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Executives

Nikki Sacks - IR

Kim Schaefer - CEO

Jim Calder - CFO

Analysts

Will Marks - JMP Securities

Bill Crow - Raymond James

Jeff Thompson - Keefe, Bruyette & Woods

David Hargreaves - Stern, Agee & Leach

Great Wolf Resorts, Inc. (WOLF) Q3 2010 Earnings Call November 3, 2010 9:00 AM ET

Operator

Greetings and welcome to the Great Wolf Resorts' third quarter 2010 earnings conference call. At this time our participants are on a listen only mode. A brief Question AND Answer Session will follow the formal presentation. (Operator Instructions) As a reminder, today's call is being recorded. It is now my pleasure to introduce your host Ms. Nikki Sacks with ICR. Thank you Ms. Sachs you may now began.

Nikki Sacks

Thank you. Welcome to Great Wolf Resorts third quarter 2009 earnings conference call. Great Wolf Resorts released the third quarter 2010 results and I hope you have had a chance to review the press release. If you did not receive a copy, you can call 703-435-6293 and we will be happy to fax or email a copy to you. You also may view a copy of the release at the Company's website, www.greatwolf.com by clicking on a corporate site at the bottom of the page and then clicking on the news releases at the bottom. In compliance with the SEC's Safe Harbor guidelines, certain statements that might be made during today's conference call could be considered forward-looking and subject to certain risks that could cause results to differ materially from those projected.

Those statements may include, but are not limited to, estimates of the Company's future revenues, earnings and development activities. I refer you to the Company's SEC filings for further information on the factors that could cause actual results to differ from any estimates. Now, I would like to introduce Kim Schaefer, Chief Executive Officer and Jim Calder, Chief Financial Officer who will provide you with some insights into the Company's third quarter 2010 financial and operating results. I will now turn the session over to you Kim.

Kim Schaefer

Thanks Nikki. Good afternoon everyone. In the third quarter we once gain performed above our expectations as consumers continue to enjoy Great Wolf getaway. The third quarter is seasonally strong one for Great Wolf, as it includes our two leisure months July and august. We are pleased that we continue to deliver steady growth even in slow consumer recovery. We were able to drive same store revenue for available room or referral gains and we realized higher average daily rates. Our guests are spending money on higher margin amenities and flooded our reserves as well. This resulted in adjusted EBITDA growth of 3.5% to $25.7 million. One element sustain our relative stability has been the strength of our repeat and referral guests which accounted for 64% of our business in the third quarter. One guests have had a Great Wolf experience they do seem to want to come back for more and detail their friends. In the third quarter we offered our best promotions to this group including an added value and an early booking offer. Importantly even with these discounts we were able to drive average daily rate or ADR growth in the quarter. A slight rate increase does not tend to be a deterrent to booking as the value proposition and experience is clearly still the decision driver for our guests. Our ADR increased by 2.2% compared to the same period last year. The key segment compliment our leisure trends and growth is the group market. In the third quarter group GAAP accounted for 15% of room sold compared to 11% last year with group revenue of approximately 35%. The group social guests constitute the largest segment within our group business but we are making nice progress in attracting more corporate groups association and conventions. Ancillary expense continue to improve in the quarter up approximately 2% from the prior year but this increase was in banquet. As a result of the stronger group business in the quarter. And MagiQuest who continues to hold particular PO with (inaudible) to participate in this unique activity. With respect to the booking window it has remained fairly flat for last year with 70% of guest booking they are close to home vacation within 30 days of their visit.

Touching briefly on newest resort Concord, North Carolina. In the third quarter revenue was up over year over year primarily due to increase occupancy driven by the increase group business. Fourth quarter also looks solid over year and we continue to gain awareness on the group sales side. We do remain excited about this resort and the area in general over the long term for leisure guess as well.

As the economy Charlotte which was particularly hard hit. It does continue to improve from the reception. Another area of focus is extending our margin, we’ve been working hard to implement operational enhancement to improve our cost structure. As a percentage of revenues resort development of expenses the biggest piece of company’s controllable expenses declined by 82 basis points to 31% in the third quarter.

