Silverleaf Resorts, Inc. (NASDAQ: SVLF) today reported
the following results for its fourth quarter and year ended
December 31, 2010.
Financial highlights for the year ended December 31, 2010:
- Gross Vacation Interval sales of $206.3
million
- Net income of $5.8 million or diluted
earnings per share of $0.15
Financial highlights for the quarter ended December 31,
2010:
- Gross Vacation Interval sales of $48.7
million
2010 Annual Results
Net income for the year ended December 31, 2010 was $5.8
million, or diluted earnings per share of $0.15, compared to net
income of $5.5 million, or diluted earnings per share of $0.14, for
the year ended December 31, 2009. Excluding the recognition of
$18.5 million additional provision for estimated uncollectible
revenue in the third quarter of 2009, net income and diluted
earnings per share for 2009 would have been $16.6 million and
$0.43, respectively.
Vacation Interval sales were $206.3 million in 2010 compared to
$241.0 million in 2009. The decrease in Vacation Interval sales is
primarily attributable to a reduction in marketing to existing
customers which resulted in lower sales of upgrade intervals. The
Company implemented more stringent underwriting policies at the end
of 2009 to improve the collection of notes receivable. Vacation
Interval sales to existing customers comprised 59.3% and 62.0% of
total Vacation Interval sales in the years ended December 31, 2010
and 2009.
The provision for estimated uncollectible revenue as a
percentage of Vacation Interval sales was 28.3% for the year ended
December 31, 2010 compared to 33.3% for the year ended December 31,
2009. Cancellations during 2009, and most notably during the third
quarter of 2009, exceeded cancellations projected under the
Company’s static-pool analysis of the notes receivable portfolio,
which tracks uncollectible notes for each year's sales over the
lives of the notes. Considering an increase in future cancels
beyond that previously estimated, the allowance for uncollectible
notes was increased by $18.5 million in the third quarter of 2009
above the 25.9% provision rate estimated in the second quarter of
2009. The allowance for uncollectible notes was 20.2% of the gross
notes receivable portfolio as of December 31, 2010 compared to
21.0% as of December 31, 2009. Factors considered in the assessment
of uncollectibility include the aging of notes receivable,
historical collection experience and credit losses, customer credit
scores (FICO® scores), and current economic factors. The Company
believes its notes receivable are adequately reserved, however,
there can be no assurance that defaults have stabilized or that
they will not increase further. Management reviews the allowance
for uncollectible notes quarterly and makes adjustments as
necessary.
Overall, total revenues for the year ended December 31, 2010
were $226.0 million compared to $236.8 million for the year ended
December 31, 2009, primarily attributable to the $12.8 million
reduction in net sales.
Cost of Vacation Interval sales was 9.2% of Vacation Interval
sales for each of the years ended December 31, 2010 and 2009.
Sales and marketing expense as a percentage of Vacation Interval
sales was 55.0% for the year ended December 31, 2010 compared to
52.2% for the same period of 2009. The increase was primarily
attributable to the decrease in sales to existing customers in 2010
as compared to 2009, which have relatively lower related sales and
marketing costs compared to new customer sales.
Total positive net interest spread (interest income less
interest expense and lender fees) decreased to $32.6 million during
2010 compared to $35.8 million during 2009. Overall, interest
expense and lender fees increased $7.0 million in 2010 compared to
2009 primarily due to an increase in lender fees amortized during
2010 related to the Silverleaf Finance VII, LLC (“SF-VII”)
securitization and amendments to the Company’s other senior loan
agreements during 2010. In addition, the weighted average cost of
borrowings increased to 7.2% for the year ended December 31, 2010
from 6.0% for the year ended December 31, 2009.
2010 Fourth Quarter Results
Net loss for the quarter ended December 31, 2010 was $857,000,
or a loss per share of $0.02, compared to net income of $2.0
million, or diluted earnings per share of $0.05, for the quarter
ended December 31, 2009.
