UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
[X] AMENDMENT NO. 1 TO QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file number: 001-13003
SILVERLEAF RESORTS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 75-2259890
(State of incorporation) (I.R.S. Employer
Identification No.)
1221 RIVER BEND DRIVE, SUITE 120
DALLAS, TEXAS 75247
(Address of principal executive offices, including zip code)
214-631-1166
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Number of shares of common stock outstanding of the issuer's Common Stock, par
value $0.01 per share, as of August 11, 2000 was: 12,889,417
SILVERLEAF RESORTS, INC.
INDEX
This amendment No. 1 on Form 10-Q/A is being filed to give effect to the
restatement of the Company's financial statements, included in Item 1, as
discussed in Note 5 thereto.
Page
---------
PART I. FINANCIAL INFORMATION (Unaudited)
Item 1. Consolidated Condensed Statements of Operations for the three months
and six months ended June 30, 2000 (restated) and 1999 (restated) ......... 3
Consolidated Condensed Balance Sheets as of June 30, 2000 (restated)
and December 31, 1999 (restated) .......................................... 4
Consolidated Condensed Statement of Shareholders' Equity for the six
months ended June 30, 2000 (restated) ..................................... 5
Consolidated Condensed Statements of Cash Flows for the six months
ended June 30, 2000 (restated) and 1999 (restated) ........................ 6
Notes to the Consolidated Condensed Financial Statements .................. 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ..................................................... 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ......................................................... 19
Item 4. Submission of Matters to a Vote of Security Holders ....................... 19
Item 6. Exhibits and Reports on Form 8-K .......................................... 19
Signatures ................................................................ 20
EXPLANATORY NOTE
On November 19, 2002, the Company simultaneously filed this Form 10Q/A
report and the other below described delinquent and/or amended reports with the
Securities and Exchange Commission:
Forms 10-Q for each of the quarterly periods ended June 30, 2002 and
March 31, 2002;
Forms 10-K for each of the years ended December 31, 2001 and December
31, 2000;
1
Forms 10-Q for each of the quarterly periods ended September 30, 2001,
June 30, 2001, and March 31, 2001;
Forms 10-Q/A for the quarterly periods ended September 30, 2000 and
March 31, 2000.
CERTAIN STATEMENTS CONTAINED IN THIS FORM 10-Q/A UNDER ITEMS 1 AND 2,
IN ADDITION TO CERTAIN STATEMENTS CONTAINED ELSEWHERE IN THIS 10-Q/A, INCLUDING
STATEMENTS QUALIFIED BY THE WORDS "BELIEVE," "INTEND," "ANTICIPATE," "EXPECTS"
AND WORDS OF SIMILAR IMPORT, ARE "FORWARD-LOOKING STATEMENTS" AND ARE THUS
PROSPECTIVE. THESE STATEMENTS REFLECT THE EXPECTATIONS OF THE COMPANY FOR THE
QUARTERLY PERIOD ENDED JUNE 30, 2000, AND HAVE NOT BEEN UPDATED FOR THIS FILING
REGARDING THE COMPANY'S FUTURE PROFITABILITY, PROSPECTS AND RESULTS OF
OPERATIONS. ALL SUCH FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS,
UNCERTAINTIES AND OTHER FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM FUTURE RESULTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS. ALL FORWARD-LOOKING STATEMENTS ARE MADE AS OF THE DATE OF THE
ORIGINAL FILING DATE OF THIS REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED
JUNE 30, 2000, AND HAVE NOT BEEN UPDATED FOR THIS FILING AND THE COMPANY ASSUMES
NO OBLIGATION TO UPDATE THE FORWARD-LOOKING STATEMENTS OR TO UPDATE THE REASONS
WHY ACTUAL RESULTS COULD DIFFER FROM THE PROJECTIONS IN THE FORWARD-LOOKING
STATEMENTS.
2
PART I: FINANCIAL INFORMATION (UNAUDITED)
ITEM 1. FINANCIAL STATEMENTS
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- -------------------------------
2000 1999 2000 1999
(As Restated) (As Restated) (As Restated) (As Restated)
------------ ------------ ------------ ------------
REVENUES:
Vacation Interval sales $ 59,338 $ 45,703 $ 113,836 $ 87,378
Sampler sales 275 360 1,543 868
------------ ------------ ------------ ------------
Total sales 59,613 46,063 115,379 88,246
Interest income 9,480 6,824 18,165 12,432
Management fee income 466 640 547 1,540
Other income 1,323 1,571 2,184 2,299
------------ ------------ ------------ ------------
Total revenues 70,882 55,098 136,275 104,517
COSTS AND OPERATING EXPENSES:
Cost of Vacation Interval sales 10,559 7,520 20,103 13,395
Sales and marketing 31,717 24,102 62,383 45,369
Provision for uncollectible notes 14,682 4,504 20,531 8,766
Operating, general and administrative 8,577 6,197 17,128 12,580
Depreciation and amortization 1,886 1,367 3,699 2,604
Interest expense and lender fees 7,612 3,795 14,098 7,080
------------ ------------ ------------ ------------
Total costs and operating expenses 75,033 47,485 137,942 89,794
Income (loss) before benefit (provision) for
income taxes and extraordinary item (4,151) 7,613 (1,667) 14,723
Benefit (provision) for income taxes 1,544 (2,931) 624 (5,669)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM $ (2,607) $ 4,682 $ (1,043) $ 9,054
Extraordinary gain on extinguishment of
debt (net of income tax of $197) 316 -- 316 --
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (2,291) $ 4,682 $ (727) $ 9,054
============ ============ ============ ============
BASIC AND DILUTED EARNINGS PER SHARE:
Income (loss) before extraordinary item $ (0.20) $ 0.36 $ (0.08) $ 0.70
Extraordinary item 0.02 -- 0.02 --
------------ ------------ ------------ ------------
Net income (loss) $ (0.18) $ 0.36 $ (0.06) $ 0.70
============ ============ ============ ============
WEIGHTED AVERAGE BASIC AND DILUTED
SHARES OUTSTANDING: 12,889,417 12,889,417 12,889,417 12,889,417
============ ============ ============ ============
See notes to consolidated condensed financial statements.
