EXHIBIT 99.1
SILVERLEAF RESORTS, INC.
1221 River Bend Drive, Suite 120
Dallas, Texas 75247
(214) 631-1166
Contact: Harry J. White, Jr.
Chief Financial Officer
SILVERLEAF RESORTS, INC. ANNOUNCES UPDATED INFORMATION
DALLAS, Texas. (March 15, 2002) - Silverleaf Resorts, Inc. today
announced updated information with regard to its previously announced liquidity
issues and other operational matters.
In February 2001, the Company disclosed significant liquidity issues
arising primarily from its failure to close a new credit facility with its
largest secured creditor. Since then, the Company and its financial advisors
have attempted to develop and implement a plan to return the Company to a more
stable financial condition. The Company has remained in default under its credit
facilities with its three principal secured lenders, but they have each agreed
to forebear taking any action as a result of the Company's defaults and to
continue funding so long as the Company continues to comply with the terms of
interim arrangements with these lenders. Unless extended, these interim
arrangements expire on March 31, 2002. In addition, the Company remains in
default with its fourth secured lender, which has tentatively extended its
payment terms.
The Company is also in default with respect to $66.7 million of its
10 1/2% senior subordinated notes due 2008. The Company will immediately
commence an exchange offer with the holders of these existing notes. Under the
terms of the exchange offer, holders will be offered a combination of cash, new
notes, and Silverleaf common stock for their existing notes. The exchange offer
may not be consummated unless at least 80% in principal amount of the existing
notes are tendered. Additionally, under the terms of the exchange offer, the
indenture related to the existing notes will be amended to waive existing
defaults, eliminate substantially all restrictive covenants, and subordinate the
existing notes to the new notes. If the exchange offer is successful, holders of
the existing notes will acquire 65% of the Company's outstanding common stock.
The principal amount of each new note issued will be only 50% of the principal
amount of each existing note exchanged. The interest rate of the new notes will
be fixed between 5% and 8%, depending upon the actual percentage of existing
notes exchanged by the pricing date.
The Company has negotiated restructured two-year revolving credit
facilities with its three principal secured lenders as well as a restructured
revolving off-balance sheet facility with another financing source. Funding
under all of these facilities is dependent upon successful completion of the
exchange offer. If Silverleaf is unable to consummate the exchange offer, there
can be no assurance that it will be able to obtain sufficient financing to
continue its operations.
The Company is reporting revenue of $285.8 million, a net loss of $59.9
million and a net loss per share of $4.65 for the year ended December 31, 2000,
compared to restated revenue of $230.4 million, restated net income of $17.7
million and restated net income per share of $1.37 for the year ended December
31, 1999. Amounts reported for the quarter ended December 31, 2000 were revenue
of $68.5 million, a net loss of $45.3 million and a net loss per share of $3.51,
compared to restated revenue of $64.1 million, restated net income of $3.2
million and restated net income per share of $0.25 for the quarter ended
December 31, 1999. At December 31, 2000, due to its announced liquidity concerns
and related uncertainties, the Company incurred one-time charges of $15.5
million to write-down inventories, $5.4 million to record the impairment of land
and land held for sale, $3.1 million to write-off unsold inventory of vacation
intervals from certain managed resorts, and $0.9 million to write-off intangible
assets established in connection with the acquisition of these managed resorts.
Additionally, the Company substantially increased its provision for
uncollectible notes in 2000 to provide for poorer performance in the Company's
notes receivable portfolio which resulted from a general downturn in the economy
and the elimination of programs that had been in place to bring delinquent notes
current. The additional amount provided was approximately $85 million. In the
fourth quarter of 2000, the Company also wrote-off its receivable from
Silverleaf Club and incurred a charge of $7.5 million.
The Company's independent auditors disclaimed an opinion on the
consolidated balance sheet of the Company and its consolidated subsidiaries as
of December 31, 2000 and the related consolidated statements of operations,
shareholders' equity, and cash flows for the year ended December 31, 2000
because of pervasive uncertainties regarding the Company's ability to continue
as a going concern.
