##### Table of Contents



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, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 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
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)122 West Washington Avenue
    
    53703Madison, Wisconsin 53703
    
    (Zip Code)(Address of principal executive offices)
 Registrants telephone number, including area code
608 661-4700
 þ
 o þ




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Great Wolf Resorts, Inc.
 Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 2005
 INDEX
 PageNo.PART I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (unaudited)Condensed Consolidated Balance Sheets for Great Wolf Resorts, Inc. and subsidiaries as of June 30, 2005, and December 31, 2004
    
    
    3Condensed Consolidated and Combined Statements of Operations for Great Wolf Resorts, Inc. and Subsidiaries for the six months ended June 30, 2005, and for Great Lakes Predecessor for the six months ended June 30, 2004
    
    
    4Condensed Consolidated and Combined Statements of Cash Flows for Great Wolf Resorts, Inc. and Subsidiaries for the six months ended June 30, 2005, and for Great Lakes Predecessor for the six months ended June 30, 2004
    
    
    5Notes to Condensed Consolidated and Combined Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    30Item 4.
    
    Controls and Procedures
    
    
    31PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    32Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    32Item 3.
    
    Defaults Upon Senior Securities
    
    
    32Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    32Item 5.
    
    Other Information
    
    
    32Item 6.
    
    Exhibits
    
    
    32Certification of Chief Executive OfficerCertification of Chief Financial OfficerCertification of Chief Executive OfficerCertification of Chief Financial Officer
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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 GREAT WOLF RESORTS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30,
    
    December 31,2005
    
    2004(Unaudited)(Dollars in thousands, exceptper share amounts)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    34,275
    
    
    $
    81,417Accounts receivable, net of allowance for doubtful accounts of $85 and $183
    
    
    1,179
    
    
    
    881Inventory
    
    
    2,590
    
    
    
    1,848Other current assets
    
    
    7,335
    
    
    
    3,921Total current assets
    
    
    45,379
    
    
    
    88,067Property and equipment, net
    
    
    350,972
    
    
    
    275,758Other assets
    
    
    10,914
    
    
    
    9,862Goodwill
    
    
    202,263
    
    
    
    218,727Total assets
    
    $
    609,528
    
    
    $
    592,414LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    1,680
    
    
    $
    27,794Accounts payable
    
    
    16,771
    
    
    
    31,506Accrued expenses
    
    
    7,925
    
    
    
    10,075Advance deposits
    
    
    4,864
    
    
    
    3,129Other current liabilities
    
    
    3,827
    
    
    
    2,138Total current liabilities
    
    
    35,067
    
    
    
    74,642Long-term debt
    
    
    155,158
    
    
    
    102,813Other long-term debt
    
    
    12,190
    
    
    
    12,058Other long-term liabilities
    
    
    391
    
    
    
    391Deferred tax liability
    
    
    20,534
    
    
    
    11,298Deferred compensation liability
    
    
    2,725
    
    
    
    2,891Total liabilities
    
    
    226,065
    
    
    
    204,093Commitments and contingenciesStockholders Equity:Common stock, $0.01 par value, 250,000,000 shares authorized,
30,262,308 shares issued and outstanding
    
    
    303
    
    
    
    303Additional paid in capital
    
    
    394,060
    
    
    
    394,060Preferred stock, $0.01 par value, 10,000,000 shares authorized, no
shares issued or outstanding
    
    
    
    
    
    
    Accumulated deficit
    
    
    (8,700
    )
    
    
    (3,842

    )Shares of common stock held in deferred compensation plan
    
    
    (2,200
    )
    
    
    (2,200
    )Total stockholders equity
    
    
    383,463
    
    
    
    388,321Total liabilities and stockholders equity
    
    $
    609,528
    
    
    $
    592,414
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GREAT WOLF RESORTS, INC. AND SUBSIDIARIES AND
GREAT LAKES PREDECESSOR
 
 CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
 Great Wolf
    
    
    
    
    
    Great WolfResorts, Inc.
    
    Predecessor
    
    Resorts, Inc.
    
    PredecessorThree months ended
    
    Six months endedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004(Unaudited, dollars in thousands, except per share data)Revenues:Rooms
    
    $
    17,023
    
    
    $
    7,441
    
    
    $
    35,099
    
    
    $
    14,684Food and beverage
    
    
    4,576
    
    
    
    1,937
    
    
    
    9,334
    
    
    
    3,724Other resort operations
    
    
    4,433
    
    
    
    1,845
    
    
    
    8,595
    
    
    
    3,462Management fees  related parties
    
    
    
    
    
    
    304
    
    
    
    
    
    
    
    709Development and other fees  related parties
    
    
    
    
    
    
    148
    
    
    
    
    
    
    
    50826,032
    
    
    
    11,675
    
    
    
    53,028
    
    
    
    23,087Other revenue from managed properties
    
    
    
    
    
    
    3,669
    
    
    
    
    
    
    
    7,009Total revenues
    
    
    26,032
    
    
    
    15,344
    
    
    
    53,028
    
    
    
    30,096Operating expenses by department:Rooms
    
    
    2,958
    
    
    
    1,211
    
    
    
    5,596
    
    
    
    2,260Food and beverage
    
    
    4,228
    
    
    
    1,726
    
    
    
    7,991
    
    
    
    3,187Other
    

    
    3,979
    
    
    
    1,529
    
    
    
    7,247
    
    
    
    2,806Other operating expenses:Selling, general and administrative
    
    
    7,327
    
    
    
    3,414
    
    
    
    14,565
    
    
    
    6,620Property operating costs
    
    
    4,346
    
    
    
    2,351
    
    
    
    10,403
    
    
    
    4,138Depreciation and amortization
    
    
    5,804
    
    
    
    3,198
    
    
    
    12,931
    
    
    
    5,91428,642
    
    
    
    13,429
    
    
    
    58,733
    
    
    
    24,925Other expenses from managed properties
    
    
    
    
    
    
    3,669
    
    
    
    
    
    
    
    7,009Total operating expenses
    
    
    28,642
    
    
    
    17,098
    
    
    
    58,733
    
    
    
