Edgar Filing: Great Wolf Resorts, Inc.

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FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

¨	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 001-35458

GREAT WOLF RESORTS, INC.

(Exact name of registrant as specified in its charter)

Delaware

51-0510250

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

525 Junction Road, Suite 6000 South

Madison, Wisconsin 53717

53717

(Address of principal executive offices)

(Zip Code)

(608) 662-4700

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares outstanding of the issuer’s common stock was 200 as of August 14, 2013.

Great Wolf Resorts, Inc.

Quarterly Report on Form 10-Q

For the Quarter Ended June 30, 2013

INDEX


		Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)		4
	Condensed Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012		4
	Condensed Consolidated Statements of Income for the three months ended June 30, 2013, period May 5, 2012 through June 30, 2012, period April 1, 2012 through May 4, 2012, six months ended June 30, 2013 , period May 5, 2012 through June 30, 2012 and period January 1, 2012 through May 4, 2012		5
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2013, period May 5, 2012 through June 30, 2012, and period January 1, 2012 through May 4, 2012		6
	Notes to Condensed Consolidated Financial Statements		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		37
Item 4.	Controls and Procedures		37

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings		37
Item 1A.	Risk Factors		37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		37
Item 3.	Defaults Upon Senior Securities		38
Item 4.	Mine Safety Disclosures		38
Item 5.	Other Information		38
Item 6.	Exhibits		38
Signatures			39

FORWARD-LOOKING STATEMENTS

Some of the statements contained in this report, and in other information we file with the Securities and Exchange Commission, or the SEC, are or may be deemed to be forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created by the Private Securities Litigation Act of 1995. All statements, other than statements of historical facts, including, among others, statements regarding our future financial results or position, business strategy, projected levels of growth, projected costs and projected performance and financing needs, are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of Great Wolf Resorts, Inc. and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “might,” “will,” “could,” “plan,” “objective,” “predict,” “project,” “potential,” “continue,” “ongoing,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that actual results may differ materially from those contemplated by such forward-looking statements. Many of these factors are beyond our ability to control or predict. Such factors include, but are not limited to:

•

competition in our markets;

•

changes in family vacation patterns and consumer spending habits;

•

regional or national economic downturns;

•

our ability to attract a significant number of guests from our target markets;

•

economic conditions in our target markets;

•

the impact of fuel costs and other operating costs;

•

our ability to develop new resorts in desirable markets or further develop and improve existing resorts on a timely and cost efficient basis;

•

our ability to manage growth, including the expansion of our infrastructure and systems necessary to support growth;

•

our ability to manage cash and obtain additional cash required for growth;

•

the general tightening in the U.S. lending markets;

•

potential accidents or injuries at our resorts;

•

decreases in travel due to pandemic or other widespread illness;

•

our ability to achieve or sustain profitability;

•

downturns in our industry segment;

•

extreme weather conditions;

•

reductions in the availability of credit to indoor waterpark resorts generally or to us and our subsidiaries;

•

uninsured losses or losses in excess of our insurance coverage;

•

our ability to protect our intellectual property, trade secrets and the value of our brands; and

•

current and possible future legal restrictions and requirements.

Further descriptions of these risks, uncertainties, and other matters can be found in our annual report and other reports filed from time to time with the SEC, including but not limited to our Annual Report on Form 10-K for the year ended December 31, 2012. We caution that the foregoing list of important factors is not complete, and we assume no obligation to update any forward-looking statement that we may make.

We believe these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. All written and oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by these cautionary statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time unless otherwise required by law. Past financial or operating performance is not necessarily a reliable indicator of future performance and you should not use our historical performance to anticipate results or future period trends.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GREAT WOLF RESORTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; dollars in thousands, except share and per share data)


	June 30, 2013			December 31, 2012
				(as revised)
ASSETS
Current assets:
Cash and cash equivalents	$	26,926		$	28,124
Restricted cash		6,119			4,159
Escrows		5,093			7,022
Accounts receivable, net of allowance for doubtful accounts of $11 and $0		5,865			7,620
Accounts receivable – affiliates		5,157			5,145
Inventory		7,556			7,203
Other current assets		4,826			4,284

Total current assets		61,542			63,557
Property and equipment, net of accumulated depreciation of $52,674 and $30,737		604,835			615,055
Investments in and advances to unconsolidated affiliates		33,236			25,697
Other assets		7,261			5,406
Goodwill		124,435			124,435
Intangible assets, net of accumulated amortization of $797 and $456		47,229			47,444

Total assets	$	878,538		$	881,594

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	65,881		$	66,768
Accounts payable		7,681			7,459
Accounts payable – affiliates		2,402			1,741
Accrued interest payable		7,793			7,858
Accrued expenses		24,395			24,934
Advance deposits		13,790			8,360
Gift certificates payable		5,266			6,882
Other current liabilities		535			1,655

Total current liabilities		127,743			125,657
Mortgage debt		390,919			396,012
Other long-term debt		61,164			60,984
Deferred tax liability, net		43,840			43,713
Deferred compensation liability		2,616			2,164

Total liabilities		626,282			628,530
Commitments and contingencies (NOTE 8)
Stockholders’ equity:
Common stock, $0.01 par value; 1,000 shares authorized; 200 shares issued and outstanding		0			0
Additional paid-in-capital		267,514			267,112
Accumulated deficit		(15,258	)		(14,048	)

Total stockholders’ equity		252,256			253,064

Total liabilities and stockholders’ equity	$	878,538		$	881,594

See accompanying notes to the condensed consolidated financial statements.

GREAT WOLF RESORTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited; dollars in thousands)


	Successor						Predecessor			Successor						Predecessor
	Three months ended June 30, 2013			Period May 5, 2012 through June 30, 2012			Period April 1, 2012 through May 4, 2012			Six months ended June 30, 2013			Period May 5, 2012 through June 30, 2012			Period January 1, 2012 through May 4, 2012
Revenues:
Rooms	$	46,113		$	28,054		$	18,368		$	95,096		$	28,054		$	63,793
Food and beverage		12,449			8,121			4,726			25,003			8,121			17,273
Other		12,044			7,267			4,615			24,525			7,267			15,920
Management and other fees		887			480			701			1,914			480			1,398
Management and other fees — affiliates		1,050			535			441			2,077			535			1,414

Total operating revenues		72,543			44,457			28,851			148,615			44,457			99,798
Other revenue from managed properties		3,212			1,878			1,123			6,391			1,878			4,193
Other revenue from managed properties — affiliates		3,007			1,729			1,129			5,927			1,729			3,901

Total revenues		78,762			48,064			31,103			160,933			48,064			107,892
Operating expenses by department:
Rooms		6,858			4,222			2,518			13,554			4,222			9,458
Food and beverage		9,352			6,129			3,492			18,359			6,129			12,946
Other		9,514			6,585			3,718			19,985			6,585			13,450
Other operating expenses:
Selling, general and administrative (including $702, $0, $0, $1,613, $0 and $0 to affiliates, respectively)		18,502			13,376			19,626			37,492			13,376			42,205
Property operating costs		9,114			4,874			3,611			18,089			4,874			11,347
Depreciation and amortization		10,461			7,779			4,450			22,336			7,779			16,469
Loss on disposition of assets		68			0			47			170			0			47

