Silverleaf Resorts 8-K Results of Operations and Financial Condition

Ex 99.1

SILVERLEAF RESORTS, INC.
REPORTS SECOND QUARTER 2008 RESULTS,
REVISES EARNINGS GUIDANCE FOR 2008, AND
ANNOUNCES STOCK REPURCHASE PROGRAM

DALLAS—(BUSINESS WIRE) — July 30, 2008 —Silverleaf Resorts, Inc. (NASDAQ: SVLF) today reported the following results for its second quarter ended June 30, 2008.

Financial highlights for the second quarter of 2008 (compared to the second quarter of 2007):

• Vacation Interval sales increased 16.0% to $68.0 million

• Total revenues increased 8.2% to $69.1 million

• Net income of $5.9 million and diluted earnings per share of $0.15

Sharon K. Brayfield, President, commented, “Despite weaknesses in the general economy and credit markets, demand for our product continues to be strong as evidenced by the continued double digit growth in our vacation interval sales. We are experiencing growth not only in sales to our members but also new customers, which further validates our model of vacationing close to home. Our business strategy during these challenging times will continue to be improving the credit quality of our new sales while preserving liquidity through controlled and measured growth. While we are pleased with our continued success, we recognize there are still challenges we face during this tumultuous period. Consequently, we are revising our 2008 net income guidance from $28.0 million to a range of approximately $22.0 million to $23.0 million or diluted earnings per share of approximately $0.56 to $0.58. Separately, our Board of Directors has authorized a two million share repurchase program, which we believe will enhance shareholder value in the long-term.”

2008 Second Quarter Results

Overall, total revenues for the second quarter of 2008 increased 8.2% to $69.1 million compared to $63.9 million for the second quarter of 2007. Total revenues consist of net sales, interest income, management fees, and other income.

Vacation Interval sales increased 16.0% to $68.0 million in the second quarter of 2008 compared to $58.6 million in the comparable prior-year period. The increase in Vacation Interval sales is primarily attributable to continued favorable closing percentages. Vacation Interval sales to existing customers increased 16.1% to $41.4 million while Vacation Interval sales to new customers increased 15.9% to $26.6 million. Vacation Interval sales to existing customers comprised 60.9% of total Vacation Interval sales in the second quarters of 2008 and 2007 which maintains our favorable sales mix trend toward upgrades and second-week sales to existing customers, which has helped control related sales and marketing costs.

The provision for estimated uncollectible revenue was 23.9% of Vacation Interval sales during the second quarter of 2008 versus 22.0% in the first quarter of 2008 and 16.0% in the second quarter of 2007. This increase was necessary to maintain the allowance for uncollectible notes at a level management considers adequate to provide for anticipated losses resulting from customer defaults.

Cost of Vacation Interval sales increased to 11.4% of Vacation Interval sales for the second quarter of 2008 compared to 9.7% in the 2007 comparable period. This increase resulted from sales of higher cost basis inventory during the second quarter of 2008 compared to 2007.

Sales and marketing expense as a percentage of Vacation Interval sales remained nearly constant at 49.9% for the second quarter of 2008 compared to 49.7% in the prior-year comparable period. The $4.8 million increase in sales and marketing expense is primarily attributable to the increased volume of Vacation Interval sales.

Total positive net interest spread (interest income less interest expense and lender fees) was $8.9 million for the second quarter of 2008 compared to $6.8 million for the second quarter of 2007. In addition, interest expense and lender fees as a percentage of interest income declined to 41.6% in the second quarter of 2008 compared to 47.3% in the second quarter of 2007. This favorable variance is attributable to the overall decrease in the weighted average borrowing rate to 6.2% for the quarter ended June 30, 2008 from 7.7% for the quarter ended June 30, 2007 coupled with an overall increase in the weighted average yield on customer notes receivable to 16.4% at June 30, 2008 from 16.0% at June 30, 2007.

Net income for the quarter ended June 30, 2008 decreased to $5.9 million, or $0.15 per diluted share, compared to net income of $7.7 million, or $0.20 per diluted share, for the quarter ended June 30, 2007.

2008 Year-to-Date Results

Overall, total revenues for the six months ended June 30, 2008 increased 10.9% to $136.1 million compared to $122.7 million for the six months ended June 30, 2007.

