Great Wolf Resorts adjusts net income guidance

MADISON, Wis., Feb. 9 /PRNewswire-FirstCall/ — Great Wolf Resorts, Inc. (NASDAQ:WOLF) , North America’s leading family of indoor waterpark resorts, today announced that the company will release fourth-quarter and full-year 2006 financial results on Wednesday, February 28, 2007, before the market opens. The company will hold a conference call at 10 a.m. E.T. on that day to discuss its results.

Management also advises that the company believes that its fourth quarter Adjusted EBITDA was above $7.5 million, thereby exceeding the upper end of the company’s previously issued Adjusted EBITDA guidance. Accordingly, the company has revised its fourth quarter 2006 guidance for certain financial measures as follows: Adjusted EBITDA to a range of $7.5-$8.5 million; Adjusted net income (loss) to a range of $(750,000)-$250,000; and Adjusted net income (loss) per diluted share to a range of $(0.03)-$0.01.

In addition, the company advised that it has conducted its annual goodwill impairment assessment, and in connection with the results of that assessment expects to record a non-cash, pre-tax charge of approximately $51 million for fourth quarter 2006 related to two resorts in the upper Midwest. The impairment charge does not affect the historical cost carrying basis of the impacted resorts’ fixed assets. The company has not completed its estimate of the after-tax impact of the goodwill impairment charge on diluted earnings per share; as a result, the company is unable to provided updated guidance on net income (loss) and net income (loss) per diluted share for the fourth quarter and full year 2006. The effect of the goodwill impairment charge is not reflected in the company’s previously issued net income (loss) guidance for the fourth quarter of 2006. In conformance with the company’s practices, this non-cash impairment charge will be excluded from the company’s fourth quarter 2006 Adjusted EBITDA and Adjusted net income (loss) calculations.

The company conducted its goodwill analysis and assessment in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets,” which requires goodwill to be assessed for potential impairment at least annually. The company’s goodwill balance resulted from its acquisition of operating resorts in conjunction with the company’s initial public offering in December 2004. In light of current and expected future market and economic conditions for the company’s resorts located in Traverse City, Michigan and Sheboygan, Wisconsin, the company determined that the an impairment charge for goodwill associated with these resorts was required. The impairment charge will not have any impact on the company’s cash flows or cash position.

The conference call on February 28 will be hosted by Chief Executive Officer John Emery and Chief Financial Officer Jim Calder. Stockholders and other interested parties may listen to a simultaneous webcast of the conference call on the Internet by logging onto the company’s Web site,, or, or may call (800) 240-5318, reference number 11083831. A recording of the call will be available by telephone until midnight on Wednesday, March 7, 2007, by dialing (800) 405- 2236, reference number 11083831. A replay of the conference call will be posted on the company’s Web site through March 28, 2007.

About Great Wolf Resorts, Inc.

Great Wolf Resorts, Inc.(R) (NASDAQ:WOLF) is North America’s largest family of indoor waterpark resorts and, through its subsidiaries and affiliates, owns and operates its family resorts under the Great Wolf Lodge(R) and Blue Harbor Resort(TM) brands. Great Wolf Resorts is a fully integrated resort company and owns and/or manages Great Wolf Lodge locations in: Wisconsin Dells, Wis.; Sandusky, Ohio; Traverse City, Mich.; Kansas City, Kan.; Williamsburg, Va.; the Pocono Mountains, Pa.; Niagara Falls, Ontario; Mason, Ohio; and Blue Harbor Resort & Conference Center in Sheboygan, Wis. Great Wolf Lodge properties are currently in predevelopment and/or under construction in Grapevine, Texas; and Grand Mound, Wash.

The company’s resorts are family-oriented destination facilities that generally feature 300 to 400 rooms and a large indoor entertainment area measuring 40,000 to 100,000 square feet. The all-suite properties offer a variety of room styles, arcade/game rooms, fitness centers, themed restaurants, spas, supervised children’s activities and other amenities. Additional information may be found on the company’s Web site at

Non-GAAP Financial Measures

Included in this press release are certain “non-GAAP financial measures,” which are measures of the company’s historical or future performance that are different from measures calculated and presented in accordance with GAAP, within the meaning of applicable SEC rules, that Great Wolf Resorts believes are useful to investors. They are as follows: (i) Adjusted EBITDA and (ii) Adjusted net income (loss). The following discussion defines these terms and presents the reasons the company believes they are useful measures of its performance.

