Ex 99.1
SILVERLEAF RESORTS, INC. REPORTS THIRD QUARTER AND YEAR TO DATE 2006 RESULTS
- - -
Vacation Interval Sales for the Quarter Increased by 22.9% to $51.4 Million
DALLAS, TEXAS. (November 2, 2006) --- Silverleaf Resorts, Inc. (AMEX: SVL) today announced its financial results for the three and nine month periods ended September 30, 2006.
Sharon K. Brayfield, president, commented, “We are very pleased with our operating results for the third quarter of 2006 compared to 2005 as we continue to execute on our business strategy. The improvements we have made in our sales closing efficiencies and higher tour flow have resulted in our revenue growth this year and should allow us to meet our plan of 10% - 15% growth in Vacation Interval sales in 2007. We are also issuing net income guidance for 2007 in the range of $24.5 million to $25.5 million.”
Adoption of SFAS No. 152:
As previously announced, the Company was required to adopt SFAS No. 152, “Accounting for Real Estate Time-Sharing Transactions” as of January 1, 2006. As a result, new line items are included in the Company’s Consolidated Statement of Operations and total revenue and total costs and expenses are reduced. However, adoption of SFAS No. 152 did not have a material impact on consolidated operating results or financial position. See the exhibit to this release entitled “Supplemental Consolidated Statements of Operations Demonstrating the Impact of Adoption of SFAS No. 152” for a comparison of the Company’s results as reported and as its results would have been reported had SFAS No. 152 not been adopted.
2006 Third Quarter Results:
Vacation Interval sales increased 22.9% to $51.4 million during the third quarter of 2006 compared to $41.8 million during the third quarter of 2005.
Total revenue for the third quarter of 2006 decreased to $56.1 million compared to $62.3 million in the third quarter of 2005. Total revenue in the third quarter of 2006 is decreased by estimated uncollectible revenue of $8.9 million in accordance with SFAS No. 152. In addition, sampler sales are accounted for as incidental operations under SFAS No. 152, which requires that any such incidental revenues be recorded as a reduction of incremental costs or expenses. Accordingly, $0.7 million of sampler sales, which would have been reported as revenue prior to adoption of SFAS No. 152, were accounted for as a reduction to sales and marketing expense in the quarter ended September 30, 2006. Had these two changes mandated by SFAS No. 152 not been made, revenues would have increased by 5.4% to $65.7 million.
Total revenue for the third quarter of 2005 included a gain on sale of notes receivable of $5.8 million and a gain on sale of undeveloped land of $3.6 million.
Sales and marketing expense increased to 50.3% of Vacation Interval sales for the third quarter of 2006 from 47.0% for the third quarter of 2005. Had sales and marketing expense not been reduced by sampler sales, as described above, sales and marketing expense would have been 51.7% of Vacation Interval sales. The increase compared to the previous year’s quarter is due in large part to the Company’s costs associated with the Dallas and Chicago off-site sales centers.
Cost of Vacation Interval sales decreased to 11.8% of Vacation Interval sales in 2006 from 16.2% in 2005, due predominantly to the requirement under SFAS No. 152 that cost of sales be reduced by the estimated future recoveries of inventory, as described above. Without this change, cost of Vacation Interval sales would have been 16.1% of Vacation Interval sales for the quarter ended September 30, 2006.
As required by SFAS No. 152, in 2006 there is no longer a cost and operating expense for the provision for uncollectible notes as it is now replaced by the estimated uncollectible revenue offset to sales and corresponding decrease in cost of sales described above. Without this change, the third quarter 2006 provision for uncollectible notes expense would have been $6.7 million, or 13.0% of third quarter 2006 Vacation Interval sales, compared to $6.3 million for 2005, or 15.0% of Vacation Interval sales.
During the third quarter of 2006, Silverleaf recorded income tax expense at 38.5% of pre-tax income, compared to 30.2% of pre-tax income in the third quarter of 2005. The increase in the effective rate is due to the transition in 2005 from fully reserved net deferred tax assets at December 31, 2004 to net deferred tax liabilities at December 31, 2005. Income tax expense for 2006 is therefore recorded at full statutory rates.
