly
resulting from our asset base, primarily depreciation and amortization, from our operating
results; |
|
|
|
|
for planning purposes, including the preparation of our annual operating budget; |
|
|
|
|
as a valuation measure for evaluating our operating performance and our capacity to incur
and service debt, fund capital expenditures and expand our business; and |
|
|
|
|
as one measure in determining the value of other acquisitions and dispositions. |
Some of these limitations are:
|
|
|
it does not reflect every cash expenditure, future requirements for capital expenditures
or contractual commitments; |
|
|
|
|
it does not reflect the significant interest expense or the cash requirements necessary
to service interest or principal payments on our debt; |
|
|
|
|
although depreciation and amortization are non-cash charges, the assets being depreciated
and amortized will often have to be replaced or require improvements in the future, and
EBITDA does not reflect any cash requirements for such replacements or improvements; |
43
|
|
|
it is not adjusted for all non-cash income or expense items that are reflected in our
statements of cash flows; |
|
|
|
|
it does not reflect limitations on our costs related to transferring earnings from our
subsidiaries to us; and |
|
|
|
|
other companies in our industry may calculate EBITDA differently than we do, limiting its
usefulness as a comparative measure. |
|
|
Because of these limitations, our EBITDA measure should not be considered as a measure of
discretionary cash available to us to invest in the growth of our business or as a measure of cash
that will be available to us to meet our obligations. We compensate for these limitations by using
EBITDA along with other comparative tools, together with GAAP measurements, to assist in the
evaluation of operating performance. Such GAAP measurements include operating income (loss), net
income (loss), cash flows from operations and cash flow data. We have significant uses of cash
flows, including capital expenditures, interest payments, debt principal repayments, taxes and
other non-recurring charges, which are not reflected in our EBITDA-based measure. |
|
|
EBITDA is not intended as an alternative to net income (loss) as an indicator of our
operating performance, as an alternative to any other measure of performance in conformity with
GAAP or as an alternative to cash flow provided by operating activities as a measure of liquidity.
You should therefore not place undue reliance on our EBITDA-based measure or ratios calculated
using those measures. Our GAAP-based measures can be found in our consolidated financial
statements and the related notes, included elsewhere in this report. |
The following table reconciles net loss attributable to Great Wolf Resorts, Inc. to EBITDA for
the periods presented (prior to the reclassification for discontinued operations).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Net loss attributable to Great Wolf Resorts, Inc. |
|
$ |
(6,831 |
) |
|
$ |
(12,760 |
) |
|
$ |
(12,805 |
) |
|
$ |
(20,825 |
) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net of interest income |
|
|
12,058 |
|
|
|
12,279 |
|
|
|
24,175 |
|
|
|
21,225 |
|
Income tax expense |
|
|
321 |
|
|
|
194 |
|
|
|
5,147 |
|
|
|
369 |
|
Depreciation and amortization |
|
|
13,315 |
|
|
|
17,110 |
|
|
|
26,664 |
|
|
|
31,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
$ |
18,863 |
|
|
$ |
16,823 |
|
|
$ |
43,181 |
|
|
$ |
31,899 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results of Operations
General
Our financial information includes:
|
|
|
our subsidiary that provides resort development and management/licensing
services; |
|
|
|
|
our wholly-owned resorts; |
|
|
|
|
beginning in June 2010, our CK subsidiary, which is a developer of experiential
gaming products, less our noncontrolling interest; and |
|
|
|
|
our equity interest in the Grand Mound resort, in which we have a minority
ownership interest but which we do not consolidate.
|
44
Revenues. Our revenues consist of:
|
|
|
lodging revenue, which includes rooms, food and beverage, and other department
revenues from our resorts; |
|
|
|
|
revenue from our CK subsidiary, which includes product sales, admission fees
and retail revenues; |
|
|
|
|
management fee and other revenue from resorts, which includes fees received
under our management, license, development and construction management agreements; and |
|
|
|
|
other revenue from managed properties. We employ the staff at our managed
properties. Under our management agreements, the resort owners reimburse us for payroll,
benefits and certain other costs related to the operations of the managed properties. We
include the reimbursement of payroll, benefits and costs, recorded as revenue on our
statements of operations, with a corresponding expense recorded as other expenses from
managed properties. |
|
|
Operating Expenses. Our departmental operating expenses consist of rooms, food and beverage and
other department expenses. |
Our other operating expenses include the following items:
|
|
|
selling, general and administrative expenses, which are associated with the
operations and management of resorts and our CK subsidiary (beginning in June 2010) and
which consist primarily of expenses such as corporate payroll and related benefits,