Total operating expenses		63,869			42,965			37,462			129,985			42,965			105,922
Other expenses from managed properties		3,212			1,878			1,123			6,391			1,878			4,193
Other expenses from managed properties — affiliates		3,007			1,729			1,129			5,927			1,729			3,901

Total expenses		70,088			46,572			39,714			142,303			46,572			114,016

Net operating income (loss)		8,674			1,492			(8,611	)		18,630			1,492			(6,124	)
Investment income — affiliates		405			137			83			648			137			303
Interest income		55			31			24			119			31			82
Interest expense		(9,664	)		(6,259	)		(4,359	)		(19,363	)		(6,259	)		(16,016	)
Equity in unconsolidated affiliates		(262	)		(423	)		461			(1,504	)		(423	)		558

Loss from continuing operations before income taxes		(792	)		(5,022	)		(12,402	)		(1,470	)		(5,022	)		(21,197	)
Income tax benefit (expense)		428			(258	)		103			260			(258	)		(276	)

Net loss from continuing operations		(364	)		(5,280	)		(12,299	)		(1,210	)		(5,280	)		(21,473	)
Discontinued operations, net of tax		0			7			13			0			7			(23	)

Net loss		(364	)		(5,273	)		(12,286	)		(1,210	)		(5,273	)		(21,496	)
Net income attributable to noncontrolling interest, net of tax		0			11			3			0			11			15

Net loss attributable to Great Wolf Resorts, Inc.	$	(364	)	$	(5,262	)	$	(12,283	)	$	(1,210	)	$	(5,262	)	$	(21,481	)

See accompanying notes to the condensed consolidated financial statements.

GREAT WOLF RESORTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; dollars in thousands)


	Successor						Predecessor
	Six months ended June 30, 2013			Period May 5, 2012 through June 30, 2012			Period January 1, 2012 through May 4, 2012
Operating activities:
Net loss	$	(1,210	)	$	(5,273	)	$	(21,496	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		22,336			7,779			16,469
Bad debt expense		42			9			26
Amortization of debt fair value		(2,469	)		(887	)		0
Non-cash share-based compensation expense		508			868			3,348
Loss on disposition of assets		170			0			47
Equity in unconsolidated affiliates		1,504			423			(558	)
Deferred tax (benefit) expense		(101	)		36			73
Changes in operating assets and liabilities:
Accounts receivable and other assets		277			(1,221	)		(1,304	)
Accounts payable, accrued expenses and other liabilities		1,689			(882	)		3,694
Affiliate receivables and payables, net		655			93			1,379

Net cash provided by operating activities		23,401			945			1,678

Investing activities:
Capital expenditures for property and equipment		(11,341	)		(3,264	)		(2,237	)
Investment in unconsolidated affiliates		(6,712	)		0			0
Investment in development		(2,775	)		(14	)		(75	)
Proceeds from sale of assets		15			0			3
Increase in restricted cash and escrows		(31	)		(1,279	)		(3,464	)

Net cash used in investing activities		(20,844	)		(4,557	)		(5,773	)

Financing activities:
Principal payments on debt		(3,331	)		(392	)		(1,777	)
Payment of loan costs		(296	)		(4	)		(120	)
Repurchase of stock for restricted stock tax withholding		(128	)		0			0
Capital contribution		0			1,091			0

Net cash (used in) provided by financing activities		(3,755	)		695			(1,897	)

Net decrease in cash and cash equivalents		(1,198	)		(2,917	)		(5,992	)
Cash and cash equivalents, beginning of period		28,124			27,775			33,767

Cash and cash equivalents, end of period	$	26,926		$	24,858		$	27,775

Supplemental Cash Flow Information:
Cash paid for interest	$	21,897		$	2,177		$	20,499
Cash paid for income taxes, net of refunds	$	606		$	423		$	211
Non-cash investing activities:
Accrued capital expenditures	$	706		$	0		$	0

See accompanying notes to the condensed consolidated financial statements.

GREAT WOLF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Organization

Note 2 – Summary of Significant Accounting Policies

Note 3 – Revision of Prior Period Financial Statements

Note 4 – Related Party and Affiliate Transactions

Note 5 – Debt

Note 6 – Fair Value of Financial Instruments

Note 7 – Derivative Instruments

Note 8 – Commitments and Contingencies

Note 9 – Segments

Note 10 – Supplemental Guarantor Condensed Consolidating Financial Statements

Note 11 – Subsequent Events

GREAT WOLF RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; dollars in thousands, except otherwise specified)

1. ORGANIZATION

The terms “Great Wolf Resorts,” “us,” “we,” and “our” are used in this report to refer to Great Wolf Resorts, Inc.^® and its consolidated subsidiaries.

Business Summary

We are a family entertainment resort company that provides our guests with a high quality vacation at an affordable price. We are the largest owner, licensor, operator and developer in North America of drive-to destination family resorts featuring indoor waterparks and other family-oriented entertainment activities. Each of our resorts features approximately 300 to 600 family suites, each of which sleeps from six to ten people and includes a wet bar, microwave oven, refrigerator and dining and sitting area. We provide a full-service entertainment resort experience to our primary target customer base: families with children ranging in ages from 2 to 12 years old that live within a convenient driving distance of our resorts. Several of our resorts have significant meeting space or conference centers, allowing us to also attract groups in addition to our leisure guests. Our resorts are open year-round and provide a consistent, comfortable environment where our guests can enjoy our various amenities and activities. We operate and license resorts under our Great Wolf Lodge^® brand name. We own and operate the majority of the resorts in our portfolio; we have also entered into licensing and management arrangements with third parties relating to the operation of resorts under the Great Wolf Lodge brand name.

Each of our Great Wolf Lodge resorts has a Northwoods lodge theme, designed with exposed timber beams, massive stone fireplaces, Northwoods creatures including mounted wolves and an animated two-story Clock Tower that provides theatrical entertainment for younger guests. We provide our guests with a self-contained vacation experience and focus on capturing a significant portion of their total vacation spending. We earn revenues through the sale of rooms (which includes admission to our indoor waterpark), and other revenue-generating resort amenities. Each of our resorts features a combination of the following revenue-generating amenities: themed restaurants, ice cream shop and confectionery, kid spa, game arcade, gift shop, miniature golf, interactive game attraction and meeting space. We also generate revenues from licensing fees, management fees and other fees with respect to our operation or development of properties owned in whole or in part by third parties.

On May 4, 2012, the Company merged (the “Merger”) with K-9 Acquisition, Inc., a Delaware corporation (“Merger Sub”) and subsidiary of a fund managed by an affiliate of Apollo Global Management, LLC (together with its subsidiaries, “Apollo”). Although the Company continued as the same legal entity after the Merger, the Company’s capital structure changed significantly as a result of the Merger and our financial statement presentations distinguish between a “Predecessor” for periods prior to the Merger and a “Successor” for periods subsequent to the Merger. As a result of the application of the acquisition method of accounting as of the effective time of the Merger, the financial statements for the Predecessor period and for the Successor period are presented on different bases and are, therefore, not comparable.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation — We have prepared these unaudited condensed consolidated financial statements and related notes in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures typically included in an annual report have been condensed or omitted for this quarterly report. The balance sheet as of December 31, 2012 was derived from the audited financial statements. Therefore, these interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements, accompanying notes and other information included in our Annual Report on Form 10-K for the year ended December 31, 2012.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly in all material respects the financial position, results of operations and cash flows for all periods presented have been made. Our business is seasonal and for this and other reasons operating results for interim periods may not be indicative of our full year results or future performance.