-more-
The Company also announced today that it would restate its consolidated
financial statements for 1998, 1999, and the first three quarters of 2000 as a
result of adjustments identified in connection with finalizing its December 31,
2000 financial statements. The adjustments recorded in the Company's restated
consolidated financial statements decrease the Company's previously reported net
income by $997,000 and $1.6 million for the years ended December 31, 1998 and
1999, respectively. The adjustments decrease the Company's previously reported
total assets by $1.0 million and $2.0 million as of December 31, 1998 and 1999,
respectively. The adjustments to the Company's previously announced quarterly
results for 2000 decrease the Company's previously reported net income by
$311,000, $6.3 million, and $18.2 million for the quarters ended March 31, 2000,
June 30, 2000, and September 30, 2000, respectively. The adjustments decrease
the Company's previously reported total assets by $2.1 million, $9.5 million,
and $37.2 million as of March 31, 2000, June 30, 2000, and September 30, 2000,
respectively.
The specific items, that resulted in adjustments are summarized as
follows:
o The Company has significantly increased its provision for
uncollectible notes and the related allowance for the quarters
ended June 30, 2000 and September 30, 2000.
o Effective in the fourth quarter of 2000, the Company adopted
SAB No. 101 and modified its method of accounting for sampler
sales, which resulted in the adjustment of sampler sales and
the direct costs associated with these sales.
o The Company identified certain errors in accounting that had
occurred during the prior periods that resulted in the Company
either recognizing revenue that it had not yet earned or
failing to cancel sales that were properly rescinded by its
customers during the respective periods. These errors include
the failure in some cases to properly apply interest payments
and membership dues, and to properly reconcile debt balances
and lender lock box activity related to pledged notes
receivable.
o The Company changed the treatment of the costs associated with
its prepaid marketing lists from a capitalized cost amortized
over its useful life to an expense. The Company also corrected
the classification of customer notes receivable activity on
its consolidated statement of cash flows from an investing
activity to an operating activity.
o Additional write-offs include litigation costs, that the
Company originally believed would be covered under the
Company's insurance policies.
A summary of the significant effects of the restatement is included
below. The Company has begun the process of preparing the amended reports
necessary to restate its previously released financial statements. Silverleaf
intends to file these amended reports with the Securities and Exchange
Commission as soon as is practicable.
Based in Dallas, Texas, Silverleaf Resorts, Inc. currently owns and/or
operates 19 resorts in various stages of development. Silverleaf Resorts offer a
wide array of country club-like amenities, such as golf, swimming, horseback
riding, boating, and many organized activities for children and adults.
Silverleaf has a managed ownership base of over 124,000.
This release contains certain forward-looking statements that involve
risks and uncertainties and actual results many differ materially from those
anticipated. The Company is subject to specific risks associated with the
timeshare industry, the regulatory environment, and various economic factors.
Additionally, anticipated results are dependent upon the Company's ability to
identify and acquire or develop other operations under terms that are beneficial
to the Company and its shareholders. Other risk factors are more fully discussed
under "Cautionary Statements" in the Company's SEC reports, including the
Company's 1999 annual report on Form 10-K (pages 29 through 35 thereof).
(table to follow)
Silverleaf Resorts, Inc.
