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Silverleaf Resorts, Inc. (AMEX:SVL) today announced its financial results for the third quarter and nine months ended September 30, 2005. Third Quarter 2005 Highlights: -- Total revenue increased 30% to $62.3 million -- Vacation interval sales increased 14% to $41.8 million -- Net income increased 219% to $12.9 million Net income for the third quarter increased to $12.9 million, or $0.33 per diluted share, compared to net income of $4.0 million, or $0.10 per diluted share, during the third quarter of 2004. Total revenue for the period increased to $62.3 million compared to $47.8 million during the same period in 2004. Revenue for 2005 third quarter includes a gain on sale of notes receivable of $5.8 million, which was previously disclosed on July 28, 2005, and gain on sale of land of $3.6 million. Net of tax, these items and a $.9 million gain on sale of utility assets contributed $7.2 million to the net income during the third quarter, or $0.18 per diluted share. Excluding these gains, the Company's revenue for the third quarter increased 10.7% over the quarter ended September 30, 2004 while net income and EPS increased 40.7% and 50%, respectively. Vacation interval sales increased 14% to $41.8 million during the third quarter of 2005 compared to $36.7 million during the third quarter of 2004. The increase in sales in the quarter ended September 30, 2005 compared to 2004 is due primarily to an increase in sales to existing owners, which contributed to a reduction in sales and marketing expense from 49.5% of sales in the third quarter of 2004 to 46.3% in 2005, as marketing expenses are lower for these sales. In addition, the provision for uncollectible notes was 15% of vacation interval sales for the third quarter of 2005, down from 20% in 2004, as a result of better performance of notes originated since the company began focusing on selling to customers with better credit characteristics. "These results clearly reflect that we are successfully executing our two-pronged business strategy -- 1) using our internally developed best customer model to identify qualified new buyers and 2) continuing to penetrate our existing owner base through sales of additional products," commented Robert E. Mead, chairman and CEO. "This has resulted in the reduction of our sales and marketing expense ratio and an increase in net income and EPS. Our current plan includes building out our existing properties, strategically adding new resorts in select high-growth markets, and creating vacation showrooms in selected metropolitan markets within driving distance of our resorts. As a result, we believe that we will be able to maintain vacation interval sales growth. During the quarter we also completed our first securitization transaction, which we believe has afforded us greater future access to the capital markets." For the nine months ended September 30, 2005, net income was $19.6 million, or $0.50 per diluted share, compared to net income of $9.4 million during the first nine months of 2004 or $0.24 per diluted share in the first nine months of 2004. Total revenue for the period was $153.7 million, as compared to $138.4 million during the first nine months of 2004. Vacation interval sales were $109.3 million for the nine month period ended September 30, 2005, a $3.4 million increase from vacation interval sales in the same period of 2004. Based in Dallas, Silverleaf Resorts, Inc. currently owns and operates 13 timeshare 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. 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 "Cautionary Statements" in the Company's reports filed with the Securities and Exchange Commission, including the Company's 2004 Annual Report on Form 10-K (pages 19 through 27 thereof) filed on March 25, 2005. -0- *T SILVERLEAF RESORTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (in thousands, except share and per share amounts) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ----------------------- ----------------------- 2005 2004 2005 2004 ----------- ----------- ----------- ----------- Revenues: Vacation Interval sales $41,833 $36,738 $109,304 $105,869 Sampler sales 617 571 1,759 1,485 ----------- ----------- ----------- ----------- Total sales 42,450 37,309 111,063 107,354 Interest income 9,067 9,354 28,937 27,575 Management fee income 450 300 1,351 900 Gain on sales of notes receivable 5,789 -- 6,457 580 Other income 4,549 808 5,931 2,011 ----------- ----------- ----------- ----------- Total revenues 62,305 47,771 153,739 138,420 Costs and Operating Expenses: Cost of Vacation Interval sales 6,772 6,166 17,507 19,485 Sales and marketing 19,648 18,477 54,985 53,643 Provision for uncollectible notes 6,275 7,348 18,083 21,180 Operating, general and administrative 7,344 6,549 21,177 19,386 Depreciation and amortization 616 845 2,158 2,636 Interest expense and lender fees 4,094 4,568 12,765 13,143 ----------- ----------- ----------- ----------- Total costs and operating expenses 44,749 43,953 126,675 129,473 Income before provision for income taxes and discontinued operations 17,556 3,818 27,064 8,947 Provision for income taxes (5,306) -- (8,189) (23) ----------- ----------- ----------- ----------- Net income from continuing operations 12,250 3,818 18,875 8,924 Discontinued Operations Gain on sale of discontinued operations (net of taxes) 613 -- 613 -- Income from discontinued operations (net of taxes) -- 214 128 503 ----------- ----------- ----------- ----------- Net income from discontinued operations 613 214 741 503 Net income $12,863 $4,032 $19,616 $9,427 =========== =========== =========== =========== Basic income per share: Net income from continuing operations $0.33 $0.10 $0.51 $0.24 =========== =========== =========== =========== Net income from discontinued operations $0.02 $0.01 $0.02 $0.02 =========== =========== =========== =========== Net income $0.35 $0.11 $0.53 $0.26 =========== =========== =========== =========== Diluted income per share: Net income from continuing operations $0.31 $0.09 $0.48 $0.23 =========== =========== =========== =========== Net income from discontinued operations $0.02 $0.01 $0.02 $0.01 =========== =========== =========== =========== Net income $0.33 $0.10 $0.50 $0.24 =========== =========== =========== =========== Weighted average basic shares outstanding: 36,954,948 36,860,238 36,918,265 36,849,411 =========== =========== =========== =========== Weighted average diluted shares outstanding: 39,042,770 38,954,815 38,934,572 38,922,668 =========== =========== =========== =========== SILVERLEAF RESORTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) (Unaudited) September 30, December 31, ASSETS 2005 2004 ------------- ------------ Cash and cash equivalents $7,605 $10,935 Restricted cash 4,798 3,428 Notes receivable, net of allowance for uncollectible notes of $52,658 and $52,506, respectively 163,596 196,466 Accrued interest receivable 2,021 2,207 Investment in special purpose entities 21,967 5,173 Amounts due from affiliates 2,145 288 Inventories 114,815 109,303 Land, equipment, buildings, and utilities, net 10,664 24,375 Land held for sale 495 2,991 Prepaid and other assets 15,215 14,340 ------------- ------------ TOTAL ASSETS $343,321 $369,506 ============= ============ LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Accounts payable and accrued expenses $8,535 $7,980 Accrued interest payable 1,428 1,302 Amounts due to affiliates 692 929 Unearned revenues 5,376 4,634 Income taxes payable 6,638 -- Notes payable and capital lease obligations 165,509 218,310 Senior subordinated notes 34,029 34,883 ------------- ------------ Total Liabilities 222,207 268,038 ------------- ------------ 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, 37,249,006 shares issued, 36,954,948 shares outstanding at September 30, 2005, and 36,860,238 shares outstanding at December 31, 2004 372 372 Additional paid-in capital 115,522 116,614 Retained earnings (deficit) 8,702 (10,914) Treasury stock, at cost, 294,058 shares at September 30, 2005 and 388,768 shares at December 31, 2004 (3,482) (4,604) ------------- ------------ Total Shareholders' Equity 121,114 101,468 ------------- ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $343,321 $369,506 ============= ============ *T