operations management, sales and marketing, finance, legal, information technology support,
human resources and other support services, as well as general corporate expenses; |
|
|
|
|
property operation and maintenance expenses, such as utility costs and
property taxes; |
|
|
|
|
depreciation and amortization; and |
|
|
|
|
other expenses from managed properties. |
Three months ended June 30, 2011, compared with the three months ended June 30, 2010
The following table shows key operating statistics for our resorts for the three months ended June
30, 2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All |
|
|
|
|
|
|
Properties |
|
|
|
|
|
|
Same Store Comparison (a) |
|
|
|
2011 |
|
|
2011 |
|
|
2010 |
|
|
$ |
|
|
% |
|
Occupancy |
|
|
66.4 |
% |
|
|
66.4 |
% |
|
|
59.7 |
% |
|
|
N/A |
|
|
|
11.2 |
% |
ADR |
|
$ |
252.99 |
|
|
$ |
252.99 |
|
|
$ |
242.05 |
|
|
$ |
10.94 |
|
|
|
4.5 |
% |
RevPAR |
|
$ |
168.04 |
|
|
$ |
168.04 |
|
|
$ |
144.43 |
|
|
$ |
23.61 |
|
|
|
16.3 |
% |
Total RevPOR |
|
$ |
384.22 |
|
|
$ |
384.21 |
|
|
$ |
374.75 |
|
|
$ |
9.46 |
|
|
|
2.5 |
% |
Total RevPAR |
|
$ |
255.20 |
|
|
$ |
255.20 |
|
|
$ |
223.61 |
|
|
$ |
31.59 |
|
|
|
14.1 |
% |
Non-rooms revenue per occupied room |
|
$ |
131.22 |
|
|
$ |
131.22 |
|
|
$ |
132.70 |
|
|
$ |
(1.48 |
) |
|
|
(1.1 |
)% |
|
|
|
(a) |
|
Same store comparison includes properties that were open for the full periods and with
comparable number of rooms in 2011 and 2010 (that is, all properties other than our
Sheboygan resort). |
The positive changes in key operating statistics for the three months ended June 30, 2011,
compared to the three months ended June 30, 2010, appear to be the result of:
|
|
|
stabilization of economic conditions, which appear to be having a positive impact on
consumer sentiment and spending patterns; |
45
|
|
|
the timing of the Easter holiday and many schools spring break periods, both of which
are traditionally strong demand generators (which fell in the first quarter of 2010 but fell in the second quarter of 2011); and |
|
|
|
|
an increase in overall consumer demand for our properties. |
Presented below are selected amounts from the statements of operations for the three months
ended June 30, 2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
June 30, |
|
|
|
|
|
|
|
|
|
|
|
Increase/ |
|
|
|
2011 |
|
|
2010 |
|
|
(Decrease) |
|
Revenues |
|
$ |
75,725 |
|
|
$ |
66,605 |
|
|
$ |
9,120 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Departmental operating expenses |
|
|
25,010 |
|
|
|
22,420 |
|
|
|
2,590 |
|
Selling, general and administrative |
|
|
16,924 |
|
|
|
13,951 |
|
|
|
2,973 |
|
Depreciation and amortization |
|
|
13,315 |
|
|
|
17,018 |
|
|
|
(3,703 |
) |
Loss on
disposition of assets |
|
|
1,038 |
|
|
|
9 |
|
|
|
1,029 |
|
Net operating income |
|
|
4,894 |
|
|
|
(194 |
) |
|
|
5,088 |
|
Discontinued operations, net of tax |
|
|
107 |
|
|
|
595 |
|
|
|
(488 |
) |
Net loss attributable to Great Wolf Resorts, Inc. |
|
|
(6,831 |
) |
|
|
(12,760 |
) |
|
|
5,929 |
|
Revenues. Total revenues increased due to the following:
|
|
|
More stable economic conditions with corresponding strengthening in consumer confidence
and discretionary spending, which positively affected our business; |
|
|
|
|
The timing of the Easter holiday and many schools
spring break periods (which fell in the first quarter of 2010 but fell in the second quarter of 2011), both of which
are traditionally strong demand generators for our resorts, and; |
|
|
|
|
The inclusion of CK for a full quarter in 2011 as a consolidated subsidiary following our acquisition of a 62.4%
equity interest in June 2010. |
Operating expenses.
|
|
|
Departmental operating expenses increased by $2,590 in the three months ended June 30,
2011, as compared to the three months ended June 30, 2010, due primarily to an increase in
revenues and the acquisition of CK. |
|
|
|
|
Total selling, general and administrative expenses increased by $2,973 in the three
months ended June 30, 2011, as compared to the three months ended June 30, 2010, due to a
settlement payment received at our with respect to wastewater treatment litigation
related to our Poconos resort during
the three months ended June 30, 2010. There was no similar settlement received during the
three months ended June 30, 2011. |
|
|
|
|
Total depreciation and amortization decreased by $3,703 for the three months ended June
30, 2011, as compared to the three months ended June 30, 2010, primarily due to the
write-off of unamortized debt issuance costs in the amount of $3,500 related to our then-existing
Williamsburg, Mason and Grapevine loans that were repaid with the net proceeds of the
Notes in the three months ended June 30, 2010. There was no
similar write-off in
the three months ended June 30, 2011. |
|
|
|
|
Loss on disposition of assets increased due to a loss related to CK during the
three months ended June 30, 2011. There was no similar loss during the three months
ended June 30, 2010. |
Net operating income. During the three months ended June 30, 2011, we had net operating
income of $4,894 as compared to a net operating loss of $194 for the three months ended June 30,
2010
Net loss attributable to Great Wolf Resorts, Inc. Net loss attributable to Great Wolf Resorts,
Inc. decreased primarily due to an increase in net operating income of $5,088.
