##### Table of Contents





UNITED
    STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
    20549
      Form 10-K
      (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal period ended
    December 31, 2008ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File Number 000-51064
      GREAT WOLF RESORTS,
    INC.
 (Exact name of registrant as
    specified in its charter)
  Delaware

51-0510250(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)122 West Washington Avenue
    Madison, Wisconsin 53703

53703(Zip Code)(Address of principal executive
    offices)   Registrants
    telephone number, including area code
    608
    661-4700
 Securities registered pursuant to Section 12(b) of the
    Act:
 None
  Securities registered pursuant to Section 12(g) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, par value $0.01 per share

NASDAQ Global Market   o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
    Large accelerated filer
    o

Accelerated filer
    þ

Non-accelerated
    filer o
    (Do not check if a smaller reporting company)

Smaller reporting
    company o   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




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##### 





Great
    Wolf Resorts, Inc.
  Annual
    Report on
    Form 10-K
 For the
    Year Ended December 31, 2008
  INDEX
  PageNo.PART IItem 1.

Business


2Item 1A.

Risk Factors


21Item 1B.

Unresolved Staff Comments


35Item 2.

Properties


36Item 3.

Legal Proceedings


37Item 4.

Submission of Matters to a Vote of Security
    Holders


37PART IIItem 5.

Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


37Item 6.

Selected Financial Data


39Item 7.

Managements Discussion and Analysis of
    Financial Condition and Results of Operations


41Item 7A.

Quantitative and Qualitative Disclosures About
    Market Risk


62Item 8.

Financial Statements and Supplementary Data


64Item 9.

Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


96Item 9A.

Controls and Procedures


96Item 9B.

Other Information


99PART IIIItem 10.

Directors, Executive Officer and Corporate
    Governance of the Registrant


99Item 11.

Executive Compensation


99Item 12.

Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


99Item 13.

Certain Relationships and Related Transactions,
    and Director Independence


99Item 14.

Principal Accountant Fees and Services


99PART IVItem 15.

Exhibits and Financial Statement Schedules


99Signatures


100EX-10.20EX-21.1EX-23.1EX-23.2EX-31.1EX-31.2EX-32.1EX-32.2   1




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PART I  ITEM 1.
    BUSINESS  Overview
    and Development
  ® ® Form 10-K
  ® tm
       2




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##### Table of Contents



Properties 
    Overview
    IndoorOwnership

Opened/

Number of


Number of


EntertainmentPercentage

Opening

Guest Suites


Condo Units(1)


Area(2)(Approx.
    ft2)Existing Resorts:Wisconsin Dells, WI(3)

30.32%

1997


308



77



102,000Sandusky, OH(3)

30.32%

2001


271







41,000Traverse City, MI

100%

2003


280







57,000Kansas City, KS

100%

2003


281







57,000Sheboygan, WI

100%

2004


182



64



54,000Williamsburg, VA

100%

2005


405







87,000Pocono Mountains, PA

100%

2005


401







101,000Niagara Falls, ONT(4)



2006


406







104,000Mason, OH

100%

2006


401







105,000Grapevine, TX(5)

100%

2007


605







110,000Grand Mound, WA(6)

49%

2008


398







74,000Resort Under Construction:Concord, NC(7)

100%

March 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, childrens activity room, family
    tech center,
    MagiQuest®

    and fitness room, as well as our spa in the resorts that have
    such amenities.(3)
    
    These properties are owned by a joint venture. CNL Lifestyle
    Properties, Inc. (CNL), a real estate investment trust focused
    on leisure and lifestyle properties, owns a 69.68% interest in
    the joint venture, and we own a 30.32% interest. We operate the
    properties and license the Great Wolf Lodge brand to the joint
    venture under long-term agreements through October 2020, subject
    to earlier termination in certain situations.(4)
    
    An affiliate of Ripley Entertainment, Inc. (Ripley) owns this
    resort. We have granted Ripley a license to use the Great Wolf
    Lodge name for this resort through April 2016. We will manage
    the resort on behalf of Ripley through April 2009.(5)
    
    In late 2007, we began construction on an additional 203 suites
    and 20,000 square feet of meeting space as an expansion of
    this resort. The meeting space, along with 92 rooms, was opened
    in December 2008, with the rest of the rooms completed and
    opened in January 2009.(6)
    
    This property is owned by a joint venture. The Confederated
    Tribes of the Chehalis Reservation (Chehalis) own 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 Chehalis.(7)
    
    We are developing a Great Wolf Lodge resort in Concord, North
    Carolina. The Northwoods-themed, 402-suite resort will provide a
    comprehensive package of destination lodging amenities and
    activities. Construction on the resort began in October 2007
    with expected completion in March 2009.  Northwoods Lodge Theme.
 3




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Guest Suites. ® tm tm tm tm pay-per-view pay-per-play
  Indoor Waterparks.
       4




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##### Table of Contents



Amenities.
  
    Themed Restaurants.  Our resorts feature one or
    more full-service, themed restaurants and a themed bar and
    grille that serves alcoholic beverages and sandwiches. Our
    themed restaurants include the Gitchigoomie
    Grilltm,

    with a life-sized sea plane suspended over the dining area,
    Lumber Jacks Cook
    Shantytm,

    the Loose Moose Bar &
    Grilltm,

    and the Camp Critter Bar &
    Grilletm,

    which features a two-story realistic tree with a canopy of
    leaves and canvas-topped booths with hanging lanterns, giving
    guests the impression that they are dining in a Northwoods
    forest campsite. Our Blue Harbor Resort features our On the
    Rocks Bar & Grille and Rusty
    Anchortm

    Buffet.
    Ice Cream Shop and Confectionery.  Each of our
    Great Wolf Lodge resorts has a Bear Claw Café or Bear Paw
    Sweets & Eats ice cream shop and confectionery that
    provides sandwiches,
    Starbucks®

    coffee, pastries, ice cream, candies, home-made fudge and other
    snacks that families can share together. Our Blue Harbor Resort
    has a Sweetshop Landing confectionery.
    Snack Bar.  Each of our waterparks has a snack
    bar that offers a variety of sandwiches, pizzas and similar
    foods with ample seating so that our guests do not have to leave
    the warmth and comfort of the waterpark.
    Gift Shop.  Each of our resorts has a Buckhorn
    Exchangetm

    or Precious Cargo gift shop that provides unique themed gifts,
    including Great Wolf Lodge logo merchandise, souvenirs,
    collectibles and stuffed animals. The gift shop also offers
    resort toys, swimwear and personal necessities. Our resorts also
    have a Bear
    Essentialstm

    or Washed Ashore gift shop located in the waterpark.
    Full-Service Spa.  Each of our resorts, with
    the exception of our Sandusky resort, has an
    Elementstm

    Spa and Salon that provides a relaxing
    get-a-way
    with a full complement of massages, facials, manicures,
    pedicures and other spa treatments and a wide selection of
    Aveda®

    products. Each of our spas also includes our
    Scooops®

    Kid Spa. The furnishings for the kid-friendly spa have the look
    of a modern ice cream parlor, with chocolate-colored walls,
    retro swivel stools and a pedicure sofa that looks like an
    oversized ice cream sundae. While enjoying their treatments,
    kids can listen to music with a provided CD player and speakers
    or with their own digital music player.
    Game Arcade.  Our Youkon Jacks Game
    Parlortm

    or Northern Lights
    Arcadetm

    range in size from approximately 3,900 to 7,000 square
    feet, generally feature over 70 games and are divided into
    distinct areas with video and skill games that appeal to
    children of different ages. Tickets won from the skill games may
    be exchanged for a wide selection of merchandise that appeals to
    our younger guests.
    Cub Club.  Our Cub
    Clubtm

    rooms are professionally staffed childrens activity rooms
    with programmed activities, including arts and crafts, games and
    nature hikes. Cub Club is also a membership program for our
    younger guests. Cub Club membership is open to all children who
    have stayed at one of our resorts and includes a periodic
    newsletter, exclusive offers, rewards for each stay and a free
    meal and dessert when members visit during their birthday month.
    We currently have approximately 55,000 5




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Cub Club members. Our Blue Harbor Resort features a Crew
    Clubtm

    program and activities that are similar to our Cub Club.  
    Animated Clock Tower.  Each of our Great Wolf
    Lodge resorts has a two-story animated Clock Tower located in
    the resorts main atrium lobby. The Clock Tower provides
    daily theatrical entertainment through talking and singing
    trees, animals and Northwoods figures. Our Blue Harbor Resort
    features a 2,000-gallon water fountain featuring a hand-blown
    glass sculpture and a music and light show located in its main
    atrium lobby.
    Outdoor Water Amenities.  Outdoor water
    amenities complement our indoor waterpark facilities and allow
    our guests to take advantage of favorable weather conditions.
    Our outdoor water amenities include activity pools and a large
    deck or patio area and are generally open from May until
    September, longer if the weather is favorable. Our Wisconsin
    Dells and Grapevine resorts also have outdoor waterslides.
    Fitness Room.  Our fitness rooms contain
    aerobic exercise equipment, weight-lifting machines, and
    numerous televisions for active viewing.
    Meeting Space.  Our resorts offer meeting space
    ranging from approximately 3,000 to over 7,000 square feet
    that are available for guest meetings, including a 99-seat,
    state-of-the-art, symposium-style room at our Traverse City and
    Niagara resorts.
    Conference Facility.  Many of our resorts
    feature conference facility space. Our Traverse City, Sheboygan,
    Williamsburg, Mason, Grapevine and Grand Mound resorts feature
    conference facilities that range in size from 10,000 
    40,000 square feet. Each of these conference facilities
    also feature some if not all, of the following additional
    aspects to their conference facilities: Grand Ballroom, flexible
    meeting spaces, executive boardroom, audio visual systems, and
    multiple pre-function concourses including an outdoor patio.
    Wileys Woods.  Wileys Woods is a
    four-story, approximately 16,000 square-foot structure
    located at our Wisconsin Dells resort. Children ages three and
    older can navigate through slides, bridges, nets and mazes.
    Admission to Wileys Woods is free for all resort guests
    and is open to the public for a fee.
    MagiQuest.  Seven of our resorts feature a
    MagiQuest®

    attraction. MagiQuest is an interactive, live-action, fantasy
    adventure game that guests can play throughout the resort.
    Minigolf.  Five of our resorts feature a
    custom-designed, outdoor 18-hole miniature golf course.
    gr8_space.  Four of our resorts feature an
    approximately 1,000 square foot interactive family tech
    center. gr8_space features multiple computer stations offering
    Internet access, docking stations for digital music players, as
    well as multiple gaming stations. gr8_space also features family
    events, like rock star karaoke and family challenge games. In
    the evening, gr8_space features dedicated teen time and
    activities for fun on their terms.  Operating
    Properties
    Great
    Wolf Lodge  Wisconsin Dells, Wisconsin
     6




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one-hour two-hour three-hour five-hour
  six-acre
    Great
    Wolf Lodge  Sandusky, Ohio
    one-hour two-hour three-hour
    Great
    Wolf Lodge  Traverse City, Michigan
  two-hour three-hour four-hour
  10,000 square-feet.
 7




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Great
    Wolf Lodge  Kansas City, Kansas
  one-hour three-hour four-hour
    Blue
    Harbor Resort  Sheboygan, Wisconsin
  12-acre one-hour two-hour three-hour four-hour
      Great
    Wolf Lodge  Williamsburg, Virginia
  83-acre one-hour three-hour five-hour
   8




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10,000 square-feet.
  Great
    Wolf Lodge  Pocono Mountains
  95-acre one-hour two-hour five-hour
    Great
    Wolf Lodge  Niagara Falls, Ontario
       9




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Great
    Wolf Lodge  Mason, Ohio
  39-acre one-hour two-hour
    Great
    Wolf Lodge  Grapevine, Texas
  51-acre one-hour 60-mile three-hour
    Great
    Wolf Lodge  Grand Mound, Washington
  39-acre one-hour three-hour four-hour five-hour
 10




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Property
    Under Construction
  Great
    Wolf Lodge  Concord, North Carolina
  37-acre one-hour two-hour
    Business
    and Growth Strategies
    
    Increase Total Resort Revenue.  We make efforts
    to increase total resort revenue by increasing:  
    Average Room Rate:  We attempt to increase
    our average room rate over time by driving demand for our
    resorts and focusing on yield management techniques. We strive
    to increase demand through intelligent sales, marketing and
    public relations efforts, by increasing our visibility and by
    enhancing our brand image. We attempt to employ our yield
    management techniques to project demand in order to effectively
    direct our sales and marketing efforts and selectively increase
    room rates. We believe that our focus on optimizing the
    relationship between room rates and occupancies will allow us to
    maximize profitability. Our average room rate was approximately
    $250 for the year ended December 31, 2008.
    Average Occupancy:  We seek to maintain high
    occupancy levels during peak times and also focus on increasing
    our off-peak occupancies. Our off-peak occupancy levels
    generally occur in May, September and during the middle of the
    week. Our occupancy levels are affected by school calendars,
    with the summer months, weekends, spring break period and other
    school holidays achieving the highest occupancy levels. We will
    continue to seek to improve off-peak occupancy levels by holding
    special events and targeting group sales and conferences. Our
    average occupancy was approximately 62.9% for the year ended
    December 31, 2008.
    Other Revenue:  We provide our guests with a
    self-contained vacation experience and attempt to capture a
    significant portion of their spending on food and beverage,
    entertainment and merchandise. Each of our resorts feature a
    combination of the following amenities: at least one themed
    restaurant, an ice cream shop and confectionery, snack shop, an
    full-service adult spa, kids spa, gift shop, game 11