Net income for the quarter ended September 30, 2006 decreased to $6.0 million, or $0.15 per diluted share compared to net income of $12.9 million, or $0.33 per diluted share for the quarter ended September 30, 2005. For the purposes of providing more transparency, the Company’s results for the third quarters of 2006 and 2005 shown below exclude historical gains and discontinued operations, and assume 2005 amounts were fully taxed at the 2006 effective income tax rate of 38.5%.
| | | 2006 | | 2005 | |
| | | Actual | | Actual | |
| Net income, as reported | | $ | 6.0 | | $ | 12.9 | |
| Adjustments between net income as reported, and | | | | | | | |
| Adjusted net income: | | | | | | | |
| Gain on sale of notes receivable | | | - | | | (5.8 | ) |
| Gain on sale of undeveloped land | | | - | | | (3.6 | ) |
| Income from discontinued operations, net of taxes | | | - | | | (0.6 | ) |
| Provision for income taxes, as reported | | | 3.8 | | | 5.3 | |
| Adjusted income before provision for income taxes | | | 9.8 | | | 8.2 | |
| Provision for income taxes at 2006 rate of 38.5% | | | (3.8 | ) | | (3.2 | ) |
Adjusted Net Income | | $ | 6.0 | | $ | 5.0 | |
Adjusted Fully Diluted EPS | | $ | 0.15 | | $ | 0.13 | |
2006 Year to Date Results:
Vacation Interval sales increased 29.5% to $141.5 million during the first nine months of 2006 compared to $109.3 million during the same period of 2005.
Total revenue for the first nine months of 2006 increased to $154.8 million compared to $153.7 million in the first nine months of 2005. Total revenue in the first nine months of 2006 is decreased by estimated uncollectible revenue of $24.5 million in accordance with SFAS No. 152, representing estimated future gross cancellations of notes receivable prior to any recoveries of inventory. In addition, sampler sales are accounted for as incidental operations under SFAS No. 152, which requires that any such incidental revenues be recorded as a reduction of incremental costs or expenses. Accordingly, $2.1 million of sampler sales, which would have been reported as revenue prior to adoption of SFAS No. 152, were accounted for as a reduction to sales and marketing expense in the nine-month period ended September 30, 2006. Had these two changes mandated by SFAS No. 152 not been made, revenues would have increased by 18.0% to $181.5 million.
Total revenue for the first nine months of 2005 included a gain on sale of notes receivable of $6.5 million and a gain on sale of undeveloped land of $3.6 million.
Sales and marketing expense decreased to 48.4% of Vacation Interval sales for the first nine months of 2006 from 50.3% for the same period of 2005. Had sales and marketing expense not been reduced by sampler sales, as described above, sales and marketing expense would have been 49.9% of Vacation Interval sales.
Cost of Vacation Interval sales decreased to 10.6% of Vacation Interval sales in the first nine months of 2006 from 16.0% during the same period of 2005, due predominantly to the requirement under SFAS No. 152 that cost of sales be reduced by the estimated future recoveries of inventory, as described above. Without this change, cost of vacation interval sales would have been 14.9% of Vacation Interval sales for the nine months ended September 30, 2006.
As required by SFAS No. 152, in 2006 there is no longer a cost and operating expense for the provision for uncollectible notes as it is now replaced by the estimated uncollectible revenue offset to sales and corresponding decrease in cost of sales described above. Without this change, the first nine months of 2006 provision for uncollectible notes expense would have been $18.4 million, or 13.0% of 2006 Vacation Interval sales, compared to $18.1 million for 2005, or 16.5% of Vacation Interval sales.
During the first nine months of 2006, Silverleaf recorded income tax expense at 38.5% of pre-tax income, compared to 30.3% of pre-tax income in the same period of 2005. The increase in the effective rate is due to the transition in 2005 from fully reserved net deferred tax assets at December 31, 2004 to net deferred tax liabilities at December 31, 2005. Income tax expense for 2006 is therefore recorded at full statutory rates.