Principles of Consolidation — The accompanying unaudited condensed consolidated financial statements include all of the accounts of Great Wolf Resorts and our consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in the condensed consolidated financial statements.

Noncontrolling Interests. Creative Kingdoms, LLC (“Creative Kingdoms”) was a consolidated subsidiary with a noncontrolling interest through December 28, 2012, at which time we purchased the entire noncontrolling interest. Prior to that date, the net earnings attributable to the controlling and noncontrolling interests were included on the face of our condensed consolidated statements of income.

Variable Interest Entities. A legal entity is referred to as a variable interest entity if, by design (1) the total equity investment at risk is not sufficient to permit the legal entity to finance its activities without additional subordinated financial support from other parties, or (2) the entity has equity investors that cannot make significant decisions about the entity’s operations through voting rights, or do not have the obligation to absorb the expected losses, or do not have the right to receive the residual returns of the entity. A variable interest entity must be consolidated if it is determined that we have both the (1) power to direct the activities of the variable interest entity that most significantly impact the entity’s economic performance and (2) obligation to absorb losses or the right to receive benefits of the variable interest entity that could potentially be significant to the variable interest entity.

In accordance with the guidance for the consolidation of variable interest entities, we analyze our variable interests, including equity investments and management agreements, to determine if an entity in which we have a variable interest is a variable interest entity and whether we must consolidate that variable interest entity. Our analysis includes both quantitative and qualitative reviews. We based our quantitative analysis on the forecasted cash flows of the entity, and our qualitative analysis on a consideration of all facts and circumstances including, but not limited to, our role in establishing the variable interest entity, our ongoing rights and responsibilities, the organization structure, and relevant financial and other agreements.

We have equity investments in the joint ventures that own (i) the Great Wolf Lodge resort in Grand Mound, Washington (“Grand Mound”) and (ii) the Great Wolf Lodge resort which is to be developed in Garden Grove, California (“Garden Grove”) as described in Note 4. We manage each resort, and we have concluded that both joint ventures are variable interest entities due to the management contracts that provide us with certain rights. However, we have concluded that we are not the primary beneficiary because the majority equity owners of each joint venture have substantive participating rights over the activities that most significantly impact the economic performance of each joint venture. As a result, we have concluded that power is shared between us and the other equity investors in each joint venture. As we share power with the majority equity owners, we are not the primary beneficiary of either joint venture and, therefore, we do not consolidate these entities. Our maximum exposure to loss related to our involvement with each joint venture as of June 30, 2013 and December 31, 2012 is limited to the carrying value of our equity investment in the joint ventures and receivables as of those dates. Our exposure is limited because of the non-recourse nature of the borrowings of the joint ventures. The total carrying values of those items on our condensed consolidated balance sheet as of June 30, 2013 and December 31, 2012 is $38,195 and $30,382, respectively, and are included in the “Accounts receivable — affiliates” and “Investments in and advances to unconsolidated affiliates” line items on our condensed consolidated balance sheets.

Reclassifications — We have reclassified (i) “Affiliate receivables and payables, net” in our 2012 condensed consolidated statements of cash flows on a separate line to present related party transactions on the face of the statement, and (ii) income tax expense from “Equity in unconsolidated affiliates” to “Income tax expense” in our 2012 condensed consolidated statements of income as equity in unconsolidated affiliates is presented within loss from continuing operations before income taxes and no longer presented net of tax, to conform to the 2013 presentation.

Discontinued Operations — On March 24, 2011, we sold our Blue Harbor Resort. As a result of the sale, we have included the operations of the Blue Harbor Resort in discontinued operations for all prior periods presented. The operations and cash flows of the entity have been eliminated from the ongoing operations and we do not have any significant continuing involvement in the operations of the entity after the disposal transaction.

Income Taxes — At the end of each interim reporting period, we estimate the effective tax rate expected to be applicable for the full fiscal year. We use that estimated effective tax rate in providing for income taxes on a year-to-date basis. We account for the tax effect of significant unusual or extraordinary items in the period in which they occur. We account for major changes in our valuation allowance within continuing operations in the period in which they occur.

New Accounting Pronouncements — We have considered all recently issued accounting pronouncements and do not believe the adoption of such pronouncements will have a material impact on our condensed consolidated financial statements.

3. REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS

In connection with the preparation of our condensed consolidated financial statements for the first quarter of 2013, we identified an error in the timely recording for separation payments. In accordance with accounting guidance found in ASC 250-10 (SEC Staff Accounting Bulletin No. 99, Materiality), we assessed the materiality of the error and concluded that the error was not material to any of our previously issued financial statements. In accordance with accounting guidance found in ASC 250-10 (SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements), we revised our previously issued financial statements to correct the effect of this error. As the revision relates to the fourth quarter of 2012, it will be reflected in future filings as applicable.

The following table presents the effect of this correction on the Company’s Consolidated Balance Sheet as of December 31, 2012 and on the Consolidated Statement of Income, Consolidated Statement of Equity and Consolidated Statement of Cash Flows for the successor period May 5, 2012 through December 31, 2012:


	As Previously Reported			Adjustment			As Revised
December 31, 2012
Consolidated Balance Sheet
Accrued expenses	$	23,888		$	1,046		$	24,934
Total current liabilities		124,611			1,046			125,657
Total liabilities		627,484			1,046			628,530
Accumulated deficit		(13,002	)		(1,046	)		(14,048	)
Total stockholders’ equity		254,110			(1,046	)		253,064

Period May 5, 2012 through December 31, 2012
Consolidated Statement of Income
Selling, general and administrative		51,930			1,046			52,976
Total operating expenses		177,591			1,046			178,637
Total expenses		193,190			1,046			194,236
Net operating income		13,996			(1,046	)		12,950
Loss from continuing operations before income taxes		(11,425	)		(1,046	)		(12,471	)
Net loss from continuing operations		(13,094	)		(1,046	)		(14,140	)
Net loss		(13,085	)		(1,046	)		(14,131	)
Net loss attributable to Great Wolf Resorts, Inc.		(13,002	)		(1,046	)		(14,048	)
Consolidated Statement of Equity
Net loss attributable to Great Wolf Resorts, Inc.		(13,002	)		(1,046	)		(14,048	)
Accumulated deficit		(13,002	)		(1,046	)		(14,048	)
Consolidated Statement of Cash Flow
Net loss		(13,085	)		(1,046	)		(14,131	)
Accounts payable, accrued expenses and other liabilities		1,000			1,046			2,046

4. RELATED PARTY AND AFFILIATE TRANSACTIONS

Our related parties and affiliates include (i) members of the joint venture that own the Great Wolf Lodge resort in Grand Mound, Washington, (ii) members of the joint venture that own the Great Wolf Lodge which is to be developed in Garden Grove, California and (iii) Apollo, our indirect controlling shareholder.

Our unconsolidated 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. On March 21, 2013, each joint venture partner made an additional investment of $6,712 in preferred equity of the unconsolidated joint venture. Our ownership interest remains at 49%.

