UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from            to
 Commission File Number 000-51064
 
 GREAT WOLF RESORTS, INC.
 (Exact name of registrant as specified in its charter)
 Delaware(State or other jurisdiction of incorporation or organization)
    
    51-0510250(I.R.S. Employer Identification No.)122 West Washington Avenue 
Madison, Wisconsin 53703(Address of principal executive offices)
    
    53703(Zip Code)
 (608) 661-4700
 þ o
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



Great Wolf Resorts, Inc.
 Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 2009
 INDEX
 PageNo.PART I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)Condensed Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008
    
    
    3Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months
ended June 30, 2009 and 2008
    
    
    4Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2009 and 2008
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    41Item 4. Controls and Procedures
    
    
    42PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    43Item 1A. Risk Factors
    
    
    43Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    43Item 3. Defaults Upon Senior Securities
    
    
    43Item 4. Submission of Matters to a Vote of Security Holders
    
    
    43Item 5. Other Information
    
    
    44Item 6. Exhibits
    
    
    45Signature
    
    
    47
  2




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##### 



PART I. FINANCIAL INFORMATION
 
 ITEM 1.
    
    FINANCIAL STATEMENTS
 GREAT WOLF RESORTS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS  (Dollars in thousands, except share and per share amounts)
 June 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    23,035
    
    
    $
    14,231Accounts receivable, net of allowance for doubtful accounts of $98 and $114
    
    
    2,847
    
    
    
    2,167Accounts receivable  unconsolidated affiliates, net of allowance for
doubtful accounts of $1,638 and $1,201
    
    
    2,353
    
    
    
    925Inventory
    
    
    5,636
    
    
    
    4,265Other current assets
    
    
    8,634
    
    
    
    3,055Total current assets
    
    
    42,505
    
    
    
    24,643Property and equipment, net
    
    
    722,939
    
    
    
    716,173Investments in and advances to unconsolidated affiliates
    
    
    34,207
    
    
    
    43,855Other assets
    
    
    39,586
    
    
    
    31,561Other intangible assets
    
    
    23,829
    
    
    
    23,829Total assets
    
    $
    863,066
    
    
    $
    840,061LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    81,964
    
    
    $
    81,464Accounts payable
    
    
    6,810
    
    
    
    23,217Accounts payable  unconsolidated affiliates
    
    
    9
    
    
    
    622Accrued expenses
    
    
    22,682
    
    
    
    22,565Accrued expenses  unconsolidated affiliates
    
    
    1,475
    
    
    
    1,184Advance deposits
    
    
    11,867
    
    
    
    7,498Gift certificates payable
    
    
    4,180
    
    
    
    5,416Total current liabilities
    
    
    128,987
    
    
    
    141,966Mortgage debt
    
    
    379,728
    
    
    
    333,259Other long-term debt
    
    
    92,320
    
    
    
    92,328Deferred compensation liability
    
    
    678
    
    
    
    568Total liabilities
    
    
    601,713
    
    
    
    568,121Commitments and contingenciesStockholders equity:Common stock, $0.01 par value; 250,000,000 shares authorized;
31,298,676 and 30,982,646 shares issued and outstanding
    
    
    313
    
    
    
    310Additional paid-in-capital
    
    
    400,402
    
    
    
    399,641Preferred stock, $0.01 par value, 10,000,000 shares authorized, no
shares issued or outstanding
    
    
    
    
    
    
    Accumulated deficit
    
    
    (139,162
    )
    
    
    (127,811
    )Deferred compensation
    
    
    (200
    )
    
    
    (200
    )Total stockholders equity
    
    
    261,353
    
    
    
    271,940Total liabilities and stockholders equity
    
    $
    863,066
    
    
    $
    840,061
  3




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##### 



GREAT WOLF RESORTS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  AND COMPREHENSIVE LOSS  (Unaudited; dollars in thousands, except share and per share data)
 Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues:Rooms
    
    $
    40,310
    
    
    $
    35,941
    
    
    $
    76,655
    
    
    $
    74,807Food and beverage
    
    
    11,305
    
    
    
    10,235
    
    
    
    21,207
    
    
    
    20,663Other hotel operations
    
    
    10,160
    
    
    
    9,110
    
    
    
    19,125
    
    
    
    18,680Management and other fees
    
    
    402
    
    
    
    663
    
    
    
    991
    
    
    
    1,429Management and other fees  affiliates
    
    
    1,210
    
    
    
    1,501
    
    
    
    2,434
    
    
    
    2,59663,387
    
    
    
    57,450
    
    
    
    120,412
    
    
    
    118,175Other revenue from managed properties  affiliates
    
    
    5,238
    
    
    
    5,568
    
    
    
    10,520
    
    
    
    9,051Total revenues
    
    
    68,625
    
    
    
    63,018
    
    
    
    130,932
    
    
    
    127,226Operating expenses by department:Rooms
    
    
    5,948
    
    
    
    5,273
    
    
    
    10,977
    
    
    
    10,420Food and beverage
    
    
    8,865
    
    
    
    8,142
    
    
    
    16,280
    
    
    
    16,135Other
    
    
    8,424
    
    
    
    7,464
    
    
    
    15,692
    
    
    
    14,741Other operating expenses:Selling, general and administrative
    
    
    16,987
    
    
    
    16,694
    
    
    
    31,631
    
    
    
    30,092Property operating costs
    
    
    9,114
    
    
    
    8,085
    
    
    
    21,456
    
    
    
    19,914Depreciation and amortization
    
    
    14,630
    
    
    
    11,741
    
    
    
    27,216
    
    
    
    22,760Loss on disposition of property
    
    
    
    
    
    
    
    
    
    
    191
    
    
    
    63,968
    
    
    
    57,399
    
    
    
    123,443
    
    
    
    114,062Other expenses from managed properties  affiliates
    
    
    5,238
    
    
    
    5,568
    
    
    
    10,520
    
    
    
    9,051Total operating expenses
    
    
    69,206
    
    
    
    62,967
    
    
    
    133,963
    
    
    
    123,113Net operating (loss) income
    
    
    (581
    )
    
    
    51
    
    
    
    (3,031
    )
    
    
    4,113Investment income  affiliates
    
    
    (336
    )
    
    
    (553
    )
    
    
    (720
    )
    
    
    (1,004
    )Interest income
    
    
    (148
    )
    
    
    (409
    )
    
    
    (336
    )
    
    
    (899
    )Interest expense
    
    
    8,777
    
    
    
    6,884
    
    
    
    15,044
    
    
    
    13,791Loss before income taxes and equity in losses of
unconsolidated affiliates
    
    
    (8,874
    )
    
    
    (5,871
    )
    
    
    (17,019
    )
    
    
    (7,775
    )Income tax benefit
    
    
    (3,635
    )
    
    
    (2,232
    )
    