Net income for the nine months ended September 30, 2006 decreased to $19.0 million, or $0.48 per diluted share compared to net income of $19.6 million, or $0.50 per diluted share for the nine months ended September 30, 2005. For the purposes of providing more transparency, the Company’s results for the nine months ended September 30, 2005 and 2006 shown below include core operations, and exclude historical gains and discontinued operations, and assume 2005 amounts were fully taxed at the 2006 effective income tax rate of 38.5%.
| | | 2006 | | 2005 | |
| | | Actual | | Actual | |
| Net income, as reported | | $ | 19.0 | | $ | 19.6 | |
| Adjustments between net income as reported, and | | | | | | | |
| Adjusted net income: | | | | | | | |
| Gain on sale of notes receivable | | | - | | | (6.5 | ) |
| Gain on sale of undeveloped land | | | (0.5 | ) | | (3.6 | ) |
| Income from discontinued operations, net of taxes | | | - | | | (0.7 | ) |
| Provision for income taxes, as reported | | | 11.9 | | | 8.2 | |
| Adjusted income before provision for income taxes | | | 30.4 | | | 17.0 | |
| Provision for income taxes at 2006 rate of 38.5% | | | (11.7 | ) | | (6.5 | ) |
Adjusted Net Income | | $ | 18.7 | | $ | 10.5 | |
Adjusted Fully Diluted EPS | | $ | 0.48 | | $ | 0.27 | |
Outlook
The Company continues to anticipate that its net income for the year ending December 31, 2006 will be $21 million to $22 million ($0.53 to $0.56 per diluted share). For the full year 2007, the Company is establishing net income guidance in the range of $24.5 million to $25.5 million.
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 visit www.silverleafresorts.com.
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 2005 Annual Report on Form 10-K (pages 22 through 30 thereof) filed on March 17, 2006.
Contact:
Silverleaf Resorts, Inc., Dallas
Thomas J. Morris, 214-631-1166 x2218
or
Investor Relations
Erica Pettit, 212-850-5614
or
Media
Jessy Adams, 212-850-5684
For more information or to visit our website, click here:
http://www.b2i.us/irpass.asp?BzID=1358&Nav=0&S=0&L=1
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(Unaudited)
| | | Three Months Ended | | Nine Months Ended | |
| | | September 30, | | September 30, | |
| | | 2006 | | 2005 | | 2006 | | 2005 | |
Revenues: | | | | | | | | | | | | | |
| Vacation Interval sales | | $ | 51,414 | | $ | 41,833 | | $ | 141,516 | | $ | 109,304 | |
| Estimated uncollectible revenue | | | (8,910 | ) | | - | | | (24,525 | ) | | - | |
| Sampler sales | | | - | | | 617 | | | - | | | 1,759 | |
| Net sales | | | 42,504 | | | 42,450 | | | 116,991 | | | 111,063 | |
| | | | | | | | | | | | | | |
| Interest income | | | 12,021 | | | 9,067 | | | 33,439 | | | 28,937 | |
| Management fee income | | | 465 | | | 450 | | | 1,396 | | | 1,351 | |
| Gain on sale of notes receivable | | | - | | | 5,789 | | | - | | | 6,457 | |
| Other income | | | 1,110 | | | 4,549 | | | 2,980 | | | 5,931 | |
| Total revenues | | | 56,100 | | | 62,305 | | | 154,806 | | | 153,739 | |
| | | | | | | | | | | | | | |
Costs and Operating Expenses: | | | | | | | | | | | | | |
| Cost of Vacation Interval sales | | | 6,069 | | | 6,772 | | | 14,986 | | | 17,507 | |
| Sales and marketing | | | 25,880 | | | 19,648 | | | 68,535 | | | 54,985 | |