3
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share and per share amounts)
(Unaudited)
June 30, December 31,
2000 1999
-------------- --------------
(As Restated) (As Restated)
ASSETS
Cash and cash equivalents $ 4,243 $ 4,814
Restricted cash 978 903
Notes receivable, net of allowance for uncollectible notes of
$47,646 and $32,023, respectively 339,162 282,290
Accrued interest receivable 2,590 2,255
Amounts due from affiliates 9,028 6,596
Inventories 120,426 112,613
Land, equipment, buildings, and utilities, net 50,313 50,446
Income taxes receivable 2,564 --
Land held for sale 1,063 1,078
Prepaid and other assets 18,256 16,947
-------------- --------------
TOTAL ASSETS $ 548,623 $ 477,942
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued expenses $ 14,462 $ 13,398
Accrued interest payable 3,044 2,621
Amounts due to affiliates 334 --
Unearned revenues 10,950 7,998
Income taxes payable -- 185
Deferred income taxes, net 25,788 26,256
Notes payable and capital lease obligations 262,756 194,468
Senior subordinated notes 74,000 75,000
-------------- --------------
Total Liabilities 391,334 319,926
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, par value $0.01 per share, 100,000,000
shares authorized, 13,311,517 shares issued, and
12,889,417 shares outstanding 133 133
Additional paid-in capital 109,339 109,339
Retained earnings 52,816 53,543
Treasury stock, at cost (422,100 shares) (4,999) (4,999)
-------------- --------------
Total Shareholders' Equity 157,289 158,016
-------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 548,623 $ 477,942
============== ==============
See notes to consolidated condensed financial statements.
4
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
(in thousands, except share and per share amounts)
(Unaudited)
Common Stock
-------------------------
Number of $0.01 Additional Treasury Stock
Shares Par Paid-in Retained ------------------------
Issued Value Capital Earnings Shares Cost Total
-------------- --------- ------------- ----------- ------------ ----------- ------------
January 1, 2000 (As Previously
Reported) 13,311,517 $ 133 $ 109,339 $ 56,737 (422,100) $ (4,999) $ 161,210
Adjustments - - - (3,194) - - (3,194)
--------------- --------- ------------- ------------ ------------- ------------ -------------
January 1, 2000 (As Restated) 13,311,517 133 109,339 53,543 (422,100) (4,999) 158,016
Net loss (As Restated) - - - (727) - - (727)
--------------- --------- ------------- ------------ ------------- ------------ -------------
June 30, 2000 (As Restated) 13,311,517 $ 133 $ 109,339 $ 52,816 (422,100) $ (4,999) $ 157,289
=============== ========= ============= ============ ============= ============ =============
See notes to consolidated condensed financial statements.
5
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Six Months Ended
June 30,
----------------------------
2000 1999
(As Restated) (As Restated)
------------- -------------
OPERATING ACTIVITIES:
Net income (loss) $ (727) $ 9,054
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Provision for uncollectible notes 20,531 8,766
Depreciation and amortization 3,699 2,604
Deferred income taxes (468) 2,260
Extraordinary gain on extinguishment of debt (514) --
Increase (decrease) in cash from changes in
assets and liabilities:
Restricted cash (75) (30)
Notes receivable (77,403) (62,146)
Accrued interest receivable (335) (348)
Amounts due from affiliates (2,098) (2,221)
Inventories (7,813) (18,251)
Land held for sale 15 (24)
Prepaid and other assets (1,499) 258
Income tax receivable (2,564) --
Accounts payable and accrued expenses 1,064 6,315
Accrued interest payable 423 3
Unearned revenues 2,952 3,413
Income taxes payable (185) (4,002)
------------- -------------
Net cash used in operating activities (64,997) (54,349)
------------- -------------
INVESTING ACTIVITIES:
Purchases of land, equipment, buildings, and utilities (1,247) (11,489)
Proceeds from sales of land, equipment, buildings, and utilities -- 4,494
------------- -------------
Net cash used in investing activities (1,247) (6,995)
------------- -------------
FINANCING ACTIVITIES:
Proceeds from borrowings from unaffiliated entities 98,723 72,115
Payments on borrowings to unaffiliated entities (33,050) (19,053)
------------- -------------
Net cash provided by financing activities 65,673 53,062
------------- -------------
Net decrease in cash and cash equivalents (571) (8,282)
CASH AND CASH EQUIVALENTS:
Beginning of period 4,814 11,355
------------- -------------
End of period $ 4,243 $ 3,073
============= =============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 13,817 $ 7,480
Income taxes $ 2,790 $ 7,411
Non-cash transactions:
Equipment acquired under capital lease or note $ 2,165 $ 4,640
Extraordinary gain on extinguishment of debt $ 514 $ --
See notes to consolidated condensed financial statements.
6
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BACKGROUND
These consolidated condensed financial statements of Silverleaf Resorts, Inc.
and subsidiaries ("the Company") presented herein do not include certain
information and disclosures required by accounting principles generally accepted
in the United States of America for complete financial statements. However, in
the opinion of management, all adjustments considered necessary for a fair
presentation have been included. Operating results for the three and six months
ended June 30, 2000 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000.
Subsequent to the issuance of its annual and interim financial statements for
the year ended December 31, 1999 and the quarterly periods in the six months
ended June 30, 2000, the Company's management determined that the accounting
treatment afforded to certain types of transactions was inappropriate.
Accordingly, the previously reported financial information for the three and six
month periods ended June 30, 2000 and 1999, along with the December 31, 1999
balance sheet, have been restated. Such restatement is further discussed in Note
5 to the Company's financial statements included herein.
Certain previously reported amounts have been reclassified to conform to the
current presentation.
Recent Accounting Pronouncements
SFAS No. 133 -- In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133, as amended,
is effective for fiscal years beginning after June 15, 2000 and will be adopted
for the period beginning January 1, 2001. SFAS No. 133 requires that all
derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of the derivatives are recorded each period in current
earnings or other comprehensive income depending on whether a derivative is
designated as part of a hedge transaction, and if it is, the type of hedge
transaction. The impact of SFAS No. 133 on the Company's results of operations,
financial position, or cash flows will be dependent on the level and types of
derivative instruments the Company will have entered into at the time the
standard is implemented.