Adjustments to Consolidated Financial Statements
(Unaudited)
A summary of the effects of adjustments on the Company's statements of
operations for the years ended December 31, 1998 and 1999 and the nine months
ended September 30, 2000 is as follows (in thousands):
<Table>
<Caption>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
---------------------- ------------
1998 1999 2000
--------- --------- ------------
Revenues As Previously Reported .................................... $ 160,755 $ 230,758 $ 211,745
Revision to downgrade policy ................................... -- -- 4,231
Delayed cancellation of rescinded sales ........................ (531) (337) 910
Deferral of sales within the rescission period ................. (733) 231 585
Incorrect application of membership dues payments .............. -- -- (104)
Revision to interest income related to loan amortization ....... -- -- 936
Revision to sampler revenue recognition policy ................. (1,083) (20) (726)
Reconciliation of lender debt .................................. -- (189) (267)
--------- --------- ---------
Total adjustments .......................................... (2,347) (315) 5,565
Revenues As Restated ........................................... $ 158,408 $ 230,443 $ 217,310
========= ========= =========
Costs and Expenses As Previously Reported .......................... $ 130,945 $ 199,402 $ 195,701
Increased provision for uncollectible notes .................... -- -- 38,530
Revision to downgrade policy ................................... -- -- 4,231
Delayed cancellation of rescinded sales ........................ (169) (79) 263
Deferral of sales within the rescission period ................. (365) 157 249
Incorrect application of membership dues payments .............. -- -- (44)
Revision to sampler revenue recognition policy ................. (387) 1,127 26
Reconciliation of lender debt .................................. (189) 289 194
Litigation costs ............................................... -- 43 1,041
Revision to prepaid customer lists policy ...................... -- -- 388
Other miscellaneous items ...................................... 382 703 449
--------- --------- ---------
Total adjustments .......................................... (728) 2,240 45,327
Costs and Expenses As Restated ................................. $ 130,217 $ 201,642 $ 241,028
========= ========= =========
Income before provision for income taxes as previously reported .... $ 29,810 $ 31,356 $ 16,044
Total adjustments .............................................. (1,619) (2,555) (39,762)
--------- --------- ---------
Income (loss) before provision for income taxes as restated .... $ 28,191 $ 28,801 $ (23,718)
========= ========= =========
Provision for income taxes as previously reported .................. $ 11,432 $ 12,072 6,178
Total adjustments .............................................. (622) (982) (14,966)
--------- --------- ---------
Provision (benefit) for income taxes as restated ............... $ 10,810 $ 11,090 $ (8,788)
========= ========= =========
Net income as previously reported .................................. $ 18,378 $ 19,284 $ 10,182
Total adjustments .............................................. (997) (1,573) (24,796)
--------- --------- ---------
Net income (loss) as restated .................................. $ 17,381 $ 17,711 $ (14,614)
========= ========= =========
</Table>
-more-
A summary of the significant effects of the restatement on the
Company's consolidated financial statements for the years ended December 31,
1998 and 1999, and as of December 31, 1999 is as follows (in thousands):
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1998 1999
----------------------- -----------------------
AS AS
PREVIOUSLY AS PREVIOUSLY AS
REPORTED RESTATED REPORTED RESTATED
---------- -------- ---------- --------
Vacation Interval Sales.................................... $135,582 $134,413 $191,207 $192,767
Sampler sales.............................................. 2,768 1,356 $ 4,250 1,665
Total revenues............................................. 160,755 158,408 230,758 230,443
Total costs and expenses................................... 130,945 130,217 199,402 201,642
Income before provision for income taxes................... 29,810 28,191 31,356 28,801
Net income................................................. 18,378 17,381 19,284 17,711
Earnings per share - basic ................................ 1.45 1.38 1.50 1.37
Earnings per share - diluted............................... 1.45 1.37 1.50 1.37
Net cash used in operating activities...................... 17,633 99,512 7,705 120,971
Net cash used in investing activities...................... 94,475 12,552 123,093 10,480
</Table>
<Table>
<Caption>
DECEMBER 31, 1999
------------------------
AS
PREVIOUSLY AS
REPORTED RESTATED
------------ --------
Notes receivable, net....................................... $286,581 $282,290
Accrued interest receivable................................. (a) 2,255
Land held for sale.......................................... (a) 1,078
Prepaid and other assets.................................... 17,203 16,947
Accounts payable and accrued expenses....................... 15,539 13,398
Accrued interest payable.................................... (a) 2,621
Unearned revenues........................................... 5,601 7,998
Deferred income taxes, net.................................. 28,251 26,256
Notes payable and capital lease obligations................. 194,171 194,468
Retained earnings........................................... 56,737 53,543
Total shareholders' equity.................................. 161,210 158,016
</Table>
(a) - Not previously presented separately
The restatement also resulted in a decrease in retained earnings of $624,000 as
of January 1, 1998.