Later cost were down 3% overall as we continue to evaluate our operating models and implement efficiencies. Food and beverage cost were down 1% as a result of menu and portioning improvement. Importantly this focus on cost control and margin improvement has not come at the expense of guest satisfaction.

In third quarter guest service scores remained flat to prior year and already high level for the hospitality industry. Consumer awareness of Great Wolf Resorts is vital to our ongoing growth. To that end the month Great Wolf Resorts was featured in an episode of the CBS hit show Undercover Boss. The fact that a major network (inaudible) and so wanted to show case (inaudible) is estimate to the strains of the brand.

Now that’s as much from my standard but that’s okay.

It was no I mean experience related, enjoy the show, it gave us further insight into the front line operations of our resort but it also served an important function of consumer awareness. It was due by more then $13.4 million people then I did it eared and we received almost eight times more unique visitors to our website then we did on the same day the prior month. Web traffic remained elevated following the arena and we've also had 1000s more people signed up for email and so now we have more consumers, more guests that are aware of Great Wolfs Resorts.

So looking ahead to the fourth quarter the positive trend appears to be continuing. Families and undoubtedly want to take vacations and with consumer sentiment continuing to improve Great Wolf is doing their needs.

On the group side our page is improving along with the rest of the industries so we fell very optimistic about our future in this sector as well. With respect to our priorities growth remains our key focus both internal and external. In terms of opportunities outside of our existing resorts we are very active. We announced a number of activities on last quarter’s conference call.

License and management, we currently have license and management agreements at two development resorts we are working to secure the necessary financing. The developers are looking at both traditional and non-traditional sources and we will give you an update when there is news to announce on that.

So like in investments, we acquired a majority of taking credit of kingdom, the developer of experience or gaining products including MagicQuest. Acquiring a majority stake not only allowed us to protect an important proprietary revenue stream for great will but we believe there are exciting opportunities to help the founders further growth unique products and expand the MagiQuest platform, both in live gaming and online outside of Great Wolf. We are expanding our brands beyond our resorts, in the third quarter we opened our first standalone Scoops Kid Spa location in the Mall of America and Bloomington Minnesota.

And we need to go through a busy season to get a good results but the initial feedback has been very positive. We will continue to sell license and management agreement with new resort development but we are lending ourselves to ground up construction, we are looking at ways to convert existing modern parts or resorts to our Great Wolf brand. I'm really excited about these prospects and the opportunities that we believe [Roy] had for growth for our company. I'd like to now turn it over to Jim Calder, to discuss more third quarter detail, our balance sheet, and the outlook for the remainder of the year.

Jim Calder

Thanks, Kim, I'll briefly talk about our operational performance in the third quarter, so that is recording debt to liquidity positions and it concludes some comments on guidance for the rest of 2010. Our third quarter total revenues were $81.1 million up 5.6% from $76.8 million in the third quarter. As consumer demand take out during the seasonally strong summer period. Same store revenue per available room or RevPAR for all of our Great Wolf Lodge Brand properties in the third quarter was $175 up 91 basis points from the prior year.

These results were driven by 2.2% increase in average daily rate or ADR, partially offset by 90 basis point decline in occupancy. As Kim mentioned in property guests spend on amenities continue to improve and total revenue per occupied room or RevPAR which includes revenue for items like food and beverage and all the various amenities we have with our recourse increase by 2.2% on the same store basis from 2009 third quarter and $386. Relative to the broader lodging industry throughout this challenging economically from mid 2008 till today our business has proven to be more stable. We have experienced RevPAR declined with the rest of the US hotel industry our declines have been much more moderate. As we have discussed before that means our business is now comparing against results more difficult in the industry on the year-over-year basis as the overall US hotel industry is now comparing year-over-year changes versus a really depressed 2009 numbers. Because of this we have again in today’s release presented a 2 year cumulative change in RevPAR to demonstrate our out performance as compared to the overall US hotel industry. On a 2 year cumulative basis our same store third quarter RevPAR is down just 3.7% compared to a 10% decline for that overall hotel industry according to data from Smith Travel illustrating outperformance of continued out performance of the broader hotel industry over the 2 year period. For generation 2 properties which are larger properties that better represent our current resort development model and contribute about 80% of our adjusted EBITDA. Q3 seems to a RevPAR with $190 a 16 basis point decrease from the prior year and seems to a total RevPAR was $418 a 2.2% increase on the 2000 third quarter. These results were driven by 2.3% increase in ADR and a 2.8% in same store for occupied rooms spent on food beverage and other non Rev amenities partially offset by 170 basis point increase in occupancy. Turing now to the balance sheet and liquidity our balance sheet contuse to benefit from improvements we have made over the past several quarters. We have noted that maturities until the second quarter of 2012 and no significant long terms capital can be missed for construction or development of new properties. We are already actively working on re-financing or $78 million Concord mortgage loan which matures in April 2012 and that is the next maturity which I mentioned. We currently believe the re-finance load for this property will be in the 60 to $65 million range.