SAB No. 101 -- In December 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101, "Revenue Recognition" ("SAB No. 101"), which
is required to be adopted by the Company in 2000. In connection with the
adoption of SAB No. 101 in the fourth quarter of 2000, management determined
that its methodology for recording sampler sales was inappropriate. As a result,
the Company has changed its method of accounting for sampler sales, and treated
such change as a correction of an error. See Note 5. There were no other
significant changes in the Company's accounting practices resulting from the
adoption of SAB No. 101.
NOTE 2 - EARNINGS PER SHARE
Outstanding stock options were not dilutive because the exercise price for such
options exceeded the market price for the Company's shares for the three and six
month periods ended June 30, 2000 and 1999.
7
NOTE 3 - DEBT
Notes payable, capital lease obligations, and senior subordinated notes as of
June 30, 2000 and December 31, 1999 are as follows (in thousands):
2000 1999
-------- --------
$60 million revolving loan agreement, which contains certain financial
covenants, due December 2000, principal and interest payable from the proceeds
obtained on customer notes receivable pledged
as collateral for the note, at an interest rate of LIBOR plus 2.55% .......... $ 34,249 $ 39,864
$70 million revolving loan agreement, capacity reduced by amounts outstanding
under the $10 million inventory loan agreement, which contains certain
financial covenants, due August 2004, principal and interest payable from the
proceeds obtained on customer notes receivable pledged as
collateral for the note, at an interest rate of LIBOR plus 2.65% ............. 51,885 45,783
$75 million revolving loan agreement, which contains certain financial
covenants, due April 2005, principal and interest payable from the proceeds
obtained on customer notes receivable pledged as collateral
for the note, at an interest rate of LIBOR plus 3.00% ........................ 73,626 62,166
$75 million revolving loan agreement, which contains certain financial
covenants, due November 2005, principal and interest payable from the proceeds
obtained on customer notes receivable pledged as collateral
for the note, at an interest rate of LIBOR plus 2.67% ........................ 46,436 14,150
$30 million revolving loan agreement, which contains certain financial
covenants, due September 2006, principal and interest payable from the
proceeds obtained on customer notes receivable pledged as collateral
for the note, at an interest rate of Prime ................................... 27,035 6,680
$10 million inventory loan agreement, which contains certain financial
covenants, due August 2002, interest payable monthly, at an interest
rate of LIBOR plus 3.50% ..................................................... 9,936 9,937
$10 million inventory loan agreement, which contains certain financial
covenants, due November 2001, interest payable monthly, at an interest
rate of LIBOR plus 3.25% ..................................................... 3,917 --
Various notes, due from August 2000 through November 2009, collateralized
by various assets with interest rates ranging from 4.20% to 14.0% ............ 3,917 4,088
-------- --------
Total notes payable .................................................... 251,001 182,668
Capital lease obligations ...................................................... 11,755 11,800
-------- --------
Total notes payable and capital lease obligations ...................... 262,756 194,468
10 1/2% senior subordinated notes, due 2008, interest payable semi-
annually on April 1 and October 1, guaranteed by all of the Company's
present and future domestic restricted subsidiaries .......................... 74,000 75,000
-------- --------
$336,756 $269,468
======== ========
At June 30, 2000, LIBOR rates were from 6.64% to 6.77%, and the Prime rate was
9.50%. At December 31, 1999, LIBOR rates were from 5.82% to 6.00%, and the Prime
rate was 8.50%.
In June 2000, the Company recognized an extraordinary gain of $316,000, net of
income tax of $197,000, related to the early extinguishment of $1.0 million of
10 1/2% senior subordinated notes.
8
Certain of the above debt agreements include restrictions on the Company's
ability to pay dividends based on minimum levels of net income and cash flow.
The debt agreements contain covenants including requirements that the Company
(i) preserve and maintain the collateral securing the loans; (ii) pay all taxes
and other obligations relating to the collateral; and (iii) refrain from selling
or transferring the collateral or permitting any encumbrances on the collateral.
The debt agreements also contain restrictive covenants which include (i)
restrictions on liens against and dispositions of collateral, (ii) restrictions
on distributions to affiliates and prepayments of loans from affiliates, (iii)
restrictions on changes in control and management of the Company, (iv)
restrictions on sales of substantially all of the assets of the Company, and (v)
restrictions on mergers, consolidations, or other reorganizations of the
Company. Under certain credit facilities, a sale of all or substantially all of
the assets of the Company, a merger, consolidation, or reorganization of the
Company, or other changes of control of the ownership of the Company, would
constitute an event of default and permit the lenders to accelerate the maturity
thereof.
Such credit facilities also contain operating covenants requiring the Company to
(i) maintain an aggregate minimum tangible net worth ranging from $17.5 million
to $110 million, minimum liquidity, including a debt to equity ratio of not
greater than 2.5 to 1 and a liquidity ratio of not less than 5%, an interest
coverage ratio of at least 2.0 to 1, a marketing expense ratio of no more than
0.55 to 1, a consolidated cash flow to consolidated interest expense ratio of at
least 2.0 to 1, and total tangible capital funds greater than $200 million plus
75% of net income beginning October 1999; (ii) maintain its legal existence and
be in good standing in any jurisdiction where it conducts business; (iii) remain
in the active management of the Resorts; and (iv) refrain from modifying or
terminating certain timeshare documents. The credit facilities also include
customary events of default, including, without limitation (i) failure to pay
principal, interest, or fees when due, (ii) untruth of any representation of
warranty, (iii) failure to perform or timely observe covenants, (iv) defaults
under other indebtedness, and (v) bankruptcy.
As of June 30, 2000, the Company is in default with respect to its operating
covenants related to one of its revolving loan agreements, with respect to its
operating covenants related to its senior subordinated notes, and with respect
to under-collateralization related to a non-revolving secured lender.
NOTE 4 - SUBSIDIARY GUARANTEES
All subsidiaries of the Company have guaranteed the $74.0 million of senior
subordinated notes. The separate financial statements and other disclosures
concerning each guaranteeing subsidiary (each, a "Guarantor Subsidiary") are not
presented herein because the Company's management has determined that such
information is not material to investors. The guarantee of each Guarantor
Subsidiary is full and unconditional and joint and several. Each Guarantor
Subsidiary is a wholly owned subsidiary of the Company, and together comprise
all direct and indirect subsidiaries of the Company.