    31,934Net operating loss
    
    
    (2,610
    )
    
    
    (1,754
    )
    
    
    (5,705
    )
    
    
    (1,838
    )Interest income
    
    
    (356
    )
    
    
    (83
    )
    
    
    (648
    )
    
    
    (161
    )Interest expense
    
    
    1,968
    
    
    
    1,529
    
    
    
    3,024
    
    
    
    2,812Gain on sale of investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,072
    )Interest on mandatorily redeemable shares
    
    
    
    
    
    
    474
    
    
    
    
    
    
    
    2,166Minority interests
    
    
    
    
    
    
    (47
    )
    
    
    
    
    
    
    (18
    )Loss before income taxes
    
    
    (4,222
    )
    
    
    (3,627
    )
    
    
    (8,081
    )
    
    
    (5,565
    )Income tax benefit
    
    
    (1,689
    )
    
    
    
    
    
    
    (3,223
    )
    
    
    Loss from continuing operations
    
    
    (2,533
    )
    
    
    (3,627
    )
    
    
    (4,858
    )
    
    
    (5,565
    )Income from discontinued operations
    
    
    
    
    
    
    815
    
    
    
    
    
    
    
    835Net loss
    
    $
    (2,533
    )
    
    $
    (2,812
    )
    
    $
    (4,858
    )
    
    $
    (4,730
    )Basic loss per share
    
    $
    (0.08
    )
    
    
    
    
    
    $
    (0.16
    )Diluted loss per share
    
    $
    (0.08
    )
    
    
    
    
    
    $
    (0.16
    )Weighted average common shares outstanding:Basic
    
    
    30,132,896
    
    
    
    
    
    
    
    30,132,896Diluted
    
    
    30,132,896
    
    
    
    
    
    
    
    30,132,896
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GREAT WOLF RESORTS, INC. AND SUBSIDIARIES AND
GREAT LAKES PREDECESSOR
 
 CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
 Great WolfResorts, Inc.
    
    PredecessorSix months endedJune 30,2005
    
    2004(Unaudited, dollars in thousands)Operating activities:Net loss
    
    $
    (4,858
    )
    
    $
    (4,730
    )Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    12,931
    
    
    
    6,569Non-cash employee compensation expense
    
    
    (246
    )
    
    
    Gain on sale of assets
    
    
    
    
    
    
    (548
    )Gain on sale of investments
    
    
    
    
    
    
    (1,072
    )Minority interests
    
    
    
    
    
    
    91Deferred tax benefit
    
    
    (3,223
    )
    
    
    Changes in operating assets and liabilities:Prepaid expenses and other assets
    
    
    (4,538
    )
    
    
    (2,957
    )Accounts payable, accrued expenses and other liabilities
    
    
    (6,709
    )
    
    
    4,269Net cash (used in) provided by operating activities
    
    
    (6,643
    )
    
    
    1,622Investing activities:Capital expenditures for property and equipment
    
    
    (65,195
    )
    
    
    (55,433
    )Proceeds from sale of assets
    
    
    
    
    
    
    10,475Increase in equity escrow
    
    
    
    
    
    
    (5,940
    )Net cash used in investing activities
    
    
    (65,195
    )
    
    
    (50,898
    )Financing activities:Principal payments on long-term debt
    
    
    (49,151
    )
    
    
    (1,996
    )Proceeds from issuance of long-term debt
    
    
    75,514
    
    
    
    34,639Payment of loan costs
    
    
    (1,667
    )
    
    
    (2,283
    )Member contributions
    
    
    
    
    
    
    25,860Member distributions
    
    
    
    
    
    
    (6,804
    )Changes in mandatorily redeemable ownership interests
    
    
    
    
    
    
    2,166Net distributions to minority investors
    
    
    
    
    
    
    495Net cash provided by financing activities
    
    
    24,696
    
    
    
    52,077Net increase (decrease) in cash and cash equivalents
    
    
    (47,142
    )
    
    
    2,801Cash and cash equivalents, beginning of period
    
    
    81,417
    
    
    
    3,553Cash and cash equivalents, end of period
    
    $
    34,275
    
    
    $
    6,354Supplemental Cash Flow Information-Cash paid for interest, net of capitalized interest
    
    $
    2,599
    
    
    $
    2,755
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GREAT WOLF RESORTS, INC. AND SUBSIDIARIES AND
GREAT LAKES PREDECESSOR
 
 NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
 1. ORGANIZATION
 Background
   
    
    The Great Lakes Companies, Inc. (GLC), and its consolidated subsidiaries;
    
    Great Wolf Lodge of Traverse City, LLC;
    
    Great Wolf Lodge of Kansas City, LLC;
    
    Blue Harbor Resort Sheboygan, LLC;
    
    Great Wolf Lodge of Williamsburg, LLC; and
    
    Great Wolf Lodge of the Poconos, LLC.
     
    
    The Predecessor contributed its hotel management and multifamily housing management and
development assets, which were unrelated to the resort business, to two subsidiaries of the
Predecessor and then distributed the interests in those subsidiaries to the former
shareholders of GLC.
 6




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
    
    We effected, through our Operating Partnership, the acquisition of GLC and each
resort-owning entity. Pursuant to these acquisitions, investors of GLC and the
resort-owning entities received cash, unregistered shares of our common stock or a
combination of cash and unregistered shares of our common stock. We issued 13,901,947
shares of our common stock and paid approximately $97,600 in cash in connection with these
acquisitions.
    