46
Six months ended June 30, 2011, compared with the six months ended June 30, 2010
The following table shows key operating statistics for our resorts for the three months ended June
30, 2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All |
|
|
|
|
|
|
|
|
|
Properties (a) |
|
|
Same Store Comparison (b) |
|
|
|
2011 |
|
|
2011 |
|
|
2010 |
|
|
$ |
|
|
% |
|
Occupancy |
|
|
63.9 |
% |
|
|
64.5 |
% |
|
|
60.0 |
% |
|
|
N/A |
|
|
|
7.5 |
% |
ADR |
|
$ |
257.69 |
|
|
$ |
258.83 |
|
|
$ |
251.39 |
|
|
$ |
7.44 |
|
|
|
3.0 |
% |
RevPAR |
|
$ |
164.65 |
|
|
$ |
166.83 |
|
|
$ |
150.86 |
|
|
$ |
15.97 |
|
|
|
10.6 |
% |
Total RevPOR |
|
$ |
393.78 |
|
|
$ |
394.85 |
|
|
$ |
388.50 |
|
|
$ |
6.35 |
|
|
|
1.6 |
% |
Total RevPAR |
|
$ |
251.61 |
|
|
$ |
254.50 |
|
|
$ |
233.15 |
|
|
$ |
21.35 |
|
|
|
9.2 |
% |
Non-rooms revenue per occupied room |
|
$ |
136.10 |
|
|
$ |
136.02 |
|
|
$ |
137.11 |
|
|
$ |
(1.09 |
) |
|
|
(0.8 |
)% |
|
|
|
(a) |
|
Includes results for properties all owned, managed and/or licensed resorts. All
Properties operating statistics include our Blue Harbor Resort in Sheboygan, WI, through
March 23, 2011. We sold Blue Harbor Resort on March 24, 2011. |
|
(b) |
|
Same store comparison includes properties that were open for the full periods and with
comparable number of rooms in 2011 and 2010 (that is, all properties other than our
Sheboygan resort). |
The positive changes in key operating statistics for the six months ended June 30, 2011,
compared to the six months ended June 30, 2010, appear to be the result of:
|
|
|
stabilization of economic conditions, which appear to be having a positive impact on
consumer sentiment and spending patterns; and |
|
|
|
|
an increase in overall consumer demand for our properties. |
Presented below are selected amounts from the statements of operations for the six months
ended June 30, 2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended |
|
|
|
June 30, |
|
|
|
|
|
|
|
|
|
|
|
Increase/ |
|
|
|
2011 |
|
|
2010 |
|
|
(Decrease) |
|
Revenues |
|
$ |
147,610 |
|
|
$ |
135,448 |
|
|
$ |
12,162 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Departmental operating expenses |
|
|
48,934 |
|
|
|
44,483 |
|
|
|
4,451 |
|
Selling, general and administrative |
|
|
33,905 |
|
|
|
32,128 |
|
|
|
1,777 |
|
Depreciation and amortization |
|
|
26,563 |
|
|
|
31,164 |
|
|
|
(4,601 |
) |
Loss on
disposition of assets |
|
|
1,038 |
|
|
|
19 |
|
|
|
1,019 |
|
Net operating income |
|
|
8,641 |
|
|
|
218 |
|
|
|
8,423 |
|
Interest expense, net of interest income |
|
|
24,099 |
|
|
|
20,674 |
|
|
|
3,425 |
|
Income tax expense |
|
|
5,136 |
|
|
|
359 |
|
|
|
4,777 |
|
Discontinued operations, net of tax |
|
|
(6,809 |
) |
|
|
558 |
|
|
|
(7,367 |
) |
Net loss attributable to Great Wolf Resorts, Inc. |
|
|
(12,805 |
) |
|
|
(20,825 |
) |
|
|
8,020 |
|
Revenues. Total revenues increased due to the following:
|
|
|
More stable economic conditions with corresponding strengthening in consumer confidence
and discretionary spending, which positively affected our business; and |
47
|
|
|
|
The inclusion of CK as a consolidated subsidiary for a full
six months in 2011 following our acquisition of a 62.4%
equity interest in June 2010. |
Operating expenses.
|
|
|
Departmental operating expenses increased by $4,451 in the six months ended June 30,
2011, as compared to the six months ended June 30, 2010, due primarily to an increase in
revenues and the acquisition of CK. |
|
|
|
|
Total selling, general and administrative expenses decreased by $1,777 in the six months
ended June 30, 2011, as compared to the six months ended June 30, 2010, due to a settlement
payment received with respect to wastewater treatment litigation during the three
months ended June 30, 2010. There was no similar settlement
payment received during the six months
ended June 30, 2011. |
|
|
|
|
Total depreciation and amortization decreased for the six
months ended June 30, 2011, as
compared to the six months ended June 30, 2010, primarily due to
the write-off of
unamortized debt issuance costs in the amount of $3,500 related to our then-existing
Williamsburg, Mason and Grapevine loans that were repaid with the net proceeds of the
Notes in the six months ended June 30, 2010. There was no
similar write-off in the
six months ended June 30, 2011. |
|
|
|
|
Loss on disposition of assets increased due to a loss related to CK during the six
months ended June 30, 2011. There was no similar loss during the six months ended
June 30, 2010. |
Net operating income. During the six months ended June 30, 2011, we had net operating income
of $8,641 as compared to a net operating income of $218 for the six months ended June 30, 2010.
|
|
Net loss attributable to Great Wolf Resorts, Inc. Net loss attributable to Great Wolf
Resorts, Inc. decreased due to: |
|
|
|
An increase in net operating income of $8,423; and |
|
|
|
|
During the six months ended June 30, 2011 we disposed of our Blue Harbor Resort in
Sheboygan, WI and have included the propertys operations in discontinued operations for the
six months ended June 30, 2011 and 2010. Included in discontinued operations for the six
months ended June 30, 2011 is a gain on sale of $6,667. |
These increases were partially offset by:
|
|
|
An increase in net interest expense of $3,425, mainly due to interest expense related to
our first mortgage notes issued in April 2010; and |
|
|
|
|
An increase in income tax expense of $4,777 recorded in the six months ended June 30,
2011 as compared to the six months ended June 30, 2010. The increase in income tax expense
was mainly due to an increase in our valuation allowance of $4,772, as a result of our sale
of Blue Harbor Resort. The increase was due to uncertainties related to our ability to
utilize some of our deferred tax assets, primarily consisting of certain net operating loss
carryforwards, before they expire. |
Segments
We are organized into a single operating division. Within that operating division, we have
two reportable segments:
|
|
|
resort ownership/operation-revenues derived from our consolidated owned resorts; and |
|
|
|
|
resort third-party management/licensing-revenues derived from management, license and
other related fees from unconsolidated managed resorts. |
48
See our Segments section in our Summary of Significant Accounting Policies, in Note 2 of
our condensed consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2011 |
|
|
2010 |
|
|
Increase |
|
|
2011 |
|
|
2010 |
|
|
Increase |
|
Resort
Ownership/Operation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
67,208 |
|
|
$ |
58,605 |
|
|
$ |
8,603 |
|
|
$ |
130,461 |
|
|
$ |
120,382 |
|
|
$ |
10,079 |
|
EBITDA |
|
|
16,140 |
|
|
|
14,758 |
|
|
|
1,382 |
|
|
|
39,482 |
|
|
|
29,569 |
|
|
|
9,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resort Third-Party
Management/License |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
7,366 |
|
|
|
7,132 |
|
|
|
234 |
|
|
|
14,683 |
|
|
|
14,198 |
|
|
|
485 |
|
EBITDA |
|
|
1,678 |
|
|
|
1,519 |
|
|
|
159 |
|
|
|
3,434 |
|
|
|
3,174 |
|
|
|
260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
1,151 |
|
|
|
868 |
|
|
|
283 |
|
|
|
2,466 |
|
|
|
868 |
|
|
|
1,598 |
|
EBITDA |
|
|
1,045 |
|
|
|
546 |
|
|
|
499 |
|
|
|
265 |
|
|
|
(844 |
) |
|
|
1,109 |
|
The Other column in the table above includes items that do not constitute a reportable segment
and represent corporate-level activities and the activities of other operations not included in the
Resort Ownership/Operation or Resort Third-Party Management/License segments.