Our unconsolidated joint venture with an affiliate of McWhinney Real Estate Services, Inc. owns the Great Wolf Lodge resort and conference center to be developed on a 10.8-acre land parcel in Garden Grove, California. Our ownership interest in this joint venture is 15.28%.

We regularly transact business with our related parties and affiliates. The following summarizes our transactions:


	Successor				Predecessor		Successor				Predecessor
	Three months ended June 30, 2013		Period May 5, 2012 through June 30, 2012		Period April 1, 2012 through May 4, 2012		Six months ended June 30, 2013		Period May 5, 2012 through June 30, 2012		Period January 1, 2012 through May 4, 2012
Management and other fees	$	1,050	$	535	$	441	$	2,077	$	535	$	1,414
Other revenue from managed properties		3,007		1,729		1,129		5,927		1,729		3,901
Selling, general and administrative		702		0		0		1,613		0		0
Other expenses from managed properties		3,007		1,729		1,129		5,927		1,729		3,901
Investment income		405		137		83		648		137		303


	June 30, 2013		December 31, 2012

Accounts receivable	$	5,157	$	5,145
Investments in and advances to unconsolidated affiliates		33,236		25,697
Accounts payable		2,402		1,741

5. DEBT

Debt consists of the following:


	Carrying Value						Principal Amounts
	June 30, 2013			December 31, 2012			June 30, 2013
Mortgage Debt:
Traverse City/Kansas City mortgage loan	$	61,660		$	62,215		$	62,914
Pocono Mountains mortgage loan		92,244			93,114			90,984
Concord mortgage loan		47,440			49,158			47,285
First mortgage notes		255,456			258,293			230,000
Other Long-Term Debt:
Junior subordinated debentures		61,164			60,984			80,545

		517,964			523,764			511,728
Less current portion of long-term debt		(65,881	)		(66,768	)		(65,881	)

Total long-term debt	$	452,083		$	456,996		$	445,847

The carrying value amounts as of June 30, 2013 and December 31, 2012, include net fair value adjustments that are amortized to interest expense over the life of each loan, using the effective interest rate method. The unamortized fair value adjustment as of June 30, 2013 and December 31, 2012 was $6,236 and $8,705, respectively.

Traverse City/Kansas City Mortgage Loan — This non-recourse loan is secured by our Traverse City and Kansas City resorts. The loan bears interest at a fixed rate of approximately 7.00%, is subject to a 25-year principal amortization schedule, and matures in January 2015. The loan has customary financial and operating debt compliance covenants. The loan also has customary restrictions on our ability to prepay the loan prior to maturity. We were in compliance with all covenants under this loan at June 30, 2013. While recourse under the loan is limited to the property owner’s interest in the mortgaged property, we have provided limited guarantees with respect to certain customary non-recourse provisions and environmental indemnities relating to the loan.

In September 2010, the loan’s master servicer implemented a lock-box cash management arrangement. The lock-box cash management arrangement requires substantially all cash receipts for the two resorts to be moved each day to a lender-controlled bank account, which the loan servicer then uses to fund debt service and operating expenses for the two resorts on a monthly basis, with excess cash flow being deposited in a reserve account and held as additional collateral for the loan. Therefore, we have classified the entire outstanding principal balance of the loan as a current liability as of June 30, 2013 and December 31, 2012, since the lock-box arrangement requires us to use the properties’ working capital to service the loan, and we do not presently have the ability to refinance this loan to a new, long-term loan. Although the entire principal balance of the loan is classified as a current liability as of June 30, 2013 and December 31, 2012, the loan is not in default, and the principal balance is not due currently.

Pocono Mountains Mortgage Loan — This loan is secured by a mortgage on our Pocono Mountains resort. The loan bears interest at a fixed rate of 6.10% and matures in January 2017. The loan is currently subject to a 30-year principal amortization schedule. The loan has customary covenants associated with an individual mortgaged property. The loan also has customary restrictions on our ability to prepay the loan prior to maturity. We were in compliance with all covenants under this loan at June 30, 2013.

Concord Mortgage Loan — This loan is secured by a mortgage on our Concord resort. This loan bears interest at a floating rate of 30-day LIBOR plus a spread of 500 basis points with a minimum rate of 6.00% per annum (effective rate of 6.00% at June 30, 2013 and December 31, 2012) and matures on December 31, 2016. This loan requires four quarterly principal payments of $375. We are required to provide interest rate protection on a portion of the loan amount through the loan’s maturity date. Therefore, we executed interest rate caps that cap the loan at an 8.00% interest rate through December 2016. See Note 7 for additional discussion of the interest rate caps. We were in compliance with all covenants under this loan at June 30, 2013.

First Mortgage Notes — In April 2010, we completed, in a private placement followed by a registered exchange offer, an offering of $230,000 in aggregate principal amount of our 10.875% first mortgage notes (the “Notes”) due April 2017. The Notes were sold at a discount that provides an effective yield of 11.875% before transaction costs. The Notes are senior obligations of GWR Operating Partnership, L.L.L.P. and Great Wolf Finance Corp (“Issuers”). The Notes are guaranteed by Great Wolf Resorts and by our subsidiaries that own three of our resorts and those guarantees are secured by first priority mortgages on those three resorts. The Notes are also guaranteed by certain of our other subsidiaries on a senior unsecured basis.

Junior Subordinated Debentures — In March 2005, we completed a private offering of $50,000 of trust preferred securities (“TPS”) through Great Wolf Capital Trust I (“Trust I”), a Delaware statutory trust which is our subsidiary. The securities pay holders cumulative cash distributions at an annual fixed rate of 7.80% through March 2015 and then at a floating annual rate of LIBOR plus a spread of 310 basis points thereafter. The securities mature in March 2035 and are callable at no premium after March 2010. In addition, we invested $1,550 in Trust I’s common securities, representing 3% of the total capitalization of Trust I.

In March 2012, we completed an exchange through Great Wolf Capital Trust IV (“Trust IV”), a Delaware statutory trust which is our subsidiary, and issued $28,125 of TPS in exchange for all $28,125 of TPS of Great Wolf Capital Trust III (“Trust III”). The securities pay holders cumulative cash distributions at an annual fixed rate of 7.90% through July 2012 and at a floating annual rate equal to LIBOR plus 550 basis points thereafter (effective rate of 5.78% and 5.81% at June 30, 2013 and December 31, 2012, respectively). The securities mature in July 2017 and are callable at no premium after July 2012. In conjunction with this transaction, Trust IV issued to us 870 common securities, which are all of the issued and outstanding common securities of Trust IV, with a liquidation amount of $870. In addition, in conjunction with this transaction, we issued to Trust IV $28,995 of junior subordinated debentures with payment terms that mirror the distribution terms of the TPS of Trust IV.

Our condensed consolidated financial statements present the debentures issued to the Trusts as other long-term debt. Our investments in the Trusts are accounted for as cost investments and are included in other assets on our consolidated balance sheets. For financial reporting purposes, we record interest expense on the corresponding notes in our condensed consolidated statements of income.

For a description of the refinancing of certain of our debt that occurred after June 30, 2013, see the information provided under Note 11.

6. FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). GAAP outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Certain assets and liabilities must be measured at fair value, and disclosures are required for items measured at fair value.

We measure our financial instruments using inputs from the following three levels of the fair value hierarchy. The three levels are as follows:

•

Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date.

•

Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (that is, interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

•

Level 3 includes unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability. We develop these inputs based on the best information available, including our own data.

The following table summarizes our financial assets using the fair value hierarchy on a recurring basis:

June 30, 2013


	Level 1		Level 2		Level 3		Total
Interest rate caps	$	0	$	203	$	0	$	203

December 31, 2012


	Level 1		Level 2		Level 3		Total
Interest rate caps	$	0	$	115	$	0	$	115

Level 2 assets consist of our interest rate caps. To determine the estimated fair value of our interest rate caps we use market information provided by the banks from whom the interest rate caps were purchased.

As of June 30, 2013 and December 31, 2012, we estimate the total fair value of the interest rate caps described above to be approximately equal to their total carrying values. We based the fair value of the interest rate caps on available market data for similar securities, which would be categorized as Level 2 in the fair value hierarchy.

The carrying amounts for cash and cash equivalents, restricted cash, escrows, accounts receivable, other current assets, accounts payable, accrued expenses, gift certificates payable, advance deposits and other current liabilities approximate fair value because of the short-term nature of these instruments.

7. DERIVATIVE INSTRUMENTS

In connection with the refinancing of the Concord Mortgage loan, we were required to provide interest rate protection on a portion of the loan amount through the loan’s maturity date. Therefore, we executed interest rate caps that cap the loan at an 8.00% interest rate through December 2016. The interest rate caps were not designated as hedges. We mark the interest rate caps to market and record the change to interest expense.

The following table summarizes the fair value of derivative instruments in our condensed consolidated balance sheets:


		Fair Value as of
	Balance Sheet Classification	June 30, 2013		December 31, 2012
Derivatives not designated as hedging instruments
Interest rate caps	Other assets	$	203	$	115

The following table summarizes the effect of derivatives not designated as hedging instruments in our condensed consolidated statements of income:


			Gain (Loss) Recognized (Pre-tax)
	Income Statement Classification		Three months ended June 30, 2013 Successor		Period May 5, 2012 through June 30, 2012 Successor			Period April 1, 2012 through May 4, 2012 Predecessor		Six months ended June 30, 2013 Successor		Period May 5, 2012 through June 30, 2012 Successor			Period January 1, 2012 through May 4, 2012 Predecessor
Derivatives not designated as hedging instruments
Interest rate caps		Interest expense	$	82		(144	)		0		87		(144	)	$	(34	)

For a description of the settlement of these interest rate caps in connection with the refinancing of certain of our debt that occurred after June 30, 2013, see the information provided under Note 11.

8. COMMITMENTS AND CONTINGENCIES

Litigation — On and after March 14, 2012, the Company and certain of its current and former officers and directors and, in some cases, some or all of K-9 Investors, L.P., Apollo Management VII, L.P., Apollo Global Management, LLC and K-9 and Merger Sub were named as defendants in five class action lawsuits filed in the Delaware Court of Chancery which were ultimately consolidated into a single class action (the “Delaware Action”). In the Delaware Action, the plaintiff, on behalf of a putative class of stockholders, sought to enjoin the proposed transaction that was the subject of the Merger Agreement. Other lawsuits were filed in Wisconsin state and federal court — two in the Circuit Court, Civil Division for Dane County, one of which was dismissed by the plaintiff prior to settlement (the surviving action, “Wisconsin State Court Action”), and one in the United States District Court for the Western District of Wisconsin (the “Wisconsin Federal Court Action”).

On April 25, 2012, the parties to the Delaware Action and the Wisconsin State Court Action reached an agreement in principle to settle those cases. The proposed settlement, which was subject to court approval, provided for, among other things, the dismissal with prejudice of plaintiffs’ complaints and of all claims asserted therein, that all parties granted all applicable releases of claims against all other parties, and that the parties to the Delaware Action and the Wisconsin State Court Action acknowledged that the plaintiffs and their counsel in those cases would petition the appropriate court or courts for an award of attorneys’ fees and expenses in connection with the cases. Any award of fees and expenses to plaintiffs’ counsel was subject to approval by the appropriate court or courts. Pursuant to an order from the Delaware Court of Chancery, notice to the class was mailed on October 19, 2012.

On April 30, 2012, the parties to the Wisconsin Federal Court Action agreed to settle that case, subject to court approval of the proposed class-wide settlement in the Delaware Action and entry of a final order dismissing the Delaware Action in its entirety. Pursuant to their agreement, the parties to the Wisconsin Federal Court Action filed with the court, on April 30, 2012, a stipulation providing that the Wisconsin Federal Court Action be voluntarily dismissed with respect to all defendants and that such dismissal would be with prejudice as to the plaintiff upon the consummation of the settlement of the Delaware Action.

On September 27, 2012, the parties to the Delaware Action agreed to settle that case. Pursuant to their agreement, the parties to the Delaware Action filed with the Delaware Court of Chancery on September 27, 2012, a stipulation providing that the Delaware Action be voluntarily dismissed with respect to all defendants and that such dismissal be with prejudice as to the plaintiff.

On December 18, 2012, the Delaware Court of Chancery approved the class-wide settlement in the Delaware Action and entered a final order dismissing the Delaware Action in its entirety. It awarded counsel for the plaintiffs in the Delaware Action fees and expenses in the amount of $1,940, which was paid in 2013.

The Company, the members of the Board of Directors, Apollo Management VII, L.P., Apollo Global Management, LLC, K-9 and Merger Sub each have denied, and continue to deny, that they committed or attempted to commit any violation of law or breach of fiduciary duty owed to the Company and/or its stockholders, aided or abetted any breach of fiduciary duty, or otherwise engaged in any of the wrongful acts alleged in all of these cases. All of the defendants expressly maintain that they complied with their fiduciary and other legal duties. However, in order to avoid the costs, disruption and distraction of further litigation, and without admitting the validity of any allegation made in the actions or any liability with respect thereto, the defendants concluded that it is desirable to settle the claims against them on the terms reflected in the settlements.

We are involved in litigation from time to time in the ordinary course of our business. We do not believe that the outcome of any pending or threatened litigation will have a material adverse effect on our financial condition or results of operations. However, as is inherent in legal proceedings where issues may be decided by finders of fact, there is a risk that unpredictable decisions, materially adverse to the Company, could occur.

9. SEGMENTS

We have two reportable segments:

•

Resort ownership/operation — aggregated operating results derived from our consolidated owned resorts; and

•

Resort third-party management/licensing — aggregated operating results derived from management, license and other related fees from unconsolidated managed resorts.

The Other items in the table below includes items that do not constitute a reportable segment and represent corporate-level activities and the activities of other operations not included in the Resort Ownership/Operation or Resort Third-Party Management/License segments. Total assets at the corporate level primarily consist of cash, our investment in affiliates, and intangibles. Total assets for all segments are located within the United States.