    We issued an aggregate of 130,949 shares of unregistered common stock to holders of
tenant in common interests in two of our resorts.
     §
    
    On May 4, 2005, we announced a joint venture with Paramount Parks, Inc., a unit of Viacom
Inc., to develop a 39-acre, $100,000+ Great Wolf Lodge resort and conference center at
Paramounts Kings Island in Mason, Ohio. We will operate the resort under our Great Wolf
Lodge brand and will maintain a majority of the equity position in the project. Paramount
will have a minority equity interest in the development by contributing the land needed for
the resort. The resort will have 401 suites and a comprehensive package of first-class
destination lodging amenities and activities. Construction on the resort began in July
2005, with opening slated for late 2006.§
    
    On June 14, 2005, we announced plans to develop an additional 100 guest suites at our
Williamsburg resort. The planned expansion also includes multiple new attractions within
the waterpark. Construction for the expansion is scheduled to start in Fall 2005 with
expected completion in Fall 2006.§
    
    On June 29, 2005, we announced a joint venture with The Confederated Tribes of the
Chehalis Reservation, to develop a 39-acre, $80,000+ Great Wolf Lodge resort and conference
center in Chehalis, Washington. We will operate the resort under our Great Wolf Lodge brand,
The Confederated Tribes of the Chehalis Reservation will contribute the land needed for the
resort, and they will have a minority equity interest in the joint venture. Construction on
the resort is scheduled to begin in Fall 2005 with expected completion in late 2006.§
    
    At June 30, 2005, we had 77 individually owned condominium units under construction at
our Wisconsin Dells resort. Expected completion of the condominium units is July/August
2005. Also, in June 2005, our Wisconsin Dells resort began construction of a 35,000 square
foot expansion to its waterpark. Expected completion of the waterpark expansion is Spring
2006.
 Business Summary
  7




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##### Table of Contents



IndoorOpened/Target
    
    
    
    
    
    EntertainmentLocation
    
    Opening
    
    Rooms
    
    Area(1)(Approx. ft2)Existing Resorts:Wisconsin Dells, WI
    
    May 1997(2)
    
    
    309
    (3)
    
    
    64,000
    (4)Sandusky, OH(5)
    
    March 2001
    
    
    271
    
    
    
    41,000Traverse City, MI
    
    March 2003
    
    
    281
    
    
    
    51,000Kansas City, KS
    
    May 2003
    
    
    281
    
    
    
    49,000Sheboygan, WI(6)
    
    June 2004
    
    
    183
    (7)
    
    
    54,000Williamsburg, VA
    
    March 2005
    
    
    301
    (8)
    
    
    66,000Resorts Announced or Under Construction:Pocono Mountains, PA
    
    Fall 2005
    
    
    400
    
    
    
    91,000Niagara Falls, ONT(9)
    
    Spring 2006
    
    
    404
    
    
    
    94,000Mason, OH (10)
    
    Late 2006
    
    
    401
    
    
    
    92,000Chehalis, WA(11)
    
    Late 2006
    
    
    317
    
    
    
    65,000
 
 (1)
    
    Our indoor entertainment areas generally include our indoor waterpark, game arcade,
childrens activity room and fitness room, as well as our Aveda concept spa, 3D virtual
reality theatre, Wileys Woods and party room in the resorts that have such amenities.(2)
    
    We purchased this property in November 1999.(3)
    
    Our Wisconsin Dells property includes an additional 77 individually owned condominium units
under construction as of June 30, 2005.(4)
    
    Our Wisconsin Dells property has started a 35,000 square foot expansion of their existing
waterpark. Construction on the expansion began in June 2005 with expected completion in the
Spring 2006.(5)
    
    Prior to May 2004 we operated this resort as a Great Bear Lodge.(6)
    
    Our Sheboygan property is branded as a Blue Harbor Resort. This resort is subject to a
98-year and 11-month ground lease with the Redevelopment Authority of the City of Sheboygan.(7)
    
    Our Sheboygan resort includes an additional 64 individually owned condominium units.(8)
    
    Our Williamsburg property will be adding an additional 100 guest suites. Construction for
the expansion is scheduled to start in Fall 2005 with expected completion in Fall 2006. 8




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(9)
    
    Ripleys, our licensee, owns this resort. We are assisting Ripleys with construction
management and other pre-opening matters related to the Great Wolf Lodge in Niagara Falls. We
have granted Ripleys a license to use the Great Wolf Lodge name for this resort and other
intellectual property for ten years after opening. We have agreed to enter into a management
agreement, pursuant to which we expect to operate the resort on behalf of Ripleys for five
years, and a central reservations agreement. In conjunction with this project, we will receive
a one-time construction fee and ongoing license, central reservation and management fees.(10)
    
    We have entered into a joint venture with Paramount Parks, Inc., a unit of Viacom Inc. to
build this resort. We will operate the resort under our Great Wolf Lodge brand and will
maintain a majority of the equity position in the project. Paramount will have a minority
equity interest in the development by contributing the land needed for the resort.
Construction on the resort began in July 2005 with expected completion in late 2006.(11)
    
    We have entered into a joint venture with The Confederated Tribes of the Chehalis
Reservation. We will operate the resort under our Great Wolf Lodge brand. The Confederated
Tribes of the Chehalis Reservation will contribute the land needed for the resort, and they
will have a minority equity interest in the joint venture. Construction on the resort is
scheduled to begin in Fall 2005 with expected completion in late 2006. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 General
  Income Taxes
 Stock Based Compensation
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Three months ended
    
    Six months endedJune 30, 2005
    
    June 30, 2005Net loss, as reported
    
    $
    (2,533
    )
    
    $
    (4,858
    )Compensation expense, SFAS 123 fair value method
    
    
    (359
    )
    
    
    (687
    )Pro forma net loss
    
    $
    (2,892
    )
    
    $
    (5,545
    )Pro forma net loss per share  Basic
    
    $
    (0.10
    )
    
    $
    (0.18
    )Pro forma net loss per share  Diluted
    
    $
    (0.10
    )
    
    $
    (0.18
    )
  Three months endedJune 30, 2005Dividend yield
    
    
    Weighted-average, risk free interest rate
    
    
    3.65
    %Weighted-average, expected life of option
    
    6.0 yearsExpected stock price volatility
    
    
    40
    %
 Segments
 Recent Accounting Pronouncements
 3. PURCHASE ACCOUNTING IN CONNECTION WITH THE IPO
   
    
    Recorded property and equipment, other assets, debt and other liabilities at their
preliminarily estimated fair values;
    
    Recorded a deferred tax liability resulting from the difference between the
preliminarily estimated fair values and the tax bases of assets acquired from the seven
resort-owning entities. We recorded this liability at our anticipated effective tax rate of
40%;
    