Combined summarized operating results of the Guarantor Subsidiaries for the six
months ended June 30, 2000 and 1999, are as follows (in thousands):
June 30,
-----------------------------------
2000 1999
----------- ----------
Revenues $-- $ 1
Expenses -- (45)
----------- ----------
Net loss $-- $(44)
=========== ==========
9
Combined summarized balance sheet information as of June 30, 2000 for the
Guarantor Subsidiaries is as follows (in thousands):
June 30, 2000
----------------
Other assets $ 10
----------------
Total assets $ 10
================
Investment by parent (includes equity
and amounts due to parent) $ 10
----------------
Total liabilities and equity $ 10
================
NOTE 5 - RESTATEMENT
Subsequent to the issuance of its interim financial statements for the three and
six-month periods ended June 30, 2000, the Company's management determined that
the accounting treatment that had been originally afforded to certain types of
transactions was inappropriate. The specific matters for which adjustments have
been made are described below:
Revision to Downgrade Policy - It was determined that the Company's reporting
classification for downgrade transactions was inappropriate. Previously, the
Company had inappropriately classified the difference between the traded
Vacation Interval and the newly assumed Vacation Interval of lower value as a
reduction to Vacation Interval sales. The decreased sales price from the
original Vacation Interval to the downgraded Vacation Interval represents a
write-off of an uncollectible note. Hence, the Company increased Vacation
Interval sales and equal amounts were charged to the provision for uncollectible
notes as shown below for the period restated.
Provision for Uncollectible Notes - During 2000, the Company substantially
reduced two programs that were previously used to remedy defaulted notes
receivable. Additionally, there was a deterioration of the U.S. economy that
came to public awareness in late 2000. In connection with the Company's analysis
of the adequacy of its allowance for uncollectible notes for the year ended
December 31, 2000, it was determined that a significant increase to the
provision for uncollectible notes was warranted. Based on these results, the
Company reexamined the adequacy of its reserve in prior periods. It was
determined that the performance of the notes receivable portfolio began to
deteriorate in the second quarter of 2000. Accordingly, the Company increased
its allowance for uncollectible notes and the related provision for
uncollectible notes as shown below.
Delayed Cancellation of Rescinded Sales - The Company identified an accumulation
of rescinded Vacation Interval sales that had not been appropriately cancelled.
To correct the delayed cancellation of such sales, the Company adjusted Vacation
Interval sales and the direct costs associated with these sales as shown below
for the periods restated.
Deferral of Sales within the Rescission Period - It was determined that the
Company was immediately recognizing certain Vacation Interval sales rather than
appropriately deferring such sales until the customer's legal right of
rescission period had elapsed. Consequently, the Company adjusted Vacation
Interval sales and the direct costs associated with these sales as shown below
for the periods restated.
Interest Income Related to Loan Amortization - The Company determined that an
over-application of principal related to certain customer accounts had occurred
in 2000. To properly account for interest income during 2000, the Company
recorded an adjustment to interest income as shown below, with offsetting
increases to customer notes receivable.
10
Revision to Sampler Revenue Recognition Policy - In connection with the adoption
of SAB No. 101, the Company determined that it had inappropriately accounted for
customer payments associated with the sampler program as revenue in advance of
fulfilling the Company's obligations or expiration of the sampler terms. As a
result, the Company has modified its method of accounting for sampler sales to
properly match revenues to the fulfillment of its obligations, which resulted in
the adjustment of sampler sales and the direct costs associated with these sales
as shown below for the periods restated.
Reconciliation of Lender Debt - It was discovered that the Company had not been
appropriately reconciling debt balances and lender lock box activity related to
pledged notes receivable. As a result, the Company failed to recognize certain
customer deposits and returned customer payments processed through the lender
lock boxes on a timely basis. The Company could not identify the specific
customers involved, and determined that it would not pursue recovery of any
amounts previously credited to customers in error. As a result, management
concluded that the correcting adjustment should reduce interest income, increase
the provision for uncollectible notes, and increase the recorded debt balances.
Consequently, adjustments were made to reconcile lender debt as shown below for
the periods restated.
Litigation Costs - The Company was notified by its insurance carrier that
remediation work performed by the Company related to certain condominiums
subject to litigation would not be covered by insurance. Prior to that time, the
Company had incorrectly deferred these remediation costs under the premise that
such costs would be recovered. The Company has written-off the deferred
remediation costs as shown below for the periods restated.
Revision to Prepaid Customer Lists Policy - It was determined that the Company's
accounting treatment for costs of acquiring marketing customer lists to be used
in the leads accumulation process was inappropriate. Previously, the Company had
capitalized and amortized these costs over their estimated useful lives.
Subsequently, it was determined that these costs should be charged to expense as
incurred. As a result, the Company charged such costs to sales and marketing
expense as shown below.
Cash Flows From Operating Activities - On the consolidated statements of cash
flows, customer notes receivable activity is now properly classified as an
operating activity rather than an investing activity as previously reported.
A summary of the effects of these adjustments on the Company's consolidated
condensed statements of operations is as follows (in thousands):
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- -------------------------
1999 2000 1999 2000
-------- -------- --------- ---------
Revenues As Previously Reported .................... $ 56,373 $ 71,319 $ 105,453 $ 136,225
Revision to downgrade policy ...................... -- 698 -- 780
Delayed cancellation of rescinded sales ........... (746) (843) (1,107) (1,017)
Deferral of sales within the rescission period .... (316) -- 49 585
Revision to interest income related to loan .......