The following summarizes significant financial information regarding our segments:


	Resort Ownership/ Operation		Resort Third-Party Management /License		Other			Totals per Financial Statements
Three months ended June 30, 2013 (Successor)
Revenues	$	69,544	$	8,156	$	1,062		$	78,762

Depreciation and amortization		9,738		—		723			10,461
Net operating income (loss)		7,379		1,937		(642	)		8,674
Investment income – affiliates		—		—		—			405
Interest income		—		—		—			55
Interest expense		—		—		—			(9,664	)
Equity in unconsolidated affiliates		—		—		—			(262	)

Loss from continuing operations before income taxes		—		—		—		$	(792	)

Additions to long-lived assets		9,334		—		388		$	9,722


	Resort Ownership/ Operation		Resort Third-Party Management /License		Other			Totals per Financial Statements
Period May 5, 2012 through June 30, 2012 (Successor)
Revenues	$	42,664	$	4,622	$	778		$	48,064

Depreciation and amortization		6,950		—		829			7,779
Net operating income (loss)		3,385		1,012		(2,905	)		1,492
Investment income – affiliates		—		—		—			137
Interest income		—		—		—			31
Interest expense		—		—		—			(6,259	)
Equity in unconsolidated affiliates		—		—		—			(423	)

Loss from continuing operations before income taxes		—		—		—		$	(5,022	)

Additions to long-lived assets		3,258		—		6		$	3,264

Total assets		758,652		1,207		109,836		$	869,695


	Resort Ownership/ Operation		Resort Third-Party Management /License		Other			Totals per Financial Statements
Period April 1, 2012 through May 4, 2012 (Predecessor)
Revenues	$	27,157	$	3,394	$	552		$	31,103

Depreciation and amortization		4,179		—		271			4,450
Net operating income (loss)		3,280		1,143		(13,034	)		(8,611	)
Investment income – affiliates		—		—		—			83
Interest income		—		—		—			24
Interest expense		—		—		—			(4,359	)
Equity in unconsolidated affiliates		—		—		—			461

Loss from continuing operations before income taxes		—		—		—		$	(12,402	)


	Resort Ownership/ Operation		Resort Third-Party Management /License		Other			Totals per Financial Statements
Six months ended June 30, 2013 (Successor)
Revenues	$	142,866	$	16,309	$	1,758		$	160,933

Depreciation and amortization		20,392		—		1,944			22,336
Net operating income (loss)		19,579		3,991		(4,940	)		18,630
Investment income – affiliates		—		—		—			648
Interest income		—		—		—			119
Interest expense		—		—		—			(19,363	)
Equity in unconsolidated affiliates		—		—		—			(1,504	)

Loss from continuing operations before income taxes		—		—		—		$	(1,470	)

Additions to long-lived assets		10,788		—		553		$	11,341

Total assets		752,521		7,825		118,192		$	878,538


	Resort Ownership/ Operation		Resort Third-Party Management /License		Other			Totals per Financial Statements
Period January 1, 2012 through May 4, 2012 (Predecessor)
Revenues	$	95,876	$	10,906	$	1,110		$	107,892

Depreciation and amortization		15,476		—		993			16,469
Net operating income (loss)		11,070		2,813		(20,007	)		(6,124	)
Investment income – affiliates		—		—		—			303
Interest income		—		—		—			82
Interest expense		—		—		—			(16,016	)
Equity in unconsolidated affiliates		—		—		—			558

Loss from continuing operations before income taxes		—		—		—		$	(21,197	)

Additions to long-lived assets		2,173		—		64		$	2,237

10. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

On April 7, 2010, our subsidiaries, GWR Operating Partnership, L.L.L.P and Great Wolf Finance Corp. were co-issuers (the “Issuers”) with respect to $230,000 in principal amount of 10.875% first mortgage notes. In connection with the issuance, certain of our subsidiaries (the “Subsidiary Guarantors”) have guaranteed the first mortgage notes. Certain of our other subsidiaries (the “Non-Guarantor Subsidiaries”) have not guaranteed the first mortgage notes.

The following tables present the condensed consolidating balances sheets of the Company (“Parent”), the Issuers, the Subsidiary Guarantors and the Non-Guarantor Subsidiaries , the condensed consolidating statements of income for the three months ended June 30, 2013, period May 5, 2012 through June 30,2012, period April 1, 2012 through May 4, 2012, six months ended June 30, 2013 and period January 1, 2012 through May 4, 2012, and the condensed consolidating statements of cash flows for the six months ended June 30, 2013, period May 5, 2012 through June 1, 2012 and period January 1, 2012 through May 4, 2012. The Subsidiary Guarantors have guaranteed the first mortgage notes on a joint and several basis, and such guarantees are full and unconditional.

The accompanying condensed consolidating financial information has been prepared and presented pursuant to SEC Regulation S-X Rule 3-10, Financial statements of guarantors and issuers of guaranteed securities registered or being registered. Each of the Subsidiary Guarantors is 100% owned, directly or indirectly, by Great Wolf Resorts, Inc. There are significant restrictions on the Subsidiary Guarantors’ ability to pay dividends or obtain loans or advances. The Company’s and the Issuers’ investments in their consolidated subsidiaries are presented under the equity method of accounting.

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET

June 30, 2013

Successor

(Dollars in thousands)


	Parent			Issuers		Subsidiary Guarantors		Non Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	9,334		$	11,182	$	1,359	$	5,051		$	0		$	26,926
Restricted cash		1,026			0		0		5,093			0			6,119
Escrows		0			0		0		5,093			0			5,093
Accounts receivable, net		229			256		4,302		1,078			0			5,865
Accounts receivable—affiliate		0			0		2,835		2,322			0			5,157
Accounts receivable—consolidating entities		281,844			617,244		593,752		89,314			(1,582,154	)		0
Inventory		0			0		3,625		3,931			0			7,556
Other current assets		1,247			8		1,778		1,793			0			4,826

Total current assets		293,680			628,690		607,651		113,675			(1,582,154	)		61,542
Property and equipment, net		0			0		321,241		283,594			0			604,835
Investments in consolidating entities		263,304			286,760		0		0			(550,064	)		0
Investments in and advances to affiliates		0			3,143		0		30,093			0			33,236
Other assets		2,476			229		4,342		214			0			7,261
Goodwill		0			0		55,468		68,967			0			124,435
Intangible assets, net		0			0		47,103		126			0			47,229

Total assets	$	559,460		$	918,822	$	1,035,805	$	496,669		$	(2,132,218	)	$	878,538

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	0		$	0	$	0	$	65,881		$	0		$	65,881
Accounts payable		15			2,116		3,289		2,261			0			7,681
Accounts payable—affiliate		41			2,351		10		0			0			2,402
Accounts payable—consolidating entities		194,906			389,132		772,401		225,715			(1,582,154	)		0
Accrued interest payable		619			6,253		0		921			0			7,793
Accrued expenses		3,147			210		13,299		7,739			0			24,395
Advance deposits		0			0		7,391		6,399			0			13,790
Gift certificates payable		3,472			0		791		1,003			0			5,266
Other current liabilities		0			0		315		220			0			535

Total current liabilities		202,200			400,062		797,496		310,139			(1,582,154	)		127,743
Mortgage debt		0			255,456		0		135,463			0			390,919
Other long-term debt		61,164			0		0		0			0			61,164
Deferred tax liability, net		43,840			0		0		0			0			43,840
Deferred compensation liability		0			0		2,616		0			0			2,616