Liquidity and Capital Resources
We had total indebtedness of $538,264 and $552,298 as of June 30, 2011 and December 31, 2010,
respectively, summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2011 |
|
|
2010 |
|
Long-Term Debt: |
|
|
|
|
|
|
|
|
Traverse City/Kansas City mortgage loan |
|
$ |
66,421 |
|
|
$ |
67,236 |
|
Pocono Mountains mortgage loan |
|
|
93,646 |
|
|
|
94,274 |
|
Concord mortgage loan |
|
|
76,433 |
|
|
|
78,147 |
|
First mortgage notes (net of discount of $8,812 and $9,578) |
|
|
221,188 |
|
|
|
220,422 |
|
Junior subordinated debentures |
|
|
80,545 |
|
|
|
80,545 |
|
Other Long-Term Debt: |
|
|
|
|
|
|
|
|
City of Sheboygan bonds |
|
|
|
|
|
|
8,573 |
|
City of Sheboygan loan |
|
|
|
|
|
|
3,054 |
|
Other |
|
|
31 |
|
|
|
47 |
|
|
|
|
|
|
|
|
|
|
|
538,264 |
|
|
|
552,298 |
|
Less current portion of long-term debt |
|
|
(88,542 |
) |
|
|
(70,083 |
) |
|
|
|
|
|
|
|
Total long-term debt |
|
$ |
449,722 |
|
|
$ |
482,215 |
|
|
|
|
|
|
|
|
Traverse City/Kansas City Mortgage Loan This non-recourse loan is secured by our Traverse
City and Kansas City resorts. The loan bears interest at a fixed rate of 6.96%, is subject to a
25-year principal amortization schedule, and matures in January 2015. The loan has customary
financial and operating debt compliance covenants. The loan also has customary restrictions on our
ability to prepay the loan prior to maturity. We were in compliance with all covenants under this
loan at June 30, 2011.
49
While recourse under the loan is limited to the property owners interest in the mortgaged
property, we have provided limited guarantees with respect to certain customary non-recourse
provisions and environmental indemnities relating to the loan.
The loan also contains limitations on our ability, without lenders consent, to (i) make
payments to our affiliates if a default exists; (ii) enter into transactions with our affiliates;
(iii) make loans or advances; or (iv) assume, guarantee or become liable in connection with any
other obligations.
The loan requires us to maintain a minimum debt service coverage ratio (DSCR) of 1.35,
calculated on a quarterly basis. This ratio is defined as the two collateral properties combined
trailing twelve-month net operating income divided by the greater of (i) the loans twelve-month
debt service requirements and (ii) 8.5% of the amount of the outstanding principal indebtedness
under the loan. Failure to meet the minimum DSCR is not an event of default and does not
accelerate the due date of the loan. Not meeting the minimum DSCR, however, subjects the two
properties to a lock-box cash management arrangement, at the discretion of the loans servicer.
The loan also contains a similar lock-box requirement if we open any Great Wolf Lodge or Blue
Harbor Resort within 100 miles of either resort, and the two collateral properties combined
trailing twelve-month net operating income is not at least equal to 1.8 times 8.5% of the amount of
the outstanding principal indebtedness under the loan. For the twelve-month period ended June 30,
2011, the DSCR for this loan was 1.08, and the DSCR for this loan has been below 1.35 since the
second quarter of 2007.
In September 2010 the loans master servicer implemented the lock-box cash management
arrangement. That lock-box cash management arrangement requires substantially all cash
receipts for the two resorts to be moved each day to a lender-controlled bank account, which the
loan servicer then uses monthly to fund debt service and operating expenses for the two resorts,
with excess cash flow being deposited in a reserve account and held as additional collateral for
the loan. We believe that this arrangement constitutes a traditional lock-box
arrangement as discussed in authoritative accounting guidance. Based on that guidance, since the
loans master servicer has now implemented a lock-box arrangement,
we have classified the entire outstanding principal balance of the loan as a
current liability as of June 30, 2011, since the lock-box arrangement requires us to use the
properties working capital to service the loan, and we do not presently have the ability to
refinance this loan to a new, long-term loan. Although the entire principal balance of the loan is
classified as a current liability as of June 30, 2011, the loan is not in default and the
principal balance is not due currently.
At our request, in October 2010 the loan was transferred to its special servicer. We informed
the special servicer that, given the current and expected performance at that time of the two
properties securing this loan, we might elect to cease the subsidization of debt service on this
non-recourse loan. If we were to elect to cease the subsidization of debt service, that may result
in a default under the loan agreement. We believe the combined market value of the two properties
securing this loan is now significantly less than the principal amount of the loan. The properties
had a combined net book value of $40,456 as of June 30, 2011, which includes the effect of an
impairment charge we recorded in 2010 to adjust the carrying value of the properties to their
estimated fair value, and the amount of debt outstanding under the loan was $66,421 as of June 30,
2011.
Through March 2011, we worked with the special servicer to discuss a potential modification of
this loan. Those discussions proved unsuccessful and the special servicer has transferred the loan
back to the master servicer, where the lock-box arrangement as described above remains in place.
