Silverleaf Resorts, Inc. Reports First Quarter 2006 Results

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8% Sparqs Linked TO Valero Energy Corp.	AMEX:SVL	AMEX	Ordinary Share

Silverleaf Resorts (AMEX:SVL)
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Silverleaf Resorts, Inc. (AMEX:SVL) today announced its financial results for the first quarter ended March 31, 2006. 2006 First Quarter Financial Highlights: -- Vacation Interval sales increased by 37.6% to $41.5 million -- Net income increased by 146.4% to $6.2 million -- Adoption of SFAS No. 152, "Accounting for Real Estate Time-Sharing Transactions," results in new income statement categories -- Earnings guidance for 2006 increased to net income of $21 million to $22 million ($0.53 to $0.56 per diluted share) "It is gratifying to see the momentum in 2005 carry into the first quarter of 2006, as we reported significantly better results this quarter compared to the same period last year," commented Sharon K. Brayfield, President. Ms. Brayfield further commented, "Our Vacation Interval sales growth during the first quarter is attributed primarily to increased efficiencies in sales to new and existing customers. Our focus will continue to be on sales to existing customers while providing new vacation experiences, such as the indoor water park we plan to build at The Villages Resort in East Texas and the recent acquisition of The Pinnacle Lodge in Winter Park, Colo. In addition, new sales initiatives, such as the Silverleaf Vacation Stores in the Dallas and Chicago markets as well as targeted acquisitions, will help us to continue to grow sales to new customers." Adoption of SFAS No. 152: As required, the Company adopted SFAS No. 152, "Accounting for Real Estate Time-Sharing Transactions" as of January 1, 2006. The adoption of SFAS No. 152 prospectively revises the classification of certain revenue and cost activity. However, the adoption of SFAS No. 152 did not have a material effect on our reported first quarter 2006 net income, nor did it result in a cumulative effect adjustment. Since SFAS No. 152 did not permit the reclassification of our prior period consolidated financial statements, we have provided a Consolidated Statements of Operations Demonstrating the Impact of Adoption of SFAS No. 152 exhibit to provide users of our financial statements with a meaningful comparison of current year operating results to prior years by presenting 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 First Quarter Results: Vacation Interval sales increased 37.6% to $41.5 million during the first quarter of 2006 compared to $30.1 million during the first quarter of 2005. Vacation Interval sales to new customers increased 33.2% to $20.0 million on a 6.8% increase in new customer tours. Vacation Interval sales to existing customers increased 41.9% to $21.5 million on a 1.2% increase in existing customer tours. Total revenue for the first quarter of 2006 increased to $45.7 million compared to $42.1 million in the year ago quarter. Total revenue in the first quarter of 2006 is decreased by estimated uncollectible revenue of $7.2 million in accordance with SFAS No. 152, representing estimated future gross cancellations of notes receivable prior to any recoveries of inventory. In addition, under SFAS No. 152, sampler sales are accounted for as incidental operations, which requires that any such incidental revenues be recorded as a reduction of incremental costs or expenses. Accordingly, $0.8 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 March 31, 2006. Had these two changes mandated by SFAS No. 152 not been made, revenues would have increased by 27.4% to $53.6 million. Sales and marketing expense decreased to 46.4% of Vacation Interval sales for the first quarter of 2006 from 57.0% for the first quarter of 2005. Had sales and marketing expense not been reduced by sampler sales, as described above, sales and marketing expense would have been 48.2% of Vacation Interval sales. Cost of Vacation Interval sales decreased to 10.1% of Vacation Interval sales in 2006 from 15.7% 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 14.4% of Vacation Interval sales for the quarter ended March 31, 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 quarter 2006 provision for uncollectible notes expense would have been $5.4 million, or 13.0% of 2006 Vacation Interval sales, compared to $5.3 million for 2005, or 17.5% of Vacation Interval sales. During the first quarter of 2006, Silverleaf recorded income tax expense at 38.5% of pre-tax income, compared to 20.0% of pre-tax income in the first quarter of 2005. The increase in the estimated effective income tax 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 March 31, 2006 increased to $6.2 million, or $0.16 per diluted share compared to net income of $2.5 million, or $0.06 per diluted share for the quarter ended March 31, 2005. Outlook Due primarily to increased sales efficiencies achieved in the first quarter of 2006, the Company is increasing its guidance for 2006 to net income of $21 million to $22 million ($0.53 to $0.56 per diluted share). 