-more-
A summary of the significant effects of the restatement on the
Company's condensed consolidated financial statements for the nine months ended
September 30, 2000, each of the fiscal 1999 quarters, and the fiscal 2000
quarters ended March 31, 2000, June 30, 2000, and September 30, 2000 is as
follows (in thousands):
<Table>
<Caption>
NINE MONTHS ENDED
SEPTEMBER 30, 2000
------------------------
AS
PREVIOUSLY AS
REPORTED RESTATED
----------- --------
Vacation interval sales................................................... $174,876 $181,421
Sampler sales............................................................. 4,172 2,537
Total revenues............................................................ 211,745 217,310
Provision for uncollectible notes......................................... 17,488 60,128
Total costs and expenses.................................................. 195,701 241,028
Income (loss) before income taxes and extraordinary item.................. 16,044 (23,718)
Income (loss) before extraordinary item................................... 9,866 (14,930)
Net income................................................................ 10,182 (14,614)
Earnings (loss) per share before extraordinary item - basic and diluted... .77 (1.16)
Earnings (loss) per share - basic and diluted............................. .79 (1.14)
Net cash provided by (used in) operating activities....................... 6,857 (95,478)
Net cash provided by (used in) financing activities....................... (103,779) ( 1,688)
</Table>
<Table>
<Caption>
QUARTER ENDED
----------------------------------------------------------------------
MARCH 31, 1999 JUNE 30, 1999 SEPTEMBER 30, 1999
---------------------- ---------------------- --------------------
AS AS AS
PREVIOUSLY AS PREVIOUSLY AS PREVIOUSLY AS
REPORTED RESTATED REPORTED RESTATED REPORTED RESTATED
---------- -------- ---------- -------- ---------- --------
Total revenues........................... $49,080 $49,419 $56,373 $55,098 $61,534 $ 61,862
Total costs and expenses................. 41,195 42,309 47,468 47,485 52,710 53,023
Income before provision for income
taxes................................ 7,885 7,110 8,905 7,613 8,824 8,839
Net income............................... 4,849 4,372 5,477 4,682 5,427 5,436
Earnings per share - basic and
diluted.............................. .38 .34 .42 .36 .42 .42
<Caption>
QUARTER ENDED
-----------------------
DECEMBER 31, 1999
-----------------------
AS
PREVIOUSLY AS
REPORTED RESTATED
---------- ---------
Total revenues........................... $ 63,771 $ 64,065
Total costs and expenses................. 58,029 58,825
Income before provision for income
taxes................................ 5,743 5,240
Net income............................... 3,532 3,222
Earnings per share - basic and
diluted.............................. .27 .25
</Table>
<Table>
<Caption>
QUARTER ENDED
---------------------------------------------------------------------
MARCH 31, 2000 JUNE 30, 2000 SEPTEMBER 30, 2000
-------------------- --------------------- ---------------------
AS AS AS
PREVIOUSLY AS PREVIOUSLY AS PREVIOUSLY AS
REPORTED RESTATED REPORTED RESTATED REPORTED RESTATED
---------- -------- ---------- -------- ---------- --------
Total revenues............................................. $ 64,906 $ 65,393 $ 71,319 $ 70,882 $ 75,519 $ 81,034
Total costs and expenses................................... 61,857 62,909 65,395 75,033 68,449 103,086
Income (loss) before provision (benefit) for income
taxes and extraordinary item........................... 3,049 2,484 5,924 (4,151) 7,070 (22,052)
Income (loss) before extraordinary item.................... 1,875 1,564 3,643 (2,607) 4,348 (13,888)
Net income (loss).......................................... 1,875 1,564 3,959 (2,291) 4,348 (13,888)
Earnings (loss) per share before extraordinary item -
basic and diluted...................................... .15 .12 .29 (.20) .34 (1.08)
Earnings (loss) per share - basic and diluted.............. .15 .12 .31 (.18) .34 (1.08)
</Table>
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