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arcade, MagiQuest, minigolf and gr8 space. Our average non-room
    revenue, including the revenue from these amenities, was
    approximately $134 per occupied room night for the year ended
    December 31, 2008. By providing these additional
    revenue-generating amenities, we seek to maximize the amount of
    time and money spent
    on-site by
    our guests. We have also entered into a number of co-marketing
    agreements with strategic partners and expect to enter into
    additional co-marketing agreements in the future in order to
    increase other revenue.  
    Leverage Our Economies of Scale.  We attempt to
    continue to take advantage of the following economies of scale:  
    Increased Purchasing Power:  We strive to
    continue to capitalize on our increasing purchasing power with
    respect to operating supplies, food and beverage, insurance and
    employee benefits. As the number of resorts we own and operate
    increases, we expect to be able to leverage our increased buying
    volume and power to obtain more advantageous and predictable
    pricing on commodity goods and services. We have entered into an
    arrangement with a nationally recognized hospitality procurement
    company to further leverage our buying power. In addition, we
    intend to continue to make efforts to manage increases and
    fluctuations in the cost of electricity, water and natural gas
    for our resorts by entering into volume-based contracts where we
    are able to do so.
    Centralized Services:  By centralizing certain
    of our services, we focus on decreasing our
    per-unit
    costs, increasing our control over those services and being in a
    position to deliver a greater quality of service to our
    customers. For example, our central reservations call center
    operates every day of the year, has approximately 135 full- and
    part-time employees and accepts reservations for our resorts.
    The call center also has the capacity to efficiently handle high
    call volumes and should require only limited additional
    incremental costs over the next several years as we increase our
    portfolio of resorts. In addition, as we have grown we have
    focused on increasing the functionality of our web-based online
    reservations system. We expect this centralized function to
    allow us to further efficiently handle an increasing volume of
    guest reservations with limited incremental costs.
    Build Upon Our Existing Brand Awareness and
    Loyalty.  Our Great Wolf Lodge brand is symbolized
    by our distinctive and easily identifiable theming, from our
    signature treehouse waterfort, to our mascots and recognizable
    logos and merchandise. We believe we have fostered strong
    customer and brand loyalty, which is evidenced by our relatively
    high levels of repeat and referral guests. We will continue to
    focus on ensuring that each of our guests associates the Great
    Wolf Lodge brand with a memorable and consistent family vacation
    experience.    
    Capitalize on First-Mover Advantage.  We strive
    to be the first to develop and operate family entertainment
    resorts featuring indoor waterparks in our selected target
    markets. We seek to continue to leverage our development
    expertise, existing platform and model and our access to capital
    to take advantage of the significant barriers to entry
    associated with the development of large family entertainment
    resorts with indoor waterparks like our Great Wolf Lodge
    resorts. We seek to set the standard for quality, build on
    visible sites and capitalize on the opportunity to be located
    near other popular local attractions that draw our target
    customers. We believe that the combination of our first mover
    advantage and the significant barriers to entry in our target
    markets provide us with a competitive advantage.  
    Focus on Development and Strategic Growth
    Opportunities.  Family entertainment resorts
    featuring indoor waterparks are a relatively new concept and a
    growing segment of the resort and entertainment industries. We
    intend to focus on this growth opportunity by:  
    Building in Target Markets:  We intend to
    develop additional resorts, primarily as licensed or
    minority-owned resorts, in major domestic markets
    and/or
    international markets.
    Selective Sales of Ownership Interests/Recycling of
    Capital:  We will selectively consider
    opportunities to sell partial or whole interests in one or more
    of our owned and operated properties, as we did 12




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in our CNL joint venture. We intend to continue to manage all of
    our Great Wolf Lodge branded resorts, and we will consider
    transactions that allow us to maintain our management/licensing
    position at a resort while realizing value created through our
    development expertise. In those situations, we expect then to
    recycle capital generated by such transactions for investment in
    future growth opportunities.  
    Licensing Our Resort Concept
    Internationally:  We plan to selectively seek
    licensing and management opportunities internationally. Similar
    to our arrangement with Ripleys in Niagara Falls, Ontario,
    we seek to enter into license and management agreements with
    other reputable companies that have local market knowledge in
    order to increase revenues and expand the reach of our Great
    Wolf Lodge brand.
    Forming Strategic Partnerships:  We will
    consider strategic partnerships on a selective basis. For
    example, we have entered into resort ownership joint ventures
    with CNL Lifestyle Properties and The Confederated Tribes of the
    Chehalis Reservation and we are actively exploring other
    possible joint venture arrangements for future properties.
    Expanding and Enhancing Existing Resorts:  We
    seek to continue to focus on growth opportunities at our
    existing resorts by adding revenue-enhancing features that drive
    ancillary vacation spending at certain of our resorts and meet
    our target returns, including non-water based attractions. We
    also intend to continue to evaluate incremental
    revenue-generating opportunities, such as expanding the number
    of rooms and adding condominium units at certain of our resorts.
    In addition, we will consider adding conference centers at
    existing resorts to capture convention and other business travel
    revenue.  
    Continue to Innovate.  We intend to leverage
    our in-house expertise, in conjunction with the knowledge and
    experience of our third-party suppliers and designers, to
    develop and implement the latest innovations in family
    entertainment activities and amenities, including waterpark
    attractions. We have received numerous industry awards for our
    guests experiences, our operations, innovative
    development, sales and marketing initiatives and materials, and
    employee retention.  Our
    Competitive Strengths
    
    Unforgettable Family Resort Experience.  Each
    of our resorts provides a welcome opportunity for families to
    spend quality time together, relax and reconnect. In addition to
    our indoor waterparks, our resorts provide other activities and
    amenities that the entire family can enjoy together. Our family
    amenities and activities include themed restaurants, a game
    arcade, ice cream shop and confectionery, gift shop, snack shop,
    animated Clock Tower and fireside bedtime stories. We also have
    amenities and activities tailored to each member of the family,
    including our full-service Aveda spa, Scooops Kids Spa, Cub
    Club, MagiQuest, minigolf, gr8 space and fitness room. Our
    resorts also offer special events, including seasonal and
    holiday activities, wild animal and nature educational programs
    and other special events. We believe that our focus on
    delivering an unforgettable family resort experience appeals to
    our target customers and results in repeat visits and referrals.
    For the year ended December 31, 2008, we generated
    approximately 56% of our rooms revenue from repeat visitors and
    referral guests.
    Value, Comfort and Convenience.  Guest rooms at
    each of our resorts are spacious and comfortable suites that
    generally range in size from approximately 385 square feet
    to 1,970 square feet and include a wet bar, microwave,
    refrigerator and dining and sitting area. Many of the suites
    have specific themes that are geared toward enhancing our
    younger guests experience, including our KidCabin and Wolf
    Den Suites, which have a partitioned room with bunk beds
    designed as log cabins and Northwoods forest dens, respectively.
    All of our resorts are within a convenient driving distance of
    our large target customer bases. Because our indoor waterparks
    and our other amenities 13




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generally are not impacted by weather conditions, we offer our
    guests a reliable experience. On average, we believe that a
    two-night stay at our resorts for a family of four, is an
    affordable family vacation option.  
    Favorable Market Trends.  We believe recent
    vacation trends favor our Great Wolf Lodge concept as the number
    of families choosing to take shorter, more frequent vacations
    that they can drive to have increased in recent years. We
    believe that these trends will continue and that we are well
    positioned to take advantage of them. We believe our resorts are
    less affected by changes in economic cycles, as drive-to
    destinations are generally less expensive and more convenient
    than destinations that require air travel.
    Market Presence and Barriers to Entry.  We are
    the largest owner and operator of family entertainment resorts
    with indoor waterparks in North America based on the number of
    resorts in operation. We believe this market presence gives us a
    significant competitive advantage in attracting guests and
    efficiently developing additional resorts. In addition, we
    believe the significant barriers to entry present in our
    industry segment; including operational complexity, substantial
    capital requirements, availability of suitable sites in
    desirable markets and a difficult, multi-year permitting
    process, discourage other companies in the lodging and
    entertainment industries from developing similar family
    entertainment resorts. A new Great Wolf Lodge resort typically
    costs in excess of $120,000 and takes from one to three years to
    develop, which includes market selection, site selection and
    permitting, an additional 18 months or more to build.
    Focus on Safety.  We invest heavily in safety
    measures in the design, construction and operation of our
    resorts. For example, we specifically design our waterparks with
    attention to sightlines and safety precautions and use one of
    the most respected training methods in the water safety industry
    to train each of our lifeguards. We design and construct our
    indoor waterparks with state-of-the-art air quality and water
    treatment systems. We also maintain and periodically upgrade our
    facilities to ensure that we provide our guests with
    best-in-class
    safety measures and systems.
    Experienced Management Team and Committed and Motivated
    Staff.  Our senior management team has significant
    experience in the hospitality, family entertainment and real
    estate development industries and has significant expertise in
    operating complex, themed, family entertainment resorts
    featuring indoor waterparks. In addition, we have a team of
    skilled, loyal and committed employees at each of our resorts.
    We offer our resort employees a number of benefits, including
    what we believe is a pleasant and rewarding work environment,
    career-oriented training, the ability to obtain consistent
    year-round work, which is uncommon in the resort industry, and
    career growth opportunities. As a result, we believe our
    employees are committed to delivering a superb customer
    experience and helping to assure that our guests fully enjoy
    their family vacation.  Industry
    Overview
     14




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Resort
    Operations
        Training
    and Development
   15




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##### Table of Contents



Sales and
    Marketing
          Maintenance
    and Inspections
  On-site build-up,
    Development
    Criteria
    
    Large target customer base.  We select
    development sites that generally have a minimum of five million
    target customers within a convenient driving distance. Because
    we offer an affordable vacation experience, we appeal to
    families in a variety of income ranges.
    Recognized tourist destination.  We generally
    focus on drive-to destinations that attract a large number of
    tourists, including both emerging and traditional family
    vacation markets. We believe we can charge 16




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##### Table of Contents



premium rates in these markets due to the high quality of our
    resorts and our family-oriented amenities and activities. In
    addition, the indoor nature of many of our amenities and
    activities allows us to reduce the impact of seasonality that
    negatively affects other attractions in these areas. These areas
    also often have active and effective local visitors and
    convention bureaus that complement our marketing and advertising
    efforts at little or no cost to us.  
    Highly visible and large sites.  We generally
    develop resorts in highly visible locations along major
    roadways. Visibility from highways enhances easy drive-to
    access, provides marketing benefits due to high volumes of
    traffic and often produces synergies from adjacent land uses or
    complementary developments. We generally choose sites that have
    enough acreage to allow for potential expansions and future
    sales of out-lots.      Competition
      and/or
   17




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Governmental
    Regulation
         18




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Environmental
    Matters
          and/or clean-up
 19




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##### Table of Contents



clean-up, clean-up
    Insurance
      Intellectual
    Property
    Employees
   20




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##### Table of Contents



Offices
    Domestic
    and Foreign Operations
    Code
    of Business Conduct and Ethics
  www.greatwolf.com
  Available
    Information
  www.greatwolf.com Form 10-K, Form 10-Q, Form 8-K www.sec.gov
  ITEM 1A.
    RISK
    FACTORS    Risks
    Related to Our Business
  Current
    economic conditions, including recent disruptions in the
    financial markets may adversely affect our industry, business
    and results of operations, our ability to obtain financing on
    reasonable and acceptable terms and the market price of our
    common stock.
   21




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##### Table of Contents



We may
    not be able to develop new resorts or further develop existing
    resorts on a timely or cost efficient basis, which would
    adversely affect our growth strategy.
    
    development costs may exceed budgeted or contracted amounts or
    may exceed available capital;
    increases in the costs of materials or supplies used in
    construction of our resorts;
    changes in applicable building codes, construction materials,
    labor costs or construction methodologies may increase
    development costs;
    delays in architectural or other design-related services, or in
    the commencement or completion of construction;
    failure to obtain all necessary zoning, land use, occupancy,
    construction, operating and other required governmental permits
    and authorizations;
    changes in real estate, zoning, land use, environmental and tax
    laws;
    unavailability of financing on favorable or any terms;
    failure of developed properties to achieve desired revenue or
    profitability levels once opened;
    scarcity of suitable development sites, due to existing
    development, physical limitation or competition for sites from
    competitors that may have greater financial resources or risk
    tolerance than we do or other factors; and
    incurrence of substantial costs in the event a development
    project is abandoned or modified prior to completion.   22