    
    (6,783
    )
    
    
    (3,037
    )Equity in losses of unconsolidated affiliates, net of tax
    
    
    467
    
    
    
    451
    
    
    
    1,115
    
    
    
    1,679Net loss
    
    $
    (5,706
    )
    
    $
    (4,090
    )
    
    $
    (11,351
    )
    
    $
    (6,417
    )Other comprehensive loss, net of tax:Unrealized (gain) loss on interest rate swaps
    
    
    
    
    
    
    (356
    )
    
    
    
    
    
    
    51Comprehensive loss
    
    $
    (5,706
    )
    
    $
    (3,734
    )
    
    $
    (11,351
    )
    
    $
    (6,468
    )Net loss per share-basic
    
    $
    (0.18
    )
    
    $
    (0.13
    )
    
    $
    (0.36
    )
    
    $
    (0.21
    )Net loss per share-diluted
    
    $
    (0.18
    )
    
    $
    (0.13
    )
    
    $
    (0.36
    )
    
    $
    (0.21
    )Weighted average common shares outstanding:Basic
    
    
    31,263,487
    
    
    
    30,875,615
    
    
    
    31,123,072
    
    
    
    30,770,388Diluted
    
    
    31,263,487
    
    
    
    30,875,615
    
    
    
    31,123,072
    
    
    
    30,770,388
  4




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##### 



GREAT WOLF RESORTS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (Unaudited; dollars in thousands)
 Six months endedJune 30,2009
    
    
    2008Operating activities:Net loss
    
    $
    (11,351
    )
    
    $
    (6,417
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization
    
    
    27,216
    
    
    
    22,760Bad debt expense
    
    
    457
    
    
    
    41Non-cash employee compensation and professional fees expense
    
    
    469
    
    
    
    90Loss on disposition of property
    
    
    191
    
    
    
    Equity in losses of unconsolidated affiliates
    
    
    1,854
    
    
    
    2,756Deferred tax benefit
    
    
    (7,582
    )
    
    
    (4,115
    )Changes in operating assets and liabilities:Accounts receivable and other assets
    
    
    (5,025
    )
    
    
    (6,476
    )Accounts payable, accrued expenses and other liabilities
    
    
    2,106
    
    
    
    6,292Net cash provided by operating activities
    
    
    8,335
    
    
    
    14,931Investing activities:Capital expenditures for property and equipment
    
    
    (45,846
    )
    
    
    (55,272
    )Loan repayment from unconsolidated affiliates
    
    
    8,098
    
    
    
    Investments in unconsolidated affiliates
    
    
    (303
    )
    
    
    (9,823
    )Investment in development
    
    
    1,086
    
    
    
    (1,811
    )Proceeds from sale of assets
    
    
    66
    
    
    
    Decrease in restricted cash
    
    
    163
    
    
    
    37Increase in escrows
    
    
    (1,379
    )
    
    
    (1,857
    )Net cash used in investing activities
    
    
    (38,115
    )
    
    
    (68,726
    )Financing activities:Principal payments on long-term debt
    
    
    (3,112
    )
    
    
    (758
    )Proceeds from issuance of long-term debt
    
    
    50,073
    
    
    
    72,957Payment of loan costs
    
    
    (8,377
    )
    
    
    (2,314
    )Net cash provided by financing activities
    
    
    38,584
    
    
    
    69,885Net increase in cash and cash equivalents
    
    
    8,804
    
    
    
    16,090Cash and cash equivalents, beginning of period
    
    
    14,231
    
    
    
    18,597Cash and cash equivalents, end of period
    
    $
    23,035
    
    
    $
    34,687Supplemental
Cash Flow Information:Cash paid for interest, net of capitalized interest
    
    $
    14,599
    
    
    $
    13,602Cash paid for income taxes
    
    $
    36
    
    
    $
    155Non-cash items:Construction in process accruals
    
    $
    319
    
    
    $
    17,884
  5




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##### 



GREAT WOLF RESORTS, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; dollars in thousands, except share and per share amounts)
 1. ORGANIZATION
 ®
 Business Summary
 ® TM
   Number
    
    NumberOf
    
    Of
    
    IndoorOwnership
    
    Opened/
    
    Guest
    
    Condo
    
    EntertainmentPercentage
    
    Opening
    
    Suites
    
    Units (1)
    
    Area (2)(Approx. ft2)Wisconsin Dells, WI (3)
    
    
    30.26
    %
    
    
    1997
    
    
    
    308
    
    
    
    77
    
    
    
    102,000Sandusky, OH (3)
    
    
    30.26
    %
    
    
    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
    
    
    
    
    
    
    
    74,000Concord, NC
    
    
    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, 6




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##### 



family tech center, MagiQuest® (an
interactive game attraction) and fitness room, as well as our spa in the
resorts that have such amenities.(3)
    
    These properties are owned by a joint venture. CNL Lifestyle Properties, Inc.
(CNL), a real estate investment trust focused on leisure and lifestyle
properties, owns a 69.74% interest in the joint venture, and we own a 30.26%
interest. We operate the properties and license the Great Wolf Lodge brand to
the joint ventures properties under long-term agreements through October 2020,
subject to earlier termination in certain situations. In April 2009, we signed
an agreement to sell our 30.26% joint venture interest to CNL. The sale is
contingent upon, among other things, receiving consent from the lender in the
joint ventures two properties. We expect to close the sale
during the third quarter of 2009.(4)
    
    An affiliate of Ripley Entertainment, Inc. (Ripley), our licensee, owns this
resort. We have granted Ripley a license to use the Great Wolf Lodge name for
this resort through April 2016. We managed 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) owns a 51% interest in the joint venture, and
we own a 49% interest. We operate the property and license the Great Wolf Lodge
brand to the property under long-term agreements through April 2057, subject to
earlier termination in certain situations. The joint venture leases the land
for the resort from the United States Department of Interior, which is trustee
for Chehalis. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 General
   Principles of Consolidation
 7




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##### 



Investments In and Advances to Unconsolidated Affiliates
 Income Taxes
 Fair Value of Financial Instruments
 Comprehensive Income
 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.
  Resort
    
    
    Resort
    
    
    
    
    
    
    Totals perOwnership/
    
    
    Third-Party
    
    
    
    
    
    
    FinancialOperation
    
    
    Management
    
    
    Other
    
    
    StatementsThree months ended June 30,
2009Revenues
    
    $
    61,775
    
    
    $
    6,850
    
    
    $
    
    
    
    $
    68,625Depreciation and amortization
    
    
    (14,474
    )
    
    
    
    
    
    
    (156
    )
    
    
    (14,630
    )Operating income (loss)
    
    
    (777
    )
    
    
    1,612
    
    
    
    (1,416
    )
    