Great Wolf Resorts defines Adjusted EBITDA as net income plus (a) interest expense, net, (b) income taxes, (c) depreciation and amortization, (d) non- cash employee compensation, (e) costs associated with early extinguishment of debt or postponement of debt offerings, (f) opening costs of resorts under development, (g) shareholder litigation expenses, (h) equity in earnings (loss) of affiliates, (i) loss on sale of assets, (j) impairment charges, (k) other unusual or non-recurring items, and (l) minority interests. The company defines Adjusted net income (loss) as net income without the effects of (a) non-cash employee compensation, (b) costs associated with early extinguishment of debt or postponement of debt offerings, (c) opening costs of resorts under development, (d) shareholder litigation expenses, (e) loss on sale of assets, (f) impairment charges, (g) other unusual or non-recurring items, and (h) the effect of non-normalized income tax expense.

Adjusted EBITDA and Adjusted net income (loss) as calculated by the company are not necessarily comparable to similarly titled measures by other companies. In addition, Adjusted EBITDA (a) does not represent net income or cash flows from operations as defined by GAAP, (b) is not necessarily indicative of cash available to fund the company’s cash flow needs, and (c) should not be considered as an alternative to net income, operating income, cash flows from operating activities or the company’s other financial information as determined under GAAP. Also, Adjusted net income does not represent net income as defined by GAAP.

Management believes Adjusted EBITDA is useful to an investor in evaluating the company’s operating performance because a significant portion of its assets consists of property and equipment that are depreciated over their remaining useful lives in accordance with GAAP. Because depreciation and amortization are non-cash items, management believes that presentation of Adjusted EBITDA is a useful measure of the company’s operating performance. Also, management believes measures such as Adjusted EBITDA are widely used in the hospitality and entertainment industries to measure operating performance.

Similarly, management believes Adjusted net income (loss) is a useful performance measure because certain items included in the calculation of net income may either mask or exaggerate trends in the company’s ongoing operating performance. Furthermore, performance measures that include these types of items may not be indicative of the continuing performance of the company’s underlying business. Therefore, the company presents Adjusted EBITDA and Adjusted net income (loss) because they may help investors to compare Great Wolf Resorts’ ongoing performance before the effect of various items that do not directly affect the company’s ongoing operating performance.

Forward-Looking Statements

This press release may contain forward-looking statements within the meaning of the federal securities laws. All statements, other than statements of historical facts, including, among others, statements regarding Great Wolf Resorts’ future financial position, business strategy, projected levels of growth, projected costs and projected performance and financing needs, are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of Great Wolf Resorts, Inc. and members of its management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that actual results may differ materially from those contemplated by such forward- looking statements. Many of these factors are beyond the company’s ability to control or predict. Such factors include, but are not limited to, the completion of the company’s review of its financial position as of December 31, 2006 and the results of operations for the fiscal year and quarterly period ended December 31, 2006, the completion of the company’s goodwill impairment analysis and the final impacts there from on the company’s results of operations for its fiscal year and quarterly period ended December 31, 2006, competition in the company’s markets, changes in family vacation patterns and consumer spending habits, regional or national economic downturns, the company’s ability to attract a significant number of guests from its target markets, economic conditions in its target markets, the impact of fuel costs and other operating costs, the company’s ability to develop new resorts in desirable markets or further develop existing resorts on a timely and cost efficient basis, the company’s ability to manage growth, including the expansion of the company’s infrastructure and systems necessary to support growth, the company’s ability to manage cash and obtain additional cash required for growth, potential accidents or injuries at its resorts, its ability to achieve or sustain profitability, downturns in its industry segment and extreme weather conditions, increases in operating costs and other expense items and costs, uninsured losses or losses in excess of the company’s insurance coverage, the company’s ability to protect its intellectual property, trade secrets and the value of its brands, and other factors discussed under Item IA (Risk Factors) in Great Wolf Resorts 2005 Form 10-K. We assume no duty to update these statements.

Management believes these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. All written and oral forward-looking statements attributable to Great Wolf Resorts or persons acting on its behalf are qualified in their entirety by these cautionary statements. Further, forward-looking statements speak only as of the date they are made, and the company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time unless otherwise required by law.