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##### Table of Contents



We
    compete with other family vacation travel destinations and
    resorts.
    
    location,
    room rates,
    name recognition,
    reputation,
    the uniqueness and perceived quality of the attractions and
    amenities,
    the atmosphere and cleanliness of the attractions and amenities,
    the quality and perceived value of the lodging accommodations,
    the quality and perceived value of the food and beverage service,
    convenience,
    service levels and
    reservation systems.    We may
    not be able to achieve or manage our expected growth, which
    could adversely affect our operating results.
  and/or
 23




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##### Table of Contents



Accidents
    or injuries in our resorts, particularly in our waterparks, may
    subject us to liability, and accidents or injuries at our
    resorts or at competing resorts with waterparks could adversely
    affect our safety reputation and attendance, which would harm
    our business, financial condition and results of
    operations.
      We
    have a history of losses and we may not be able to achieve or
    sustain profitability.
    Our
    business is largely dependent upon family vacation patterns,
    which may cause fluctuations in our revenues.
    We may
    not be able to attract a significant number of customers from
    our key target markets, which would adversely affect our
    business, financial condition and results of
    operations.
   24




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##### Table of Contents



Because
    we concentrate in a single industry segment, we may be adversely
    affected by a downturn in that industry segment.
    Changes
    in consumer spending habits may affect our growth, financial
    condition and results of operations.
    Increases
    in operating costs and other expense items could reduce our
    operating margins and adversely affect our growth, financial
    condition and results of operations.
           25




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##### Table of Contents



Uninsured
    losses or losses in excess of our insurance coverage could
    adversely affect our financial condition and our cash flow, and
    there are a limited number of insurers that will underwrite
    coverage for resorts with indoor waterparks.
    We
    will be required to make certain capital expenditures to
    maintain the quality of our resorts, which could adversely
    affect our financial condition and results of
    operations.
    We may
    not be able to adequately protect our intellectual property,
    which could harm the value of our brands and adversely affect
    our business.
       26




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##### Table of Contents



Our
    operations may be adversely affected by extreme weather
    conditions and the impact of disasters.
    A
    significant decline in real estate values may have an adverse
    impact on our financial condition.
    If we
    fail to maintain effective internal controls over financial
    reporting or remediate any future material weakness in our
    internal control over financial reporting, we may be unable to
    accurately report our financial results or prevent fraud, which
    could have a material adverse effect on our financial results
    and our stock price.
      Sustained
    increases in costs of medical and other employee health and
    welfare benefits may reduce our profitability.
    We may
    have disputes with our joint venture partners owning majority
    interests in three resorts that we manage and
    license.
   27




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##### Table of Contents



Because
    the land used by two of our resorts are subject to ground
    leases, termination of these leases by the lessors could cause
    us to lose the ability to operate these resorts altogether and
    incur substantial costs in restoring the premises.
      We are
    subject to the risks of brand concentration.
    A
    failure to keep pace with developments in technology could
    impair our operations or competitive position.
  and/or
  An
    increase in the use of third-party Internet reservation services
    could adversely impact our revenues.
  ® ® ®
 28




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##### Table of Contents



The
    illiquidity of real estate may make it difficult for us to
    dispose of one or more of our resorts.
    We may
    have assumed unknown liabilities in connection with the
    IPO.
  Form 10-K Form 10-K
  We
    depend on a seasonal workforce.
    Risks
    Related to Regulation
  Compliance
    with the Americans with Disabilities Act and other governmental
    regulations and changes in governmental rules and regulations
    may adversely affect our financial condition and results of
    operations.
   29




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We
    face possible liability for environmental cleanup costs and
    damages for contamination related to our properties, which could
    adversely affect our business, financial condition and results
    of operations.
       30




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##### Table of Contents



and/or clean-up clean-up, clean-up
    Regulation
    of the marketing and sale of condominiums, including a prior
    offer of condominiums at our Blue Harbor Resort, could adversely
    affect our business.
     31




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##### Table of Contents



Failure
    to maintain the integrity of internal or customer data could
    result in faulty business decisions, damage of reputation and/or
    subject us to costs, fines or lawsuits.
    Changes
    in privacy law could adversely affect our ability to market our
    products effectively.
    Risks
    Related to Our Capital Structure
  We may
    issue partnership units in the future that may be dilutive to,
    and may have preferential rights over, our common
    stockholders.
   32




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##### Table of Contents



Our
    stock price has been volatile in the past and may be volatile in
    the future.
    
    variations in our quarterly operating results;
    changes in market valuations of companies in the resort or
    entertainment industries, generally, and the family
    entertainment resort segment, specifically;
    fluctuations in stock market prices and volumes;
    issuances of common stock or other securities in the future;
    the addition or departure of key personnel;
    announcements by us or our competitors of new properties,
    acquisitions or joint ventures, or our failure to announce new
    properties of a type or in a quantity deemed desirable by
    participants in the public market; and
    expectations about macroeconomic condition.    The
    sale of a substantial number of shares of our common stock may
    cause the market price of our common stock to
    decline.
    Provisions
    in our certificate of incorporation, bylaws, employment
    agreements and Delaware law have anti-takeover effects that
    could prevent a change in control that could be beneficial to
    our stockholders, which could depress the market price of our
    common stock.
    
    authorize our board of directors to issue blank
    check preferred stock and determine the powers,
    preferences and privileges of those shares without prior
    stockholder approval; 33




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##### Table of Contents




    prohibit the right of our stockholders to act by written consent;
    limit the calling of special meetings of stockholders;
    impose a requirement that holders of 50% of the outstanding
    shares of common stock are required to amend the provisions
    relating to actions by written consent of stockholders and the
    limitations of calling special meetings; and
    provide for payments to certain of our executive officers upon
    termination of employment within certain time periods before or
    after a change of control.  Our
    organizational documents contain no limitations on the amount of
    debt we may incur, so we may become too highly
    leveraged.
    We may
    not be able to obtain additional financing on favorable terms,
    if at all.
    
    general capital market conditions;
    capital providers perception of our growth potential;
    our then-current debt levels;
    our then-current and expected future earnings;
    our cash flow; and
    the market price per share of our common stock.    Investing
    through partnerships or joint ventures decreases our ability to
    manage risk.
    The
    covenants in our mortgage loan agreements impose significant
    restrictions on us.
   34




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##### Table of Contents




    incurring or guaranteeing additional indebtedness;
    transferring or selling assets currently held by us;
    transferring ownership interests in certain of our
    subsidiaries; and
    reducing our tangible net worth below specified levels.    Because
    we have guaranteed certain mortgage-related obligations of our
    subsidiaries if our subsidiary fails to meet its obligations
    under the mortgage, we may be required to satisfy such
    obligations and such an undertaking could have an adverse affect
    on our financial condition.
    Certain
    of our insiders exercise considerable influence over the
    company.
  Form 10-K,
  Forward-Looking
    Statements
  Form 10-K
    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS   35




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##### Table of Contents



ITEM 2.
    PROPERTIES    
    resort ownership/operation, and
    resort third-party management, and
    condominium sales-revenues.      
    Great Wolf Lodge of Wisconsin Dells is located on 16 acres
    in Wisconsin Dells, Wisconsin, all of which have been developed.
    This property is owned by a joint venture of which we have a
    30.32% minority interest and CNL Lifestyle Properties, Inc. has
    a 69.68% majority interest.
    Great Wolf Lodge of Sandusky is located on 15 acres in
    Sandusky, Ohio, all of which have been developed. This property
    is owned by a joint venture of which we have a 30.32% minority
    interest and CNL Lifestyle Properties, Inc. has a 69.68%
    majority interest.
    Great Wolf Lodge of Grand Mound is located on 39 leased acres in
    Grand Mound, Washington. This property is owned by a joint
    venture of which we have a 49% minority interest and The
    Confederated Tribes of the Chehalis Reservation has a 51%
    majority interest.    
    Great Wolf Lodge of Traverse City is located on 48 acres in
    Traverse City, Michigan, of which 27 acres have been
    developed and 21 acres remain undeveloped.
    Great Wolf Lodge of Kansas City is located on 17 acres in
    Kansas City, Kansas, all of which have been developed.
    Blue Harbor Resort of Sheboygan is located on 12 leased acres in
    Sheboygan, Wisconsin, all of which have been developed.
    Great Wolf Lodge of Williamsburg is located on 83 acres in
    Williamsburg, Virginia, of which 37 acres have been
    developed and 46 acres remain undeveloped.
    Great Wolf Lodge of the Pocono Mountains is located on
    95 acres in Pocono Township, near Stroudsburg,
    Pennsylvania, of which 45 acres are developed and
    50 acres remain undeveloped.
    Great Wolf Lodge of Mason is located on 39 acres in Mason,
    Ohio. All 39 acres of this property are developed.
    Great Wolf Lodge of Grapevine is located on 51 acres in
    Grapevine, Texas, of which 30 acres are developed and
    21 acres remain undeveloped.
    Great Wolf Lodge of Concord, which is under construction, is
    located on 37 acres in Concord, North Carolina, of which
    34 acres are being developed and 3 acres may be
    subdivided and developed separately.     36




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##### Table of Contents



ITEM 3.
    LEGAL
    PROCEEDINGS    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES    Stock PriceHigh


LowFiscal 2007:First Quarter

$
14.73


$
12.91Second Quarter

$
15.16


$
12.15Third Quarter

$
15.85


$
12.27Fourth Quarter

$
13.46


$
9.51Fiscal 2008:First Quarter

$
9.94


$
6.29Second Quarter

$
8.38


$
4.34Third Quarter

$
6.40


$
3.00Fourth Quarter

$
3.80


$
0.61Fiscal 2009:First Quarter through March 3, 2009

$
3.05


$
1.50       10-year
 37




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##### Table of Contents



Dividend
    Policy
    Performance
    Graph
      
  Securities
    Authorized for Issuance Under Equity Compensation
    Plans
   38




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##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA    Great
    Wolf Resorts Financial Information
    
    our subsidiary that provides resort development and management
    services and licenses certain intellectual property;
    our Traverse City, Kansas City, Sheboygan, Williamsburg, Pocono
    Mountains, Mason and Grapevine operating resorts;
    for all periods prior to October 2005, the Wisconsin Dells and
    Sandusky resorts;
    equity interests in resorts in which we have ownership interests
    but which we do not consolidate; and
    our resort that is under construction which we will consolidate.  Predecessor
    Financial Information
    
    The Great Lakes Companies, Inc. (GLC) and its consolidated
    subsidiaries, including development of, ownership interests in,
    and management contracts with respect to, resorts and certain
    non-resort hotels and multifamily housing development and
    management assets;
    the entities that owned our Traverse City, Kansas City and
    Sheboygan operating resorts; and
    the entities that owned our Williamsburg and Pocono Mountains
    resorts that were under construction.     39




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##### Table of Contents



Form 10-K.
  December 21,Year Ended


Year Ended


Year Ended


Year Ended


2004-



January 1,December 31,


December 31,


December 31,


December 31,


December 31,



2004-2008


2007


2006


2005


2004



December 20,Great Wolf


Great Wolf


Great Wolf


Great Wolf


Great Wolf



2004Resorts, Inc.


Resorts, Inc.


Resorts, Inc.


Resorts, Inc.


Resorts, Inc.