    
    (581
    )Investment income  affiliates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (336
    )Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (148
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,777Loss before income taxes and
equity in losses of
unconsolidated affiliates
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (8,874
    )Additions to long-lived assets
    
    
    16,064
    
    
    
    
    
    
    
    104
    
    
    $
    16,168
 Resort
    
    
    Resort
    
    
    
    
    
    
    Totals perOwnership/
    
    
    Third-Party
    
    
    
    
    
    
    FinancialOperation
    
    
    Management
    
    
    Other
    
    
    StatementsSix months ended June 30, 2009Revenues
    
    $
    116,987
    
    
    $
    13,945
    
    
    $
    
    
    
    $
    130,932Depreciation and amortization
    
    
    (26,845
    )
    
    
    
    
    
    
    (371
    )
    
    
    (27,216
    )Operating income (loss)
    
    
    (3,659
    )
    
    
    3,425
    
    
    
    (2,797
    )
    
    
    (3,031
    )
 8




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##### 



Resort
    
    
    Resort
    
    
    
    
    
    
    Totals perOwnership/
    
    
    Third-Party
    
    
    
    
    
    
    FinancialOperation
    
    
    Management
    
    
    Other
    
    
    StatementsInvestment income  affiliates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (720
    )Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (336
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,044Loss before income taxes and
equity in losses of
unconsolidated affiliates
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (17,019
    )Additions to long-lived assets
    
    
    45,619
    
    
    
    
    
    
    
    227
    
    
    $
    45,846Total assets
    
    
    754,162
    
    
    
    2,459
    
    
    
    106,445
    
    
    $
    863,066
 Resort
    
    
    Resort
    
    
    
    
    
    
    Totals perOwnership/
    
    
    Third-Party
    
    
    
    
    
    
    FinancialOperation
    
    
    Management
    
    
    Other
    
    
    StatementsThree months ended June 30,
2008Revenues
    
    $
    55,286
    
    
    $
    7,732
    
    
    $
    
    
    
    $
    63,018Depreciation and amortization
    
    
    (11,531
    )
    
    
    
    
    
    
    (210
    )
    
    
    (11,741
    )Operating income (loss)
    
    
    1,571
    
    
    
    2,164
    
    
    
    (3,684
    )
    
    
    51Investment income  affiliates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (553
    )Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (409
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,884Loss before income taxes and
equity in losses of
unconsolidated affiliates
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (5,871
    )Additions to long-lived assets
    
    
    35,184
    
    
    
    
    
    
    
    228
    
    
    $
    35,412
 Resort
    
    
    Resort
    
    
    
    
    
    
    Totals perOwnership/
    
    
    Third-Party
    
    
    
    
    
    
    FinancialOperation
    
    
    Management
    
    
    Other
    
    
    StatementsSix months ended June 30, 2008Revenues
    
    $
    114,150
    
    
    $
    13,076
    
    
    $
    
    
    
    $
    127,226Depreciation and amortization
    
    
    (22,376
    )
    
    
    
    
    
    
    (384
    )
    
    
    (22,760
    )Operating income (loss)
    
    
    4,561
    
    
    
    4,024
    
    
    
    (4,472
    )
    
    
    4,113Investment income  affiliates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,004
    )Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (899
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,791Loss before income taxes and
equity in losses of
unconsolidated affiliates
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (7,775
    )Additions to long-lived assets
    
    
    54,734
    
    
    
    
    
    
    
    538
    
    
    $
    55,272Total assets
    
    
    709,853
    
    
    
    5,326
    
    
    
    140,800
    
    
    $
    855,979
  Recent Accounting Pronouncements 
 9




---



##### 



10




---



##### 



3. INVESTMENT IN AFFILIATES
 CNL Joint Venture
  June 30,
    
    December 31,2009
    
    2008Balance sheet data:Total assets
    
    $
    101,940
    
    
    $
    104,712Total liabilities
    
    $
    70,919
    
    
    $
    69,612
 For the three months ended
    
    For the six months endedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Operating data:Revenue
    
    $
    7,041
    
    
    $
    7,006
    
    
    $
    14,650
    
    
    $
    16,368Operating expenses
    
    $
    (9,592
    )
    
    $
    (10,307
    )
    
    $
    (19,830
    )
    
    $
    (21,185
    )Net loss
    
    $
    (2,551
    )
    
    $
    (3,301
    )
    
    $
    (5,180
    )
    
    $
    (4,817
    )
   11




---



##### 



Grand Mound Joint Venture
  June 30,
    
    December 31,2009
    
    2008Balance sheet data:Total assets
    
    $
    150,043
    
    
    $
    152,215Total liabilities
    
    $
    116,651
    
    
    $
    118,636
 For the three months ended
    
    For the six months endedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Operating data:Revenue
    
    $
    10,156
    
    
    $
    11,383
    
    
    $
    20,133
    
    
    $
    13,291Operating expenses
    
    $
    (8,718
    )
    
    $
    (9,610
    )
    
    $
    (17,302
    )
    
    $
    (14,282
    )Net loss
    
    $
    (22
    )
    
    $
    (15
    )
    
    $
    (186
    )
    
    $
    (3,634
    )
  4. SHARE-BASED COMPENSATION
     Stock Options
   12




---



##### 



WeightedAverageExercise
    
    
    Weighted Average RemainingShares
    
    
    Price
    
    
    Contractual LifeNumber of shares under option:Outstanding at beginning of period
    
    
    475,000
    
    
    $
    17.59Granted
    
    
    Exercised
    
    
    Forfeited
    
    
    (9,000
    )
    
    $
    17.00Outstanding at end of period
    
    
    466,000
    
    
    $
    17.60
    
    
    5.59 yearsExercisable at end of period
    
    
    461,000
    
    
    $
    17.65
    
    
    5.50 years
  Market Condition Share Awards
    
    
    541,863 were based on our common stocks performance in 2009 relative to a stock
index, as designated by the Compensation Committee of the Board of Directors. These
shares vest ratably over a three-year period, 2009-2011. The per share fair value
of these market condition shares was $1.26 as of the grant date.The fair value of these market condition shares was determined using a Monte Carlo
simulation and the following assumptions:
 Dividend yield
    
    
    Weighted average, risk free interest rate
    
    
    0.62
    %Expected stock price volatility
    
    
    96.51
    %Expected
stock price volatility (small-cap stock index)
    
    
    37.89
    %
 We used an expected dividend yield of 0% as we do not currently pay a dividend and do
not contemplate paying a dividend in the foreseeable future. The weighted average,
risk free interest rate was based on the one-year T-bill rate. Our expected stock
price volatility was estimated using daily returns data of our stock for a two-year
period ending on the grant date. The expected stock price volatility for the small cap
stock index was estimated using daily returns data for a two-year period ending on the
grant date.
  13




---



##### 




    
    84,748 were 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 as of the grant date.The fair value of these market condition shares was determined using a Monte Carlo
simulation and the following assumptions:
 Dividend yield
    
    
    Weighted average, risk free interest rate
    
    
    2.05
    %Expected stock price volatility
    
    
    34.98
    %Expected stock price volatility (small-cap stock index)
    
    
    20.08
    %
 We used an expected dividend yield of 0% as we did not pay a dividend and did not
contemplate paying a dividend in the foreseeable future. The weighted average, risk
free interest rate was based on the one-year T-bill rate. Our expected stock price
volatility was estimated using daily returns data of our stock for a two-year period
ending on the grant date. The expected stock price volatility for the small cap stock
index was estimated using daily returns data for a two-year period ending on the grant
date. Due to resignation of a senior officer in May 2008, 55,046 shares were forfeited.The market condition for these shares was not met and therefore no shares related to
this grant were issued.
  