So it will require some pay down from the current $78 million dollar balance. We are planned for this pay down in our forecast and given our current strong cash and liquidity positions. We do not receive any issue with making that pay down. Consistent what we have stated before as we continue to pursue our capital like gross strategy our primary use of cash outside of normal property CapEx will be to manage our balance sheet leverage.

Through September 30th year to date we spent approximately $8 million in total CapEx this year and expected total spent for 2010 to be about $9 million. As we discussed in today’s release subsequent to the end of the quarter. The non-recourse loans secured by our Traverse City, Michigan and Kanas City, Kansas resorts was transferred to the loans special servicer in October 2010.

This transform was found at our request. In order to open up a direct dialogue with the special service responsible for the CMBS loan. Traverse City and Kanas City resorts are still producing positive EBITDA and this loan is not impairment to fall.

But the resorts have failed to meet a required minimum debt service coverage ration over the past few years. And as we disclosed previously the DSER has been blown 1.0 times on this loan for some time. Due to current economic conditions we believe that the value of the two properties in Traverse City and Kanas City is now significantly less than the $67 million principal of day load. We are working with the loan special servicer to discuss a potential. Modification of loan and we will update you on any changes in the status of this loan as circumstances wore it.

We continue to expect our recent growth ventures that is the Scoop stand alone location, the investment in Creative Kingdoms and our announce in license and management agreements to be monitory contributors to adjusted EBITDA through early 2011. We are focused on a longer term value potential from them and as scheme discussed we are optimistic about the future growth potential from all of them.

Turning now to guidance, consumers clearly remain cautions with respect to discretionary spending and our first and are focused on receiving value. Although we like some of trends we've seen recently are, our booking window remains relatively short so we still have limited visibility. With this backdrop we are introducing fourth quarter guidance with adjusted EBITDA expected to be between $8.6 billion and $11.0 million and assuming same store RevPAR growth of 4% to 6%. We also updated and tightened our full year 2010 adjusted EBITDA guidance slightly increased of our mid point expectation to a range of $66.3 million to $68.7 million with a revised mid-point of $67.5 million and this is assuming full year 2010 REVPAR growth between 1% growth and 2% growth.

And with that operator we will take questions at this time.

Question and answer session

Operator

Thank you. (Operators Instruction). Thank you, our first question is coming from Will Marks with JMP Securities. Proceed with your question.

Will Marks - JMP Securities

First, I want to ask about CapEx this year and next, what the plans are?

Jim Calder

Sure, year-to-date we have spent about $8 million on CapEx in 2010, we think our full year spend will be little over $9 million, I would expect 2011 to be very similar to that, we do not have any plans for anything dramatic at this time, we are under process of operating a capital budgeting for next year but do not expect anything dramatic and as we mentioned we do not have any commitments for long term construction or development or anything like that, so I think that sort of $8 to $10 million range is reasonable for next year as well.

Will Marks - JMP Securities

So, it’s largely maintenance CapEx?

Jim Calder

Yes.

Will Marks - JMP Securities

Okay. And is there anything for Pittsburgh? How much money on these joint ventures?