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. For more information or to visit our website, click here: http://www.b2i.us/irpass.asp?BzID=1358&Nav=0&S=0&L=1 -0- *T SILVERLEAF RESORTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share amounts) (Unaudited) Three Months Ended March 31, ----------------------- 2006 2005 ----------- ----------- Revenues: Vacation Interval sales $41,467 $30,137 Estimated uncollectible revenue (7,186) -- Sampler sales -- 641 ----------- ----------- Net sales 34,281 30,778 Interest income 10,095 9,757 Management fee income 465 450 Gain on sale of notes receivable -- 669 Other income 831 426 ----------- ----------- Total revenues 45,672 42,080 Costs and Operating Expenses: Cost of Vacation Interval sales 4,181 4,718 Sales and marketing 19,232 17,184 Provision for uncollectible notes -- 5,275 Operating, general and administrative 7,189 6,728 Depreciation and amortization 539 798 Interest expense and lender fees 4,425 4,385 ----------- ----------- Total costs and operating expenses 35,566 39,088 Income before provision for income taxes and discontinued operations 10,106 2,992 Provision for income taxes (3,891) (598) ----------- ----------- Net income from continuing operations 6,215 2,394 Discontinued Operations Net income from discontinued operations (net of taxes) -- 128 ----------- ----------- Net income $6,215 $2,522 =========== =========== Basic income per share: Net income from continuing operations $0.17 $0.07 =========== =========== Net income from discontinued operations $-- $-- =========== =========== Net income $0.17 $0.07 =========== =========== Diluted income per share: Net income from continuing operations $0.16 $0.06 =========== =========== Net income from discontinued operations $-- $-- =========== =========== Net income $0.16 $0.06 =========== =========== Weighted average basic common shares outstanding 37,494,304 36,861,169 =========== =========== Weighted average diluted common shares outstanding 38,615,036 38,943,016 =========== =========== 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 March 31, 2006 --------------------------- As Reported - Comparable Three Reflects to 2005 - Months Adoption Does Not Ended of SFAS Reflect March 31, No.152 SFAS No. 152 2005 -------------- ------------ ----------- Revenues: Vacation Interval sales $41,467 $41,467 $30,137 Estimated uncollectible revenue (7,186) -- -- Sampler sales -- 768 641 All other revenue 11,391 11,391 11,302 -------------- ------------ ----------- Total revenues 45,672 53,626 42,080 Costs and Operating Expenses: Cost of Vacation Interval sales 4,181 5,977 4,718 Sales and marketing 19,232 20,000 17,184 Provision for uncollectible notes -- 5,390 5,275 All other costs and expenses 12,153 12,153 11,911 -------------- ------------ ----------- Total costs and operating expenses 35,566 43,520 39,088 Income before provision for income taxes and discontinued operations 10,106 10,106 2,992 Provision for income taxes (3,891) (3,891) (598) -------------- ------------ ----------- Net income from continuing operations 6,215 6,215 2,394 Discontinued Operations Net income from discontinued operations (net of taxes) -- -- 128 -------------- ------------ ----------- Net income $6,215 $6,215 $2,522 ============== ============ =========== Basic income per share: Net income from continuing operations $0.17 $0.17 $0.07 ============== ============ =========== Net income from discontinued operations $-- $-- $-- ============== ============ =========== Net income $0.17 $0.17 $0.07 ============== ============ =========== Diluted income per share: Net income from continuing operations $0.16 $0.16 $0.06 ============== ============ =========== Net income from discontinued operations $-- $-- $-- ============== ============ =========== Net income $0.16 $0.16 $0.06 ============== ============ =========== Weighted average basic common shares outstanding 37,494,304 37,494,304 36,861,169 ============== ============ =========== Weighted average diluted common shares outstanding 38,615,036 38,615,036 38,943,016 ============== ============ =========== SILVERLEAF RESORTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) March 31, December 31, ASSETS 2006 2005 ------------ ------------ (unaudited) Cash and cash equivalents $7,942 $10,990 Restricted cash 7,955 4,893 Notes receivable, net of allowance for uncollectible notes of $64,837 and $52,479, respectively 182,756 177,572 Accrued interest receivable 2,347 2,243 Investment in special purpose entity 22,245 22,802 Amounts due from affiliates 937 680 Inventories 138,912 117,597 Land, equipment, buildings, and utilities, net 10,192 10,441 Land held for sale 203 495 Prepaid and other assets 16,318 14,083 ------------ ------------ TOTAL ASSETS $389,807 $361,796 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Accounts payable and accrued expenses $8,554 $9,556 Accrued interest payable 1,655 1,354 Amounts due to affiliates 1,095 544 Unearned revenues 5,343 5,310 Taxes payable 2,571 1,268 Deferred taxes payable, net 12,152 8,485 Notes payable and capital lease obligations 194,131 177,269 Senior subordinated notes 33,175 33,175 ------------ ------------ Total Liabilities 258,676 236,961 ------------ ------------ 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, 37,494,304 shares issued and outstanding at March 31, 2006 and at December 31, 2005 375 375 Additional paid-in capital 112,288 112,207 Retained earnings 18,468 12,253 ------------ ------------ Total Shareholders'Equity 131,131 124,835 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $389,807 $361,796 ============ ============ *T

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SVL 8% Sparqs Linked TO Valero Energy Corp.