Predecessor(Dollars in thousands, except per share amounts)Statement of Operations and Comprehensive Loss:Revenues:Rooms

$
143,395


$
112,261


$
87,775


$
73,207


$
3,261



$
31,438Food, beverage and other


74,173



56,673



43,137



36,846



1,289




16,110Sales of condominiums














25,862








Management and other fees


2,798



2,855



2,087



494



79




3,157Management and other fees-affiliates


5,346



4,314



3,729



482








Other revenue from managed properties(1)


19,826



11,477



11,920



2,524








14,553Total revenues


245,538



187,580



148,648



139,415



4,629




65,258Operating expenses by department:Rooms


20,134



15,716



11,914



10,944



298




4,917Food, beverage and other


59,949



48,300



35,923



31,407



958




13,678Other operating expenses:Selling, general and administrative


51,902



47,915



41,421



26,894



7,372




18,613Property operating costs


37,086



30,555



23,217



24,798



295




8,810Depreciation and amortization


46,081



36,372



25,903



26,248



1,897




12,925Costs of sales of condominiums














16,780








Impairment loss on investment in affiliates


18,777




















Goodwill impairment


17,430







50,975












Loss on disposition of property


19



128



1,066



26,161








Other expenses from managed properties(1)


19,826



11,477



11,920



2,524








14,553Total operating expenses


271,204



190,463



202,339



165,756



10,820




73,496Net operating loss


(25,666
)


(2,883
)


(53,691
)


(26,341
)


(6,191
)



(8,238
)Investment income  affiliates


(2,187
)


(667
)















Interest income


(1,424
)


(2,758
)


(3,105
)


(1,623
)


(66
)



(224
)Interest expense


27,277



14,887



7,169



6,728



280




6,748Gain on sale of investments and securities























(1,653
)Interest on mandatorily redeemable shares























1,761Loss before income taxes, minority interests, and equity in
    unconsolidated affiliates


(49,332
)


(14,345
)


(57,755
)


(31,446
)


(6,405
)



(14,870
)Income tax benefit


(11,956
)


(5,859
)


(8,764
)


(7,199
)


(2,563
)



Minority interests, net of tax






(452
)


(502
)


(4
)







Equity in unconsolidated affiliates, net of tax


3,349



1,547



761



170








Loss from continuing operations


(40,725
)


(9,581
)


(49,250
)


(24,413
)


(3,842
)



(14,870
)Income from discontinued operations























(1,928
)Net loss

$
(40,725
)

$
(9,581
)

$
(49,250
)

$
(24,413
)

$
(3,842
)


$
(12,942
)Other comprehensive loss, net of tax:Unrealized (gain) loss on interest rate swaps


(387
)


387
















Comprehensive loss

$
(40,338
)

$
(9,968
)

$
(49,250
)

$
(24,413
)

$
(3,842
)


$
(12,942
)Basic loss per share

$
(1.32
)

$
(0.31
)

$
(1.63
)

$
(0.81
)

$
(0.13
)Diluted loss per share

$
(1.32
)

$
(0.31
)

$
(1.63
)

$
(0.81
)

$
(0.13
)Weighted average common shares outstanding  Basic


30,827,860
(2)


30,533,249
(2)


30,299,647
(2)


30,134,146
(2)


30,132,896
(2)Diluted


30,827,860
(2)


30,533,249
(2)


30,299,647
(2)


30,134,146
(2)


30,132,896
(2) 40




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##### Table of Contents



December 21,Year Ended


Year Ended


Year Ended


Year Ended


2004-



January 1,December 31,


December 31,


December 31,


December 31,


December 31,



2004-2008


2007


2006


2005


2004



December 20,Great Wolf


Great Wolf


Great Wolf


Great Wolf


Great Wolf



2004Resorts, Inc.


Resorts, Inc.


Resorts, Inc.


Resorts, Inc.


Resorts, Inc.



Predecessor(Dollars in thousands, except per share amounts)Cash Flows:Cash flows from:Operating activities

$
33,534


$
29,751


$
29,723


$
17,788


$
762



$
3,637Investing activities


(144,612
)


(213,867
)


(107,123
)


(65,496
)


(97,583
)



(64,472
)Financing activities


106,712



105,935



119,396



23,081



172,151




61,424Balance Sheet Data (end of period):Total assets

$
840,061


$
770,805


$
683,439


$
605,526


$
622,025Total debt


507,051



396,302



289,389



168,328



142,665Non-GAAP financial Measures:EBITDA

$
18,181
(3)

$
32,305
(3)

$
(28,221
)(3)

$
(369
)(3)

$
(4,294
)


$
6,507     (1)
    
    Reflects reimbursement of payroll, benefits and costs related to
    the operations of properties managed by us in
    2005-2008
    and the Predecessor in 2004.(2)
    
    Included in the total shares outstanding of our common stock are
    11,765 shares (in 2008) and 129,412 shares (in
    2004-2007)
    held in a trust that holds the assets to pay obligations under
    our deferred compensation plan. Under applicable accounting
    rules, the shares of common stock held in that trust are treated
    as treasury stock for purposes of our earnings per share
    computations and are therefore excluded from the basic and
    diluted earnings per share calculations.(3)
    
    See reconciliation to net loss in Managements
    Discussion and Analysis of Financial Condition and Results of
    Operation  Non-GAAP Financial Measures.  ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  The following discussion should be read in conjunction with
    the financial statements and notes thereto appearing elsewhere
    in this report. Where appropriate, the following discussion
    includes analysis of the effects of our IPO, the Formation
    Transactions and related refinancing transactions and certain
    other transactions. 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 section in Item 1A of this Annual
    Report on
    Form 10-K
    report entitled Forward-Looking Statements. Certain
    risk factors may cause our actual results, performance or
    achievements to differ materially from those expressed or
    implied by the following discussion. For a discussion of such
    risk factors, see the sections in Item 1A of this Annual
    Report on
    Form 10-K
    report entitled Risk Factors and
    Forward-Looking Statements. All dollar amounts in
    this discussion, except for per share data and operating
    statistics, are in thousands.
  Overview
    Business.
   41




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##### Table of Contents



IndoorOpened/

Number of


Number of


EntertainmentOwnership Percentage


Opening

Guest Suites


Condo Units(1)


Area(2)(Approx.
    ft2)Existing Resorts:Wisconsin Dells, WI(3)


30.32
%

1997


308



77



102,000Sandusky, OH(3)


30.32
%

2001


271







41,000Traverse City, MI


100
%

2003


280







57,000Kansas City, KS


100
%

2003


281







57,000Sheboygan, WI


100
%

2004


182



64



54,000Williamsburg, VA


100
%

2005


405







87,000Pocono Mountains, PA


100
%

2005


401







101,000Niagara Falls, ONT(4)





2006


406







104,000Mason, OH


100
%

2006


401







105,000Grapevine, TX(5)


100
%

2007


605







110,000Grand Mound, WA(6)


49
%

2008


398







74,000Resort Under Construction:Concord, NC(7)


100
%

March 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, childrens activity room, family
    tech center,
    MagiQuest®

    and fitness room, as well as our spa in the resorts that have
    such amenities.(3)
    
    These properties are owned by a joint venture. CNL Lifestyle
    Properties, Inc. (CNL), a real estate investment trust focused
    on leisure and lifestyle properties, owns a 69.68% interest in
    the joint venture, and we own a 30.32% interest. We operate the
    properties and license the Great Wolf Lodge brand to the joint
    venture under long-term agreements through October 2020, subject
    to earlier termination in certain situations.(4)
    
    An affiliate of Ripley Entertainment, Inc. (Ripley) owns this
    resort. We have granted Ripley a license to use the Great Wolf
    Lodge name for this resort through April 2016. We will manage
    the resort on behalf of Ripley through April 2009.(5)
    
    In late 2007, we began construction on an additional 203 suites
    and 20,000 square feet of meeting space as an expansion of
    this resort. The meeting space, along with 92 rooms, was opened
    in December 2008, with the rest of the rooms completed and
    opened in January 2009.(6)
    
    This property is owned by a joint venture. The Confederated
    Tribes of the Chehalis Reservation (Chehalis) own 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 Chehalis.(7)
    
    We are developing a Great Wolf Lodge resort in Concord, North
    Carolina. The Northwoods-themed,
    402-suite
    resort will provide a comprehensive package of destination
    lodging amenities and activities. Construction on the resort
    began in October 2007 with expected completion in March 2009. 42




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Industry Trends.
        Outlook.
     43




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##### Table of Contents




    record prices for many commodities, most notably oil, that
    resulted in increased costs for gasoline and other consumer
    staples;
    severe turbulence in the banking and lending sectors, which has
    led to a general lessening of the availability of credit to
    consumers;
    an increased national unemployment rate;
    a continuing decline in the national average of home
    prices; and
    high volatility in the stock market that led to substantial
    declines in leading market averages and aggregate household
    savings.    
    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 three years.
    The Michigan/Northern Ohio region includes cities that have
    historically been the Traverse City and Sandusky resorts
    largest origin 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, 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. As discussed further
    below, due to the continued adverse current and expected market
    conditions for our Sandusky resort, in 2008 we recorded an
    $18,777 impairment loss related to our interest in the joint
    venture that owns the Wisconsin Dells and Sandusky resorts.
    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 may continue to have an impact on
    the operating performance of our Wisconsin Dells resort. As
    discussed in Critical Accounting Policies and
    Estimates below, due to the continued adverse current and
    expected market conditions for our Wisconsin Dells resort, in
    2008 we recorded an $18,777 impairment loss related to our
    interest in the joint venture that owns the Wisconsin Dells and
    Sandusky resorts.
    We have experienced a much slower-than-expected occupancy
    ramp-up and
    lower-than-expected average daily room rates at our Sheboygan,
    Wisconsin property since its opening in 2004. We believe this
    operating weakness has been primarily attributable to the fact
    that the overall development of Sheboygan as a tourist
    destination continues to lag materially behind our initial
    expectations. We believe this has materially impacted and will
    likely continue to impact the consumer demand for our indoor
    waterpark resort in that market and the operations of the resort.
    Our Mason resort opened its first phase in December 2006 and is
    ramping up more slowly than we had projected, which we believe
    is due, in part, to the opening of competitive properties in the
    region and to perceived operating issues at the resort in early
    2007. 44




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##### Table of Contents



Revenue and Key Performance Indicators.
  
    Monitoring our historical trends for occupancy and estimating
    our high occupancy nights;
    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 continously 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.  on-site
    
    Occupancy;
    Average daily room rate, or ADR;
    Revenue per available room, or RevPAR;
    Total revenue per available room, or Total RevPAR;
    Total revenue per occupied room, or Total RevPOR; and
    Earnings before interest, taxes, depreciation and amortization,
    or EBITDA.    
    Occupancy is calculated by dividing total occupied rooms by
    total available rooms.
    ADR is calculated by dividing total rooms revenue by total
    occupied rooms. 45




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##### Table of Contents




    RevPAR is the product of occupancy and ADR.    
    Total RevPAR is calculated by dividing total revenue by total
    available rooms.
    Total RevPOR is calculated by dividing total revenue by total
    occupied rooms.        Critical
    Accounting Policies and Estimates
    Investments in Property and Equipment.
    Buildings and improvements


20-40 yearsFixtures and equipment, including waterpark equipment


5-15 years    46




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##### Table of Contents



Carrying
    Values of Goodwill, Intangible Assets and Investment in
    Affiliates.
  Goodwill 
    
    2009 budget information;
    The impact of the December holiday season on overall 2008
    financial results;
    Full year 2008 financial results for each of the resorts;
    Impact of/changes in the economy since the severe economic
    disruptions of 2008; and
    Forecasted booking trends for 2009.    Intangible Assets 
 47




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##### Table of Contents



Investments in Affiliates 
    
    2009 budget information;
    The impact of the December holiday season on overall 2008
    financial results;
    The relative success of operational adjustments implemented
    throughout 2008 to improve the resorts operations;
    Full year 2008 financial results for each of the resorts;
    Impact of/changes in the economy since the severe economic
    disruptions of 2008; and
    Forecasted booking trends for 2009.      Accounting for Income Taxes.
   48




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##### Table of Contents



New
    Accounting Pronouncements
  FAS 157-2, (FSP 157-2). FSP 157-2 FSP 157-2
       49




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##### Table of Contents



FAS 142-3, (FSP 142-3). FSP 142-3 FSP 142-3 FSP 142-3
    No. 08-6, (EITF 08-6). EITF 08-6 EITF 08-6
  Non-GAAP Financial
    Measures
        
    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.    
    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.   50




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##### Table of Contents



Year Ended December 31,2008


2007


2006Net loss

$
(40,725
)

$
(9,581
)

$
(49,250
)Adjustments:Interest expense, net of interest income


25,853



12,129



4,064Income tax benefit


(13,028
)


(6,615
)


(8,938
)Depreciation and amortization


46,081



36,372



25,903EBITDA

$
18,181


$
32,305


$
(28,221
)   Results
    of Operations
  General
    Great
    Wolf Resorts Financial Information
    
    our subsidiary entity that provides resort development and
    management/licensing services;
    our Traverse City, Kansas City, Sheboygan, Williamsburg, Pocono
    Mountains, Mason and Grapevine operating resorts;
    equity interests in resorts in which we have ownership interests
    but which we do not consolidate; and
    our resort that is under construction which we will consolidate.  Revenues.
  
    lodging revenue, which includes rooms, food and beverage, and
    other department revenues from our resorts;
    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 (except for the Niagara Falls resort).
    Under our management agreements, the resort owners reimburse us
    for payroll, benefits and certain other costs related to the
    operations of the managed properties.
    EITF 01-14,
    Income Statement Characteristics of Reimbursements for
    Out-of-Pocket Expenses, establishes standards for
    accounting for reimbursable expenses in our statements of
    operations. Under this pronouncement, the reimbursement of
    payroll, benefits and costs is recorded as other revenue
    from managed properties on our statements of operations,
    with a corresponding expense recorded as other expenses
    from managed properties.  Operating Expenses.
    
    selling, general and administrative expenses, which are
    associated with the operations and management of resorts and
    which consist primarily of expenses such as corporate payroll
    and related benefits, 51




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##### Table of Contents



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, which are recorded as an
    expense in accordance with
    EITF 01-14.  Year
    Ended December 31, 2008 compared with Year Ended
    December 31, 2007
    All Properties(a)


Same Store Comparison(b)Increase (Decrease)2008


2008


2007


$


%Occupancy


62.9
%


61.9
%


61.5
%


N/A



0.7
%ADR

$
249.92


$
243.81


$
244.16


$
(0.35
)


(0.1
)%RevPAR

$
157.19


$
151.02


$
150.16


$
0.86



0.6
%Total RevPOR

$
383.75


$
369.61


$
370.77


$
(1.16
)


(0.3
)%Total RevPAR

$
241.36


$
228.95


$
228.02


$
0.93



0.4
%     (a)
    
    Includes results for properties that were open for any portion
    of the period, for all owned and/or managed resorts.(b)
    
    Same store comparison includes properties that were open for the
    full periods in 2008 and 2007 (that is, our Wisconsin Dells,
    Sandusky, Traverse City, Kansas City, Sheboygan, Williamsburg,
    Pocono Mountains, Niagara Falls, and Mason resorts).        Increase2008


2007


(Decrease)Revenues

$
245,538


$
187,580


$
57,958Operating expenses:Departmental operating expenses


80,083



64,016



16,067Selling, general and administrative


51,902



47,915



3,987Property operating costs


37,086



30,555



6,531Depreciation and amortization


46,081



36,372



9,709Impairment loss on investment in affiliates


18,777







18,777Goodwill impairment


17,430







17,430Net operating loss


(25,666
)


(2,883
)


(22,783
)Interest expense, net of interest income


25,853



12,129



13,724Income tax benefit


(11,956
)


(5,859
)


(6,097
)Net loss


(40,725
)


(9,581
)


(31,144
)  52




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##### Table of Contents



Revenues.
  Operating expenses.
  