| Provision for uncollectible notes | | | - | | | 6,275 | | | - | | | 18,083 | |
| Operating, general and administrative | | | 7,958 | | | 7,344 | | | 23,329 | | | 21,177 | |
| Depreciation and amortization | | | 627 | | | 616 | | | 1,750 | | | 2,158 | |
| Interest expense and lender fees | | | 5,730 | | | 4,094 | | | 15,273 | | | 12,765 | |
| Total costs and operating expenses | | | 46,264 | | | 44,749 | | | 123,873 | | | 126,675 | |
| | | | | | | | | | | | | | |
| Income before provision for income taxes | | | | | | | | | | | | | |
| and discontinued operations | | | 9,836 | | | 17,556 | | | 30,933 | | | 27,064 | |
| Provision for income taxes | | | (3,787 | ) | | (5,306 | ) | | (11,909 | ) | | (8,189 | ) |
Income from continuing operations | | | 6,049 | | | 12,250 | | | 19,024 | | | 18,875 | |
| | | | | | | | | | | | | | |
Discontinued Operations | | | | | | | | | | | | | |
| Gain on sales of discontinued operations (net of taxes) | | | - | | | 613 | | | - | | | 613 | |
| Income from discontinued operations (net of taxes) | | | - | | | - | | | - | | | 128 | |
Net income from discontinued operations (net of taxes) | | | - | | | 613 | | | - | | | 741 | |
| | | | | | | | | | | | | | |
Net income | | $ | 6,049 | | $ | 12,863 | | $ | 19,024 | | $ | 19,616 | |
| | | | | | | | | | | | | | |
Basic income per share: | | | | | | | | | | | | | |
| Income from continuing operations | | $ | 0.16 | | $ | 0.33 | | $ | 0.51 | | $ | 0.51 | |
| Income from discontinued operations | | $ | - | | $ | 0.02 | | $ | - | | $ | 0.02 | |
| Net income | | $ | 0.16 | | $ | 0.35 | | $ | 0.51 | | $ | 0.53 | |
| | | | | | | | | | | | | | |
Diluted income per share: | | | | | | | | | | | | | |
| Income from continuing operations | | $ | 0.15 | | $ | 0.31 | | $ | 0.48 | | $ | 0.48 | |
| Income from discontinued operations | | $ | - | | $ | 0.02 | | $ | - | | $ | 0.02 | |
| Net income | | $ | 0.15 | | $ | 0.33 | | $ | 0.48 | | $ | 0.50 | |
| | | | | | | | | | | | | | |
Weighted average basic common shares outstanding | | | 37,590,168 | | | 36,954,948 | | | 37,528,924 | | | 36,918,265 | |
| | | | | | | | | | | | | | |
Weighted average diluted common shares outstanding | | | 39,233,579 | | | 39,042,770 | | | 39,232,479 | | | 38,934,572 | |
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
| | | September 30, | | December 31, | |
| ASSETS | | 2006 | | 2005 | |
| | | (Unaudited) | | | |
| Cash and cash equivalents | | $ | 8,834 | | $ | 10,990 | |
| Restricted cash | | | 38,082 | | | 4,893 | |
| Notes receivable, net of allowance for uncollectible notes of | | | | | | | |
| $69,836 and $52,479, respectively | | | 218,298 | | | 177,572 | |
| Accrued interest receivable | | | 2,858 | | | 2,243 | |
| Investment in special purpose entity | | | 15,020 | | | 22,802 | |
| Amounts due from affiliates | | | 4,122 | | | 680 | |
| Inventories | | | 145,203 | | | 117,597 | |
| Land, equipment, and leasehold improvements, net | | | 22,264 | | | 10,441 | |
| Land held for sale | | | 203 | | | 495 | |
| Prepaid and other assets | | | 20,297 | | | 14,083 | |
| | | | | | | | |
| TOTAL ASSETS | | $ | 475,181 | | $ | 361,796 | |
| | | | | | | | |
| | | | | | | | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | |
| | | | | | | | |
| LIABILITIES | | | | | | | |
| Accounts payable and accrued expenses | | $ | 10,721 | | $ | 9,556 | |