Vacation Interval sales were $48.7 million in the fourth quarter
of 2010 compared to $46.7 million in the comparable prior-year
period due to an increase in sales of upgrade intervals in the
fourth quarter of 2010 as compared to the fourth quarter of 2009.
Vacation Interval sales to existing customers comprised 64.7% and
61.3% of total Vacation Interval sales in the quarters ended
December 31, 2010 and 2009, respectively, which maintains the
Company’s favorable sales-mix trend toward upgrades and second-week
sales to existing customers as such sales have relatively lower
associated sales and marketing costs.
The provision for estimated uncollectible revenue as a
percentage of Vacation Interval sales was 28.3% in the fourth
quarter of 2010 versus 25.9% in the fourth quarter of 2009.
Overall, total revenues for the fourth quarter of 2010 were
$54.3 million compared to $53.1 million for the fourth quarter of
2009.
Cost of Vacation Interval sales was 10.6% of Vacation Interval
sales for the fourth quarter of 2010 compared to 7.0% in the 2009
comparable period. This increase primarily resulted from revisions
made to future relative sales value for the fourth quarters of both
2010 and 2009 which had a greater impact on decreasing cost of
sales in the fourth quarter of 2009.
Sales and marketing expense as a percentage of Vacation Interval
sales was 57.9% for the fourth quarter of 2010 versus 61.6% for the
comparable prior-year period. The decrease was primarily
attributable to the increase in sales to existing customers during
the fourth quarter of 2010 which have relatively lower associated
sales and marketing costs.
Total positive net interest spread (interest income less
interest expense and lender fees) decreased to $7.1 million for the
fourth quarter of 2010 from $9.5 million for the fourth quarter of
2009. Overall, interest expense and lender fees increased $2.8
million for the fourth quarter of 2010 compared to the same period
of 2009 primarily due to an increase in lender fees amortized
during 2010 related to the SF-VII securitization, which closed in
the second quarter of 2010, and amendments to the Company’s other
senior loan agreements during 2010. The weighted average cost of
borrowings increased to 7.8% for the three months ended December
31, 2010 from 6.0% for the three months ended December 31, 2009
which was primarily related to SF-VII.
Balance Sheet
At December 31, 2010, the Company’s senior credit facilities
provided for loans of up to $628.5 million, of which $227.5 million
was unused. In June 2010, the Company completed a term
securitization transaction involving the issuance of approximately
$151.5 million of Timeshare Loan-Backed Notes Series 2010-A. In
December 2010, the Company completed two term securitization
transactions involving the issuance of approximately $104.4 million
and $48.4 million of Timeshare Loan-Backed Notes Series 2010-B and
Series 2010-C, respectively. In addition, the Company completed the
extension of five of its senior revolving credit facilities in 2010
and further extension of one of its senior revolving credit
facilities in February 2011. Considering the completion of the new
term securitizations, the extension of the five senior credit
facilities in 2010, and conservative business decisions and cash
flow management during 2010, the Company’s senior credit facilities
provide adequate liquidity through 2011. At December 31, 2010, the
Company’s senior debt consisted of 73% fixed-rate debt and 27%
variable-rate debt. The majority of the Company’s variable-rate
debt is subject to interest-rate floors between 6.00% and
8.00%.
Pending Merger
Effective February 3, 2011, Silverleaf entered into a definitive
agreement to be acquired by SL Resort Holdings Inc., an affiliate
of Cerberus Capital Management, L.P. ("Cerberus"). The transaction
has been approved by Silverleaf's Board of Directors, and the Board
will be recommending that Silverleaf's shareholders approve the
transaction. Under the agreement, Silverleaf shareholders will
receive, at the closing, $2.50 in cash for each share of Silverleaf
common stock they own, representing a premium of approximately 75%
based on the closing trading price of $1.43 of Silverleaf common
stock on February 3, 2011. Cerberus has agreed to provide equity
financing for the full amount of the merger consideration. The
Silverleaf Board of Directors has received an opinion from its
financial advisor, Gleacher & Company Securities, Inc., that
the consideration to be paid to Silverleaf shareholders in the
transaction is fair from a financial point of view. Completion of
the transaction is subject to customary closing conditions,
including approval by the Company's shareholders. Silverleaf
intends to hold a special meeting of its shareholders for the
purpose of approving the merger as promptly as possible.