Jim Calder

That is truly just property level capital expenditures we are talking about. The part we like about the joint venture announcements that we have out there for outside Pittsburg and in Garden Grove, California is that the joint venture structures derivatives not going to involve any cash outlay from us, our contribution to each of those joint ventures has contribution of some services during the construction or pre development period. Things that we would normally do in order evolve with the construction of recourse. So, that’s definitely what we like about the structure those joint ventures that should not require any cash of our balance sheet until the continuation of our cash laid growth strategy.

Will Marks - JMP Securities

Okay. Second question. On the operations of the quarter, definitely in line or slightly above the guided range. But, can you remind me why there is no growth? Obviously the industry grew a lot in the quarter. I know the two-year trend, but specifically why wasn't this summer better than last summer?

Kim Schaefer

Well I think one of the things was that we have a nice opportunity over the last couple of years it has been on the occupancy side our weekends or peak periods have stayed really strong and so from a occupancy standpoint you have your summer is in pretty good space from that leisure gaps what you are looking for is to strengthen September a little bit with the group side of the business that is going to continue to be an upside. But July and august run pretty strong, so what you are looking for there is really to see we are back to 2008 ADRs and so we are going to continue to strengthen your ADRs and really fill those shorter period more than it is the, this is certainly a little bit here an there but the summer got up to a little bit of the slow start this year. Consumer confidence was definitely little shaken and originally and even when we had our earnings call we were looking at slow start to summer. It came back really strong but I think some of the properties, like Grapevine, that school goes back so early in august, you didn’t have a lot of upside towards that lat summer bookings like most of our properties did so ii think it was really two things, the summer started late. And I think that we are really looking at ADR opportunities and the growth of the group in September that’s going to continue to strengthen our overall third quarter.

Will Marks - JMP Securities

And then, carry that into next year, I know it is early. We started hearing some guidance from companies on next year, but any thoughts? Number one, do you expect to grow the adjusted EBIDTA line in REVPAR for next year?

Jim Calder

Well for 2011 we have not yet introduced any formal guidance obviously in this in the release today. Our traditional time line is when we do our fourth quarter call or was there a balance which would be in quarterly mid-February of next year.

We would introduce full year 2011 guidance and we are sort of that on same track right now. We are deep in the heart of our budgeting season with our operation and capital budgeting we all had general managers in our office next week.

As a matter of fact that duty dies and all their budget their preliminary budget for 2011. So we are not prepared this time to put out anything for 2011. I think realistically we, where we were sitting today I think realistically we are going to expect some growth. And as Kim said we have seen a lot what we think are positives signs coming up.

But I don’t want to quantify that or I don’t think I can quantify that. At this point in time as additionally have additional information or are prepared to roll that out. We will roll that out formally but we haven’t just yet.

Operator

Thank you our next question comes Bill Crow with Raymond James please proceed with your question.

Bill Crow - Raymond James

Good morning, guys. A couple of questions. On the occupancy, there were no calendar changes that would have caused occupancy to drop year-over-year, is that correct? In the 3rd quarter?

Kim Schaefer

Correct.

Bill Crow - Raymond James

I am trying to figure out why it seems like there was much more travel. Now obviously, a lot of it is business transient. But my sense is, that even on the leisure side, travel picked up year-over-year. Do you think you are getting less market share? People are getting back on airplanes and traveling further. Talk about why you think occupancy went down in the busiest quarter?

Kim Schaefer

Well, I think that like I said with Will, I think one of the things as we had a slow start to the summer. No question about that our first two weeks of July were not as strong as I would have liked so I think you are going to look for that to be upside in 2011 and I think there was a couple of things that mean as you heard in see the first conference the weather was good so you had a lot more people out of the partial, lot more people doing things outside, I mean some as always one of those time where I mean you are definitely in more competitive environment but when I look just for Great Wolf Resorts I think that we had a late start to the summer, I think you had some other properties like a great fine (inaudible) when global (inaudible) so early to take it out early did not have a strong start to the summer and most of the properties recovered nicely and there is a overall year-over-year occupancy was inline its not slightly better. We are going to have to see third quarter improve is really going to be on the group price and I think to continue to see our ADRs improve I think that’s why we are going to have the mult upside on EBITDA up till next year is really through driving from ADR.