Vacation Interval sales increased 18.8% to $133.0 million in the first six months of 2008 compared to $111.9 million in the comparable prior-year period. The increase in Vacation Interval sales is primarily attributable to an 8.3% increase in tours and continued favorable closing percentages. Vacation Interval sales to existing customers increased 20.8% to $79.5 million while Vacation Interval sales to new customers increased 16.0% to $53.6 million. Vacation Interval sales to existing customers comprised 59.7% and 58.7% of total Vacation Interval sales in the first six months of 2008 and 2007, respectively, which continues our favorable sales mix trend toward upgrades and second-week sales to existing customers, which has helped control related sales and marketing costs.

The provision for estimated uncollectible revenue was 23.0% of Vacation Interval sales during the first six months of 2008 versus 16.0% for the same period of 2007. This increase was necessary to maintain the allowance for uncollectible notes at a level management considers adequate to provide for anticipated losses resulting from customer defaults.

Cost of Vacation Interval sales decreased to 9.5% of Vacation Interval sales for the first half of 2008 compared to 10.2% in the 2007 comparable period. This decrease resulted from increased relative sales prices compared to last year partially offset by sales of higher cost basis inventory during the first six months of 2008.

Sales and marketing expense as a percentage of Vacation Interval sales remained nearly constant at 50.7% for the six-month period ended June 30, 2008 versus 50.6% for the same period of 2007. The $10.9 million increase in sales and marketing expense is primarily attributable to the increased volume of Vacation Interval sales.

Total positive net interest spread (interest income less interest expense and lender fees) was $17.3 million for the first six months of 2008 compared to $13.7 million for the first six months 2007. In addition, interest expense and lender fees as a percentage of interest income declined to 41.8% in the first half of 2008 compared to 46.2% for the comparable prior year period. This favorable variance is attributable to the overall decrease in the weighted average borrowing rate to 6.3% for the six months ended June 30, 2008 from 7.7% for the six months ended June 30, 2007 coupled with an overall increase in the weighted average yield on customer notes receivable to 16.4% at June 30, 2008 from 16.0% at June 30, 2007.

Net income for the six months ended June 30, 2008 decreased to $13.3 million, or $0.34 per diluted share, compared to net income of $14.3 million, or $0.36 per diluted share, for the six months ended June 30, 2007.

Balance Sheet

On June 9, 2008, the Company announced completion of a term securitization through a newly formed and fully consolidated special purpose finance subsidiary, Silverleaf Finance VI, LLC (“SF-VI”). SF-VI issued approximately $115.4 million of its Timeshare Loan-Backed Notes Series 2008-A in a private offering and sale, which were secured by approximately $128.6 million in timeshare loans sold to SF-VI by the Company and another of its fully consolidated special purpose finance subsidiaries. The cash proceeds from the sale of the timeshare loans to SF-VI were primarily used to repay approximately $93.8 million in consolidated indebtedness.

At June 30, 2008, notes receivable and revolving debt balances increased over comparative balances at December 31, 2007. These increases are directly related to increased Vacation Interval sales.

At June 30, 2008, senior credit facilities provided for loans of up to $541.2 million, of which $195.0 million was available for future advances. Considering forecasted sales and expansion plans, these senior credit facilities provide adequate liquidity through at least 2009. At June 30, 2008, the Company’s senior debt consisted of 50% fixed-rate debt and 50% variable-rate debt.

Expansion at existing resorts, including construction of lodging units and additional amenities, decreased to $9.4 million for the second quarter of 2008 from $10.2 million for the comparable prior year period. This reduction in capital expenditures is consistent with the Company’s moderate growth initiative in effect for 2008.

Outlook

Based on the above and near-term outlook for our business, the Company is revising its 2008 net income guidance from $28.0 million to a range of approximately $22.0 million to $23.0 million or diluted earnings per share of approximately $0.56 to $0.58.

2008 Stock Option Plan

At a special shareholders meeting held on July 29, 2008, the Company’s shareholders approved the Company’s 2008 Stock Option Plan, which reserves for issuance up to two million shares of the Company’s common stock.

Stock Repurchase Program

The Company has authorized the repurchase of up to two million shares of its common stock to be acquired from time to time in the open market or in negotiated transactions, depending upon market conditions and other factors. These two million shares represent approximately 5.3% of the Company’s 38.1 million shares of common stock outstanding at June 30, 2008. Repurchased shares will become treasury shares to be used to meet our future common stock obligations under our employee stock option plans and for other corporate purposes. The Company’s Board of Directors has set a two-year term on the stock repurchase plan.