Consummation of the merger is subject to certain terms and
conditions customary for transactions of this type, including
receipt of shareholder approvals. Upon completion of the
transaction, Silverleaf will become a private company, wholly-owned
by SL Resort Holdings, Inc., and its common stock will no longer be
traded on NASDAQ.
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, an indoor water
park, swimming, tennis, boating, and many organized activities for
children and adults. For additional information, please visit
www.silverleafresorts.com.
Forward-Looking Statements
This communication contains forward-looking statements that
involve numerous risks and uncertainties. The statements contained
in this communication that are not purely historical are
forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of
the Exchange Act of 1934, as amended, including, without
limitation, statements regarding the expected benefits and closing
of the proposed merger, the management of the Company and the
Company’s expectations, beliefs and intentions. All forward-looking
statements included in this communication are based on information
available to the Company on the date hereof. In some cases, you can
identify forward-looking statements by terminology such as “may,”
“can,” “will,” “should,” “could,” “expects,” “plans,”
“anticipates,” “intends,” “believes,” “estimates,” “predicts,”
“potential,” “targets,” “goals,” “projects,” “outlook,” “continue,”
“preliminary,” “guidance,” or variations of such words, similar
expressions, or the negative of these terms or other comparable
terminology. No assurance can be given that any of the events
anticipated by the forward-looking statements will transpire or
occur, or if any of them do so, what impact they will have on the
Company’s results of operations or financial condition.
Accordingly, actual results may differ materially and adversely
from those expressed in any forward-looking statements. Neither the
Company nor any other person can assume responsibility for the
accuracy and completeness of forward-looking statements. There are
various important factors that could cause actual results to differ
materially from those in any such forward-looking statements, many
of which are beyond the Company’s control. These factors include:
failure to obtain stockholder approval of the proposed merger;
failure to obtain, delays in obtaining or adverse conditions
contained in any required regulatory or other approvals; failure to
consummate or delay in consummating the transaction for other
reasons; changes in laws or regulations; and changes in general
economic conditions. The Company undertakes no obligation (and
expressly disclaims any such obligation) to publicly update or
revise any forward-looking statement, whether as a result of new
information, future events or otherwise. For additional information
please refer to the Company’s most recent Form 10-K, 10-Q and 8-K
reports filed with the SEC.
Additional Information and Where to Find It
In connection with the proposed merger and required stockholder
approval, the Company will file a proxy statement with the SEC. The
definitive proxy statement will be mailed to stockholders of the
Company. INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE
PROXY STATEMENT AND OTHER RELEVANT MATERIALS WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
COMPANY AND THE MERGER. Investors and security holders may obtain
free copies of these documents (when they are available) and other
documents filed with the SEC on the SEC’s website at www.sec.gov.
In addition, the documents filed by the Company with the SEC may be
obtained free of charge by contacting Silverleaf Resorts, Inc.,
Attn: Corporate Secretary, Silverleaf Resorts, Inc., 1221 River
Bend Drive, Suite 120, Dallas Texas 75247. The Company’s filings
with the SEC are also available on its website at www.silverleafresorts.com.
This communication shall not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to
buy any securities, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction.