amortization ..................................... -- 180 -- 218
Revision to sampler revenue recognition policy .... (264) (397) 141 (310)
Reconciliation of lender debt ..................... 51 (75) (19) (206)
-------- -------- --------- ---------
Total adjustments .......................... (1,275) (437) (936) 50
Revenues As Restated .............................. $ 55,098 $ 70,882 $ 104,517 $ 136,275
======== ======== ========= =========
Costs and Expenses As Previously Reported .......... $ 47,468 $ 65,395 $ 88,663 $ 127,252
Increased provision for uncollectible notes .... -- 8,379 -- 8,779
Revision to downgrade policy ................... -- 698 -- 780
Delayed cancellation of rescinded sales ........ (214) (244) (299) (293)
Deferral of sales within the rescission period . (117) -- 122 249
Revision to sampler revenue recognition policy . 73 18 672 38
Reconciliation of lender debt .................. (6) 6 76 161
Litigation costs ............................... -- 503 -- 639
Revision to prepaid customer lists policy ...... -- 185 -- 185
Other miscellaneous items ...................... 281 93 560 152
-------- -------- --------- ---------
Total adjustments .......................... 17 9,638 1,131 10,690
11
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ -------------------------
1999 2000 1999 2000
------------------------ -------------------------
Costs and Expenses As Restated ................. $ 47,485 $ 75,033 $ 89,794 $ 137,942
======== ======== ========= =========
Income before provision for income taxes as
previously reported ................................ $ 8,905 $ 5,924 $ 16,790 $ 8,973
Total adjustments .............................. (1,292) (10,075) (2,067) (10,640)
-------- -------- --------- ---------
Income (loss) before provision for income taxes
as restated .................................... $ 7,613 $ (4,151) $ 14,723 $ (1,667)
======== ======== ========= =========
Provision for income taxes as previously reported .. $ 3,428 $ 2,281 $ 6,464 $ 3,455
Total adjustments .............................. (497) (3,825) (795) (4,079)
-------- -------- --------- ---------
Provision (benefit) for income taxes as restated $ 2,931 $ (1,544) $ 5,669 $ (624)
======== ======== ========= =========
Net income as previously reported .................. $ 5,477 $ 3,959 $ 10,326 $ 5,834
Total adjustments .............................. (795) (6,250) (1,272) (6,561)
-------- -------- --------- ---------
Net income (loss) as restated .................. $ 4,682 $ (2,291) $ 9,054 $ (727)
======== ======== ========= =========
A summary of the significant effects of the restatement on the Company's
consolidated condensed financial statements for the three and six month periods
ended June 30, 2000 and 1999, and as of June 30, 2000 and December 31, 1999 is
as follows (in thousands):
THREE MONTHS ENDED JUNE 30,
-----------------------------------------------
1999 2000
--------------------- ---------------------
AS AS
PREVIOUSLY AS PREVIOUSLY AS
REPORTED RESTATED REPORTED RESTATED
---------- -------- ---------- --------
Vacation Interval sales ....................................... $46,447 $45,703 $59,159 $ 59,338
Sampler sales ................................................. 1,327 360 984 275
Total revenues ................................................ 56,373 55,098 71,319 70,882
Total costs and expenses ...................................... 47,468 47,485 65,395 75,033
Income (loss) before provision (benefit) for income taxes and
extraordinary item ....................................... 8,905 7,613 5,924 (4,151)
Net income (loss) ............................................. 5,477 4,682 3,959 (2,291)
Earnings (loss) per share before extraordinary item - basic and 0.42 0.36 0.29 (0.20)
diluted
Earnings (loss) per share - basic and diluted ................. 0.42 0.36 0.31 (0.18)
SIX MONTHS ENDED JUNE 30,
------------------------------------------------------
1999 2000
---------------------- --------------------------
AS AS
PREVIOUSLY AS PREVIOUSLY AS
REPORTED RESTATED REPORTED RESTATED
--------- --------- ---------- ---------
Vacation Interval sales ....................................... $ 87,775 $ 87,378 $ 113,045 $ 113,836
Sampler sales ................................................. 2,027 868 2,281 1,543
Total revenues ................................................ 105,453 104,517 136,226 136,275
Total costs and expenses ...................................... 88,663 89,794 127,253 137,942
Income (loss) before provision (benefit) for income taxes and
extraordinary item ..................................... 16,790 14,723 8,973 (1,667)
Net income (loss) ............................................. 10,326 9,054 5,834 (727)
Earnings (loss) per share before extraordinary item - basic and 0.80 0.70 0.43 (0.08)
diluted
Earnings (loss) per share - basic and diluted ................. 0.80 0.70 0.45 (0.06)
Net cash provided by (used in) operating activities ........... 728 (54,349) 1,283 (64,997)
Net cash used in investing activities ......................... (61,459) (6,995) (67,570) (1,247)
12
DECEMBER 31, 1999 JUNE 30, 2000
------------------------------------------------------
AS AS
PREVIOUSLY PREVIOUSLY
REPORTED AS RESTATED REPORTED AS RESTATED
---------- ----------- ---------- -----------
Notes receivable, net ............... $286,581 $282,290 $352,905 $339,162
Accrued interest receivable ......... (a) 2,255 (a) 2,590
Land held for sale .................. (a) 1,078 (a) 1,063
Prepaid and other assets ............ 17,203 16,947 18,726 18,256
Accounts payable and accrued expenses 15,539 13,398 16,560 14,462
Accrued interest payable ............ (a) 2,621 (a) 3,044
Unearned revenues ................... 5,601 7,998 8,427 10,950
Deferred income taxes, net .......... 28,251 26,256 29,299 25,788
Notes payable and capital lease ..... 194,171 194,468 262,502 262,756
obligations
Retained earnings ................... 56,737 53,543 62,571 52,816
Total shareholders' equity .......... 161,210 158,016 167,044 157,289
(a) - not previously presented separately
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company's consolidated condensed financial statements for the three and six
months ended June 30, 2000 and 1999, have been restated as discussed in Note 5
to the accompanying consolidated condensed financial statements. The information
included in the following discussion gives effect to that restatement.
Certain matters discussed throughout this Form 10-Q/A filing are forward looking
statements that are subject to risks and uncertainties that could cause actual
results to differ materially from those projected.
The Company currently owns and/or operates 22 resorts in various stages of
development. These 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. The Company represents an owner base of over 109,000.
The consolidated condensed financial statements of the Company include the
accounts of Silverleaf Resorts, Inc. and its subsidiaries, all of which are
wholly owned.