    Eliminated mandatorily redeemable interests of the Predecessor due to the conversion of
those ownership interests to our common stock in conjunction with the Formation
Transactions; and
    
    Recorded as goodwill the excess of consideration in the purchase transaction over the
fair value of net tangible assets acquired from the seven resort-owning entities.
  10




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4. PROPERTY AND EQUIPMENT
  June 30,
    
    December 312005
    
    2004Land
    
    $
    26,695
    
    
    $
    12,064Building and improvements
    
    
    115,294
    
    
    
    89,294Furniture, fixtures and equipment
    
    
    135,441
    
    
    
    82,470Construction in process
    
    
    84,603
    
    
    
    92,544362,033
    
    
    
    276,372Less accumulated depreciation
    
    
    (11,061
    )
    
    
    (614
    )Property and equipment, net
    
    $
    350,972
    
    
    $
    275,758
 5. LONG-TERM DEBT AND OTHER LONG-TERM DEBT
  June 30,
    
    December 31,2005
    
    2004Long-Term Debt:Senior credit facility
    
    $
    
    
    
    $
    Traverse City/Kansas City Mortgage Loan
    
    
    74,531
    
    
    
    75,000Sheboygan Mortgage Loan
    
    
    29,234
    
    
    
    29,475Junior Subordinated Debentures
    
    
    51,550
    
    
    
    Other mortgage debt
    
    
    1,523
    
    
    
    1,523Williamsburg Construction Loan
    
    
    
    
    
    
    19,011Poconos Construction Loan
    
    
    
    
    
    
    5,598Other Long-Term Liabilities:City of Sheboygan bonds
    
    
    8,129
    
    
    
    8,063City of Sheboygan loan
    
    
    4,061
    
    
    
    3,995169,028
    
    
    
    142,665Less current portion of long-term debt
    
    
    (1,680
    )
    
    
    (27,794
    )$
    167,348
    
    
    $
    114,871
 Senior Credit Facility
 11




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##### Table of Contents



Traverse City/Kansas City Mortgage Loan
 Sheboygan Mortgage Loan
 Junior Subordinated Debentures
    Williamsburg Construction Loan
 Poconos Construction Loan
 City of Sheboygan Bonds
 12




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##### Table of Contents



City of Sheboygan Loan
 Future Maturities
 ThroughJune 30,2006
    
    $
    1,6802007
    
    
    1,8382008
    
    
    29,8152009
    
    
    1,5872010
    
    
    1,705Thereafter
    
    
    132,403Total
    
    $
    169,028
 6. EARNINGS PER SHARE
   Three months
    
    Six monthsended
    
    endedJune 30, 2005
    
    June 30, 2005Net loss attributable to common shares
    
    $
    (2,533
    )
    
    $
    (4,858
    )Weighted average common shares outstanding  basic and diluted
    
    
    30,132,896
    
    
    
    30,132,896Net loss per share  basic and diluted
    
    $
    (0.08
    )
    
    $
    (0.16
    )
 7. DISCONTINUED OPERATIONS
  13




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##### Table of Contents



Three months
    
    Six monthsended
    
    endedJune 30,
    
    June 30,2004
    
    2004Revenues
    
    $
    1,963
    
    
    $
    3,464Expenses
    
    
    (1,587
    )
    
    
    (3,068
    )Gain on sale
    
    
    548
    
    
    
    548Minority interest
    
    
    (109
    )
    
    
    (109
    )Income (loss) from discontinued operations
    
    $
    815
    
    
    $
    835
 
 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
 Formation.
  
    
    The Great Lakes Companies, Inc. (GLC) and its consolidated subsidiaries;
    
    Great Wolf Lodge of Traverse City, LLC;
    
    Great Wolf Lodge of Kansas City, LLC;
    
    Blue Harbor Resort Sheboygan, LLC;
    
    Great Wolf Lodge of Williamsburg, LLC; and
    
    Great Wolf Lodge of the Poconos, LLC.
   14




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##### Table of Contents




    
    The Predecessor contributed its hotel management and multifamily housing management and
development assets, which were unrelated to the resort business, to two subsidiaries of the
Predecessor and then distributed the interests in those subsidiaries to the former
shareholders of GLC.
    
    We effected, through our Operating Partnership, the acquisition of GLC and each
resort-owning entity. Pursuant to these acquisitions, investors of GLC and the
resort-owning entities received cash, unregistered shares of our common stock or a
combination of cash and unregistered shares of our common stock. We issued 13,901,947
shares of our common stock and paid approximately $97,600 in cash in connection with these
acquisitions.
    
    We issued an aggregate of 130,949 shares of unregistered common stock to holders of
tenant in common interests in two of our resorts.
     §
    
    On May 4, 2005, we announced a joint venture with Paramount Parks, Inc., a unit of Viacom
Inc., to develop a 39-acre, $100,000+ Great Wolf Lodge resort and conference center at
Paramounts Kings Island in Mason, Ohio. We will operate the resort under our Great Wolf
Lodge brand and will maintain a majority of the equity position in the project. Paramount
will have a minority equity interest in the development by contributing the land needed for
the resort. The resort will have 401 suites and a comprehensive package of first-class
destination lodging amenities and activities. Construction on the resort began in July
2005, with opening slated for late 2006.§
    
    On June 14, 2005, we announced plans to develop an additional 100 guest suites at our
Williamsburg resort. The planned expansion also includes multiple new attractions within
the waterpark. Construction for the expansion is scheduled to start in Fall 2005 with
expected completion in Fall 2006.
 15




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##### Table of Contents



§
    
    On June 29, 2005, we announced a joint venture with The Confederated Tribes of the
Chehalis Reservation, to develop a 39-acre, $80,000+ Great Wolf Lodge resort and conference
center in Chehalis, Washington. We will operate the resort under our Great Wolf Lodge brand,
The Confederated Tribes of the Chehalis Reservation will contribute the land needed for the
resort, and they will have a minority equity interest in the joint venture. Construction on
the resort is scheduled to begin in Fall 2005 with expected completion in late 2006.§
    