    
    81,293 were based on our common stocks absolute performance during the
three-year period 2007-2009. For shares that are earned, half of the 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.The fair value of these market condition shares was determined using a Monte Carlo
simulation and the following assumptions:
 Dividend yield
    
    
    Weighted average, risk free interest rate
    
    
    4.73
    %Expected stock price volatility
    
    
    42.13
    %
 We used an expected dividend yield of 0% as we do not currently pay a dividend and do
not contemplate paying a dividend in the foreseeable future. The weighted average,
risk free interest rate was based on the four-year T-bill rate. Our expected stock
price volatility was estimated using daily returns data of our stock for a two-year
period ending on the grant date. Due to the resignation of two senior officers in
2008, 58,628 shares were forfeited.
    
    81,293 were based on our common stocks performance in 2007-2010 relative to a
stock index, as designated by the Compensation Committee of the Board of Directors.
For shares that are earned, half of the shares vest on December 31, 2009, and the
other half vest on December 31, 2010. The per share fair value of these market
condition shares was $8.24.The fair value of these market condition shares was determined using a Monte Carlo
simulation and the following assumptions:
 Dividend yield
    
    
    Weighted average, risk free interest rate
    
    
    4.73
    %
 14




---



##### 



Expected stock price volatility
    
    
    42.13
    %Expected stock price volatility (small-cap
stock index)
    
    
    16.64
    %
 We used an expected dividend yield of 0% as we did not pay a dividend and did not
contemplate paying a dividend in the foreseeable future. The weighted average, risk
free interest rate was based on the four-year T-bill rate. Our expected stock price
volatility was estimated using daily returns data of our stock for a two-year period
ending on the grant date. The expected stock price volatility for the small cap stock
index was estimated using daily returns data for a two-year period ending on the grant
date. Due to the resignation of two senior officers in 2008, 58,628 shares were
forfeited.
 Performance Share Awards
   Deferred Compensation Awards
   Non-vested Shares
  15




---



##### 



Weighted AverageGrant Date FairShares
    
    
    ValueNon-vested shares balance at beginning of period
    
    
    300,249
    
    
    $
    9.29Granted
    
    
    331,179
    
    
    $
    2.88Forfeited
    
    
    (27,367
    )
    
    $
    7.25Vested
    
    
    (78,523
    )
    
    $
    9.62Non-vested shares balance at end of period
    
    
    525,538
    
    
    $
    5.31
   Vested Shares
  
    
    We issued 17,532 shares in February 2009 related to 2008 bonus amounts. We
valued these shares at $32 based on the closing market value of our common stock on
the date of the grant.
    
    We issued 265,908 shares in February 2008 related to 2007 bonus amounts. These
shares were valued at $2,055 based on the closing market value of our common stock
on the date of grant.
  5. PROPERTY AND EQUIPMENT
  June 30,
    
    
    December 31,2009
    
    
    2008Land and improvements
    
    $
    60,718
    
    
    $
    51,684Building and improvements
    
    
    445,626
    
    
    
    353,537Furniture, fixtures and equipment
    
    
    361,641
    
    
    
    315,577Construction in process
    
    
    480
    
    
    
    117,063
 16




---



##### 



June 30,
    
    
    December 31,2009
    
    
    2008868,465
    
    
    
    837,861Less accumulated depreciation
    
    
    (145,526
    )
    
    
    (121,688
    )Property and equipment, net
    
    $
    722,939
    
    
    $
    716,173
  6. LONG-TERM DEBT
  June 30,
    
    
    December 31,2009
    
    
    2008Long-Term Debt:Traverse City/Kansas City mortgage loan
    
    $
    69,498
    
    
    $
    70,211Mason mortgage loan
    
    
    75,800
    
    
    
    76,800Pocono Mountains mortgage loan
    
    
    96,015
    
    
    
    96,571Williamsburg mortgage loan
    
    
    63,875
    
    
    
    64,625Grapevine mortgage loan
    
    
    78,709
    
    
    
    78,709Concord construction loan
    
    
    77,571
    
    
    
    27,594Junior subordinated debentures
    
    
    80,545
    
    
    
    80,545Other Debt:City of Sheboygan bonds
    
    
    8,510
    
    
    
    8,493City of Sheboygan loan
    
    
    3,396
    
    
    
    3,503Other
    
    
    93
    
    
    
    554,012
    
    
    
    507,051Less current portion of long-term debt
    
    
    (81,964
    )
    
    
    (81,464
    )Total long-term debt
    
    $
    472,048
    
    
    $
    425,587
 Traverse City/Kansas City Mortgage Loan
 Mason Mortgage Loan
 Pocono Mountains Mortgage Loan 
 17




---



##### 



Williamsburg Mortgage Loan 
  Grapevine Mortgage Loan
  Concord Construction Loan
 Junior Subordinated Debentures
  18




---



##### 



City of Sheboygan Bonds
 City of Sheboygan Loan
 Future Maturities
 ThroughJune 30,2010
    
    $
    81,9642011
    
    
    8,8942012
    
    
    214,3632013
    
    
    3,5382014
    
    
    3,818Thereafter
    
    
    241,435Total
    
    $
    554,012
 19




---



##### 



7. COMPREHENSIVE INCOME
  8. EARNINGS PER SHARE
     Three months ended
    
    Six months endedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Net loss
    
    $
    (5,706
    )
    
    $
    (4,090
    )
    
    $
    (11,351
    )
    
    $
    (6,417
    )Weighted average common shares outstanding  basic
    
    
    31,263,487
    
    
    
    30,875,615
    
    
    
    31,123,072
    
    
    
    30,770,388Weighted average common shares outstanding  diluted
    
    
    31,263,487
    
    
    
    30,875,615
    
    
    
    31,123,072
    
    
    
    30,770,388Net loss per share  basic
    
    $
    (0.18
    )
    
    $
    (0.13
    )
    
    $
    (0.36
    )
    
    $
    (0.21
    )Net loss per share  diluted
    
    $
    (0.18
    )
    
    $
    (0.13
    )
    
    $
    (0.36
    )
    
    $
    (0.21
    )
 9. SUBSEQUENT EVENTS
  
    
    The maturity date of each loan is extended to July 1, 2011.
    