13
RESULTS OF OPERATIONS
Three Months Ended Six Months Ended
June 30, June 30,
----------------- -----------------
2000 1999 2000 1999
----- ----- ----- -----
As a percentage of total revenues:
Vacation Interval sales 83.7% 82.9% 83.5% 83.6%
Sampler sales 0.4% 0.7% 1.2% 0.8%
----- ----- ----- -----
Total sales 84.1% 83.6% 84.7% 84.4%
Interest income 13.4% 12.4% 13.3% 11.9%
Management fee income 0.7% 1.2% 0.4% 1.5%
Other income 1.8% 2.8% 1.6% 2.2%
----- ----- ----- -----
Total revenues 100.0% 100.0% 100.0% 100.0%
As a percentage of Vacation Interval sales:
Cost of Vacation Interval sales 17.8% 16.5% 17.7% 15.3%
Provision for uncollectible notes 24.7% 9.9% 18.0% 10.0%
As a percentage of total sales:
Sales and marketing 53.2% 52.3% 54.1% 51.4%
As a percentage of total revenues:
Operating, general and administrative 12.1% 11.2% 12.6% 12.0%
Depreciation and amortization 2.7% 2.5% 2.7% 2.5%
As a percentage of interest income:
Interest expense and lender fees 80.3% 55.6% 77.6% 56.9%
The following table sets forth certain operating information for the Company.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
Revenues
Revenues for the quarter ended June 30, 2000 were $70.9 million, representing a
$15.8 million or 28.6% increase over revenues of $55.1 million for the quarter
ended June 30, 1999. The increase was primarily due to a $13.6 million increase
in sales of Vacation Intervals and a $2.7 million increase in interest income.
The strong increase in Vacation Interval sales primarily resulted from an
increase in the number of upgrade sales for the second quarter of 2000 versus
the same period of 1999, improved closing percentages at several sales offices,
and increased sales prices.
In the second quarter of 2000, the number of Vacation Intervals sold, exclusive
of upgraded Vacation Intervals, was 3,947 compared to 3,943 in the same period
of 1999; however, the average price per interval increased 15.2% to $9,828 from
$8,534. Total interval sales for the second quarter of 2000 included 1,768
biennial intervals (counted as 884 Vacation Intervals) compared to 1,455 (728
Vacation Intervals) in the second quarter of 1999. The Company increased sales
of upgraded intervals through the continued implementation of marketing and
sales programs focused on selling upgraded intervals to the Company's existing
Vacation Interval owners. In the second quarter of 2000, the 4,211 upgraded
Vacation Intervals were sold at an average price of $4,879 compared to 2,762
upgraded Vacation Intervals sold at an average price of $4,364 during the
comparable 1999 period.
Sampler sales decreased $85,000 to $275,000 for the quarter ended June 30, 2000,
compared to $360,000 for the same period in 1999. Despite an increase in sales
contracts, the decrease resulted from the timing of revenue recognition, which
corresponds to when members utilize their stays.
14
Interest income increased 38.9% to $9.5 million for the quarter ended June 30,
2000, from $6.8 million for the same period of 1999. This increase primarily
resulted from an increase in notes receivable, net of allowance for
uncollectible notes, since June 30, 1999, due to increased sales.
Management fee income, which consists of management fees collected from the
resorts' management clubs, cannot exceed the management clubs' net income.
Management fee income decreased $174,000 for the second quarter of 2000, as
compared to the second quarter of 1999, due to increased operating expenses at
the management clubs.
Other income consists of water and utilities income, condominium rental income,
marina income, golf course and pro shop income, and other miscellaneous items.
Other income decreased $248,000 to $1.3 million for the second quarter of 2000
compared to $1.6 million for the same period of 1999. The decrease primarily
relates to a reduction of sales of the Bonus Time Program to owners of Vacation
Intervals at the Company's managed resorts.
Cost of Sales
Cost of sales as a percentage of Vacation Interval sales increased to 17.8% in
the second quarter of 2000, from 16.5% for the same period of 1999. As the
Company continues to deplete its inventory of low-cost Vacation Intervals
acquired primarily in 1995 and 1996, the Company's sales mix has shifted to more
recently constructed units, which were built at a higher average cost per
Vacation Interval. Hence, the cost of sales as a percentage of Vacation Interval
sales has increased compared to 1999. This increase, however, was partially
offset by increased sales prices since the second quarter of 1999.
Sales and Marketing
Sales and marketing costs as a percentage of total sales increased to 53.2% for
the quarter ended June 30, 2000, from 52.3% for the same period of 1999. Due to
recent growth rates and implementation of new leads generation programs, the
Company experienced relatively higher marketing costs in the second quarter of
2000. The Company increased its headcount at the call centers significantly
since the second quarter of 1999, which created inefficiencies due to temporary
lack of available training resources. In addition, the Company has moved towards
reliance on national retail chains for its leads generation efforts, in addition
to the traditional local programs. The transition to national programs has been
slower in generating leads than originally planned. A major focus of Company
management for the remainder of 2000 is to improve the efficiencies of the
marketing process, which will bring sales and marketing expenses more in line
with expectations.
Provision for Uncollectible Notes
The provision for uncollectible notes as a percentage of Vacation Interval sales
increased to 24.7% for the second quarter of 2000, compared to 9.9% the second
quarter of 1999. The increased provision for uncollectible notes was due to a
deterioration of the U.S. economy and a substantial reduction by the Company in
two programs that were previously used to bring delinquent notes receivable
current.
Operating, General and Administrative
Operating, general and administrative expenses as a percentage of total revenues
increased to 12.1% for the second quarter of 2000, compared to 11.2% for the
same period of 1999. The increase is primarily attributable to increased legal
expenses, increases in payroll taxes, employee benefits, and workers'
compensation related to Company growth, and increased title and recording fees
due to increased borrowings against pledged notes receivable.
Depreciation and Amortization
Depreciation and amortization expense as a percentage of total revenues
increased to 2.7% for the quarter ended June 30, 2000, compared to 2.5% for the
quarter ended June 30, 1999. Overall, depreciation and amortization expense
increased $519,000 for the second quarter of 2000, as compared to 1999,
primarily due to investments in automated dialers, investments in telephone
systems, and investments in a central marketing facility, which opened in
September 1999.