Bill Crow - Raymond James

Okay. Jim, can you tell us what the EBIDTA is from Kansas City and Traverse City properties, maybe a trailing 4th quarter basis?

Jim Calder

Yeah, I don’t have that number right in front of me Will, but we've disclosed previously that the debt service coverage ratio on the [trailing] 12 basis was about 0.80 right it when the…

Bill Crow - Raymond James

What is the debt service coverage on that? I mean what is the debt cost on that?

Jim Calder

The debt service amounts about $6 million annually, rough number.

Bill Crow - Raymond James

And you guys have something like if I look on a cost basis. Somewhere in the low, somewhere in the low $50 million on each of those properties, is that kind of $180,000 plus of key?

Jim Calder

Original construction cost, are all in costs. That's correct. Undepreciated, that’s correct though.

Bill Crow - Raymond James

If you are saying the value now is less than the loan for the two. Have you take that write off? Can you remind me? The impairment?

Jim Calder

The way the GAAP rules work, the fair market value is a relative point but it's not the only point they consider, the GAAP has for impairment of online of asset just sort of a different test or it doesn’t require an immediate write down, obviously if circumstances change, and we go into say a payment default on this loan, or we take some action to stop the subsidization of debt service on this one at that point, that would be a triggering event under GAAP. And I would expect at that point, we would have an adjustment to the fair value. But we have not recorded any adjustment like that as to this point.

Bill Crow - Raymond James

And if you return these assets to the lender, do you retain the management franchise roles? Or does that all go with the asset?

Jim Calder

Certainly that would be up double at the discretion of the whoever assumes ownership of this. AT that point it be the lender, we clearly think you create the most amount of value for these assets, we have a very strong brand, we have nationally recognized brand, we have capabilities of managing these assets and a tremendous amount of what we think our high quality operators available and then our water park resort space so we were saying that we would be likely candidate to be the manager to licensee of all of these things going forward because we think for revenue all the mid earner would feel that’s and are not in that scenario today. But if we were in (inaudible) area we think we would be the ones that would just be able to create value for somewhere down the road the reverse amount of value

Bill Crow - Raymond James

I guess I am asking that because if a Marriott franchise, a managed hotel, whoever is owner is loses it, typically those contracts remain in place. Same at Starwood. So you don't have a separate because you own it, you don't have a separate management and franchise contract that would maintain your rights to do that if a new owner came along? Is that fair?

Jim Calder

Not a perpetuity we do not, its slightly different and how the contracts will you describe Bill that’s

Bill Crow - Raymond James

How do you think now the company has matured, what do you think is if benefits or necessity for increased distribution? In other words, if you lost these two, how big an impact does it have on the remaining hotels? How important is it that you continue to grow, to build up a brand? Or have you found out that because people travel within two or three hours of where they live, that you don't need the national branding?

Kim Schaefer

Yes I think that’s a very good question and some of that we talked about and I think we made that decision when we decided to split off what we call Gen 1 and Gen 2 I think that our business model has evolved so much over the years and so well we have a, we love these assets because they are original assets and they’ve been very good for brand awareness and it really doesn’t have an effect on Garden Grove, California or a Pittsburgh Pennsylvania property so I think that there fairly independent because people do tend to travel regionally. I think that our ability to manage them to life and some all the reasons that we talked our infrastructure our expertise in this business.

But I don’t think that we if we have Traverse City or Kanas City that it makes a difference on our overall plans moving forward.

Operator

Thank you our next question coming from Jeff Thompson with Keefe, Bruyette & Woods, please proceed with question.

Jeff Thompson - Keefe, Bruyette & Woods

Thanks. Good morning. On the comments on external growth, there was mention of and I am sorry I didn't catch all of it but there was a mention of perhaps, converting existing waterparks that are out there. I didn't know what you meant by that. Could you add some color there? And second question, on the mention of margin improvement or potential margin improvement. There was an interesting term called portioning improvement, which does that mean less food and beverage per purchase by the consumer? And then my third question is on the "Undercover Boss" deal, was there any expenses that the company will incur, or were all specific expenses picked up by the production company.