50
Given improved operating trends and performance at the properties during the three and six
months ended June 30, 2011, we currently expect the properties to generate sufficient cash flow so
that our subsidization of debt service, if any, for 2011 will be insignificant to our overall
operations. As a result, we currently believe the most likely course of action for 2011 is to
continue to operate these properties, assuming these trends continue.
Pocono Mountains Mortgage Loan This loan is secured by a mortgage on our Pocono Mountains
resort. The loan bears interest at a fixed rate of 6.10% and matures in January 2017. The loan is
currently subject to a 30-year principal amortization schedule. The loan has customary covenants
associated with an individual mortgaged property. The loan also has customary restrictions on our
ability to prepay the loan prior to maturity. We were in compliance with all covenants under this
loan at June 30, 2011.
The loan requires us to maintain a minimum DSCR of 1.25, calculated on a quarterly basis.
Subject to certain exceptions, the DSCR is increased to 1.35 if we open up a waterpark resort
within 75 miles of the property or incur mezzanine debt secured by the resort. This ratio is
defined as the propertys combined trailing twelve-month net operating income divided by the
greater of (i) the loans twelve-month debt service requirements and (ii) 7.25% of the amount of
the outstanding principal indebtedness under the loan. Failure to meet the minimum DSCR is not an
event of default and does not accelerate the due date of the loan. Not meeting the minimum DSCR,
however, subjects the property to a lock-box cash management arrangement, at the discretion of the
loans servicer. We believe that lock-box arrangement would require substantially all cash
receipts for the resort to be moved each day to a lender-controlled bank account, which the loan
servicer would then use to fund debt service and operating expenses for the resort, with excess
cash flow being deposited in a reserve account and held as additional collateral for the loan.
While recourse under the loan is limited to the property owners interest in the mortgage property,
we have provided limited guarantees with respect to certain customary non-recourse provisions and
environmental indemnities relating to the loan.
The loan also contains limitations on our ability, without lenders consent, to (i) make
payments to our affiliates if a default exists; (ii) enter into transactions with our affiliates;
(iii) make loans or advances; or (iv) assume, guarantee or become liable in connection with any
other obligations.
Concord Mortgage Loan This loan is secured by our Concord resort. The loan bears interest
at a floating annual rate of LIBOR plus a spread of 310 basis points, with a minimum rate of 6.50%
per annum (effective rate of 6.50% as of June 30, 2011). This loan matures in April 2012 and
requires interest only payments until the one-year anniversary of the conversion date of the
property and then requires monthly principal payments based on a 25-year amortization schedule.
However, if the resort owners net income available to pay debt service on this loan for four
consecutive quarters is less than $10,000, or if maximum principal amount of the loan exceeds 75%
of the fair market value of the property, then the lender may require us to post cash collateral or
partially repay the loan in an amount sufficient to remedy such deficiency. This loan has
customary financial and operating debt compliance covenants associated with an individual mortgaged
property, including a minimum consolidated tangible net worth provision. We were in compliance with
all covenants under this loan at June 30, 2011.
On July 15, 2011, we
repaid $20,433 of the amounts outstanding under the above-described loan using cash on hand and
refinanced the remaining $56,000 outstanding with a new loan secured by our Concord resort due
in 2014. See
Subsequent Event footnote in our Notes to our Condensed Consolidated Financial Statements.
First Mortgage Notes In April 2010, we completed a private placement of $230,000 in
aggregate principal amount of our 10.875% first mortgage notes (the Notes) due April 2017. The
Notes were sold at a discount that provides an effective yield of 11.875% before transaction costs.
We are amortizing the discount over the life of the Notes using the
straight-line method, which approximates the effective interest method. The proceeds of the
Notes were used to retire the outstanding mortgage debt on our Mason, Williamsburg, and Grapevine
properties and for general corporate purposes.
51
The Notes are senior obligations of GWR Operating Partnership, LLLP and Great Wolf Finance
Corp (Issuers). The Notes are guaranteed by Great Wolf Resorts and by our subsidiaries that
own three of our resorts and those guarantees are secured by first priority mortgages on those
three resorts. The Notes are also guaranteed by certain of our other subsidiaries on a senior
unsecured basis.
The Notes require that we satisfy certain tests
in order to, among other things: (i) incur additional
indebtedness;
(ii) make distributions from GWR Operating Partnership, L.L.L.P. to Great Wolf Resorts, Inc.;
(iii) repurchase the equity interests in GWR Operating Partnership, L.L.L.P. or to prepay the subordinated debt of GWR Operating Partnership, L.L.L.P. or its subsidiaries;
(iv) make investments, (v) enter into affiliate transactions,
(vi) sell assets other than in the ordinary course of business or (vii) merge. We are currently
restricted from these activities with certain carve-outs, as provided
in the indenture.
Junior Subordinated Debentures In March 2005 we completed a private offering of $50,000 of
trust preferred securities (TPS) through Great Wolf Capital Trust I (Trust I), a Delaware statutory
trust which is our subsidiary. The securities pay holders cumulative cash distributions at an
annual rate which is fixed at 7.80% through March 2015 and then floats at LIBOR plus a spread of
310 basis points thereafter. The securities mature in March 2035 and are callable at no premium
after March 2010. In addition, we invested $1,500 in Trust Is common securities, representing 3%
of the total capitalization of Trust I.
Trust I used the proceeds of the offering and our investment to purchase from us $51,550 of
junior subordinated debentures with payment terms that mirror the distribution terms of the TPS.
The indenture governing the debentures contains limitations on our ability, without the consent of
the holders of the debentures to make payments to our affiliates or for our affiliates to make
payments to us, if a default exists. The costs of the TPS offering totaled $1,600, including
$1,500 of underwriting commissions and expenses and $100 of costs incurred directly by Trust I.
Trust I paid these costs utilizing an investment from us. These costs are being amortized over a
30-year period. The proceeds from our debentures sale, net of the costs of the TPS offering and our
investment in Trust I, were $48,400. We used the net proceeds to retire a construction loan.