15
Interest Expense
Interest expense as a percentage of interest income increased to 80.3% for the
second quarter of 2000, from 55.6% for the same period of 1999. This increase is
primarily the result of interest expense related to increased borrowings against
pledged notes receivable. Also, the Company's weighted average cost of borrowing
increased to 9.6% in the second quarter of 2000 compared to 9.0% in the second
quarter of 1999.
Income (Loss) before Benefit (Provision) for Income Taxes and Extraordinary Item
Income (loss) before benefit (provision) for income taxes and extraordinary item
decreased $11.8 million to a loss of $4.2 million for the quarter ended June 30,
2000, from income of $7.6 million for the quarter ended June 30, 1999. The
decrease is a result of the aforementioned operating results.
Benefit (Provision) for Income Taxes
Benefit (provision) for income taxes as a percentage of income (loss) before
benefit (provision) for income taxes and extraordinary item was 37.2% for the
second quarter of 2000 compared to 38.5% in the second quarter of 1999. The
decrease in effective income tax rate was primarily the result of permanent
differences in 2000 lowering the benefit recognized.
Extraordinary Item
The Company recognized an extraordinary gain of $316,000, net of income tax of
$197,000, related to the early extinguishment of $1.0 million of 10 1/2% senior
subordinated notes in the second quarter of 2000. There were no extraordinary
items during the second quarter of 1999.
Net Income (Loss)
Net income decreased $7.0 million to a loss of $2.3 million for the quarter
ended June 30, 2000, as compared to net income of $4.7 million for the quarter
ended June 30, 1999. The decrease is a result of the aforementioned operating
results.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
Revenues
Revenues for the six months ended June 30, 2000 were $136.3 million,
representing a $31.8 million or 30.4% increase over revenues of $104.5 million
for the six months ended June 30, 1999. The increase was primarily due to a
$26.5 million increase in sales of Vacation Intervals and a $5.7 million
increase in interest income. The strong increase in Vacation Interval sales
primarily resulted from an increase in the number of upgrade sales for the six
months of 2000 versus the same period of 1999, improved closing percentages at
several sales offices, and increased sales prices.
In the first half of 2000, the number of Vacation Intervals sold, exclusive of
upgraded Vacation Intervals, decreased 0.5% to 7,824 from 7,866 in the same
period of 1999; however, the average price per interval increased 17.9% to
$9,829 from $8,339. Total interval sales for the six months ended June 30, 2000
included 3,434 biennial intervals (counted as 1,717 Vacation Intervals) compared
to 2,872 (1,436 Vacation Intervals) in the six months ended June 30, 1999. The
Company increased sales of upgraded intervals through the continued
implementation of marketing and sales programs focused on selling upgraded
intervals to the Company's existing Vacation Interval owners. In the first half
of 2000, the 7,706 upgraded Vacation Intervals were sold at an average price of
$4,792 compared to 5,010 upgraded Vacation Intervals sold at an average price of
$4,348 during the comparable 1999 period.
Sampler sales increased $675,000 to $1.5 million for the six months ended June
30, 2000, compared to $868,000 for the same period in 1999. The increase is
consistent with the overall increase in Vacation Interval sales.
16
Interest income increased 46.1% to $18.2 million for the six months ended June
30, 2000, from $12.4 million for the same period of 1999. This increase
primarily resulted from an increase in notes receivable, net of allowance for
uncollectible notes, since June 30, 1999, due to increased sales.
Management fee income, which consists of management fees collected from the
resorts' management clubs, cannot exceed the management clubs' net income.
Management fee income decreased $993,000 for the first half of 2000, as compared
to the first half of 1999, due to increased operating expenses at the management
clubs.
Other income consists of water and utilities income, condominium rental income,
marina income, golf course and pro shop income, and other miscellaneous items.
Other income decreased $115,000 to $2.2 million for the six months ended June
30, 2000 compared to $2.3 million for the same period of 1999. The decrease
primarily relates to a reduction of sales of the Bonus Time Program to owners of
Vacation Intervals at the Company's managed resorts.
Cost of Sales
Cost of sales as a percentage of Vacation Interval sales increased to 17.7% in
the six months ended June 30, 2000, from 15.3% for the same period of 1999. As
the Company continues to deplete its inventory of low-cost Vacation Intervals
acquired primarily in 1995 and 1996, the Company's sales mix has shifted to more
recently constructed units, which were built at a higher average cost per
Vacation Interval. Hence, the cost of sales as a percentage of Vacation Interval
sales increased compared to 1999. This increase, however, was partially offset
by increased sales prices since June 30, 1999.
Sales and Marketing
Sales and marketing costs as a percentage of total sales increased to 54.1% for
the six months ended June 30, 2000, from 51.4% for the same period of 1999. Due
to recent growth rates and implementation of new leads generation programs, the
Company experienced relatively higher marketing costs in the first half of 2000.
The Company increased its headcount at the call centers significantly since the
second quarter of 1999, which created inefficiencies due to temporary lack of
available training resources. In addition, the Company has moved towards
reliance on national retail chains for its leads generation efforts, in addition
to the traditional local programs. The transition to national programs has been
slower in generating leads than originally planned. A major focus of Company
management for the remainder of 2000 is to improve the efficiencies of the
marketing process, which will bring sales and marketing expenses more in line
with expectations.
Provision for Uncollectible Notes
The provision for uncollectible notes as a percentage of Vacation Interval sales
increased to 18.0% for the six months ended June 30, 2000, compared to 10.0% for
the same period of 1999. The increased provision for uncollectible notes was due
to the deterioration of the U.S. economy and a substantial reduction by the
Company in two programs that were previously used to bring delinquent notes
receivable current.
Operating, General and Administrative
Operating, general and administrative expenses as a percentage of total revenues
increased to 12.6% for the six months ended June 30, 2000, as compared to 12.0%
for the six months ended June 30, 1999. The increase is primarily attributable
to increased legal expenses, increases in payroll taxes, employee benefits, and
workers' compensation related to Company growth, and an increase in title and
recording fees due to increased borrowings against pledged notes receivable.
Depreciation and Amortization
Depreciation and amortization expense as a percentage of total revenues
increased to 2.7% for the six months ended June 30, 2000, compared to 2.5% for
the six months ended June 30, 1999. Overall, depreciation and amortization
expense increased $1.1 million for the first half of 2000, as compared to 1999,
primarily due to investments in automated dialers, investments in telephone
systems, and investments in a central marketing facility, which opened in
September 1999.