Kim Schaefer

Well lets, I think all three of these are mine so let me see how I can do on this show. Lets talk about conversion. I think what we work what we do is we are looking at our traditional of ground up construction that fairly built a very successful platform for munch. Partially because of the environment that we are in new construction is very difficult as we saw in California is going to be an amazing property and if anything should get finance that should but it is still a difficult lending environment. So what we are trying to do is balance opportunities they had we can get a great work to a market faster and one of those opportunities would be either looking at existing resorts that may be need to repurpose what new opportunity, what opportunity is for high ADR and occupancy on the leisure side where we can come in add a water part repurpose and remodel the existing resort to become Great Wolf Resorts. So I think that’s one of the opportunities that we think or there is existing water parts already out there that are not great (inaudible) that may not have the expertise to attract the families and manage and operate the way that we can with the efficiencies that we have so we think that there is opportunities to be able to bring a Great Wolf to market quicker then a ground of construction. So those are things that we think we need to actively pursue and have conversations around going forward.

Jeff Thompson - Keefe, Bruyette & Woods

On that note, are you talking about, if you found such a property that had that potential? Are you talking about acquiring the property or trying to enter into a license management type deal?

Kim Schaefer

Well, I think one of the things, Will said that our balance sheet right now and the cash flow that we have is going to be for lowering our debts so that’s really what we are going to focus on, now we got a little bit that we can (inaudible) really have been looking at licensing and management or JV partnerships with somebody else a group who is also looking for opportunities whether its distressed assets or whether its just repurposing assets to do more with the overall real estate, so I think that, that’s really where we would focus, just would not be doing this on our own, it would be with somebody else.

Jeff Thompson - Keefe, Bruyette & Woods

Okay

Kim Schaefer

On the food and beverage side, you are right. Portioning is kind of taking a look at how much food were putting on the plate, most people don’t want to take left over, they are only there for a day. So, we look at the amount of waste that we have and can we be more efficient in giving kind of just the overall value. Are we giving people the right size as well as are we buying the right product, are we costing it correctly and if we have 12 resorts all buying the same meat, and the same chicken, we get a much better buying then we do what everybody is doing there, thereon. Allowed us just a law that consistency in the menus as well as portion controls.

Jeff Thompson - Keefe, Bruyette & Woods

As long as these kids aren't getting two chicken nugget with their kid's meal.

Kim Schaefer

Its not the kids that we have to bother much.

Jeff Thompson - Keefe, Bruyette & Woods

And on the TV costs, were there any there?

Kim Schaefer

Yes, undercover Boss, I was free wouldn’t say talent, so that’s why I probably wasn’t paid for my appearance on there. But how we looked at that is, we got about 44 minutes of airtime on CDS, number one rated show for that Sunday night. So I think what we look at as the $18 million worth marketing value we get, we had out of pocket cost any of the gift sets that we gave to the employees were out of pockets, I think we figured that out of pocket, we are about $50,000 with our overall cost for any of the travel, any of the gifts, just the overall experience of what we have for the show. Our, we are really excited; we think about the great trade off to have that opportunity to get that awareness and grand equity (inaudible).

Jeff Thompson - Keefe, Bruyette & Woods

Have they talked about a rerun for that episode, in the first quarter of next year?

Kim Schaefer

We know that reruns are certainly part of what they do, we have been the highest rated show this far this season so I would expect that we be rerun but what I could do about it is CBS.com and it lives in for me.

Jeff Thompson - Keefe, Bruyette & Woods

Are you happy about that?

Kim Schaefer

Well you know I guess that what we have to do for the company I think the company looks great I think the people are very excited about the presentation the company is, they knew the company, they loved it even more they have never heard of the company. We definitely know we have got in some trail but I think more importantly it was a number of people who went to the website, it was a number of people who will now find up for our email sets, we have an opportunity to keep having a conversation with that that’s very exciting for us so I think it was worth that

Jeff Thompson - Keefe, Bruyette & Woods

Yeah definitely and that’s positive

Kim Schaefer

Yes absolutely

Operator

Thank you our next question is coming from (inaudible) SBR Capital. Please proceed with your question.