    Required principal paydowns on the Mason loan are set at $1,000 each quarter in 2009,
and $2,000 each quarter in 2010 and 2011.
    
    Required principal paydowns on the Grapevine loan are set at $800 each quarter in 2009,
2010 and 2011.
    
    We have provided the Mason mortgage loan lenders with a $30,000 corporate guaranty and
cross-collateralization on our Grapevine resort. The corporate guaranty and
cross-collateralization on the Grapevine property will
remain in place until we make a $30,000 principal reduction of the Mason loan (in addition to
the quarterly
 20




---



##### 



required principal payments, as described above) over the remaining term of the
loan. Should there be certain liquidity-producing events, including the sale of an equity
interest in any of our majority-owned resorts or the refinance of a mortgage loan on an
existing property, we will be required to use 50 percent of the net proceeds toward the
$30,000 mandatory principal reduction.
 
    
    Payment quarterly of a variable fee of 0.25% of the principal balance outstanding on the
Mason mortgage.
    
    The interest rate on the Grapevine loan is adjusted to a floating rate of LIBOR plus a
spread of 400 basis points, with a minimum rate of 7.00% per annum.
    
    The interest rate on the Mason loan is maintained at a floating rate of LIBOR plus a
spread of 425 basis points, with a minimum rate of 6.50% per annum.
 
 ITEM 2.
    
    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. 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 1 of our Annual Report on Form
10-K entitled, Forward-Looking Statements. All dollar amounts in this discussion, except for per
share data and operating statistics, are in thousands.
 Overview
  Business.
   21




---



##### 



IndoorOwnership
    
    Opened/
    
    Number of
    
    Number of
    
    EntertainmentPercentage
    
    Opening
    
    Guest Suites
    
    Condo Units (1)
    
    Area (2)(Approx. ft2)Wisconsin Dells, WI (3)
    
    
    30.26
    %
    
    
    1997
    
    
    
    308
    
    
    
    77
    
    
    
    102,000Sandusky, OH (3)
    
    
    30.26
    %
    
    
    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
    
    
    
    
    
    
    
    74,000Concord, 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 69.74% interest in the joint venture, and we own a 30.26%
interest. We operate the properties and license the Great Wolf Lodge brand to
the joint ventures properties under long-term agreements through October 2020,
subject to earlier termination in certain situations. In April 2009, we signed
an agreement to sell our 30.26% joint venture interest to CNL. The sale is
contingent upon receiving, among other things, consent from the lender in the
joint ventures two properties. We expect to close the sale
during the third quarter of 2009.(4)
    
    An affiliate of Ripley Entertainment, Inc. (Ripley), our licensee, owns this
resort. We have granted Ripley a license to use the Great Wolf Lodge name for
this resort through April 2016. We managed 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) owns a 51% interest in the joint venture, and
we own a 49% interest. We operate the property and license the Great Wolf Lodge
brand to the property under long-term agreements through April 2057, subject to
earlier termination in certain situations. The joint venture leases the land
for the resort from the United States Department of the Interior, which is
trustee for Chehalis. Industry Trends.
 22




---



##### 



Outlook.
    23




---



##### 




    
    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 few 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.
    
    Our Wisconsin Dells property has been significantly impacted by the abundance of
competing indoor waterpark resorts in that market. The Wisconsin Dells market has
approximately 16 indoor waterpark resorts that compete with us. We believe this large number
of competing properties in a relatively small tourist destination location has and will
likely continue to have an impact on the operating performance of our Wisconsin Dells
resort.
    
    We have experienced much lower-than-expected occupancy and lower-than-expected average
daily room rates at our Sheboygan, Wisconsin property since its opening in 2004. We believe
this operating weakness 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 has experienced
lower-than-expected occupancy and lower-than-expected average daily room rates. We believe
this is due, in part, to the opening of competitive properties in the region.
   24




---



##### 



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 daily to evaluate the effectiveness of offered discounts;
and
    
    Offering specials on standard suites and yielding better rates on larger suites when
standard suites sell out.
   
    
    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.
    
    RevPAR is the product of occupancy and ADR.
  25




---



##### 




    
    Total RevPAR is calculated by dividing total revenue by total available rooms.
    
    Total Rev POR is calculated by dividing total revenue by total occupied rooms.
    Critical Accounting Policies and Estimates
   Recent Accounting Pronouncements
  26




---



##### 



27




---



##### 



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.
 28




---



##### 




    
    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.
   Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net loss
    
    $
    (5,706
    )
    
    $
    (4,090
    )
    
    $
    (11,351
    )
    
    $
    (6,417
    )Adjustments:Interest
expense, net of interest income
    
    
    8,629
    
    
    
    6,475
    
    
    
    14,708
    
    
    
    12,892Income tax benefit
    
    
    (3,966
    )
    
    
    (2,410
    )
    
    
    (7,523
    )
    
    
    (4,115
    )Depreciation and amortization
    
    
    14,630
    
    
    
    11,741
    
    
    
    27,216
    
    
    
    22,760EBITDA
    
    $
    13,587
    
    
    $
    11,716
    
    
    $
    23,050
    
    
    $
    25,120
 Results of Operations
 General
  
    
    our subsidiary entity that provides resort development and management/licensing services;
    
    our Traverse City, Kansas City, Sheboygan, Williamsburg, Pocono Mountains, Mason,
Grapevine and Concord operating resorts; and
    
    our equity interests in three resorts in which we have ownership interests but which we
do not 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
 29




---



##### 




    
    other revenue from managed properties. We employ the staff at our managed properties.
Under our management agreements, the resort owners reimburse us for payroll, benefits and
certain other costs related to the operations of the managed properties. Emerging Issues
Task Force, or EITF, Issue No. 01-14, Income Statement Characteristics of Reimbursements
for Out-of-Pocket Expenses (EITF 01-14), 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 revenue 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, 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.
 Three months ended June 30, 2009, compared with the three months ended June 30, 2008
  All Properties (a)Three months
    
    Three monthsended
    
    ended
    
    DecreaseJune 30, 2009
    
    June 30, 2008
    
    $
    
    %Occupancy
    
    
    61.5
    %
    
    
    67.2
    %
    
    
    N/A
    
    
    
    (8.5
    )%ADR
    
    $
    231.29
    
    
    $
    235.31
    
    
    $
    (4.02
    )
    
    
    (1.7
    )%RevPAR
    
    $
    142.36
    
    
    $
    158.09
    
    
    $
    (15.73
    )
    