Total liabilities		307,204			655,518		800,112		445,602			(1,582,154	)		626,282
Commitments and contingencies
Stockholders’ equity:
Common stock		0			0		0		0			0			0
Additional paid-in-capital		267,514			262,773		207,615		55,158			(525,546	)		267,514
Accumulated deficit		(15,258	)		531		28,078		(4,091	)		(24,518	)		(15,258	)

Total equity		252,256			263,304		235,693		51,067			(550,064	)		252,256

Total liabilities and equity	$	559,460		$	918,822	$	1,035,805	$	496,669		$	(2,132,218	)	$	878,538

CONSOLIDATING BALANCE SHEET

December 31, 2012

(Dollars in thousands)


	Parent			Issuers			Subsidiary Guarantors		Non Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	10,188		$	7,524		$	1,260	$	9,152		$	0		$	28,124
Restricted cash		1,026			0			0		3,133			0			4,159
Escrows		0			0			0		7,022			0			7,022
Accounts receivable, net		1,510			0			3,593		2,517			0			7,620
Accounts receivable – affiliates		1			0			3,475		1,669			0			5,145
Accounts receivable – consolidating entities		286,950			516,074			532,841		72,650			(1,408,515	)		0
Inventory		0			0			2,809		4,394			0			7,203
Other current assets		149			0			2,249		1,886			0			4,284

Total current assets		299,824			523,598			546,227		102,423			(1,408,515	)		63,557
Property and equipment, net		0			0			327,346		287,709			0			615,055
Investment in consolidating entities		259,419			272,492			0		0			(531,911	)		0
Investment in and advances to affiliates		0			0			1,476		24,221			0			25,697
Other assets		2,472			1			2,789		144			0			5,406
Goodwill		0			0			55,468		68,967			0			124,435
Intangible assets, net		0			0			47,444		0			0			47,444

Total assets	$	561,715		$	796,091		$	980,750	$	483,464		$	(1,940,426	)	$	881,594

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	0		$	0		$	0	$	66,768		$	0		$	66,768
Accounts payable		0			1,773			3,146		2,633			(93	)		7,459
Accounts payable – affiliates		0			1,739			2		0			0			1,741
Accounts payable – consolidating entities		194,546			268,601			734,219		210,327			(1,407,693	)		0
Accrued interest payable		625			6,253			0		980			0			7,858
Accrued expenses		3,301			13			14,593		7,027			0			24,934
Advance deposits		0			0			3,220		5,140			0			8,360
Gift certificates payable		4,687			0			960		1,235			0			6,882
Other current liabilities		795			0			278		1,311			(729	)		1,655

Total current liabilities		203,954			278,379			756,418		295,421			(1,408,515	)		125,657
Mortgage debt		0			258,293			0		137,719			0			396,012
Other long-term debt		60,984			0			0		0			0			60,984
Deferred tax liability, net		43,713			0			0		0			0			43,713
Deferred compensation liability		0			0			2,164		0			0			2,164

Total liabilities		308,651			536,672			758,582		433,140			(1,408,515	)		628,530
Commitments and contingencies
Stockholders’ equity:
Common stock		0			0			0		0			0			0
Additional paid-in-capital		267,112			262,773			207,615		55,158			(525,546	)		267,112
Accumulated deficit		(14,048	)		(3,354	)		14,553		(4,834	)		(6,365	)		(14,048	)

Total equity		253,064			259,419			222,168		50,324			(531,911	)		253,064

Total liabilities and equity	$	561,715		$	796,091		$	980,750	$	483,464		$	(1,940,426	)	$	881,594

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Three months ended June 30, 2013

Successor

(Dollars in thousands)


	Parent			Issuers			Subsidiary Guarantors			Non Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Revenues:
Rooms	$	0		$	0		$	23,762		$	22,351		$	0		$	46,113
Food and beverage		0			0			6,456			5,993			0			12,449
Other		0			0			5,612			6,432			0			12,044
Management and other fees		100			0			3,458			26			(2,697	)		887
Management and other fees—affiliates		0			0			1,050			0			0			1,050

Total operating revenues		100			0			40,338			34,802			(2,697	)		72,543
Other revenue from managed properties		0			0			3,212			0			0			3,212
Other revenue from managed properties—affiliates		0			0			3,007			0			0			3,007

Total revenues		100			0			46,557			34,802			(2,697	)		78,762

Operating expenses by department:
Rooms		0			0			3,439			3,868			(449	)		6,858
Food and beverage		0			0			4,976			4,376			0			9,352
Other		0			0			4,576			4,938			0			9,514
Other operating expenses:
Selling, general and administrative		2,002			233			10,276			8,239			(2,248	)		18,502
Property operating costs		0			0			3,991			5,123			0			9,114
Depreciation and amortization		0			0			5,660			4,801			0			10,461
Loss on disposition of assets		0			0			0			68			0			68

Total operating expenses		2,002			233			32,918			31,413			(2,697	)		63,869
Other expenses from managed properties		0			0			3,212			0			0			3,212
Other expenses from managed properties—affiliates		0			0			3,007			0			0			3,007

Total expenses		2,002			233			39,137			31,413			(2,697	)		70,088

Net operating (loss) income		(1,902	)		(233	)		7,420			3,389			0			8,674
Investment income—affiliates		0			0			0			405			0			405
Interest income		45			3			0			7			0			55
Interest expense		(1,531	)		(4,858	)		0			(3,275	)		0			(9,664	)
Equity in unconsolidated affiliates		2,398			7,486			0			(262	)		(9,884	)		(262	)

(Loss) income from continuing operations before income taxes		(990	)		2,398			7,420			264			(9,884	)		(792	)
Income tax benefit (expense)		626			0			(24	)		(174	)		0			428

Net (loss) income attributable to Great Wolf Resorts, Inc.	$	(364	)	$	2,398		$	7,396		$	90		$	(9,884	)	$	(364	)

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Period May 5, 2012 through June 30, 2012

Successor

(Dollars in thousands)


	Parent			Issuers			Subsidiary Guarantors			Non Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Revenues:
Rooms	$	0		$	0		$	15,258		$	12,796		$	0		$	28,054
Food and beverage		0			0			4,291			3,830			0			8,121
Other		0			0			3,433			3,834			0			7,267
Management and other fees		52			0			3,830			3			(3,405	)		480
Management and other fees—affiliates		0			0			535			0			0			535

Total operating revenues		52			0			27,347			20,463			(3,405	)		44,457
Other revenue from managed properties		0			0			1,878			0			0			1,878
Other revenue from managed properties—affiliates		0			0			1,729			0			0			1,729

Total revenues		52			0			30,954			20,463			(3,405	)		48,064

Operating expenses by department:
Rooms		0			0			2,391			2,394			(563	)		4,222
Food and beverage		0			0			3,323			2,806			0			6,129
Other		0			0			2,923			3,662			0			6,585
Other operating expenses:
Selling, general and administrative		1,349			20			9,795			5,054			(2,842	)		13,376
Property operating costs		0			0			2,653			2,221			0			4,874
Depreciation and amortization		0			0			3,827			3,952			0			7,779

Total operating expenses		1,349			20			24,912			20,089			(3,405	)		42,965
Other expenses from managed properties		0			0			1,878			0			0			1,878
Other expenses from managed properties—affiliates		0			0			1,729			0			0			1,729