    At June 30, 2005, we had 77 individually owned condominium units under construction at
our Wisconsin Dells resort. Expected completion of the condominium units is July/August
2005. Also, in June 2005, our Wisconsin Dells resort began construction of a 35,000 square
foot expansion to its waterpark. Expected completion of the waterpark expansion is Spring
2006.
 Business.
   IndoorOpened/Target
    
    
    
    
    
    EntertainmentLocation
    
    Opening
    
    Rooms
    
    Area(1)(Approx. ft2)Existing Resorts:Wisconsin Dells, WI
    
    May 1997(2)
    
    
    309
    (3)
    
    
    64,000
    (4)Sandusky, OH(5)
    
    March 2001
    
    
    271
    
    
    
    41,000Traverse City, MI
    
    March 2003
    
    
    281
    
    
    
    51,000Kansas City, KS
    
    May 2003
    
    
    281
    
    
    
    49,000Sheboygan, WI(6)
    
    June 2004
    
    
    183
    (7)
    
    
    54,000Williamsburg, VA
    
    March 2005
    
    
    301
    (8)
    
    
    66,000Resorts Announced or Under Construction:Pocono Mountains, PA
    
    Fall 2005
    
    
    400
    
    
    
    91,000Niagara Falls, ONT(9)
    
    Spring 2006
    
    
    404
    
    
    
    94,000Mason, OH (10)
    
    Late 2006
    
    
    401
    
    
    
    92,000Chehalis, WA(11)
    
    Late 2006
    
    
    317
    
    
    
    65,000
 
 (1)
    
    Our indoor entertainment areas generally include our indoor waterpark, game arcade,
childrens activity room and fitness room, as well as our Aveda concept spa, 3D virtual
reality theatre, Wileys Woods and party room in the resorts that have such amenities.(2)
    
    We purchased this property in November 1999. 16




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##### Table of Contents



(3)
    
    Our Wisconsin Dells property includes an additional 77 individually owned condominium units
under construction as of June 30, 2005.(4)
    
    Our Wisconsin Dells property has started a 35,000 square foot expansion of their existing
waterpark. Construction on the expansion began in June 2005 with expected completion in the
Spring 2006.(5)
    
    Prior to May 2004 we operated this resort as a Great Bear Lodge.(6)
    
    Our Sheboygan property is branded as a Blue Harbor Resort. This resort is subject to a
98-year and 11-month ground lease with the Redevelopment Authority of the City of Sheboygan.(7)
    
    Our Sheboygan resort includes an additional 64 individually owned condominium units.(8)
    
    Our Williamsburg property will be adding an additional 100 guest suites. Construction for
the expansion is scheduled to start in Fall 2005 with expected completion in Fall 2006.(9)
    
    Ripleys, our licensee, owns this resort. We are assisting Ripleys with construction
management and other pre-opening matters related to the Great Wolf Lodge in Niagara Falls. We
have granted Ripleys a license to use the Great Wolf Lodge name for this resort and other
intellectual property for ten years after opening. We have agreed to enter into a management
agreement, pursuant to which we expect to operate the resort on behalf of Ripleys for five
years, and a central reservations agreement. In conjunction with this project, we will receive
a one-time construction fee and ongoing license, central reservation and management fees.(10)
    
    We have entered into a joint venture with Paramount Parks, Inc., a unit of Viacom Inc. to
build this resort. We will operate the resort under our Great Wolf Lodge brand and will
maintain a majority of the equity position in the project. Paramount will have a minority
equity interest in the development by contributing the land needed for the resort.
Construction on the resort began in July 2005 with expected completion in late 2006.(11)
    
    We have entered into a joint venture with The Confederated Tribes of the Chehalis
Reservation. We will operate the resort under our Great Wolf Lodge brand. The Confederated
Tribes of the Chehalis Reservation will contribute the land needed for the resort, and they
will have a minority equity interest in the joint venture. Construction on the resort is
scheduled to begin in Fall 2005 with expected completion in late 2006. Industry Trends and Outlook.
  17




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##### Table of Contents




    
    A slower-than-expected summer vacation season in the Midwest.
Across our portfolio of resorts, revenue in April, May and June
2005 trended down from prior years. For example, June bookings
from the Detroit area, which is a primary source of demand for two
of our properties, declined more than 30 percent from the same
month in 2004. Our results were particularly negatively impacted
by weakness in demand during the last two weeks in June. That
period is significant to our results for the three months ended
June 30, 2005, as it represents the traditional beginning of the
summer vacation season, as we ramp-up staffing in order to provide
appropriate employee training and guest service levels to
accommodate the increased number of guests. When revenues were
well below our expectations for June, we did not sufficiently
adjust our cost structure to align it more closely with the actual
revenue we generated.
    
    Competitive pressures at our Sandusky resort (as discussed above).
The Sandusky market has been impacted by an increase in the
number of competitive rooms of indoor waterpark resorts. During
the second quarter of 2004, our 271-room resort was the only
indoor waterpark resort in that market, but at June 30, 2005,
indoor waterpark resorts have more than 800 rooms in this market.
    
    A slower-than-expected occupancy ramp-up at our Sheboygan,
Wisconsin property. This resort opened in June 2004, but the
overall development of Sheboygan as a tourist destination
continues to lag behind our initial expectations. This has
impacted the consumer demand for our indoor waterpark resort in
that market.
  
    
    We have implemented revised, targeted marketing programs at each
of our resorts for the remainder of 2005 to address the softness
in demand we witnessed at our locations in the second quarter.
    
    We have re-forecasted revenue at all of our resorts for the
remainder of 2005, based on current market conditions and trends.
Our revised revenue projections for the remainder of 2005 are
significantly lower than our original projections. We have
reviewed all of our resorts operating budgets for the second half
of 2005 and have taken steps to reduce or eliminate certain
operating costs in order to more closely align our cost structure
with our revised revenue expectations.
    