    
    (10.0
    )%Total RevPOR
    
    $
    360.23
    
    
    $
    366.41
    
    
    $
    (6.18
    )
    
    
    (1.7
    )%Total RevPAR
    
    $
    221.72
    
    
    $
    246.17
    
    
    $
    (24.45
    )
    
    
    (9.9
    )%
 
 (a)
    
    Includes results for properties that were open for any portion of the period, for all owned
and/or managed resorts. 30




---



##### 



Same Store Comparison (b)Three months
    
    Three monthsended
    
    ended
    
    DecreaseJune 30, 2009
    
    June 30, 2008
    
    $
    
    %Occupancy
    
    
    61.7
    %
    
    
    66
    .2%
    
    
    N/A
    
    
    
    (6.8
    )%ADR
    
    $
    226.99
    
    
    $
    230.
    89
    
    $
    (3.90
    )
    
    
    (1.7
    )%RevPAR
    
    $
    139.95
    
    
    $
    152.
    93
    
    $
    (12.98
    )
    
    
    (8.5
    )%Total RevPOR
    
    $
    353.08
    
    
    $
    358.
    89
    
    $
    (5.81
    )
    
    
    (1.6
    )%Total RevPAR
    
    $
    217.69
    
    
    $
    237.
    71
    
    $
    (20.02
    )
    
    
    (8.4
    )%
 
 (b)
    
    Same store comparison includes properties that were open for the full periods and with
comparable number of rooms in 2009 and 2008 (that is, our Wisconsin Dells, Sandusky, Traverse
City, Kansas City, Sheboygan, Williamsburg, Poconos, Niagara Falls, Mason and Grand Mound
resorts).   Three months endedJune 30,Increase/2009
    
    2008
    
    (Decrease)Revenues
    
    $
    68,625
    
    
    $
    63,018
    
    
    $
    5,607Operating expenses:Departmental operating expenses
    
    
    23,237
    
    
    
    20,879
    
    
    
    2,358Selling, general and administrative
    
    
    16,987
    
    
    
    16,694
    
    
    
    293Property operating costs
    
    
    9,114
    
    
    
    8,085
    
    
    
    1,029Depreciation and amortization
    
    
    14,630
    
    
    
    11,741
    
    
    
    2,889Net operating (loss) income
    
    
    (581
    )
    
    
    51
    
    
    
    (632
    )Interest expense, net of interest income
    
    
    8,629
    
    
    
    6,475
    
    
    
    2,154Income tax benefit
    
    
    (3,635
    )
    
    
    (2,232
    )
    
    
    (1,403
    )Net loss
    
    
    (5,706
    )
    
    
    (4,090
    )
    
    
    (1,616
    )
 Revenues.
 
    
    A shift of the Easter holiday from the first quarter in 2008 to the second quarter in
2009, resulting in a shifting of much of the holiday and school spring break-related
travel from the first quarter in 2008 to the second quarter in 2009;
    
    An increase in revenue from our Grapevine resort, due to the
completion of its
expansion in early 2009;
    
    An increase in revenue from our Concord resort, which opened in March 2009.
  Operating expenses.
 
    
    Departmental expenses increased by $2,358 for the three months ended June 30, 2009, as
compared to the three months ended June 30, 2008, due primarily to the opening of our
Concord resort.
    
    Total selling, general and administrative expenses increased by $293 in three months
ended June 30, 2009, as compared to the three months ended June 30, 2008, due primarily to
the opening of our Concord resort. This increase was partially offset by a decrease in
corporate selling, general and administrative expense due primarily to a decrease in labor
costs. Separation costs for former officers of $1,258 were recorded in the three months
ended June 30, 2008; there were no similar costs in the three months ended June 30, 2009.
 31




---



##### 




    
    Opening-related costs (included in total property operating costs) related to our
resorts were $1,339 for the three months ended June 30, 2009, as compared to $368 for the
three months ended June 30, 2008, due primarily to the opening of our Concord resort in
March 2009.
    
    Total depreciation and amortization increased for the three months ended June 30, 2009,
as compared to the three months ended June 30, 2008, primarily due to the expansion of our
Grapevine resort as well as the opening of our Concord resort.
 Net operating income (loss).
 Net loss.
 
    
    An increase in net operating loss of $632 for the three months ended June 30, 2009,
as compared to the three months ended June 30, 2008, and
    
    An increase in net interest expense of $2,154, mainly due to interest expense on our
Concord loan.
  Six months ended June 30, 2009, compared with the six months ended June 30, 2008
  All Properties (a)Six months ended
    
    Six months ended
    
    Increase (Decrease)June 30, 2009
    
    June 30, 2008
    
    $
    
    %Occupancy
    
    
    60.4
    %
    
    
    65.6
    %
    
    
    N/A
    
    
    
    (7.9
    )%ADR
    
    $
    240.92
    
    
    $
    251.03
    
    
    $
    (10.11
    )
    
    
    (4.0
    )%RevPAR
    
    $
    145.55
    
    
    $
    164.72
    
    
    $
    (19.17
    )
    
    
    (11.6
    )%Total RevPOR
    
    $
    373.58
    
    
    $
    387.76
    
    
    $
    (14.18
    )
    
    
    (3.7
    )%Total RevPAR
    
    $
    225.70
    
    
    $
    254.44
    
    
    $
    (28.74
    )
    
    
    (11.3
    )%
 
 (a)
    
    Includes results for properties that were open for any portion of the period, for all owned
and/or managed resorts. Same Store Comparison (b)Six months ended
    
    Six months ended
    
    Increase (Decrease)June 30, 2009
    
    June 30, 2008
    
    $
    
    %Occupancy
    
    
    60.3
    %
    
    
    64.4
    %
    
    
    N/A
    
    
    
    (6.4
    )%ADR
    
    $
    234.39
    
    
    $
    247.03
    
    
    $
    (12.64
    )
    
    
    (5.1
    )%RevPAR
    
    $
    141.32
    
    
    $
    159.00
    
    
    $
    (17.68
    )
    
    
    (11.1
    )%Total RevPOR
    
    $
    359.52
    
    
    $
    376.78
    
    
    $
    (17.26
    )
    
    
    (4.6
    )%Total RevPAR
    
    $
    216.77
    
    
    $
    242.52
    
    
    $
    (25.75
    )
    
    
    (10.6
    )%
 32




---



##### 



(b)
    
    Same store comparison includes properties that were open for the full periods and with
comparable number of rooms in 2009 and 2008 (that is, our Wisconsin Dells, Sandusky, Traverse
City, Kansas City, Sheboygan, Williamsburg, Poconos, Niagara Falls and Mason resorts).   Six months endedJune 30,2009
    
    2008
    

Increase/ (Decrease)Revenues
    
    $
    130,932
    
    
    $
    127,226
    
    
    $
    3,706Operating expenses:Departmental operating expenses
    
    
    42,949
    
    
    