    Departmental expenses increased $16,067 for the year ended
    December 31, 2008, as compared to the year ended
    December 31, 2007, due primarily to the opening of our
    Grapevine resort.
    Total selling, general and administrative expenses increased
    $3,987 for the year ended December 31, 2008, as compared to
    the year ended December 31, 2007, due primarily to the
    opening of our Grapevine resort. This increase was offset by a
    decrease in corporate selling, general and administrative
    expenses. Corporate selling, general and administrative expenses
    decreased due to decreases in bonus expense and restricted stock
    expense, primarily due to the resignation of two senior officers
    in 2008; and a decrease in stock option expense, as most options
    were fully vested as of December 31, 2007.
    Total property operating costs (exclusive of opening costs)
    increased $9,614 for the year ended December 31, 2008, as
    compared to the year ended December 31, 2007, due primarily
    to the opening of our Grapevine resort, as well as increased
    repairs and maintenance expense and increased utilities expense
    related to the expansion of our Williamsburg resort. Opening
    costs related to our resorts were $6,301 for the year ended
    December 31, 2008, as compared to $9,384 for the year ended
    December 31, 2007.
    Total depreciation and amortization increased mainly due to the
    opening of our Grapevine resort and the expansion of our
    Williamsburg resort as well as the write off of loan fees of
    $615 related to our Williamsburg mortgage loan that we paid off
    in August 2008. We had no similar loan fee write offs for the
    year ended December 31, 2007.
    For the year ended December 31, 2008, we recorded an
    aggregate $18,777 impairment loss related to our 30.32% interest
    in the joint venture that owns the Wisconsin Dells and Sandusky
    resorts. There was no similar charge recorded in the year ended
    December 31, 2007.
    For the year ended December 31, 2008, we recorded a
    goodwill impairment charge of $17,430 related to our Kansas City
    and Mason resorts. There was no similar charge recorded in the
    year ended December 31, 2007.  Net operating loss.
  Net loss.
   53




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##### Table of Contents



Year
    Ended December 31, 2007 compared with Year Ended
    December 31, 2006
    All Properties(a)


Same Store Comparison(b)Increase (Decrease)2007


2007


2006


$


%Occupancy


61.5
%


62.5
%


64.1
%


N/A



(2.5
)%ADR

$
244.16


$
241.56


$
234.21


$
7.35



3.1
%RevPAR

$
150.16


$
150.92


$
150.24


$
0.68



0.5
%Total RevPOR

$
370.77


$
363.65


$
351.34


$
12.31



3.5
%Total RevPAR

$
228.02


$
227.20


$
225.37


$
1.83



0.8
%     (a)
    
    Includes results for properties that were open for any portion
    of the period, for all owned
    and/or
    managed resorts.(b)
    
    Same store comparison includes properties that were open for the
    full periods in 2007 and 2006 (that is, our Wisconsin Dells,
    Sandusky, Traverse City, Kansas City, Sheboygan, Williamsburg,
    Pocono Mountains, and Niagara Falls resorts).      Increase2007


2006


(Decrease)Revenues

$
187,580


$
148,648


$
38,932Operating expenses:Departmental operating expenses


64,016



47,837



16,179Selling, general and administrative


47,915



41,421



6,494Property operating costs


30,555



23,217



7,338Depreciation and amortization


36,372



25,903



10,469Goodwill impairment






50,975



(50,975
)Loss on disposition of property


128



1,066



(938
)Net operating loss


(2,883
)


(53,691
)


50,808Interest expense, net of interest income


12,129



4,064



8,065Income tax benefit


(5,859
)


(8,764
)


2,905Net loss


(9,581
)


(49,250
)


39,669   Revenues.
  Operating expenses.
 54




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##### Table of Contents




    Departmental expenses increased for the Williamsburg, Pocono
    Mountains, Mason and Grapevine resorts by $16,814 for the year
    ended December 31, 2007, as compared to the year ended
    December 31, 2006, due to the opening of our Grapevine and
    Mason resorts, the expansion of our Williamsburg resort and
    increased revenues at our Pocono Mountains resort.
    Total selling, general and administrative expenses increased by
    $6,494 due primarily to the opening of our Grapevine and Mason
    resorts, the expansion of our Williamsburg resort and increased
    marketing efforts at our Pocono Mountains resort.
    Total property operating costs (exclusive of opening costs)
    increased $5,349 for the year ended December 31, 2007, as
    compared to the year ended December 31, 2006, due primarily
    to the opening of our Grapevine and Mason resorts, as well as
    increased repairs and maintenance expense and increased
    utilities expense related to the expansion of our Williamsburg
    resort and amenity additions to several of our other resorts.
    Opening costs related to our resorts were $9,384 for the year
    ended December 31, 2007, as compared to $7,395 for the year
    ended December 31, 2006.
    Total depreciation and amortization increased mainly due to the
    opening of our Grapevine and Mason resorts and the expansion at
    our Williamsburg resort. The total increase in depreciation and
    amortization at these three resorts was $9,331 during the year
    ended December 31, 2007 as compared to the year ended
    December 31, 2006.
    For the year ended December 31, 2006 we recorded a goodwill
    impairment charge of $50,975 related to our Traverse City and
    Sheboygan resorts, as the implied fair value of the goodwill was
    deemed less than the carrying value. There was no similar charge
    recorded in the year ended December 31, 2007.
    Loss on disposition of property of $1,066 during the year ended
    December 31, 2006 primarily relates to finalization of the
    accounting for the sale of 70% of our equity interests in the
    Wisconsin Dells and Sandusky resorts in October 2005.  Net operating loss.
  Net loss.
    
    An increase in net interest expense of $8,065 mainly due to
    mortgage debt related our Pocono Mountains and Mason
    resorts, and
    A decrease of $2,905 in income tax benefit recorded for the year
    ended December 31, 2007 as compared to the year ended
    December 31, 2006. Our effective tax rate in 2007 was
    (40.8)% as compared to 2006 of (15.4)% primarily due to the
    impact of the goodwill impairment charge in 2006.  Segments
    
    resort ownership/operation-revenues derived from our
    consolidated owned resorts; and
    resort third-party management-revenues derived from management,
    license and other related fees from unconsolidated managed
    resorts; and
    condominium sales-revenues derived from sales of condominium
    units to third-party owners.    55




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##### Table of Contents



Year Ended December 31,


Increase (Decrease)2008


2007


2006


2008 - 2007


2007 - 2006Resort Ownership/OperationRevenues

$
217,568


$
168,934


$
130,912


$
48,634


$
38,022EBITDA, excluding certain items


33,756



32,179



26,729



1,577



5,450Resort Third-Party ManagementRevenues


27,970



18,646



17,736



9,324



910EBITDA, excluding certain items


8,144



7,169



5,817



975



1,352Condominium SalesRevenues


















EBITDA, excluding certain items






(682
)


(370
)


682



(312
)OtherRevenues


















EBITDA, excluding certain items


(21,485
)


(5,177
)


(8,989
)


(16,308
)


3,812     Liquidity
    and Capital Resources
    Long-Term Debt:Traverse City/Kansas City mortgage loan

$
70,211Mason mortgage loan


76,800Pocono Mountains mortgage loan


96,571Williamsburg mortgage loan


64,625Grapevine construction loan


78,709Concord construction loan


27,594Junior subordinated debentures


80,545Other Debt:City of Sheboygan bonds


8,493City of Sheboygan loan


3,503$
507,051   Traverse City/Kansas City Mortgage Loan 25-year
  Mason Mortgage Loan 30-day
 56




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##### Table of Contents



Pocono Mountains Mortgage Loan  30-year
  Williamsburg Mortgage Loan  30-day
  Grapevine Construction Loan 30-day 25-year
    Concord Construction Loan 25-year
  Junior Subordinated Debentures
 57




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##### Table of Contents



30-year
    10-year
      City of Sheboygan Bonds No. 91-10,
  City of Sheboygan Loan
  Future Maturities
  2009

$
81,4642010


6,4852011


143,0022012


29,0392013


3,675Thereafter


243,386Total

$
507,051  58




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##### Table of Contents



Short-Term
    Liquidity Requirements
    
    recurring maintenance, repairs and other operating expenses
    necessary to properly maintain and operate 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.    Long-Term
    Liquidity Requirements
    
    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.     59




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##### Table of Contents



Off
    Balance Sheet Arrangements
    
    Our joint venture with CNL Income Properties, Inc. (CNL) owns
    two resorts, Great Wolf Lodge-Wisconsin Dells, Wisconsin and
    Great Wolf Lodge-Sandusky, Ohio. We are a limited partner with a
    30.32% ownership interest in the CNL joint venture. At
    December 31, 2008, the joint venture had aggregate
    outstanding indebtedness to third parties of $63,000. This loan
    is a mortgage loan that is non-recourse to us. In December 2008,
    we recorded an $18,777 impairment loss related to our interest
    in the joint venture, as the implied fair value of the
    investment, as discussed above, was less than its carrying value.
    We have entered into our joint venture with The Confederated
    Tribes of the Chehalis Reservation to develop a Great Wolf Lodge
    resort and conference center on a
    39-acre land
    parcel in Grand Mound, Washington. This joint venture is a
    limited liability company; we are a member of that limited
    liability company with a 49% ownership interest. At
    December 31, 2008, the joint venture had aggregate
    outstanding indebtedness to third parties of $102,000. As of
    December 31, 2008, we have made combined loan and equity
    contributions, net of loan repayments, of $38,925 to the joint
    venture to fund a portion of construction cost of the resort. In
    January 2009, the other member of the joint venture purchased
    $5,991 of our loan at par.   60




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##### Table of Contents



Contractual
    Obligations
    Payment TermsLess Than








More ThanTotal


1 Year


1-3 Years


3-5 Years


5 YearsDebt obligations(1)

$
581,092


$
92,331


$
170,699


$
53,177


$
264,885Operating lease obligations


1,229



548



485



145



51Construction contracts


20,722



20,722











Reserve on unrecognized tax benefits


1,298











1,298



Total

$
604,341


$
113,601


$
171,184


$
54,620


$
264,936     (1)
    
    Amounts include interest (for fixed rate debt) and principal.
    They also include $8,493 of fixed rate debt recognized as a
    liability related to certain bonds issued by the City of
    Sheboygan and $3,503 of fixed rate debt recognized as a
    liability related to a loan from the City of Sheboygan. These
    liabilities will be satisfied by certain future minimum
    guaranteed amounts of real and personal property tax payments
    and room tax payments to be made by our Sheboygan resort.    Working
    Capital
    
    the use of cash for capital expenditures and investments in and
    advances to affiliates and for our properties under development,
    less proceeds from issuances of long-term debt, and
    the classification of our Mason mortgage loan maturing in
    November 2009 as a current liability.  Cash
    Flows
  Comparison
    of Year Ended December 31, 2008 to Year Ended
    December 31, 2007
  Year Ended December 31,


Increase2008


2007


(Decrease)Net cash provided by operating activities

$
33,534


$
29,751


$
3,783Net cash used in investing activities


(144,612
)


(213,867
)


69,255Net cash provided by financing activities


106,712



105,935



777   Operating Activities.
  Investing Activities.
 61




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##### Table of Contents



Financing Activities.
  Comparison
    of Year Ended December 31, 2007 to Year Ended
    December 31, 2006
  Year Ended December 31,


Increase2007


2006


(Decrease)Net cash provided by operating activities

$
29,751


$
29,723


$
28Net cash used in investing activities


(213,867
)


(107,123
)