In June 2007 we completed a private offering of $28,125 of TPS through Great Wolf Capital
Trust III (Trust III), a Delaware statutory trust which is our subsidiary. The securities pay
holders cumulative cash distributions at an annual rate which is fixed at 7.90% through June 2012
and then floats at LIBOR plus a spread of 300 basis points thereafter. The securities mature in
June 2017 and are callable at no premium after June 2012. In addition, we invested $870 in the
Trusts common securities, representing 3% of the total capitalization of Trust III.
Trust III used the proceeds of the offering and our investment to purchase from us $28,995 of
junior subordinated debentures with payment terms that mirror the distribution terms of the trust
securities. The costs of the TPS offering totaled $932, including $870 of underwriting commissions
and expenses and $62 of costs incurred directly by Trust III. Trust III paid these costs utilizing
an investment from us. These costs are being amortized over a 10-year period. The proceeds from
these debentures sales, net of the costs of the TPS offering and our investment in Trust III, were
$27,193. We used the net proceeds for development costs.
Issue trusts, like Trust I and Trust III (collectively, the Trusts), are generally variable
interests. We have determined that we are not the primary beneficiary under the Trusts, and
accordingly we do not include the financial statements of the Trusts in our consolidated financial
statements.
Our consolidated financial statements present the
debentures issued to the Trusts as long-term debt. Our investments in the Trusts are accounted as
cost investments and are included in other assets on our consolidated balance sheets. For financial
reporting purposes, we record interest expense on the corresponding notes in our condensed
consolidated statements of operations.
City of Sheboygan Bonds The City of Sheboygan bonds represented the face amount of bond
anticipation notes (BANs) issued by the City in November 2003 in conjunction with the construction
of the Blue Harbor Resort in
52
Sheboygan, Wisconsin. In March 2011, we sold the Blue Harbor Resort.
In connection with the sale of the property, we were released from our obligations under the BANs.
City of Sheboygan Loan The City of Sheboygan loan amount represented a loan made by the
City in 2004 in conjunction with the construction of the Blue Harbor Resort in Sheboygan,
Wisconsin. In March 2011, we sold the Blue Harbor Resort. In connection with the sale of the
property, we were released from our obligations under the loan.
Future Maturities Future principal requirements on long-term debt are as follows:
|
|
|
|
|
Through |
|
|
|
|
June 30, |
|
|
|
|
2012 |
|
$ |
23,809 |
|
2013 |
|
|
4,449 |
|
2014 |
|
|
4,915 |
|
2015 |
|
|
115,403 |
|
2016 |
|
|
1,646 |
|
Thereafter |
|
|
396,854 |
|
|
|
|
|
Total |
|
$ |
547,076 |
|
|
|
|
|
As discussed above, the Traverse City/Kansas City mortgage loan is classified as a current
liability as of June 30, 2011, due to the implementation of a traditional lock-box arrangement,
although the loan is not in default and the full principal balance of the loan is not due
currently. The future maturities table above reflects future cash principal repayments currently
required under the provisions of that loan of $1,688 in 2012, $1,819 in 2013, $1,947 in 2014,
$60,967 in 2015.
Due to the refinancing of our Concord mortgage loan subsequent to June 30, 2011, we have not
included the balance of the mortgage loan in the future maturities due through June 30, 2012,
except for the principal payments due under the refinanced loan through June 30, 2012 and a
principal pay down on the existing loan of $20,433 that was made as part of the refinancing of the
Concord mortgage loan.
Short-Term Liquidity Requirements
Our
short-term liquidity requirements consist primarily of funds necessary to pay
operating expenses for the next 12 months, including:
|
|
|
recurring maintenance, repairs and other operating expenses necessary to properly
maintain and operate our resorts; |
|
|
|
|
recurring capital expenditures we make at our resorts; |
|
|
|
|
debt maturities within the next year; |
|
|
|
|
property taxes and insurance expenses; |
|
|
|
|
interest expense and scheduled principal payments on outstanding indebtedness; |
|
|
|
|
general and administrative expenses; and |
|
|
|
|
income taxes. |
Historically, we have satisfied our short-term liquidity requirements through a combination of
operating cash flows and cash on hand. We believe that cash provided by our operations, together
with cash on hand, will be sufficient to fund our short-term liquidity requirements for working
capital, capital expenditures and debt service for the next 12 months.
In addition, as noted above, in July 2011 we refinanced the mortgage loan on our Concord
property that was due in April 2012. We refinanced the existing $76,433 loan to a new
$56,000 loan, using cash on hand to repay the $20,433 difference in the two loan amounts.
The new loan is due in 2014.
53
Long-Term Liquidity Requirements
Our long-term liquidity requirements generally consist primarily of funds necessary to pay for
the following items for periods beyond the next 12 months:
|
|
|
scheduled debt maturities; |
|
|
|
|
costs associated with the development of new resorts; |
|
|
|
|
renovations, expansions and other non-recurring capital expenditures that need to be made
periodically to our resorts; and |
|
|
|
|
capital contributions and loans to unconsolidated joint ventures. |
We expect to meet these needs through a combination of:
|
|
|
existing working capital, |
|
|
|
|
cash provided by operations, |
|
|
|
|
proceeds from investing activities, including sales of partial or whole ownership
interests in certain of our resorts; and |
|
|
|
|
proceeds from financing activities, including mortgage financing on properties being
developed, additional or replacement borrowings under future credit facilities,
contributions from joint venture partners, and the issuance of equity instruments, including
common stock, or additional or replacement debt, including debt securities, as market
conditions permit. |
We believe these sources of capital will be sufficient to provide for our long-term capital
needs. We cannot be certain, however, that we will have access to additional future financing
sufficient to meet our long-term liquidity requirements on terms that are favorable to us, or at
all.
Other than debt maturities, our largest long-term expenditures are expected to be for capital
expenditures for development of future resorts, capital expenditures for our existing resorts, and
capital contributions or loans to joint ventures owning resorts under construction or development.