Total expenses		1,349			20			28,519			20,089			(3,405	)		46,572

Net operating (loss) income		(1,297	)		(20	)		2,435			374			0			1,492
Investment income—affiliates		0			0			0			137			0			137
Interest income		31			0			0			0			0			31
Interest expense		(931	)		(3,009	)		0			(2,319	)		0			(6,259	)
Equity in unconsolidated affiliates		(3,009	)		20			0			(423	)		2,989			(423	)

(Loss) income from continuing operations before income taxes		(5,206	)		(3,029	)		2,435			(2,231	)		0			(5,022	)
Income tax expense		(56	)		0			(94	)		(108	)		0			(258	)

Net (loss) income from continuing operations		(5,262	)		(3,009	)		2,341			(2,339	)		2,989			(5,280	)
Discontinued operations, net of tax		0			0			0			7			0			7

Net (loss) income		(5,262	)		(3,009	)		2,341			(2,332	)		2,989			(5,273	)
Net income attributable to noncontrolling interest, net of tax		0			0			0			11			0			11

Net (loss) income attributable to Great Wolf Resorts, Inc.	$	(5,262	)	$	(3,009	)	$	2,341		$	(2,321	)	$	2,989		$	(5,262	)

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Period April 1, 2012 through May 4, 2012

Predecessor

(Dollars in thousands)


	Parent			Issuers			Subsidiary Guarantors			Non Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Revenues:
Rooms	$	0		$	0		$	8,714		$	9,654		$	0		$	18,368
Food and beverage		0			0			2,225			2,501			0			4,726
Other		0			0			1,918			2,697			0			4,615
Management and other fees		30			0			2,506			2			(1,837	)		701
Management and other fees—affiliates		0			0			441			0			0			441

Total operating revenues		30			0			15,804			14,854			(1,837	)		28,851
Other revenue from managed properties		0			0			1,123			0			0			1,123
Other revenue from managed properties—affiliates		0			0			1,129			0			0			1,129

Total revenues		30			0			18,056			14,854			(1,837	)		31,103

Operating expenses by department:
Rooms		0			0			1,442			1,444			(368	)		2,518
Food and beverage		0			0			1,734			1,758			0			3,492
Other		0			0			1,580			2,138			0			3,718
Other operating expenses:
Selling, general and administrative		9,857			13			7,279			3,946			(1,469	)		19,626
Property operating costs		0			0			1,531			2,080			0			3,611
Depreciation and amortization		15			131			2,265			2,039			0			4,450
Loss on disposition of assets		0			0			47			0			0			47

Total operating expenses		9,872			144			15,878			13,405			(1,837	)		37,462
Other expenses from managed properties		0			0			1,123			0			0			1,123
Other expenses from managed properties—affiliates		0			0			1,129			0			0			1,129

Total expenses		9,872			144			18,130			13,405			(1,837	)		39,714

Net operating (loss) income		(9,842	)		(144	)		(74	)		1,449			0			(8,611	)
Investment income—affiliates		0			0			0			83			0			83
Interest income		21			4			0			(1	)		0			24
Interest expense		(595	)		(2,500	)		0			(1,264	)		0			(4,359	)
Equity in unconsolidated affiliates		(1,849	)		791			0			461			1,058			461

(Loss) income from continuing operations before income taxes		(12,265	)		(1,849	)		(74	)		728			1,058			(12,402	)
Income tax (expense) benefit		(18	)		0			(14	)		135			0			103

Net (loss) income from continuing operations		(12,283	)		(1,849	)		(88	)		863			1,058			(12,299	)
Discontinued operations, net of tax		0			0			0			13			0			13

Net (loss) income		(12,283	)		(1,849	)		(88	)		876			1,058			(12,286	)
Net income attributable to noncontrolling interest, net of tax		0			0			0			3			0			3

Net (loss) income attributable to Great Wolf Resorts, Inc.	$	(12,283	)	$	(1,849	)	$	(88	)	$	879		$	1,058		$	(12,283	)

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Six months ended June 30, 2013

Successor

(Dollars in thousands)


	Parent			Issuers			Subsidiary Guarantors			Non Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Revenues:
Rooms	$	0		$	0		$	47,544		$	47,552		$	0		$	95,096
Food and beverage		0			0			12,569			12,434			0			25,003
Other		0			0			11,428			13,097			0			24,525
Management and other fees		271			0			7,346			10			(5,713	)		1,914
Management and other fees—affiliates		0			0			2,077			0			0			2,077

Total operating revenues		271			0			80,964			73,093			(5,713	)		148,615
Other revenue from managed properties		0			0			6,391			0			0			6,391
Other revenue from managed properties—affiliates		0			0			5,927			0			0			5,927

Total revenues		271			0			93,282			73,093			(5,713	)		160,933

Operating expenses by department:
Rooms		0			0			6,879			7,630			(955	)		13,554
Food and beverage		0			0			9,613			8,746			0			18,359
Other		0			0			9,123			10,862			0			19,985
Other operating expenses:
Selling, general and administrative		3,087			679			21,833			16,651			(4,758	)		37,492
Property operating costs		0			0			8,301			9,788			0			18,089
Depreciation and amortization		0			0			11,546			10,790			0			22,336
Loss on disposition of assets		0			0			0			170			0			170

Total operating revenues		3,087			679			67,295			64,637			(5,713	)		129,985
Other expenses from managed properties		0			0			6,391			0			0			6,391
Other expenses from managed properties—affiliates		0			0			5,927			0			0			5,927

Total expenses		3,087			679			79,613			64,637			(5,713	)		142,303

Net operating (loss) income		(2,816	)		(679	)		13,669			8,456			0			18,630
Investment income—affiliates		0			0			0			648			0			648
Interest income		91			8			15			5			0			119
Interest expense		(3,039	)		(9,712	)		0			(6,612	)		0			(19,363	)
Equity in unconsolidated affiliates		3,885			14,268			0			(1,504	)		(18,153	)		(1,504	)

(Loss) income from continuing operations before income taxes		(1,879	)		3,885			13,684			993			(18,153	)		(1,470	)
Income tax benefit (expense)		669			0			(159	)		(250	)		0			260

Net (loss) income attributable to Great Wolf Resorts, Inc.	$	(1,210	)	$	3,885		$	13,525		$	743		$	(18,153	)	$	(1,210	)

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Period January 1, 2012 through May 4, 2012

Predecessor

(Dollars in thousands)


	Parent		Issuers		Subsidiary Guarantors		Non Guarantor Subsidiaries		Consolidating Adjustments			Consolidated
Revenues:
Rooms	$	0	$	0	$	30,243	$	33,550	$	0		$	63,793
Food and beverage		0		0		8,399		8,874		0			17,273
Other		0		0		7,206		8,714		0			15,920
Management and other fees		191		0		8,872		7		(7,672	)		1,398
Management and other fees—affiliates		0		0		1,414		0		0			1,414

Total operating revenues		191		0		56,134		51,145		(7,672	)		99,798
Other revenue from managed properties		0		0		4,193		0		0			4,193
Other revenue from managed properties—affiliates		0		0		3,901		0		0			3,901

Total revenues		191		0

Large accelerated filer

Accelerated filer

Non-accelerated filer

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