    We are increasing our corporate operations and marketing staffing
in order to better understand and respond to current demand,
customer booking and operating trends.
  Revenue and Key Performance Indicators.
 18




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##### Table of Contents




    
    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
    
    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.
   19




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##### Table of Contents



Recent Accounting Pronouncements
  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
 20




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##### Table of Contents




    
    as one measure in determining the value of other acquisitions and dispositions.
    Great Wolf
    
    
    
    
    
    Great WolfResorts
    
    Predecessor
    
    Resorts
    
    PredecessorThree months ended
    
    Six months endedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net loss
    
    $
    (2,533
    )
    
    $
    (2,812
    )
    
    $
    (4,858
    )
    
    $
    (4,730
    )Adjustments:Interest expense, net
    
    
    1,612
    
    
    
    1,716
    
    
    
    2,376
    
    
    
    3,235Income tax benefit
    
    
    (1,689
    )
    
    
    
    
    
    
    (3,223
    )
    
    
    Depreciation and amortization
    
    
    5,804
    
    
    
    3,526
    
    
    
    12,931
    
    
    
    6,569EBITDA
    
    $
    3,194
    
    
    $
    2,430
    
    
    $
    7,226
    
    
    $
    5,074
 Results of Operations
 General
  Great Wolf Resorts Financial Information
  
    
    our corporate entity that provides resort development and management services;
    
    our Wisconsin Dells, Sandusky, Traverse City, Kansas City, Sheboygan, and Williamsburg
operating resorts; and
    
    our Pocono Mountains resort that is under construction.
 Revenues.
 Operating Expenses.
  
    
    selling, general and administrative expenses, which are associated with the management
of resorts and which consist primarily of expenses such as corporate payroll and related
benefits, operations management, sales
 21




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##### Table of Contents



and marketing, finance, legal, information
technology support, human resources and other support services, as well as general
corporate expenses;
    
    property operation and maintenance expenses; and
    
    depreciation and amortization.
 Great Lakes Predecessor Financial Information
  
    
    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.
   Revenues.
 
    
    lodging revenue, which consists of rooms, food and beverage and other department
revenues from its consolidated and combined hotels and resorts;
    
    management fee revenue from both resort activity and non-resort activity, which
includes fees received under its management agreements; and
    
    other revenue, which consists of accounting fees, development fees, central Reservation
fees, construction management fees and other fees.
  Operating Expenses.
  
    
    selling, general and administrative expenses, which were associated with the management
of hotels and 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;
 22




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##### Table of Contents




    
    property operation and maintenance expenses;
    
    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, 2005, for Great Wolf Resorts, Inc. compared with the three months
ended June 30, 2004, for the Predecessor
  All Properties
    
    Same Store Comparison (a)Three months
    
    Three months
    
    Three monthsended
    
    ended
    
    ended
    
    Increase (Decrease)June 30, 2005
    
    June 30, 2005
    
    June 30, 2004
    
    $
    
    %Occupancy
    
    
    58.7
    %
    
    
    60.2
    %
    
    
    66.8
    %
    
    
    N/A
    
    
    
    -9.9
    %ADR
    
    $
    195.92
    
    
    $
    193.45
    
    
    $
    200.81
    
    
    ($
    7.36
    )
    
    
    -3.7
    %RevPAR
    
    $
    115.05
    
    
    $
    116.48
    
    
    $
    134.04
    
    
    ($
    17.56
    )
    
    
    -13.1
    %Total RevPOR
    
    $
    297.52
    
    
    $
    281.52
    
    
    $
    290.11
    
    
    ($
    8.59
    )
    
    
    -3.0
    %Total RevPAR
    
    $
    174.72
    
    
    $
    169.52
    
    
    $
    193.65
    
    
    ($
    24.13
    )
    
    
    -12.5
    %
 
 (a)
    
    Same store comparison includes properties that were open for the full periods in 2004 and
2005 (that is, our Wisconsin Dells, Sandusky, Traverse City and Kansas City resorts).   Three months endedJune 30,Great WolfResorts
    
    Predecessor
    
    Increase2005
    
    2004
    
    (Decrease)Revenues
    
    $
    26,032
    
    
    $
    15,344
    
    
    $
    10,688Departmental operating expenses
    
    
    11,165
    
    
    
    4,466
    
    
    
    6,699Selling, general and administrative
    
    
    7,327
    
    
    
    3,414
    
    
    
    3,913Property operating costs
    
    
    4,346
    
    
    
    2,351
    
    
    
    1,995Depreciation and amortization
    
    
    5,804
    
    
    
    3,198
    
    
    
    2,606Net operating loss
    
    
    (2,610
    )
    
    
    (1,754
    )
    
    
    (856
    )Net interest expense
    
    
    1,612
    
    
    
    1,446
    
    
    
    166Interest on mandatorily redeemable shares
    
    
    
    
    
    
    474
    
    
    
    (474
    )
 23




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##### Table of Contents



Three months endedJune 30,Great WolfResorts
    
    Predecessor
    
    Increase2005
    
    2004
    
    (Decrease)Income tax benefit
    
    
    (1,689
    )
    
    
    
    
    
    
    (1,689
    )Income from discontinued operations
    
    
    
    
    
    
    815
    
    
    
    (815
    )Net loss
    
    
    (2,533
    )
    
    
    (2,812
    )
    
    
    279
 Revenues.
 Operating expenses.
 
    
    Total departmental expenses for the resorts in Wisconsin Dells, Sandusky, Sheboygan,
and Williamsburg were $7,501 for the three months ended June 30, 2005. Departmental
expenses for the resort in Sheboygan were $631 for the three months ended June 30, 2004.
    
    Total selling, general and administrative expenses for the resorts in Wisconsin
Dells, Sandusky, Sheboygan, and Williamsburg were $4,849 for the three months ended June
30, 2005. Selling, general and administrative expenses for the resort in Sheboygan were
$225 for the three months ended June 30, 2004.
    
    Total property operating costs for the resorts in Wisconsin Dells, Sandusky,
Sheboygan, and Williamsburg were $2,737 for the three months ended June 30, 2005.
Included in this amount is $394 of pre-opening costs related to our Williamsburg resort
in the three months ended June 30, 2005. Property operating costs and pre-opening costs
for the resort in Sheboygan were $67 and $983, respectively, for the three months ended
June 30, 2004.
    