Such expenditures were $5,174 for the six months ended June 30, 2011. We expect to have
approximately $4,000 of such expenditures for the rest of 2011. As discussed above, we expect to
meet these requirements primarily through a combination of cash provided by operations and cash on
hand.
We currently project that the combination of our cash on hand plus cash provided by operations
in 2011 will be sufficient to meet the short-term liquidity requirements, as described above. Based
on our current projections, however, we do not believe that we will have sufficient excess amounts
of cash available in 2011 in order either to begin development of any new resorts or to make
material cash capital contributions to new joint ventures that would develop or acquire resorts
that we would license and manage. Also, due to the current state of the capital markets, which are
marked by the general unavailability of debt financing for large commercial real estate
construction projects, we do not expect to have significant expenditures for development of new
resorts until we have all equity and debt capital amounts fully
committed, including our projected ability to fund any required equity contribution to a
project. Furthermore, the indenture which governs our first mortgage notes imposes significant
restrictions on our ability to invest in the development of new resorts or joint ventures that may
acquire or develop resorts. We believe these factors will result in
54
our not making any significant
cash outlays in the remainder of 2011 for development of new resorts or capital contributions to
new joint ventures that develop or acquire resorts.
Off Balance Sheet Arrangements
We have one unconsolidated joint venture arrangement at June 30, 2011. We account for our
unconsolidated joint venture using the equity method of accounting.
Our joint venture with The Confederated Tribes of the Chehalis Reservation owns the Great Wolf
Lodge resort and conference center on a 39-acre land parcel in Grand Mound, Washington. This
resort opened in March 2008. This joint venture is a limited liability company. We are a member
of that limited liability company with a 49% ownership interest. At June 30, 2011, the joint
venture had aggregate outstanding indebtedness to third parties of $96,750. As of June 30, 2011,
we have made combined loan and equity contributions, net of loan repayments, of $27,179 to the
joint venture to fund a portion of construction costs of the resorts.
Based on the nature of the activities conducted in the joint venture, we cannot estimate with
any degree of accuracy amounts that we may be required to fund in the long term. We do not
currently believe that any additional future funding of the joint venture will have a material
adverse effect on our financial condition, as we currently do not expect to make any significant
future capital contributions to this joint venture.
Contractual Obligations
The following table summarizes our contractual obligations as of June 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment Terms |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
More |
|
|
|
|
|
|
|
Less Than |
|
|
|
|
|
|
|
|
|
|
Than |
|
|
|
Total |
|
|
1 Year |
|
|
1-3 Years |
|
|
3-5 Years |
|
|
5 Years |
|
|
|
|
Debt obligations (1) |
|
$ |
744,362 |
|
|
$ |
59,271 |
|
|
$ |
79,612 |
|
|
$ |
180,499 |
|
|
$ |
424,980 |
|
Operating lease obligations |
|
|
3,758 |
|
|
|
959 |
|
|
|
1,560 |
|
|
|
839 |
|
|
|
400 |
|
Reserve on unrecognized tax benefits |
|
|
1,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
749,388 |
|
|
$ |
60,230 |
|
|
$ |
81,172 |
|
|
$ |
181,338 |
|
|
$ |
426,648 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts include interest (for fixed rate debt) and principal. |
If we develop future resorts where we are the majority owner, we expect to incur significant
additional debt and construction contract obligations.
Working Capital
We had
$38,332 of available cash and cash equivalents and a working capital deficit of $73,698
(current assets less current liabilities) at June 30, 2011, compared to the $36,988 of available
cash and cash equivalents and a working capital deficit of $65,190 at December 31, 2010. The
primary reasons for the working capital deficit as of June 30, 2011 and December 31, 2010 were due
to the following items being classified as current liabilities:
|
|
|
Our Traverse City/Kansas City mortgage loan (principal balance of $66,421), due to the
lenders implementation of the traditional lock-box arrangement for the two properties, as
discussed above, and |
|
|
|
|
A principal paydown of $20,443 made in July 2011 as part of our loan refinancing on
our Concord loan, as discussed above. |
55
Cash Flows
Six months ended June 30, 2011, compared with the six months ended June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase/ |
|
|
|
2011 |
|
|
2010 |
|
|
(Decrease) |
|
Net cash provided by operating activities |
|
$ |
4,726 |
|
|
$ |
18,270 |
|
|
$ |
(13,544 |
) |
Net cash provided used in investing activities |
|
|
(670 |
) |
|
|
(2,607 |
) |
|
|
1,937 |
|
Net cash used in financing activities |
|
|
(2,712 |
) |
|
|
(6,166 |
) |
|
|
3,454 |
|
Operating Activities. The decrease in net cash provided by operating activities resulted
primarily from a decrease in accounts payable, accrued expenses and other liabilities during the
six months ended June 30, 2011 as compared to the six months ended June 30, 2010.
Investing Activities. The increase in net cash provided by investing activities for the six
months ended June 30, 2011, as compared to the six months ended June 30, 2010, resulted primarily
from a decrease in capital expenditures related to our properties that are in service and in
development as well as an increase in restricted cash and proceeds received from our sale of our
Sheboygan resort.
Financing Activities. The decrease in net cash used in financing activities resulted primarily
from payment of fewer loan costs partially offset by receiving fewer loan proceeds during the six
months ended June 30, 2011 as compared to the six months ended June 30, 2010.
Inflation
Our resort properties are able to change room and amenity rates on a daily basis, so the
impact of higher inflation can often be passed along to customers. However, a weak economic
environment that decreases overall demand for our products and services could restrict our ability
to raise room and amenity rates to offset rising costs.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our future income, cash flows and fair values relevant to financial instruments are dependent, in
part, upon prevailing market interest rates. Market risk refers to the risk of loss from adverse
changes in market prices and interest rates. Our earnings are also affected by the changes in
interest rates due to the impact those changes have on our interest income from cash and our
interest expense from variable-rate debt instruments. We may use derivative financial instruments
to manage or hedge interest rate risks related to our borrowings. We do not intend to use
derivatives for trading or speculative purposes. All dollar amounts are in thousands.