(106,744
)Net cash provided by financing activities


105,935



119,396



(13,461
)   Investing Activities.
  Financing Activities.
  Inflation
    ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK      
    $70,211 of fixed rate debt secured by two of our resorts. This
    debt bears interest at 6.96%.
    $76,800 of variable rate debt secured by one of our resorts.
    This debt bears interest at a floating rate of
    30-day LIBOR
    plus a spread of 425 basis points, with a minimum rate of
    6.50% per annum. The effective rate was 6.50% at
    December 31, 2008.
    $96,571 of fixed rate debt secured by one of our resorts. This
    debt bears interest at 6.10%.
    $64,625 of variable rate debt secured by one of our resorts.
    This debt bears interest at a floating rate of
    30-day LIBOR
    plus a spread of 350 basis points, with a minimum rate of
    6.25% per annum. The effective rate was 6.25% at
    December 31, 2008.
    $78,709 of variable rate debt secured by one of our resorts.
    This debt bears interest at a floating rate of
    30-day LIBOR
    plus a spread of 260 basis points. The effective rate was
    3.04% at December 31, 2008.
    $27,594 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 345 basis points during the construction period
    and LIBOR plus a 62




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##### Table of Contents



spread of 310 basis points once the resort is open, with a
    minimum rate of 6.50% per annum. The effective rate was 6.50% at
    December 31, 2008.  
    $51,550 of subordinated debentures 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 debentures 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.
    $8,493 of fixed rate debt (effective interest rate of 10.67%)
    recognized as a liability related to certain bonds issued by the
    City of Sheboygan and $3,503 of noninterest bearing debt
    recognized as a liability related to a loan from the City of
    Sheboygan. These liabilities will be satisfied by certain future
    minimum guaranteed amounts of real and personal property tax
    payments and room tax payments to be made by the Sheboygan
    resort.     63




---



##### 



ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  Form 10-K:
   
 PageNo.Consolidated Financial Statements of Great Wolf Resorts and
    Subsidiaries:Report of Independent Registered Public
    Accounting Firms


65Consolidated Balance Sheets for Great Wolf
    Resorts, Inc. and subsidiaries as of December 31, 2008 and
    2007


67Consolidated Statements of Operations for Great
    Wolf Resorts, Inc. and subsidiaries for the years ended
    December 31, 2008, 2007 and 2006


68Consolidated Statements of Equity for Great Wolf
    Resorts, Inc. and subsidiaries for the years ended
    December 31, 2008, 2007 and 2006


69Consolidated Statements of Cash Flows for Great
    Wolf Resorts, Inc. and subsidiaries for the years ended
    December 31, 2008, 2007 and 2006


70Notes to Consolidated Financial Statements


71   64




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           Internal Control  Integrated Framework
      65




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            Share-Based Payment.
      66




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES



CONSOLIDATED
    BALANCE SHEETS  December 31,2008


2007(dollars in thousands,except per share amounts)ASSETSCurrent assets:Cash and cash equivalents

$
14,231


$
18,597Accounts receivable, net of allowance for doubtful accounts of
    $114 and $113


2,167



2,373Accounts receivable  affiliates, net of allowance for
    doubtful accounts of $1,201 in 2008


925



3,973Inventory


4,265



4,632Other current assets


3,055



2,869Total current assets


24,643



32,444Property and equipment, net


716,173



617,697Investment in and advances to affiliates


43,855



59,148Other assets


31,561



20,257Other intangible assets


23,829



23,829Goodwill






17,430Total assets

$
840,061


$
770,805LIABILITIES, MINORITY INTERESTS AND STOCKHOLDERS
    EQUITYCurrent liabilities:Current portion of long-term debt

$
81,464


$
78,752Accounts payable


23,217



18,471Accrued expenses


22,565



20,776Accrued expenses  affiliates


1,806



124Advance deposits


7,498



8,211Gift certificates payable


5,416



4,670Total current liabilities


141,966



131,004Mortgage debt


333,259



225,042Other long-term debt


92,328



92,508Other long-term liabilities






2,232Deferred tax liability






7,597Deferred compensation liability


568



2,029Total liabilities


568,121



460,412Commitments and contingenciesStockholders Equity:Common stock, $0.01 par value, 250,000,000 shares
    authorized, 30,982,646 and 30,698,683 shares issued and
    outstanding at December 31, 2008 and 2007, respectively


310



307Preferred stock, $0.01 par value, 10,000,000 shares
    authorized, no shares issued or outstanding at December 31,
    2008 and 2007






Additional paid-in capital


399,641



399,759Accumulated deficit


(127,811
)


(87,086
)Deferred compensation


(200
)


(2,200
)Accumulated other comprehensive loss, net of tax






(387
)Total stockholders equity


271,940



310,393Total liabilities, minority interests and stockholders
    equity

$
840,061


$
770,805    67




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF OPERATIONS
    AND COMPREHENSIVE LOSS
    (dollars in thousands, except per share data)  Year Ended December 31,2008


2007


2006Revenues:Rooms

$
143,395


$
112,261


$
87,775Food and beverage


38,808



29,588



21,930Other hotel operations


35,365



27,085



21,207Management and other fees


2,798



2,855



2,087Management and other fees  affiliates


5,346



4,314



3,729225,712



176,103



136,728Other revenue from managed properties-affiliates


19,826



11,477



11,920Total revenues


245,538



187,580



148,648Operating expenses by department:Rooms


20,134



15,716



11,914Food and beverage


30,990



25,196



18,806Other


28,959



23,104



17,117Other operating expenses:Selling, general and administrative


51,902



47,915



41,421Property operating costs


37,086



30,555



23,217Depreciation and amortization


46,081



36,372



25,903Impairment loss on investment in affiliates


18,777







Goodwill impairment


17,430







50,975Loss on disposition of property


19



128



1,066251,378



178,986



190,419Other expenses from managed properties-affiliates


19,826



11,477



11,920Total operating expenses


271,204



190,463



202,339Net operating loss


(25,666
)


(2,883
)


(53,691
)Investment income  affiliates


(2,187
)


(667
)


Interest income


(1,424
)


(2,758
)


(3,105
)Interest expense


27,277



14,887



7,169Loss before income taxes, minority interests, and equity in
    unconsolidated affiliates


(49,332
)


(14,345
)


(57,755
)Income tax benefit


(11,956
)


(5,859
)


(8,764
)Minority interests, net of tax






(452
)


(502
)Equity in unconsolidated affiliates, net of tax


3,349



1,547



761Net loss

$
(40,725
)

$
(9,581
)

$
(49,250
)Other comprehensive loss, net of tax:Unrealized (gain) loss on interest rate swap


(387
)


387



Comprehensive loss

$
(40,338
)

$
(9,968
)

$
(49,250
)Basic loss per share

$
(1.32
)

$
(0.31
)

$
(1.63
)Diluted loss per share

$
(1.32
)

$
(0.31
)

$
(1.63
)Weighted average common shares outstanding:Basic


30,827,860



30,533,249



30,299,647Diluted


30,827,860



30,533,249



30,299,647    68




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES



CONSOLIDATED
    STATEMENTS OF EQUITY

(dollars
    in thousands, except per share data)  AdditionalCommon


Common


Paid- in


Accumulated


Deferred


Accumulated Other


TotalShares


Stock


Capital


Deficit


Compensation


Comprehensive Loss


EquityBalance, January 1, 2006


30,277,308


$
303


$
394,212


$
(28,255
)

$
(2,349
)

$



$
363,911Issuance of non-vested equity shares


232,012



2



















2Reclassification of unearned compensation to additional paid-in
    capital upon the adoption of Financial Accounting Standards
    No. 123(R)










(149
)






149







Stock-based compensation










3,052















3,052Share issuance costs










(206
)














(206
)Net loss














(49,250
)










(49,250
)Balance, December 31, 2006


30,509,320



305



396,909



(77,505
)


(2,200
)






317,509Issuance of non-vested equity shares


189,363



2



















2Stock-based compensation










2,850















2,850Unrealized loss on interest rate swap, net of tax






















(387
)


(387
)Net loss














(9,581
)










(9,581
)Balance, December 31, 2007


30,698,683



307



399,759



(87,086
)


(2,200
)


(387
)


310,393Issuance of non-vested equity shares


283,963



3



















3Sale of common stock  deferred compensation plan










(2,000
)






2,000







Stock-based compensation










1,882















1,882Unrealized gain on interest rate swap, net of tax






















387



387Net loss














(40,725
)










(40,725
)Balance, December 31, 2008


30,982,646


$
310


$
399,641


$
(127,811
)

$
(200
)

$



$
271,940    69




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES



CONSOLIDATED
    STATEMENTS OF CASH FLOWS

(dollars
    in thousands)  Year Ended December 31,2008


2007


2006Operating activities:Net loss

$
(40,725
)

$
(9,581
)

$
(49,250
)Adjustments to reconcile net loss to net cash provided by
    operating activities:Depreciation and amortization


46,081



36,372



25,903Bad debt expense


1,305



154



189Impairment loss in investment in affiliates


18,777







Goodwill impairment


17,430







50,975Non-cash employee compensation and professional fees expense


250



5,080



3,559Loss on disposition of property


19



128



1,066Equity in losses of unconsolidated affiliates


4,421



2,616



1,269Minority interests






(764
)


(836
)Deferred tax benefit


(14,072
)


(7,105
)


(9,500
)Changes in operating assets and liabilities:Accounts receivable and other assets


(1,916
)


(4,399
)


3,918Accounts payable, accrued expenses and other liabilities


1,964



7,250



2,430Net cash provided by operating activities


33,534



29,751



29,723Investing activities:Capital expenditures for property and equipment


(134,967
)


(171,884
)


(120,523
)Cash distributions from unconsolidated affiliates










18,902Loan repayment from unconsolidated affiliates


3,168







Investment in unconsolidated affiliates


(10,430
)


(24,058
)


(523
)Investment in development


(2,255
)


(10,276
)


(4,626
)Purchase of minority interest






(6,900
)


Issuance of notes receivable






(3,263
)


Proceeds from sale of assets










2,101Decrease (increase) in restricted cash


55



2,289



(1,282
)Decrease (increase) in escrow


(183
)


225



(1,172
)Net cash used in investing activities


(144,612
)


(213,867
)


(107,123
)Financing activities:Principal payments on long-term debt


(57,294
)


(1,350
)


(31,978
)Proceeds from issuance of long-term debt


168,042



108,263



153,039Payment of loan costs


(4,036
)


(978
)


(1,665
)Net cash provided by financing activities


106,712



105,935



119,396Net (decrease) increase in cash and cash equivalents


(4,366
)


(78,181
)


41,996Cash and cash equivalents, beginning of year


18,597



96,778



54,782Cash and cash equivalents, end of year

$
14,231


$
18,597


$
96,778Supplemental cash flow information:Cash paid for interest, net of capitalized interest

$
26,749


$
13,404


$
6,036Cash paid for income taxes, net of refunds

$
597


$
(312
)

$
(471
)Non-cash items:Construction in process accruals

$
6,969


$
9,728


$
10,101Guarantee on loan for unconsolidated affliate

$



$
1,180


$
    70




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (dollars in thousands, except per share amounts)
  1.
    ORGANIZATION    Business
    Summary
  ® tm
      Number of

IndoorOwnership

Opened/

Number of

Condo

EntertainmentPercentage

Opening

Guest Suites

Units(1)

Area(2)(Approx.
    ft2)Existing Resorts:Wisconsin Dells, WI(3)

30.32%

1997

308

77

102,000Sandusky, OH(3)

30.32%

2001

271



41,000Traverse City, MI

100%

2003

280



57,000Kansas City, KS

100%

2003

281



57,000Sheboygan, WI

100%

2004

182

64

54,000Williamsburg, VA

100%

2005

405



87,000Pocono Mountains, PA

100%

2005

401



101,000Niagara Falls, ONT(4)



2006

406



104,000Mason, OH

100%

2006

401



105,000Grapevine, TX(5)

100%

2007

605



110,000Grand Mound, WA(6)

49%

2008

398



74,000Resort Under Construction:Concord, NC(7)

100%

March 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, childrens activity room, family
    tech center,
    MagiQuest®

    and fitness room, as well as our spa in the resorts that have
    such amenities. 71




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   (3)
    
    These properties are owned by a joint venture. CNL Lifestyle
    Properties, Inc. (CNL), a real estate investment trust focused
    on leisure and lifestyle properties, owns a 69.68% interest in
    the joint venture, and we own a 30.32% interest. We operate the
    properties and license the Great Wolf Lodge brand to the joint
    venture under long-term agreements through October 2020, subject
    to earlier termination in certain situations.(4)
    
    An affiliate of Ripley Entertainment, Inc. (Ripley) owns this
    resort. We have granted Ripley a license to use the Great Wolf
    Lodge name for this resort through April 2016. We will manage
    the resort on behalf of Ripley through April 2009.(5)
    
    In late 2007, we began construction on an additional 203 suites
    and 20,000 square feet of meeting space as an expansion of
    this resort. The meeting space, along with 92 rooms, was opened
    in December 2008, with the rest of the rooms completed and
    opened in January 2009.(6)
    