    Total depreciation and amortization for the resorts in Wisconsin Dells, Sandusky,
Sheboygan, and Williamsburg was $3,904 for the three months ended June 30, 2005.
Depreciation and amortization for the resort in Sheboygan was $432 for the three months
ended June 30, 2004. The increase in depreciation and amortization also includes the
effect of a change made in the first quarter of 2005 to the estimate of useful lives
used to depreciate our property and equipment, which resulted in a decrease in
depreciation for our resorts in Traverse City and Kansas City in the three months ended
June 30, 2005, as compared to June 30, 2004.
 Net loss.
 
    
    Income tax benefit in the 2005 period with no income tax benefit in the 2004 period,
reflecting our structure after the IPO as a C Corporation that pays income taxes, as
opposed to the Predecessors pass-through entities with no income tax obligations in
the 2004 period.
    
    Interest on mandatorily redeemable shares incurred in the 2004 period was not
incurred in the 2005 period due to the conversion of the mandatorily redeemable
interests to common stock in conjunction with the Formation Transactions.
  
    
    Our increased operating loss in the 2005 period.
    
    Income from discontinued operations in the 2004 period was not incurred in the 2005 period.
 24




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##### Table of Contents



Six months ended June 30, 2005, for Great Wolf Resorts, Inc. compared with the six months ended
June 30, 2004, for the Predecessor
  All Properties
    
    Same Store Comparison (a)Six months
    
    Six months
    
    Six monthsended June
    
    ended June
    
    ended June
    
    Increase (Decrease)30, 2005
    
    30, 2005
    
    30, 2004
    
    $
    
    %Occupancy
    
    
    63.7
    %
    
    
    66.0
    %
    
    
    67.4
    %
    
    
    N/A
    
    
    
    -2.1
    %ADR
    
    $
    203.23
    
    
    $
    205.98
    
    
    $
    205.27
    
    
    $
    0.71
    
    
    
    0.3
    %RevPAR
    
    $
    129.46
    
    
    $
    136.01
    
    
    $
    138.34
    
    
    ($
    2.33
    )
    
    
    -1.7
    %Total RevPOR
    
    $
    305.84
    
    
    $
    297.73
    
    
    $
    297.35
    
    
    $
    0.38
    
    
    
    0.1
    %Total RevPAR
    
    $
    194.82
    
    
    $
    196.60
    
    
    $
    200.40
    
    
    ($
    3.80
    )
    
    
    -1.9
    %
 
 (a)
    
    Same store comparison includes properties that were open for the full periods in 2004 and
2005 (that is, our Wisconsin Dells, Sandusky, Traverse City and Kansas City resorts).   Six months endedJune 30,Great WolfResorts
    
    Predecessor
    
    Increase2005
    
    2004
    
    (Decrease)Revenues
    
    $
    53,028
    
    
    $
    30,096
    
    
    $
    22,932Departmental operating expenses
    
    
    20,834
    
    
    
    8,253
    
    
    
    12,581Selling, general and administrative
    
    
    14,565
    
    
    
    6,620
    
    
    
    7,945Property operating costs
    
    
    10,403
    
    
    
    4,138
    
    
    
    6,265Depreciation and amortization
    
    
    12,931
    
    
    
    5,914
    
    
    
    7,017Net operating loss
    
    
    (5,705
    )
    
    
    (1,838
    )
    
    
    (3,867
    )Net interest expense
    
    
    2,376
    
    
    
    2,651
    
    
    
    (275
    )Gain on sale of investments
    
    
    
    
    
    
    (1,072
    )
    
    
    1,072Interest on mandatorily redeemable shares
    
    
    
    
    
    
    2,166
    
    
    
    (2,166
    )Income tax benefit
    
    
    (3,223
    )
    
    
    
    
    
    
    (3,223
    )Income from discontinued operations
    
    
    
    
    
    
    835
    
    
    
    (835
    )Net loss
    
    
    (4,858
    )
    
    
    (4,730
    )
    
    
    (128
    )
 25




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##### Table of Contents



Revenues.
 Operating expenses.
 
    
    Total departmental expenses for the resorts in Wisconsin Dells, Sandusky, Sheboygan,
and Williamsburg were $13,294 for the six months ended June 30, 2005. Departmental
expenses for the resort in Sheboygan were $631 for the six months ended June 30, 2004.
    
    Total selling, general and administrative expenses for the resorts in Wisconsin
Dells, Sandusky, Sheboygan, and Williamsburg were $8,274 for the six months ended June
30, 2005. Selling, general and administrative expenses for the resort in Sheboygan were
$225 for the six months ended June 30, 2004.
    
    Total property operating costs for the resorts in Wisconsin Dells, Sandusky,
Sheboygan, and Williamsburg were $7,056 for the six months ended June 30, 2005.
Included in this amount is $2,880 of pre-opening costs related to our Williamsburg
resort in the six months ended June 30, 2005. Property operating costs and pre-opening
costs for the resort in Sheboygan were $67 and $1,504, respectively, for the six months
ended June 30, 2004. Property operating costs for our resort in Kansas City included an
increase of $336 and $146 for property tax expense and utility costs, respectively, for
the six months ended June 30, 2005, versus June 30, 2004.
    
    Total depreciation and amortization for the resorts in Wisconsin Dells, Sandusky,
Sheboygan, and Williamsburg was $7,700 for the six months ended June 30, 2005. Included
in this amount are loan fees of $731 and $1,385 for Williamsburg and Poconos,
respectively, were written off to amortization expense at the time the construction
loans were paid off during the six months ended June 30, 2005. Depreciation and
amortization for the resort in Sheboygan was $432 for the six months ended June 30,
2004. The increase in depreciation and amortization also includes the effect of a
change made in the first quarter of 2005 to the estimate of useful lives used to
depreciate our property and equipment, which resulted in a decrease in depreciation for
our resorts in Traverse City and Kansas City in the six months ended June 30, 2005, as
compared to June 30, 2004.
 Net loss.
 