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in
thousands, except share and per share amounts) (Unaudited)
Three Months Ended Year Ended December 31, December 31, 2010
2009 2010 2009
Revenues: Vacation Interval sales $ 48,718 $ 46,744 $
206,275 $ 240,961 Estimated uncollectible revenue (13,811 )
(12,107 ) (58,479 ) (80,322 ) Net sales 34,907
34,637 147,796 160,639 Interest income 17,092 16,686 68,731
64,834 Management fee income 630 930 2,521 3,721 Other income
1,626 844 6,963
7,621 Total revenues 54,255 53,097 226,011 236,815
Costs and Operating Expenses: Cost of Vacation Interval
sales 5,167 3,278 18,944 22,161 Sales and marketing 28,221 28,776
113,504 125,800 Operating, general and administrative 10,997 8,841
41,963 44,513 Depreciation 1,603 1,629 6,478 6,224 Interest expense
and lender fees: Related to receivables-based credit facilities
7,931 5,260 28,747 21,864 Related to other indebtedness
2,031 1,949 7,338 7,191
Total costs and operating expenses 55,950
49,733 216,974 227,753
Income (loss) before provision (benefit) for income taxes
(1,695 ) 3,364 9,037 9,062 Provision (benefit) for income taxes
(838 ) 1,346 3,262 3,604
Net income (loss) $ (857 ) $ 2,018 $
5,775 $ 5,458
Basic net income (loss) per
share $ (0.02 ) $ 0.05 $ 0.15 $ 0.14
Diluted net income (loss) per share $ (0.02 ) $ 0.05
$ 0.15 $ 0.14
Weighted average basic
common shares outstanding 37,768,652
38,146,943 37,921,956 38,146,943
Weighted average diluted common shares
outstanding 37,768,652 38,988,549
38,803,998 39,017,955
SILVERLEAF RESORTS, INC. CONDENSED CONSOLIDATED BALANCE
SHEETS (in thousands, except share and per share amounts)
December 31, December 31, ASSETS
2010 2009 (Unaudited) Cash and cash equivalents (including
from VIEs of $10 and $11, respectively) $ 11,805 $ 13,905
Restricted cash (including from VIEs of $29,578 and $18,903,
respectively) 31,327 20,668
Notes receivable, net of allowance for
uncollectible notes of $91,731 and $94,585, respectively (including
from VIEs of $275,953 and $204,813, respectively)
362,738 354,659 Accrued interest receivable (including from VIEs of
$3,398 and $2,427, respectively) 4,480 4,686 Amounts due from
affiliates, net (including due to VIEs of $182 and $192,
respectively) 10,707 1,587 Inventories 178,366 196,010 Land,
equipment, buildings, and leasehold improvements, net 46,966 51,117
Prepaid and other assets (including from VIEs of $10,315 and
$9,420, respectively) 33,757 23,856
TOTAL ASSETS $ 680,146 $ 666,488 LIABILITIES
AND SHAREHOLDERS' EQUITY LIABILITIES
Accounts payable and accrued expenses
(including from VIEs of $21 and $22, respectively)
$ 9,875 $ 8,527 Accrued interest payable (including from VIEs of
$1,073 and $813, respectively) 2,062 2,264 Unearned samplers 6,967
6,501 Income taxes payable 1,012 706 Deferred income taxes 37,715
35,342
Notes payable and capital lease
obligations (including from VIEs of $293,517 and $191,395,
respectively)
408,891 395,017 Senior subordinated notes 7,682
17,956 Total Liabilities 474,204
466,313 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS'
EQUITY Preferred stock, 10,000,000 shares authorized, none issued
and outstanding - - Common stock, par value $0.01 per share,
100,000,000 shares authorized,
38,146,943 shares issued and 37,768,652
shares outstanding at December 31, 2010 and 38,146,943 shares
issued and outstanding at December 31, 2009
381 381 Additional paid-in capital 113,866 113,447 Retained
earnings 92,122 86,347
Treasury stock, at cost, 378,291 shares at
December 31, 2010 and none at December 31, 2009
(427 ) - Total Shareholders' Equity
205,942 200,175 TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 680,146 $ 666,488 The
abbreviation "VIEs" above represents Variable Interest Entities.
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