    This property is owned by a joint venture. The Confederated
    Tribes of the Chehalis Reservation (Chehalis) own 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 Chehalis.(7)
    
    We are developing a Great Wolf Lodge resort in Concord, North
    Carolina. The Northwoods-themed,
    402-suite
    resort will provide a comprehensive package of destination
    lodging amenities and activities. Construction on the resort
    began in October 2007 with expected completion in March 2009.  2.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  Principles of Consolidation 
  Cash and Cash Equivalents
  Accounts receivable
  Inventory
  Property and Equipment
  Buildings and improvements


20-40 yearsFixtures and equipment, including waterpark equipment


5-15 years      72




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Loan Fees
  Partially-Owned Entities 78-9, 96-16, EITF 04-5,
  Investments In and Advances to Unconsolidated
    Affiliates
  Other Intangible Assets
  Goodwill
 73




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    
    2009 budget information;
    The impact of the December holiday season on overall 2008
    financial results;
    Full year 2008 financial results for each of the resorts;
    Impact of/changes in the economy since the severe economic
    disruptions of 2008; and
    Forecasted booking trends for 2009.    Impairment of Long-Lived Assets
  Revenue Recognition
    Sales of Real Estate Assets
  Other Revenue and Other Expenses From Managed
    Properties EITF 01-14
 74




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Minority Interests 
  Income Taxes
        Earnings per share
  Fair Value Measurements  
 75




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
            Derivatives
  Share based compensation .
  Advertising
  Comprehensive Income
  Segments
  
    resort ownership/operation-revenues derived from our
    consolidated owned resorts;
    resort third-party management-revenues derived from management,
    license and other related fees from unconsolidated managed
    resorts; and
    condominium sales-revenues derived from sales of condominium
    units to third-party owners. 76




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Resort


Resort Third-








Totals perOwnership/


Party


Condominium





FinancialOperation


Management


Sales


Other


StatementsYear Ended December 31, 2008Revenues

$
217,568


$
27,970


$



$



$
245,538Depreciation and amortization


(45,042
)










(1,039
)

$
(46,081
)Impairment loss on investment in affiliates














(18,777
)

$
(18,777
)Goodwill impairment


(16,021
)










(1,409
)

$
(17,430
)Operating income (loss)


(11,286
)


8,144







(22,524
)

$
(25,666
)Investment income


















2,187Interest income


















1,424Interest expense


















(27,277
)Loss before income taxes, minority interest, and equity in
    unconsolidated affiliates

















$
(49,332
)Additions to long-livedassets


134,167











800


$
134,967Total assets


738,119



2,314







99,628


$
840,061   Resort


Resort Third-








Totals perOwnership/


Party


Condominium





FinancialOperation


Management


Sales


Other


StatementsYear Ended December 31, 2007Revenues

$
168,934


$
18,646


$



$



$
187,580Depreciation and amortization


(35,767
)










(605
)

$
(36,372
)Operating income (loss)


(3,588
)


7,169



(682
)


(5,782
)

$
(2,883
)Investment income


















667Interest income


















2,758Interest expense


















(14,887
)Loss before income taxes, minority interest, and equity in
    unconsolidated affiliates

















$
(14,345
)Additions to long-livedassets


171,197











687


$
171,884Total assets


653,367



4,384







113,054


$
770,805   77




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Resort


Resort Third-








Totals perOwnership/


Party


Condominium





FinancialOperation


Management


Sales


Other


StatementsYear Ended December 31, 2006Revenues

$
130,912


$
17,736


$



$



$
148,648Depreciation and amortization


(25,390
)










(513
)

$
(25,903
)Goodwill impairment


(50,975
)













$
(50,975
)Operating income (loss)


(49,633
)


5,817



(370
)


(9,505
)

$
(53,691
)Interest income


















3,105Interest expense


















(7,169
)Loss before income taxes, minority interest, and equity in
    unconsolidated affiliates

















$
(57,755
)Additions to long-lived assets


119,692











831


$
120,523Total assets


524,820



3,120







155,499


$
683,439     Use of Estimates
  New Accounting Pronouncements  FAS 157-2, (FSP 157-2). FSP 157-2 FSP 157-2
     78




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      FAS 142-3, (FSP 142-3). FSP 142-3 FSP 142-3 FSP 142-3
    No. 08-6, (EITF 08-6). EITF 08-6 EITF 08-6
  3.
    INVESTMENT
    IN AFFILIATES  CNL
    Joint Venture
  25-year
     79




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      
    2009 budget information;
    The impact of the December holiday season on overall 2008
    financial results;
    The relative success of operational adjustments implemented
    throughout 2008 to improve the resorts operations;
    Full year 2008 financial results for each of the resorts;
    Impact of/changes in the economy since the severe economic
    disruptions of 2008; and
    Forecasted booking trends for 2009.        2008


2007Balance sheet data:Total assets

$
104,712


$
111,982Total liabilities

$
69,612


$
71,058Operating data:Revenue

$
31,531


$
34,597Operating expenses

$
(39,491
)

$
(41,341
)Net loss

$
(7,960
)

$
(6,703
)     Grand
    Mount Joint Venture
  39-acre
 80




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
        2008


2007Balance sheet data:Total assets

$
152,215


$
122,975Total liabilities

$
118,636


$
80,659Operating data:Revenue

$
33,194


$
Operating expenses

$
31,739


$
Net loss

$
(5,553
)

$
(2,369
)   4.
    PROPERTY
    AND EQUIPMENT    December 31,2008


2007Land and improvements

$
51,684


$
51,398Building and improvements


353,537



289,768Furniture, fixtures and equipment


315,577



334,836Construction in process


117,063



19,737837,861



695,739Less accumulated depreciation


(121,688
)


(78,042
)Property and equipment, net

$
716,173


$
617,697    81




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  5.
    LONG-TERM
    DEBT    December 31,2008


2007Long-Term Debt:Traverse City/Kansas City mortgage loan

$
70,211


$
71,542Mason mortgage loan


76,800



76,800Pocono Mountains mortgage loan


96,571



97,000Williamsburg mortgage loan


64,625



Grapevine construction loan


78,709



58,260Concord construction loan


27,594



Junior subordinated debentures


80,545



80,545Other Debt:City of Sheboygan bonds


8,493



8,465City of Sheboygan loan


3,503



3,690507,051



396,302Less current portion of long-term debt


(81,464
)


(78,752
)Total long-term debt

$
425,587


$
317,550   Traverse City/Kansas City Mortgage Loan 25-year
  Mason Mortgage Loan 30-day
  Pocono Mountains Mortgage Loan  30-year
  Williamsburg Mortgage Loan  30-day
 82




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Grapevine Construction Loan 30-day 25-year
    Concord Construction Loan 25-year
  Junior Subordinated Debentures
  30-year
   83




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    10-year
      City of Sheboygan Bonds No. 91-10,
  City of Sheboygan Loan
  Future Maturities
  2009

$
81,4642010


6,4852011


143,0022012


29,0392013


3,675Thereafter


243,386Total

$
507,051   6.
    FAIR
    VALUE OF FINANCIAL INSTRUMENTS   84




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
                  7.
    INCOME
    TAXES    Unrecognized tax benefit  December 31, 2007

$
1,298Gross increases  tax positions in current period


Unrecognized tax benefit  December 31, 2008

$
1,298  85




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Current


Deferred


TotalYear ended December 31, 2008Federal

$



$
(12,499
)

$
(12,499
)State and local


955



(1,573
)


(618
)Foreign


89







89$
1,044


$
(14,072
)

$
(13,028
)Year ended December 31, 2007Federal

$



$
(5,723
)

$
(5,723
)State and local


398



(1,382
)


(984
)Foreign


92







92$
490


$
(7,105
)

$
(6,615
)Year ended December 31, 2006Federal

$



$
(8,768
)

$
(8,768
)State and local


506



(732
)


(226
)Foreign


56







56$
562


$
(9,500
)

$
(8,938
)     Income Tax Expense (Benefit)for the Year Ending December 31,2008


2007


2006Income tax benefit

$
(11,956
)

$
(5,859
)

$
(8,764
)Minority interest, net of tax






312



334Equity in unconsolidated affiliates, net of tax


(1,072
)


(1,068
)


(508
)Total income tax benefit

$
(13,028
)

$
(6,615
)

$
(8,938
)      2008


2007


2006Federal statutory income tax benefit


(35.0
)%


(35.0
)%


(35.0
)%State income taxes, net of Federal income taxes


(0.6
)%


(6.1
)%


(0.7
)%Nondeductible goodwill


11.5
%






19.9
%Other


(0.1
)%


0.3
%


0.4
%(24.2
)%


(40.8
)%


(15.4
)%  86




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    2008


2007Deferred tax assets:Net operating loss carryforwards


17,504



13,553Intangibles


11,564



9,630Investment in affiliates


7,161



Salaries and wages


2,534



4,140Interest rate swap






273Other


1,329



623Total deferred tax assets


40,092



28,219Deferred tax liabilities:Property and equipment

$
(32,922
)

$
(33,598
)Prepaid expenses


(932
)


(741
)Interest rate swap


(273
)


Investment in affiliates






(1,629
)Total deferred tax liabilities


(34,127
)


(35,968
)Valuation allowance


(366
)


(325
)Net deferred tax asset (liability)

$
5,599


$
(8,074
)        87




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    8.
    RELATED-PARTY
    TRANSACTIONS      9.
    COMMITMENTS
    AND CONTINGENCIES  Legal Matters
  Letters of Credit
  Guarantees
      1 2
   88




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Commitments
  2009

$
5482010


3342011


1512012


1312013


14Thereafter


51Total

$
1,229       10.
    RETIREMENT
    PLAN    11.
    EQUITY  Deferred Compensation
  Earnings per Share
  No. 97-14,
 89




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Year Ended December 31,2008


2007


2006Net loss attributable to common shares

$
(40,725
)

$
(9,581
)

$
(49,250
)Weighted average common shares outstanding  basic and
    diluted


30,827,860



30,533,249



30,299,647Net loss per share  basic and diluted

$
(1.32
)

$
(0.31
)

$
(1.63
)   and/or
  12.
    SHARE-BASED
    COMPENSATION  .
        Stock
    Options
     90




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Year EndedDecember 31, 2006Dividend yield


Weighted average, risk free interest rate


4.33
%Weighted average, expected life of option


6.0 yearsExpected stock price volatility


39.83
%       WeightedWeighted


AverageAverage


RemainingExercise


ContractualShares


Price


LifeNumber of shares under option:Outstanding at January 1, 2006


1,471,834


$
17.45Granted


15,000


$
13.18Exercised


Forfeited


(422,334
)

$
17.03Outstanding at December 31, 2006


1,064,500


$
17.55



8.05 yearsGranted


Exercised


(167
)

$
12.40Forfeited


(77,333
)

$
20.87Outstanding at December 31, 2007


987,000


$
17.29



7.03 yearsGranted


Exercised


Forfeited


(512,000
)

$
17.01Outstanding at December 31, 2008


475,000


$
17.59



6.09 yearsExercisable at December 31, 2008


470,000


$
17.64



6.00 years     Market
    Condition Share Awards
   91




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      
    84,748 are based on our common stocks performance in 2008
    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,
    2008-2010.
    The per share fair value of these market condition shares was
    $1.63.    Dividend yield


Weighted average, risk free interest rate


2.05
%Expected stock price volatility


34.98
%Expected stock price volatility (small-cap stock index)


20.08
%       
    53,006 are based on our common stocks performance in 2007
    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,
    2007-2009.
    The per share fair value of these market condition shares was
    $7.25.    Dividend yield


Weighted average, risk free interest rate


5.05
%Expected stock price volatility


42.13
%Expected stock price volatility (small-cap stock index)


16.64
%       
    81,293 are based on our common stocks absolute performance
    during the three-year period
    2007-2009.
    Half of these shares vest on December 31, 2009, and the
    other half vest on December 31, 2010. The per share fair
    value of these market condition shares was $6.65. 92




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##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     Dividend yield


Weighted average, risk free interest rate


4.73
%Expected stock price volatility


42.13
%     
    81,293 are based on our common stocks performance in
    2007-2009
    relative to a stock index, as designated by the Compensation
    Committee of the Board of directors. Half of these shares vest
    on December 31, 2009, and the other half vest on
    December 31, 2010. The per share fair value of these market
    condition shares was $8.24.    Dividend yield


Weighted average, risk free interest rate


4.73
%Expected stock price volatility


42.13
%Expected stock price volatility (small-cap stock index)


16.64
%       
    81,820 were based on our common stocks performance in 2006
    relative to a stock index, as designated by the Compensation
    Committee of the Board of directors. The per share fair value of
    these market condition shares was $5.76.    Dividend yield


Weighted average, risk free interest rate


4.12
%Expected stock price volatility (peer group of companies)


31.00
%Expected stock price volatility (small-cap stock index)


17.50
%    93




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Performance
    Share Awards
  2008-2010; 2007-2009;
    