Unidentified Analyst

Hi good morning just a follow up on the situation you mentioned with respect to diversity and transicity to the state are you continuing to collect on the management and licensing fees there or is there some provision whereby those could be cut off due to the government violation?

Unidentified Company Speaker

No our current licensing and management contracts remain in force and remain getting paid or there is certainly no change in REVPAR just to be clear there is not been any company violation on this one just be very clear and it is not impairment of all. It is not that its minimum DSCR to service coverage ratio requirement and we have just given the bank the rate to put in the cash (inaudible) range which they have committed last month or in September excuse me but there is not company violation so things are relatively normal and the one other in the (inaudible) place but with that been put in place we wanted to address this year we spent a lot of time over the last two years trying to address various pieces of our capital structure just happens to be more that now we lined up to address. So we though the time was appropriate to again it was at our request that this I got news for the special servicer that is not require it.

But we requested that because under CMBS loans to special servicer is the only party with authority to do any sort of loan modification or have these kind of discussions. So that is why we used to get important to get in front of that party to start that discussion and we started that over the past few weeks and we think that will only spend although a while here and we will see how it goes.

Unidentified Analyst

Okay then I noticed you obviously filed S4 recently and in that you were able to breakout income statement reflecting the guarantors for the first mortgage notes that you issued and I am wondering if you could maybe follow up by providing us with the third quarter EBITDA for those three properties securing the notes.

Unidentified Company Representative

Sure the S4 did just because all of that, the S4 was related to our first mortgage notes offering that was done in a private placement in April of this year and its customary it is required to provision of the notes and sales required to register those with the SEC. we did that with an S4 that was, that went effective in the middle of October.

So now exchange period for those notes which is just a formality to exchange a non-freely transferable and when they were freely transferable and they were freely transferable note and that exchange process should be completed here over the next week or so by our attorneys and by the trustee. As you mentioned Jane in the S4 filing there is segmentation disclosure of the guarantors, non-guarantors that will be required disclosure that will be included in our 10-Q and our 10-K going forward so when we file our 10Q later on this week that disclosure will be in there. I don’t have that information here today but we will have that completed and will be customary required part of our 10-Q (inaudible) going forward.

Operator

Thank you. Our last question is coming from David Hargreaves with Stern, Agee & Leach. Please proceed with your question.

David Hargreaves - Stern, Agee & Leach

The color you gave us on the 2nd quarter, sort of monthly and the composition of your visitation. And your explanation of where it was, and was it meeting your expectations into September. I was wondering if you could since you have given us 4th quarter guidance, if you can give us qualitatively whether October meeting up to your expectations. And talk a little bit about the composition of your visitation. Do you expect things to pick up in the back half of the quarter? Anything you could offer would be appreciated.

Kim Schaefer

Well, I think that we said, we do like that in the fourth quarter typically for us, the our quarter is a very small quarter. Its almost all defined by what happens over the last two weeks during the holiday break over Christmas, that is really the biggest definition from a leisure period for us. I will say for October we like what we see on both on a leisure side, we can (inaudible) strong and we also like what's happening on the group side I mean it is what we are seeing more groups on the books, we've seen a large increase in associations which you know does take about a year over a year to get those types of groups on a book. But we are seeing a 6% increase in associations this year and that’s an effort of really focusing on group sales and what we can do to bring people into those resorts that have conference centers. So, I think when we look at fourth quarter, we are optimistic, we know that a lot of the quarters to find in December but we do like what we are seeing in our traditionally off peak season.

Operator

There are no further questions at this time. I would now like to turn the floor back over to Kim Schaefer for closing comments.

Kim Schaefer

Thanks to everyone and especially to our Great Wolf team for, I'll you do to deliver an amazing vacation experience to our guests. We look forward to updating everybody on the fourth quarter sometime in February. Thanks everyone.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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