    
    Our increased operating loss in the 2005 period.
    
    A gain on sale of investments in the 2004 period (we did not have any comparable
sales in the 2005 period).
    
    Income from discontinued operations in the 2004 period.
  26




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##### Table of Contents




    
    Interest on mandatorily redeemable shares incurred in the 2004 period was not
incurred in the 2005 period due to the conversion of the mandatorily redeemable
interests to common stock in conjunction with the Formation Transactions.
    
    Income tax benefit in the 2005 period with no income tax benefit in the 2004 period,
reflecting our structure after the IPO as a C Corporation that pays income taxes, as
opposed to the Predecessors pass-through entities with no income tax obligations in
the 2004 period.
 Liquidity and Capital Resources
  June 30,2005Long-Term Debt:Senior credit facility
    
    $
    Traverse City/Kansas City Mortgage Loan
    
    
    74,531Sheboygan Mortgage Loan
    
    
    29,234Junior Subordinated Debentures
    
    
    51,550Other mortgage debt
    
    
    1,523Other Long-Term Liabilities:City of Sheboygan bonds
    
    
    8,129City of Sheboygan loan
    
    
    4,061169,028Less current portion of long-term debt
    
    
    (1,680
    )$
    167,348
 Senior Credit Facility
 Traverse City/Kansas City Mortgage Loan
 Sheboygan Mortgage Loan
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##### Table of Contents



Junior Subordinated Debentures
    City of Sheboygan Bonds
 City of Sheboygan Loan
 Short-Term Liquidity Requirements
  
    
    recurring maintenance, repairs and other operating expenses necessary to properly maintain our resorts;
    
    property taxes and insurance expenses;
    
    interest expense and scheduled principal payments on outstanding indebtedness; and
    
    general and administrative expenses.
  28




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##### Table of Contents



Long-Term Liquidity Requirements
    Contractual Obligations
  Payment TermsLess Than
    
    
    
    
    
    
    
    
    
    More ThanTotal
    
    1 Year
    
    1-3 Years
    
    3-5 Years
    
    5 YearsDebt Obligations(1)
    
    $
    169,028
    
    
    $
    1,680
    
    
    $
    31,653
    
    
    $
    3,292
    
    
    $
    132,403Operating Lease Obligations
    
    
    1,779
    
    
    
    417
    
    
    
    815
    
    
    
    547
    
    
    
    Construction Contracts
    
    
    18,976
    
    
    
    18,976
    
    
    
    
    
    
    

    
    
    
    
    Total
    
    $
    189,783
    
    
    $
    21,073
    
    
    $
    32,468
    
    
    $
    3,839
    
    
    $
    132,403
 
 (1)
    
    Includes $8,129 of fixed rate debt recognized as a liability related to certain bonds issued
by the City of Sheboygan and $4,061 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
  29




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##### Table of Contents



Cash Flows
 Six months ended June 30, 2005, for Great Wolf Resorts, Inc. compared with the six months ended
June 30, 2004, for the Predecessor
 Increase2005
    
    2004
    
    (Decrease)Net cash (used in) provided by operating activities
    
    $
    (6,643
    )
    
    $
    1,622
    
    
    $
    (8,265
    )Net cash used in investing activities
    
    
    (65,195
    )
    
    
    (50,898
    )
    
    
    (14,297
    )Net cash provided by financing activities
    
    
    24,696
    
    
    
    52,077
    
    
    
    (27,381
    )
 Operating Activities.
 Investing Activities.
 Financing Activities.
 Inflation
  
 ITEM 3 . QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
    
    $74,531 of fixed rate debt secured by two of our resorts. This debt bears interest at
6.96%.
    
    $29,234 of variable rate debt secured by one of our resorts. This debt bears interest
at a floating rate equal to prime plus 200 basis points. The total rate was 8.25% at June
30, 2005.
    
    $51,550 of debentures that bear interest at a fixed rate of 7.80% through March 2015
and then at a floating rate of LIBOR + 310 basis points thereafter. The securities mature
in March 2035.
    
    $8,129 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 $4,061 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;
and
    
    $1,523 of other fixed rate debt.
   30




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls
  31




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 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
  FOR
    
    WITHHELDBruce D. Neviaser
    
    18,759,552 votes
    
    773,595 votesJohn Emery
    
    18,989,296 votes
    
    543,851 votesElan Blutinger
    
    19,497,512 votes
    
    35,635   votesRandy Churchey
    
    18,895,577 votes
    
    637,570 votesMichael M. Knetter
    
    19,133,833 votes
    
    399,314 votesAlissa N. Nolan
    
    19,258,306 votes
    
    274,841 votesMarc B. Vaccaro
    
    18,759,602 votes
    
    773,545 votesHoward Silver
    
    18,894,577 votes
    
    638,570 votes
 
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
 
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##### Table of Contents



ExhibitNumber
    
    Description3.1
    
    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
December 20, 2004 (incorporated herein by reference to Exhibit 3.2 to the
Companys Registration Statement on Form S-1 filed August 12, 2004)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
    
    Revolving Credit Agreement, by and among Great Wolf Resorts, Inc., GWR
Operating Partnership, L.L.L.P., the Subsidiary Guarantors named therein,
Citicorp North America, Inc., Societe Generale, Citigroup Global Markets,
Inc., SG Americas Securities LLC and Calyon New York Branch (incorporated
herein by reference to Exhibit 10.15 to the Companys Registration
Statement on Form S-1 filed January 21, 2005) as amended by First Letter
Amendment dated February 10, 2005 (incorporated herein by reference to
Exhibit 10.1 to the Companys Form 10-Q filed May 12, 2005) and by Second
Letter Amendment dated as of April 25, 2005 (incorporated herein by
reference to Exhibit 10.1 to the Companys Form 10-Q filed May 12, 2005)31.1*
    
    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. 33




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##### Table of Contents



SIGNATURE
  GREAT WOLF RESORTS, INC./s/ James A. CalderJames A. CalderChief Financial Officer
(Duly authorized officer)
 (Principal Financial and Accounting Officer)  34