| Accrued interest payable | | | 2,011 | | | 1,354 | |
| Amounts due to affiliates | | | 104 | | | 544 | |
| Unearned samplers | | | 6,167 | | | 5,310 | |
| Income taxes payable | | | 4,094 | | | 1,268 | |
| Deferred income taxes payable | | | 15,601 | | | 8,485 | |
| Notes payable and capital lease obligations | | | 260,026 | | | 177,269 | |
| Senior subordinated notes | | | 32,321 | | | 33,175 | |
| | | | | | | | |
| Total Liabilities | | | 331,045 | | | 236,961 | |
| | | | | | | | |
| 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, | | | | | | | |
| 37,685,397 shares issued and outstanding at September 30, 2006, and | | | | | | | |
| 37,494,304 shares issued and outstanding at December 31, 2005 | | | 377 | | | 375 | |
| Additional paid-in capital | | | 112,482 | | | 112,207 | |
| Retained earnings | | | 31,277 | | | 12,253 | |
| | | | | | | | |
| Total Shareholders' Equity | | | 144,136 | | | 124,835 | |
| | | | | | | | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | $ | 475,181 | | $ | 361,796 | |
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
DEMONSTRATING IMPACT OF ADOPTION OF SFAS NO. 152
(in thousands, except share and per share amounts)
(Unaudited)
| | | Three Months Ended September 30, 2006 | | Three Months | |
| | | As Reported - | | Comparable to 2005 - | | Ended | |
| | | Reflects Adoption | | Does Not Reflect | | September 30, | |
| | | of SFAS No.152 | | SFAS No. 152 | | 2005 | |
Revenues: | | | | | | | | | | |
| Vacation Interval sales | | $ | 51,414 | | $ | 51,414 | | $ | 41,833 | |
| Estimated uncollectible revenue | | | (8,910 | ) | | - | | | - | |
| Sampler sales | | | - | | | 686 | | | 617 | |
| All other revenue | | | 13,596 | | | 13,596 | | | 19,855 | |
| Total revenues | | | 56,100 | | | 65,696 | | | 62,305 | |
| | | | | | | | | | | |
Costs and Operating Expenses: | | | | | | | | | | |
| Cost of Vacation Interval sales | | | 6,069 | | | 8,295 | | | 6,772 | |
| Sales and marketing | | | 25,880 | | | 26,566 | | | 19,648 | |
| Provision for uncollectible notes | | | - | | | 6,684 | | | 6,275 | |
| All other costs and expenses | | | 14,315 | | | 14,315 | | | 12,054 | |
| Total costs and operating expenses | | | 46,264 | | | 55,860 | | | 44,749 | |
| | | | | | | | | | | |
| Income before provision for income taxes | | | | | | | | | | |
| and discontinued operations | | | 9,836 | | | 9,836 | | | 17,556 | |
| Provision for income taxes | | | (3,787 | ) | | (3,787 | ) | | (5,306 | ) |
Net income from continuing operations | | | 6,049 | | | 6,049 | | | 12,250 | |
| | | | | | | | | | | |
Discontinued Operations | | | | | | | | | | |
| Gain on sales of discontinued operations (net of taxes) | | | - | | | - | | | 613 | |
| Net income from discontinued operations (net of taxes) | | | - | | | - | | | - | |
Net income from discontinued operations (net of taxes) | | | - | | | - | | | 613 | |
| | | | | | | | | | | |
Net income | | $ | 6,049 | | $ | 6,049 | | $ | 12,863 | |
| | | | | | | | | | | |
Basic income per share: | | | | | | | | | | |
| Net income from continuing operations | | $ | 0.16 | | $ | 0.16 | | $ | 0.33 | |
| Net income from discontinued operations | | $ | - | | $ | - | | $ | 0.02 | |
| Net income | | $ | 0.16 | | $ | 0.16 | | $ | 0.35 | |
| | | | | | | | | | | |