    Employees earned and were issued 18,084 performance shares in
    February 2009 related to the 2008 grants,
    Employees earned and were issued 20,843 performance shares in
    February 2008 related to the 2007 grants, and
    Employees earned and were issued 17,949 performance shares in
    February 2007 related to the 2006 grants.    Deferred
    Compensation Awards
  No. 97-14, No. 97-14,
  paid-in-capital.
  Non-vested
    Shares
   94




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    WeightedAverageGrant DateShares

Fair ValueNon-vested shares balance at January 1, 2006


15,000


$
10.09Granted


236,000


$
11.60Forfeited


(3,000
)

$
11.77Vested


(3,000
)

$
10.09Non-vested shares balance at December 31, 2006


245,000


$
11.08Granted


143,711


$
13.47Forfeited


(5,000
)

$
10.79Vested


(50,600
)

$
11.53Non-vested shares balance at December 31, 2007


333,111


$
12.37Granted


210,799


$
6.78Forfeited


(162,008
)

$
10.91Vested


(81,653
)

$
12.14Non-vested shares balance at December 31, 2008


300,249


$
9.29       Vested
    Shares
     95




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  13.
    QUARTERLY
    FINANCIAL DATA (UNAUDITED)    First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter2008:Total Revenues

$
64,208


$
63,018


$
69,413


$
48,899Net operating income (loss)


4,062



51



9,763



(39,542
)Net income (loss)


(2,327
)


(4,090
)


2,171



(36,479
)Basic earnings (loss) per share

$
(0.08
)

$
(0.13
)

$
0.07


$
(1.18
)Diluted earnings (loss) per share

$
(0.08
)

$
(0.13
)

$
0.07


$
(1.18
)   First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter2007:Total Revenues

$
48,459


$
46,292


$
50,898


$
41,931Net operating income (loss)


(745
)


811



5,637



(8,586
)Net income (loss)


(2,005
)


(1,656
)


1,761



(7,681
)Basic earnings (loss) per share

$
(0.07
)

$
(0.05
)

$
0.06


$
(0.25
)Diluted earnings (loss) per share

$
(0.07
)

$
(0.05
)

$
0.06


$
(0.25
)     Impairment loss on investment in affiliates

$
18,777Goodwill impairment


17,430$
36,207     ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e)
 96




---



##### Table of Contents



GREAT
    WOLF RESORTS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Managements
    Report on Internal Control over Financial
    Reporting
    
    Pertain to the maintenance of records that in reasonable detail
    accurately and fairly reflect the transactions and dispositions
    of the assets of the Company;
    Provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with U.S. generally accepted accounting
    principles, and that receipts and expenditures of the Company
    are being made only in accordance with authorizations of our
    management and directors; and
    Provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of our
    assets that could have a material effect on the financial
    statements.        Changes
    in Internal Control
   97




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     Internal
    Control-Integrated Framework
        Internal Control-Integrated Framework
       98




---



##### Table of Contents



ITEM 9B.
    OTHER
    INFORMATION   PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICER AND CORPORATE GOVERNANCE    ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE    ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES    ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES  Financial Statements
  Form 10-K
  Financial Statement Schedules
    Exhibits
   99




---



##### Table of Contents



SIGNATURES      /s/  KIMBERLY
    K. SCHAEFER         Signature

Title

Date/s/  Kimberly
    K. SchaeferKimberly
    K. Schaefer

Chief Executive Officer (Principal Executive Officer) and
    Director

March 5, 2009/s/  James
    A. CalderJames
    A. Calder

Chief Financial Officer (Principal Financial and Accounting
    Officer)

March 5, 2009/s/  Joseph
    V. VittoriaJoseph
    V. Vittoria

Chairman of the Board and Director

March 5, 2009/s/  Elan
    BlutingerElan
    Blutinger

Director

March 5, 2009Randy
    L. Churchey

Director

March 5, 2009/s/  Steven
    D. HovdeSteven
    D. Hovde

Director

March 5, 2009/s/  Michael
    M. KnetterMichael
    M. Knetter

Director

March 5, 2009/s/  Richard
    T. Murray IIIRichard
    T. Murray III

Director

March 5, 2009Edward
    H. Rensi

Director

March 5, 2009/s/  Howard
    A. SilverHoward
    A. Silver

Director

March 5, 2009  100




---



##### Table of Contents



INDEX TO
    EXHIBITS
  Form 10-K.
  ExhibitNumber

Description2
.1

Form of Merger Agreement (Delaware) (incorporated herein by
    reference to Exhibit 2.1 to the Companys Registration
    Statement on
    Form S-1
    filed August 12, 2004)2
.2

Form of Merger Agreement (Wisconsin) (incorporated herein by
    reference to Exhibit 2.2 to the Companys Registration
    Statement on
    Form S-1
    filed August 12, 2004)3
.1

Form of Amended and Restated Certificate of Incorporation for
    Great Wolf Resorts, Inc. dated December 9, 2004
    (incorporated herein by reference to Exhibit 3.1 to the
    Companys Registration Statement on
    Form S-1
    filed August 12, 2004)3
.2

Form of Amended and Restated Bylaws of Great Wolf Resorts, Inc.
    effective September 12, 2007 (incorporated herein by
    reference to Exhibit 4.1 to the Companys Current
    Report on
    Form S-1
    filed September 18, 2007)4
.1

Form of the Common Stock Certificate of Great Wolf Resorts, Inc.
    (incorporated herein by reference to Exhibit 4.1 to the
    Companys Registration Statement on
    Form S-1
    filed October 21, 2004)4
.2

Junior Subordinated Indenture, dated as of March 15, 2005,
    between Great Wolf Resorts, Inc. and JPMorgan Chase Bank,
    National Association, as trustee (incorporated herein by
    reference to Exhibit 4.1 to the Companys Current
    Report on
    Form 8-K
    filed March 18, 2005)4
.3

Amended and Restated Trust Agreement, dated as of
    March 15, 2005, by and among Chase Manhattan Bank USA,
    National Association, as Delaware trustee; JPMorgan Chase Bank,
    National Association, as property trustee; Great Wolf Resorts,
    Inc., as depositor; and James A. Calder, Alex G. Lombardo and J.
    Michael Schroeder, as administrative trustees (incorporated
    herein by reference to Exhibit 4.2 to the Companys
    Current Report on
    Form 8-K
    filed March 18, 2005)10
.1

License Agreement, dated January 30, 2004, by and between
    The Great Lakes Companies, Inc. and Jim Pattison Entertainment
    Ltd. (incorporated herein by reference to Exhibit 10.1 to
    the Companys Registration Statement on
    Form S-1
    filed September 23, 2004)10
.2

Development Agreement, dated as of July 30, 2003, among the
    City of Sheboygan, Wisconsin, the Redevelopment Authority of the
    City of Sheboygan, Wisconsin, The Great Lakes Companies, Inc.,
    Blue Harbor Resort Sheboygan, LLC, and Blue Harbor Resort
    Condominium, LLC (incorporated herein by reference to
    Exhibit 10.2 to the Companys Registration Statement
    on
    Form S-1
    filed August 12, 2004)10
.3

First Amendment to the Development Agreement, dated
    June 25, 2004, by and among the City of Sheboygan,
    Wisconsin, the Redevelopment Authority of the City of Sheboygan,
    Wisconsin, The Great Lakes Companies, Inc., Blue Harbor Resort
    Sheboygan, LLC, and Blue Harbor Resort Condominium, LLC
    (incorporated herein by reference to Exhibit 10.3 to the
    Companys Registration Statement on
    Form S-1
    filed August 12, 2004)10
.4

Tall Pines Exclusive License and Royalty Agreement, dated
    July 25, 2004, between Tall Pines Development Corporation
    and The Great Lakes Companies, Inc. (incorporated herein by
    reference to Exhibit 10.4 to the Companys
    Registration Statement on
    Form S-1
    filed December 7, 2004)10
.5+

Form of Employment Agreement (incorporated herein by reference
    to Exhibit 10.5 to the Companys Registration
    Statement on
    Form S-1
    filed December 7, 2004)10
.6

Registration Statement on
    Form S-1
    filed January 21, 2005) Form of Noncompete Agreement,
    Trade Secret and Confidentiality Agreement (incorporated herein
    by reference to Exhibit 10.6 to the Companys
    Registration Statement on
    Form S-1
    filed January 21, 2005)10
.7

Form of Officers and Directors Indemnification Agreement
    (incorporated herein by reference to Exhibit 10.7 to the
    Companys Registration Statement on
    Form S-1
    filed August 12, 2004)10
.8+

Form of Indemnity Agreement (incorporated herin by reference to
    Exhibit 10.8 to the Companys Registration Statement
    on
    Form S-1
    filed September 23, 2004)10
.9+

Form of Great Wolf Resorts, Inc. Employee Stock Purchase Plan
    (incorporated herein by reference to Exhibit 10.9 to the
    Companys Registration Statement on
    Form S-1
    filed August 12, 2004)10
.10+

Form of Great Wolf Resorts, Inc. 2004 Incentive Stock Plan
    (incorporated herein by reference to Exhibit 10.10 to the
    Companys Registration Statement on
    Form S-1
    filed November 26, 2004)




---



##### Table of Contents



ExhibitNumber

Description10
.11+

Form of Great Wolf Resorts, Inc. Deferred Compensation Plan
    (incorporated herein by reference to Exhibit 10.11 to the
    Companys Registration Statement on
    Form S-1
    filed August 12, 2004)10
.12

Loan Agreement by and among Great Wolf Resorts, Inc., Citigroup
    Global Markets Realty Corp. and The Travelers Insurance Company
    (incorporated herein by reference to Exhibit 10.16 to
    Companys Registration Statement on
    Form S-1
    filed January 21, 2005)10
.13

Purchase Agreement, dated as of March 15, 2005, among Great
    Wolf Resorts, Inc., Great Wolf Capital Trust I, Taberna
    Preferred Funding I, Ltd and Merrill Lynch International
    (incorporated herein by reference to Exhibit 1.1 to the
    Companys Current Report on
    Form 8-K
    filed March 18, 2005)10
.14

Venture formation and Contribution Agreement dated
    October 3, 2005, among Great Wolf Resorts, Inc., Great Bear
    Lodge of Wisconsin Dells, LLC, Great Bear Lodge of Sandusky,
    LLC, and CNL Income Partners, LP (incorporated herein by
    reference to Exhibit 10.1 to the Companys current
    Report on
    Form 8-K
    filed October 7, 2005).10
.15

Loan Agreement dated March 1, 2007, among CNL Income GW
    WI-Del, LP and CNL Income GW Sandusky, LP, as borrowers, and
    NSPL, Inc., as lender (incorporated herein by reference to
    Exhibit 1.1 to the Companys Current Report on
    Form 8-K
    filed March 2, 2007).10
.16

Loan Agreement dated July 28, 2007, among Great Wolf Lodge
    of Grapevine, LLC, as borrower, and Merrill Lynch Capital and
    HSH Nordbank, as lenders (incorporated herein by reference to
    Exhibit 1.1 to the Companys Current Report on
    Form 8-K
    filed July 31, 2007).10
.17

Loan Agreement dated December 6, 2007, between Great Wolf
    Lodge of the Poconos, LLC, as borrower, and Citigroup Global
    Markets Realty Corp., as lender (incorporated herein by
    reference to Exhibit 1.1 to the Companys Current
    Report on
    Form 8-K
    filed December 13, 2007).10
.18

Loan Agreement dated February 6, 2008, between Great Wolf
    Lodge Williamsburg SPE, LLC, as borrower, and Citigroup Global
    Markets Realty Corp., as lender (incorporated herein by
    reference to Exhibit 1.1 to the Companys Current
    Report on
    Form 8-K
    filed February 8, 2008).10
.19

Loan Agreement dated April 30, 2008, among Great Wolf Lodge
    of the Carolinas, LLC, as borrower, Marshall Financial Group, as
    administrative agent, and the several banks and other financial
    institutions from time to time party thereto, as lenders
    (incorporated herein by reference to Exhibit 1.1 to the
    Companys Current Report on
    Form 8-K
    filed May 6, 2008).10
.20*

The Hovde Building Lease, dated September 1, 1997, as
    amended by amendments dated July 2, 2002, February 12,
    2004, April 23, 2004, August 11, 2004, and
    January 22, 2009.21
.1*

List of Subsidiaries23
.1*

Consent of Grant Thornton LLP23
.2*

Consent of Deloitte & Touche LLP31
.1*

Certification of Chief Executive Officer of Periodic Report
    Pursuant to Rule 13a  14(a) and
    Rule 15d  14(a)31
.2*

Certification of Chief Financial Officer of Periodic Report
    Pursuant to Rule 13a  14(a) and
    Rule 15d  14(a)32
.1*

Certification of Chief Executive Officer Pursuant to
    18 U.S.C. Section 135032
.2*

Certification of Chief Financial Officer Pursuant to
    18 U.S.C. Section 1350     *
    
    Filed herewith.+
    
    Indicated management contract or compensatory plan or
    arrangement required to be filed as an exhibit pursuant to
    Item 15(c) of
    Form 10-K.