17
Interest Expense
Interest expense as a percentage of interest income increased to 77.6% for the
first half of 2000, from 56.9% for the first half of 1999. This increase is
primarily the result of interest expense related to increased borrowings against
pledged notes receivable. Also, the Company's weighted average cost of borrowing
increased to 9.5% in the first six months of 2000 compared to 9.2% in the first
six months of 1999.
Income (Loss) before Benefit (Provision) for Income Taxes and Extraordinary Item
Income (loss) before benefit (provision) for income taxes and extraordinary item
decreased $16.4 million to a loss of $1.7 million for the six months ended June
30, 2000 from income of $14.7 million for the six months ended June 30, 1999.
The decrease is a result of the aforementioned operating results.
Benefit (Provision) for Income Taxes
Benefit (provision) for income taxes as a percentage of income (loss) before
benefit (provision) for income taxes and extraordinary item was 37.4% for the
first six months of 2000 compared to 38.5% for the same period of 1999. The
decrease in effective income tax rate was primarily the result of permanent
differences in 2000 lowering the benefit recognized.
Extraordinary Item
The Company recognized an extraordinary gain of $316,000, net of income tax of
$197,000, related to the early extinguishment of $1.0 million of 10 1/2% senior
subordinated notes in the first six months of 2000. There were no extraordinary
items during the first six months of 1999.
Net Income (Loss)
Net income decreased $9.8 million to a loss of $727,000 for the six months ended
June 30, 2000, as compared to net income of $9.1 million for the six months
ended June 30, 1999. The decrease is a result of the aforementioned operating
results.
LIQUIDITY AND CAPITAL RESOURCES
SOURCES OF CASH. The Company generates cash primarily from down payments on the
sale of Vacation Intervals, sampler sales, collections of principal and interest
on customer notes receivable from Vacation Interval owners, management fees, and
resort and utility operations. The Company typically receives a 10% down payment
on sales of Vacation Intervals and finances the remainder by receipt of a seven
to ten year customer promissory note. The Company generates cash from financing
of customer notes receivable (i) by borrowing at an advance rate of 70% to 85%
of eligible customer notes receivable and (ii) from the spread between interest
received on customer notes receivable and interest paid on related borrowings.
Because the Company uses significant amounts of cash in the development and
marketing of Vacation Intervals, but collects cash on customer notes receivable
over a seven-year to ten-year period, borrowing against receivables has
historically been a necessary part of normal operations.
For the six months ended June 30, 2000 and 1999, cash provided by financing
activities was $65.7 million and $53.1 million, respectively. The increase in
net cash provided by financing activities was primarily due to increased
borrowings against pledged notes receivable during the six months ended June 30,
2000, compared to the same period of 1999. As of June 30, 2000, the Company's
credit facilities provide for loans of up to $325.0 million. At June 30, 2000,
approximately $248.2 million of principal related to advances under the credit
facilities was outstanding. For the six months ended June 30, 2000, the weighted
average cost of funds for all borrowings, including the senior subordinated
debt, was approximately 9.5%.
USES OF CASH. During the six months ended June 30, 2000, cash used in operating
activities was $65.0 million, compared to cash used in operating activities of
$54.3 million for the same period of 1999. The increase in cash used in
operating activities was primarily the result of an increase in customer notes
receivable.
18
Investing activities typically reflect a net use of cash as a result of capital
additions and property acquisitions. Net cash used in investing activities for
the six months ended June 30, 2000 and 1999, was $1.2 million and $7.0 million,
respectively. The decrease was primarily due to decreased purchases of land,
equipment, buildings, and utilities offset by $4.5 million of cash received in
the first half of 1999 related to sales of equipment.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is currently subject to litigation arising in the normal course of
its business. From time to time, such litigation includes claims regarding
employment, tort, contract, truth-in-lending, the marketing and sale of Vacation
Intervals, and other consumer protection matters. Litigation has been initiated
from time to time by persons seeking individual recoveries for themselves, as
well as, in some instances, persons seeking recoveries on behalf of an alleged
class. In the judgment of the Company, none of these lawsuits or claims against
the Company, either individually or in the aggregate, is likely to have a
material adverse effect on the Company, its business, results of operations, or
financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders held on May 9, 2000, a proposal
to elect the nominees listed in the following table as the Class III Directors
of the Company was submitted to a vote of the Company's stockholders. The voting
was as follows:
Nominee Votes For Votes Withheld
------- --------- --------------
Robert E. Mead 12,402,130 58,808
James B. Francis, Jr. 12,403,685 57,253
At the same meeting, a proposal to ratify the appointment of Deloitte & Touche
LLP as independent auditors for the ensuing year was submitted to a vote of the
Company's stockholders. The voting was as follows:
Votes For Votes Against Abstained
--------- ------------- ---------
Ratification of Independent Auditors 12,426,159 9,958 24,821
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Unless otherwise indicated, the following items were included with the original
Form 10-Q for the quarterly period ended June 30, 2000 filed on August 11, 2000.
(a) Exhibits
*99.1 Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
*99.2 Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
- -------
*Filed herewith
(b) Reports on Form 8-K
None.
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 19, 2002 By: /s/ ROBERT E. MEAD
---------------------------
Robert E. Mead
Chairman of the Board
and Chief Executive Officer
Dated: November 19, 2002 By: /s/ HARRY J. WHITE, JR.
---------------------------
Harry J. White, Jr.
Chief Financial Officer
CERTIFICATION
I, Robert E. Mead, Chairman and Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of Silverleaf
Resorts, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.
Date: November 19, 2002 /s/ ROBERT E. MEAD
--------------------------
Robert E. Mead
Chairman and Chief
Executive Officer
CERTIFICATION
I, Harry J. White, Jr., Chief Financial Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of Silverleaf
Resorts, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.
Date: November 19, 2002 /s/ HARRY J. WHITE, JR.
--------------------------
Harry J. White, Jr.
Chief Financial Officer
20
3
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
99.1 Certification of CEO Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
99.2 Certification of CFO Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002