    41,296
    
    
    
    1,653Selling, general and administrative
    
    
    31,631
    
    
    
    30,092
    
    
    
    1,539Property operating costs
    
    
    21,456
    
    
    
    19,914
    
    
    
    1,542Depreciation and amortization
    
    
    27,216
    
    
    
    22,760
    
    
    
    4,456Net operating (loss) income
    
    
    (3,031
    )
    
    
    4,113
    
    
    
    (7,144
    )Interest expense, net of interest income
    
    
    14,708
    
    
    
    12,892
    
    
    
    1,816Income tax benefit
    
    
    (6,783
    )
    
    
    (3,037
    )
    
    
    (3,746
    )Equity in losses of unconsolidated
affiliates, net of tax
    
    
    1,115
    
    
    
    1,679
    
    
    
    (564
    )Net loss
    
    
    (11,351
    )
    
    
    (6,417
    )
    
    
    (4,934
    )
 Revenues.
  Operating expenses.
 
    
    Departmental expenses increased by $1,653 for the six months ended June 30, 2009, as
compared to the six months ended June 30, 2008, due primarily to the opening of our Concord
resort.
    
    Total selling, general and administrative expenses increased by $1,539 in six months
ended June 30, 2009, as compared to the six months ended June 30, 2008, due primarily to the
opening of our Concord resort and the expansion of our Grapevine resort. This increase was
partially offset by a decrease in corporate selling, general and administrative expense
related to labor costs. Separation costs for former officers of $1,258 were recorded in the
six months ended June 30, 2008; there were no similar costs in the six months ended June 30,
2009.
    
    Opening-related costs (included in total property operating costs) related to our
resorts were $5,583 for the six months ended June 30, 2009, as compared to $3,948 for the
six months ended June 30, 2008, due primarily to the expansion of our Grapevine resort in
early 2009 and the opening of our Concord resort in March 2009.
 33




---



##### 




    
    Total depreciation and amortization increased for the six months ended June 30, 2009, as
compared to the six months ended June 30, 2008, primarily due to the expansion of our
Grapevine resort, as well as the opening of our Concord resort.
 Net operating income (loss).
 Net loss.
 
    
    The decrease in operating income from $4,113 for the six months ended June 30, 2008
to an operating loss of $(3,031) for the six months ended June 30, 2009; and
    
    An increase in net interest expense of $1,816 mainly due to interest expense on our
Concord loan;
  
    
    An increase of $3,746 in income tax benefit recorded in the six months ended June 30,
2009, as compared to the six months ended June 30, 2008; and
    
    A decrease in equity in losses of unconsolidated affiliates, net of tax, due to our
resort in Grand Mound, which opened in March 2008. During the six months ended June 30,
2008, the loss included opening-related costs. There were no similar opening-related
costs in the six months ended June 30, 2009.
 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.
  Three months ended
    
    Six months endedJune 30,
    
    June 30,Increase /
    
    
    
    
    
    
    
    
    
    Increase /2009
    
    2008
    
    (Decrease)
    
    2009
    
    2008
    
    (Decrease)Resort Ownership/OperationRevenues
    
    $
    61,775
    
    
    $
    55,286
    
    
    $
    6,489
    
    
    $
    116,987
    
    
    $
    114,150
    
    
    $
    2,837EBITDA, excluding certain items
    
    
    13,697
    
    
    
    13,102
    
    
    
    595
    
    
    
    23,185
    
    
    
    26,936
    
    
    
    (3,751
    )Resort Third-Party MgmtRevenues
    
    
    6,850
    
    
    
    7,732
    
    
    
    (882
    )
    
    
    13,945
    
    
    
    13,076
    
    
    
    869EBITDA, excluding certain items
    
    
    1,612
    
    
    
    2,164
    
    
    
    (552
    )
    
    
    3,425
    
    
    
    4,024
    
    
    
    (599
    )OtherRevenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    EBITDA, excluding certain items
    
    
    (1,260
    )
    
    
    (3,474
    )
    
    
    2,214
    
    
    
    (2,426
    )
    
    
    (4,087
    )
    
    
    1,661
 34




---



##### 



Liquidity and Capital Resources
  June 30,
    
    
    December 31,2009
    
    
    2008Long-Term Debt:Traverse City/Kansas City mortgage loan
    
    $
    69,498
    
    
    $
    70,211Mason mortgage loan
    
    
    75,800
    
    
    
    76,800Pocono Mountains mortgage loan
    
    
    96,015
    
    
    
    96,571Williamsburg mortgage loan
    
    
    63,875
    
    
    
    64,625Grapevine mortgage loan
    
    
    78,709
    
    
    
    78,709Concord construction loan
    
    
    77,571
    
    
    
    27,594Junior subordinated debentures
    
    
    80,545
    
    
    
    80,545Other Debt:City of Sheboygan bonds
    
    
    8,510
    
    
    
    8,493City of Sheboygan loan
    
    
    3,396
    
    
    
    3,503Other
    
    
    93
    
    
    
    554,012
    
    
    
    507,051Less current portion of long-term debt
    
    
    (81,964
    )
    
    
    (81,464
    )Total long-term debt
    
    $
    472,048
    
    
    $
    425,587
 Traverse City/Kansas City Mortgage Loan
 Mason Mortgage Loan
 Pocono Mountains Mortgage Loan 
 Williamsburg Mortgage Loan 
 35




---



##### 



Grapevine Mortgage Loan
  Concord Construction Loan
 Junior Subordinated Debentures
   36




---



##### 



City of Sheboygan Bonds
 City of Sheboygan Loan
 Future Maturities
 ThroughJune 30,2010
    
    $
    81,9642011
    
    
    8,8942012
    
    
    214,3632013
    
    
    3,5382014
    
    
    3,818Thereafter
    
    
    241,435Total
    
    $
    554,012
 :
 
    
    The maturity date of each loan is extended to July 1, 2011.
 
    
    Required principal paydowns on the Mason loan are set at $1,000 each quarter in 2009,
and $2,000 each quarter in 2010 and 2011.
 
    
    Required principal paydowns on the Grapevine loan are set at $800 each quarter in 2009,
2010 and 2011.
 
    
    We have provided the Mason mortgage loan lenders with a $30,000 corporate guaranty and
cross-collateralization on our Grapevine resort. The corporate guaranty and
cross-collateralization on the Grapevine property will remain in place until we make a
$30,000 principal reduction of the Mason loan (in addition to the quarterly required
principal payments, as described above) over the remaining term of the loan. Should there
be certain liquidity-producing events, including the sale of an equity interest in any of
our majority-owned resorts or the refinance of a mortgage loan on an existing property, we
will be required to use 50 percent of the net proceeds toward the $30,000 mandatory
principal reduction.
 