About Silverleaf Resorts

Based in Dallas, Texas, Silverleaf Resorts, Inc. currently owns and operates timeshare resorts with a wide array of country club-like amenities, such as golf, clubhouses, swimming, tennis, boating, and many organized activities for children and adults. For additional information, please visitwww.silverleafresorts.com.

Forward-Looking Statements

This release contains certain forward-looking statements that involve risks and uncertainties and actual results may differ materially from those anticipated. The Company is subject to specific risks associated with the timeshare

industry, the regulatory environment, and various economic factors. These risks and others are more fully discussed under the heading “Risk Factors” in the Company’s reports filed with the Securities and Exchange Commission, including the Company’s 2007 Annual Report on Form 10-K filed on March 12, 2008.

For more information or to visit our website, click here:
http://www.b2i.us/irpass.asp?BzID=1358&Nav=0&S=0&L=1

Contact:
Silverleaf Resorts, Inc., Dallas, Texas
Thomas J. Morris, 214-631-1166 x2218

SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
Revenues:
Vacation Interval sales	$	67,959		$	58,577		$	133,040		$	111,942
Estimated uncollectible revenue		(16,242	)		(9,372	)		(30,560	)		(17,913	)
Net sales		51,717			49,205			102,480			94,029
Interest income		15,310			12,940			29,817			25,487
Management fee income		780			615			1,560			1,230
Other income		1,261			1,093			2,237			1,933
Total revenues		69,068			63,853			136,094			122,679
Costs and Operating Expenses:
Cost of Vacation Interval sales		7,756			5,683			12,630			11,453
Sales and marketing		33,940			29,142			67,477			56,591
Operating, general and administrative		10,224			9,480			19,516			17,903
Depreciation		1,210			858			2,324			1,716
Interest expense and lender fees		6,367			6,126			12,469			11,777
Total costs and operating expenses		59,497			51,289			114,416			99,440
Income before provision for income taxes		9,571			12,564			21,678			23,239
Provision for income taxes		(3,685	)		(4,837	)		(8,346	)		(8,947	)
Net income	$	5,886		$	7,727		$	13,332		$	14,292
Basic net income per share	$	0.15		$	0.20		$	0.35		$	0.38
Diluted net income per share	$	0.15		$	0.20		$	0.34		$	0.36
Weighted average basic common shares outstanding		38,065,077			37,808,154			37,995,956			37,808,154
Weighted average diluted common shares outstanding		39,289,637			39,396,758			39,346,094			39,384,338

SILVERLEAF RESORTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)

	June 30,		December 31,
	2008		2007
	(Unaudited)
ASSETS
Cash and cash equivalents	$	14,669	$	13,170
Restricted cash		19,693		12,816
Notes receivable, net of allowance for uncollectible notes of $77,099 and $69,128, respectively		314,232		289,907
Accrued interest receivable		3,952		3,744
Investment in special purpose entity		5,975		7,315
Amounts due from affiliates		3,042		1,358
Inventories		183,548		179,188
Land, equipment, buildings, and leasehold improvements, net		51,396		41,565
Land held for sale		509		509
Prepaid and other assets		34,178		31,487
TOTAL ASSETS	$	631,194	$	581,059
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Accounts payable and accrued expenses	$	15,563	$	21,071
Accrued interest payable		2,467		2,470
Unearned Vacation Interval sales		—		296
Unearned samplers		7,059		6,921
Income taxes payable		2,456		782
Deferred income taxes		34,749		30,463
Notes payable and capital lease obligations		354,711		316,198
Senior subordinated notes		24,671		26,817
Total Liabilities		441,676		405,018
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY
Preferred stock, 10,000,000 shares authorized, none issued and outstanding		—		—
Common stock, par value $0.01 per share, 100,000,000 shares authorized, 38,068,154 and 37,818,154 shares issued and outstanding at June 30, 2008 and December 31, 2007, respectively		381		378
Additional paid-in capital		112,842		112,700
Retained earnings		76,295		62,963
Total Shareholders’ Equity		189,518		176,041
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	631,194	$	581,059