Diluted income per share: | | | | | | | | | | |
| Net income from continuing operations | | $ | 0.15 | | $ | 0.15 | | $ | 0.31 | |
| Net income from discontinued operations | | $ | - | | $ | - | | $ | 0.02 | |
| Net income | | $ | 0.15 | | $ | 0.15 | | $ | 0.33 | |
| | | | | | | | | | | |
Weighted average basic common shares outstanding | | | 37,590,168 | | | 37,590,168 | | | 36,954,948 | |
| | | | | | | | | | | |
Weighted average diluted common shares outstanding | | | 39,233,579 | | | 39,233,579 | | | 39,042,770 | |
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
DEMONSTRATING IMPACT OF ADOPTION OF SFAS NO. 152
(in thousands, except share and per share amounts)
(Unaudited)
| | | Nine Months Ended September 30, 2006 | | Nine Months | |
| | | As Reported - | | Comparable to 2005 - | | Ended | |
| | | Reflects Adoption | | Does Not Reflect | | September 30, | |
| | | of SFAS No.152 | | SFAS No. 152 | | 2005 | |
Revenues: | | | | | | | | | | |
| Vacation Interval sales | | $ | 141,516 | | $ | 141,516 | | $ | 109,304 | |
| Estimated uncollectible revenue | | | (24,525 | ) | | - | | | - | |
| Sampler sales | | | - | | | 2,144 | | | 1,759 | |
| All other revenue | | | 37,815 | | | 37,815 | | | 42,676 | |
| Total revenues | | | 154,806 | | | 181,475 | | | 153,739 | |
| | | | | | | | | | | |
Costs and Operating Expenses: | | | | | | | | | | |
| Cost of Vacation Interval sales | | | 14,986 | | | 21,114 | | | 17,507 | |
| Sales and marketing | | | 68,535 | | | 70,679 | | | 54,985 | |
| Provision for uncollectible notes | | | - | | | 18,397 | | | 18,083 | |
| All other costs and expenses | | | 40,352 | | | 40,352 | | | 36,100 | |
| Total costs and operating expenses | | | 123,873 | | | 150,542 | | | 126,675 | |
| | | | | | | | | | | |
| Income before provision for income taxes | | | | | | | | | | |
| and discontinued operations | | | 30,933 | | | 30,933 | | | 27,064 | |
| Provision for income taxes | | | (11,909 | ) | | (11,909 | ) | | (8,189 | ) |
Net income from continuing operations | | | 19,024 | | | 19,024 | | | 18,875 | |
| | | | | | | | | | | |
Discontinued Operations | | | | | | | | | | |
| Gain on sales of discontinued operations (net of taxes) | | | - | | | - | | | 613 | |
| Net income from discontinued operations (net of taxes) | | | - | | | - | | | 128 | |
Net income from discontinued operations (net of taxes) | | | - | | | - | | | 741 | |
| | | | | | | | | | | |
Net income | | $ | 19,024 | | $ | 19,024 | | $ | 19,616 | |
| | | | | | | | | | | |
Basic income per share: | | | | | | | | | | |
| Net income from continuing operations | | $ | 0.51 | | $ | 0.51 | | $ | 0.51 | |
| Net income from discontinued operations | | $ | - | | $ | - | | $ | 0.02 | |
| Net income | | $ | 0.51 | | $ | 0.51 | | $ | 0.53 | |
| | | | | | | | | | | |
Diluted income per share: | | | | | | | | | | |
| Net income from continuing operations | | $ | 0.48 | | $ | 0.48 | | $ | 0.48 | |
| Net income from discontinued operations | | $ | - | | $ | - | | $ | 0.02 | |
| Net income | | $ | 0.48 | | $ | 0.48 | | $ | 0.50 | |
| | | | | | | | | | | |
Weighted average basic common shares outstanding | | | 37,528,924 | | | 37,528,924 | | | 36,918,265 | |
| | | | | | | | | | | |
Weighted average diluted common shares outstanding | | | 39,232,479 | | | 39,232,479 | | | 38,934,572 | |