As of June 30, 2011, we had total indebtedness of $538,264. This debt consisted of:
|
|
|
$66,421 of fixed rate debt secured by two of our resorts. This debt bears interest at
6.96%. This loan matures in January 2015. |
|
|
|
|
$93,646 of fixed rate debt secured by one of our resorts. This debt bears interest at
6.10%. This loan matures in January 2017. |
|
|
|
|
$76,433 of variable rate debt secured by one of our resorts. This debt bears interest
at a floating annual rate of LIBOR plus a spread of 310 basis points, with a minimum rate
of 6.50% per annum. The effective rate was 6.50% at June 30, 2011. This loan matures in
April 2012. |
56
|
|
|
$221,188 (net of discount of $8,812) of Notes that are secured by first
priority liens on three of our resorts. The Notes bear interest at 10.875%. The notes
are due April 2017. |
|
|
|
|
$51,550 of subordinated notes that bear interest at a fixed rate of 7.80% through March
2015 and then at a floating rate of LIBOR plus 310 basis points thereafter. The securities
mature in March 2035. |
|
|
|
|
$28,995 of subordinated notes that bear interest at a fixed rate of 7.90% through June
2012 and then at a floating rate of LIBOR plus 300 basis points thereafter. The securities
mature in June 2017. |
|
|
|
|
$31 related to a capital lease that was entered into in June 2009. The lease matures in
May 2012. |
As of June 30, 2011, we estimate the total fair value of the indebtedness described above to
be $56,789 less than their total carrying values, due to the terms of the existing debt being
different than those terms we believe would currently be available to us for indebtedness with
similar risks and remaining maturities.
At June 30, 2011 our variable rate debt is subject to minimum rate floors. If LIBOR were to
increase or decrease by 1% or 100 basis points, there would be no change in interest expense on our
variable rate debt based on our debt balance outstanding and current interest rates in effect as of
June 30, 2011, as LIBOR plus the loans basis point spreads would not increase or decrease above
the loans minimum rate floor.
During the six months ended June 30, 2011, there were no other material changes in our market
risk exposure. For a complete discussion of our market risk associated with interest rate risk as
of June 30, 2011, see Item 7A. Quantitative and Qualitative Disclosures about Market Risk in our
Annual Report on Form 10-K for the year ended December 31, 2010.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to provide reasonable assurance that
information in our reports under the Securities Exchange Act of 1934, as amended (the Exchange
Act) is recorded, processed, summarized and reported within the time periods specified pursuant
to the SECs rules and forms. Disclosure controls and procedures, as defined in Rules 13a-15(e)
and 15d-15(e) under the Exchange Act, include controls and procedures designed to ensure that
information required to be disclosed by us in the reports we file or submit under the Exchange Act
is accumulated and communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In
designing and evaluating the disclosure controls and procedures, management recognizes that any
controls and procedures, no matter how well designed and operated, can provide only reasonable, and
not absolute, assurance that the objectives of the system are met.
We carried out an evaluation, under the supervision and with the participation of our
management including our Chief Executive Officer and Chief Financial Officer, of the effectiveness
of the design and operation of our disclosure controls and procedures as of the end of the second
quarter of 2011. We have concluded that our disclosure controls and procedures were effective as of
June 30, 2011.
Changes in Internal Control over Financial Reporting
During the period covered by this quarterly report on Form 10-Q, there have been no changes to our
internal control over financial reporting that are reasonably likely to materially affect our
internal control over financial reporting.
57
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are involved in litigation from time to time in the ordinary course of our business.
We do not believe that the outcome of any pending or threatened litigation will have a
material adverse effect on our financial condition or results of operations. However, as is
inherent in legal proceedings where issues may be decided by finders of fact, there is a
risk that unpredictable decisions, materially adverse to the Company, could occur.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider
the factors discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the
year ended December 31, 2010, and subsequent Quarterly Reports on Form 10-Q, which could materially
affect our business, financial condition or future results. The risks described in our Annual
Report on Form 10-K, and subsequent Quarterly Reports on Form 10-Q, are not the only risks facing
us. Additional risks and uncertainties not currently known to us or that we currently deem to be
immaterial also may materially adversely affect our business, financial condition and/or operating
results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
We did not make any unregistered sales of equity securities during the applicable period.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
We were not in default of our obligations upon any senior securities during the applicable period.
ITEM 4. [Removed and Reserved]
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The exhibits listed below are included as exhibits in this Quarterly Report on Form 10-Q.
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Exhibit |
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Number |
|
Description |
|
10.1 |
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Separation Agreement and Release between Great Wolf Resorts, Inc. and J.
Michael Schroeder dated February 17, 2011 (incorporated herein by
reference to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q
filed May 5, 2011). |
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|
|
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10.2 |
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|
Purchase Agreement for Blue Harbor Resort, Sheboygan, Wisconsin between
Claremont New Frontier Resort, LLC and Blue Harbor Resort Sheboygan, LLC
dated March 17, 2011 (incorporated herein by reference to Exhibit 10.2 to
the Companys Quarterly Report on Form 10-Q filed May 5, 2011). |
58
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|
Exhibit |
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|
Number |
|
Description |
|
31.1* |
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|
Certification of Chief Executive Officer of Periodic Report Pursuant to
Rule 13a 14(a) and Rule 15d 14(a) |
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31.2* |
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|
Certification of Chief Financial Officer of Periodic Report Pursuant to
Rule 13a 14(a) and Rule 15d 14(a) |
|
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|
32.1* |
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|
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 |
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32.2* |
|
|
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 |
59
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
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GREAT WOLF RESORTS, INC.
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/s/ James A. Calder
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James A. Calder |
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|
Chief Financial Officer
(Duly authorized officer)
(Principal Financial and Accounting Officer) |
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|
Dated:
August 5, 2011
60