    
    Payment quarterly of a variable fee of 0.25% of the principal balance outstanding on the
Mason mortgage.
 
    
    The interest rate on the Grapevine loan is adjusted to a floating rate of LIBOR plus a
spread of 400 basis points, with a minimum rate of 7.00% per annum.
 
    
    The interest rate on the Mason loan is maintained at a floating rate of LIBOR plus a
spread of 425 basis points, with a minimum rate of 6.50% per annum.
 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;
 37




---



##### 




    
    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.
  
    
    Existing working capital,
    
    Cash provided by operations,
    
    Proceeds from investing activities, including sales of partial or whole ownership
interests in certain of our resorts; and
    
    Proceeds from financing activities, including mortgage financing on properties
being developed, additional or replacement borrowings under future credit
facilities, contributions from joint venture partners, and the issuance of equity
instruments, including common stock, or additional or replacement debt, as market
conditions permit.
   38




---



##### 



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 in the CNL joint venture with a 30.26% ownership interest. At June 30, 2009, the
joint venture had aggregate outstanding indebtedness to third parties of $62,835. This
loan is a mortgage loan that is non-recourse to us.
    
    Our joint venture with The Confederated Tribes of the Chehalis Reservation owns the
Great Wolf Lodge resort and conference center on a 39-acre land parcel in Grand Mound,
Washington. This resort opened in March 2008. This joint venture is a limited liability
company. We are a member of that limited liability company with a 49% ownership interest.
At June 30, 2009, the joint venture had aggregate outstanding indebtedness to third parties
of $102,000. As of June 30, 2009, we have made combined loan and equity contributions, net
of loan repayments, of $30,827 to the joint venture to fund a portion of construction costs
of the resort. In January 2009, the other member of the joint venture purchased $5,991 of
our loan at par.
   39




---



##### 



Contractual Obligations
  Payment TermsMoreLess Than
    
    
    
    
    
    
    
    
    
    
    ThanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsDebt obligations (1)
    
    $
    622,623
    
    
    $
    92,753
    
    
    $
    244,316
    
    
    $
    27,580
    
    
    $
    257,974Operating lease obligations
    
    
    950
    
    
    
    467
    
    
    
    364
    
    
    
    75
    
    
    
    44Construction contracts
    
    
    68
    
    
    
    68
    
    
    
    
    
    
    
    
    
    
    
    Reserve on unrecognized tax benefits
    
    
    1,268
    
    
    
    
    
    
    
    
    
    
    
    1,268
    
    
    
    Total
    
    $
    624,909
    
    
    $
    93,288
    
    
    $
    244,680
    
    
    $
    28,923
    
    
    $
    258,018
 
 (1)
    
    Amounts include interest (for fixed rate debt) and principal. They also include $8,510 of fixed rate debt
recognized as a liability related to certain bonds issued by the City of Sheboygan and $3,396 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 of our properties that were 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
 Six months ended June 30, 2009, compared with the six months ended June 30, 2008
 Increase/2009
    
    2008
    
    (Decrease)Net cash provided by operating activities
    
    $
    8,335
    
    
    $
    14,931
    
    
    $
    (6,596
    )Net cash used in investing activities
    
    
    (38,115
    )
    
    
    (68,726
    )
    
    
    30,611Net cash provided by financing activities
    
    
    38,584
    
    
    
    69,885
    
    
    
    (31,301
    )
 Operating Activities.
 Investing Activities.
 40




---



##### 



Financing Activities.
 Inflation
  
 ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
    
    $69,498 of fixed rate debt secured by two of our resorts. This debt bears interest at
6.96%.
    
    $75,800 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 June 30, 2009.
    
    $96,015 of fixed rate debt secured by one of our resorts. This debt bears interest at
6.10%.
    
    $63,875 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 June 30, 2009.
    
    $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
2.92% at June 30, 2009.
    
    $77,571 of variable rate debt secured by one of our resorts. This debt bears interest at
a floating annual rate of LIBOR plus a spread of 310 basis points, with a minimum rate of
6.50% per annum. The effective rate was 6.50% at June 30, 2009.
    
    $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.
    
    $8,510 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 $3,396 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.
 41




---



##### 




    
    $93 related to a capital lease that was entered into in June 2009. The lease matures in
May 2012.
    
 ITEM 4.
    
    CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   Changes
In Internal Control Over Financial Reporting
  42




---



##### 



PART II. OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGS
  
 ITEM 1A.
    
    RISK FACTORS
 A regional, national or global outbreak of influenza or other disease, such as the recent
international outbreak of influenza A(H1N1), could adversely affect our business and results of
operations.
   
 ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  43




---



##### 



FOR
    
    WITHHELDJoseph V. Vittoria
    
    
    25,146,012
    
    
    
    2,891,008Elan J. Blutinger
    
    
    25,224,545
    
    
    
    2,812,475Randy L. Churchey
    
    
    25,198,046
    
    
    
    2,838,974Edward H. Rensi
    
    
    27,150,358
    
    
    
    886,662Kimberly K. Schaefer
    
    
    25,357,117
    
    
    
    2,679,903Howard A. Silver
    
    
    25,224,015
    
    
    
    2,813,005
  
 ITEM 5.
    
    OTHER INFORMATION
  44




---



##### 



ITEM 6.
    
    EXHIBITS
  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, 2006 (incorporated herein by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K filed September 18, 2006)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 JP Morgan 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;
JP Morgan Chase Bank, National Association, as property trustee; Great
Wolf Resorts, Inc., as depositor; and James A. Calder, Alex P. 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)4.4
    
    Junior Subordinated Indenture, dated as of June 15, 2007, between Great
Wolf Resorts, Inc. and Wells Fargo Bank, N.A., as trustee (incorporated
herein by reference to Exhibit 4.1 to the Companys Current Report on Form
8-K filed June 19, 2007)
 45




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##### 



ExhibitNumber
    
    Description4.5
    
    Amended and Restated Trust Agreement, dated as of June 15, 2007, by and
among Great Wolf Resorts, Inc., as depositor, Wells Fargo Bank, N.A., as
property trustee, Wells Fargo Delaware Trust Company, as Delaware trustee,
and James A. Calder, Alex P. 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 June 19, 2007)4.6*
    
    Purchase Agreement, dated April 29, 2009, by and among Great Bear Lodge of
Wisconsin Dells, LLC, a Delaware limited liability company, Great Lakes
Services, LLC, a Delaware limited liability company and CNL Income
Partners, LP, a Delaware limited partnership31.1*
    
    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. 46




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##### 



SIGNATURE
  GREAT WOLF RESORTS, INC./s/ James A. CalderJames A. CalderChief Financial Officer
(Duly authorized officer)
(Principal Financial and Accounting Officer)  47