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Silverleaf Resorts, Inc. (AMEX:SVL) today announced its financial results for the year ended December 31, 2005. 2005 Financial Highlights: -- Total revenue increased to $201.9 million -- Vacation interval sales increased to $146.4 million -- Improved efficiency leads to increased net income of $23.2 million "Our efforts these past couple of years and specifically our results for 2005 clearly demonstrate that we are successfully executing on our strategy," commented Robert Mead, Chairman and CEO. "More importantly, our results reflect the strength of our business model as sales to existing customers enabled our net income growth to outpace our revenue increase. We entered 2006 in a stronger financial position compared to this time a year ago, enabling us to add new facilities and resorts and the introduction of Silverleaf's first off-site sales center, which is scheduled to open on March 8th, in the Dallas, TX area. These investments in our business, combined with our expense management, will enable us to have another strong year in 2006, as we are currently estimating core net income to increase 21% to 25% over 2005." Total revenue for 2005 increased to $201.9 million compared to $183.7 million in 2004. Revenue for 2005 includes a gain on the sale of notes receivable under a term securitization of $5.8 million, and a gain on the sale of undeveloped land of $3.6 million. Net income for the year ended December 31, 2005 increased to $23.2 million, or $0.59 per diluted share compared to net income of $13.8 million, or $0.35 per diluted share for the year ended December 31, 2004. Vacation interval sales increased 6.1% to $146.4 million during the year ended December 31, 2005 compared to $138.0 million during the year ended December 31, 2004. The increase in sales for 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 to 50.1% of sales for all of 2005 from 51.3% for all of 2004, as marketing expenses are lower for these sales. In addition, the provision for uncollectible notes was 16.2% of vacation interval sales for 2005, down from 19.4% in 2004, as a result of better performance of notes originated since the company began focusing on selling to customers with better credit characteristics. 2005 Fourth Quarter Financial Highlights: -- Total revenue increased 6.4% to $48.2 million -- Vacation interval sales increased 15.3% to $37.1 million -- Pre-tax income increased 20.8% to $5.1 million Total revenue for the fourth quarter of 2005 increased to $48.2 million from $45.3 million during the same period in 2004. Vacation interval sales increased 15.3% to $37.1 million during the fourth quarter of 2005 compared to $32.2 million during the fourth quarter of 2004. The increase in sales in the quarter ended December 31, 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 to 51.8% in the fourth quarter of 2005 from 55.6% of sales in the fourth quarter of 2004, as marketing expenses are lower for these sales. During the fourth quarter of 2004, the company recorded a gain on sale of notes receivable of $1.3 million, which did not recur in the fourth quarter of 2005. In addition, the provision for uncollectible notes was 15% of vacation interval sales for the fourth quarter of 2005, down from 17.5% in 2004, as a result of better performance of notes originated since the company began focusing on selling to customers with better credit characteristics. During the fourth quarter of 2005, the company recorded income tax expense at 30.2% pre-tax income, while in the fourth quarter of 2004, the company did not record income tax expense due to utilizing various NOL items. As a result of the increased tax provision in 2005, and gain on sale of notes receivable in the fourth quarter of 2004, net income for the fourth quarter decreased to $3.6 million, or $0.09 per diluted share, compared to net income of $4.3 million, or $0.11 per diluted share, for the fourth quarter of 2004. Outlook For the purposes of providing more transparency, the Company's estimates in this press release include core operations, and exclude historical gains and discontinued operations, and assume 2004 and 2005 amounts were fully taxed at the 2006 effective income tax rate of 38.5%. -0- *T 2004 2005 2006 Guidance ------ ------ ------------- Actual Actual Low High ------ ------ ------ ------ Net income, as reported $13.8 $23.2 Adjustments between net income as reported, and core net income: Gain on sale of notes receivable under a term securitization - (5.8) Gain on sale of undeveloped land - (3.6) Income from discontinued operations, net of taxes (0.6) (0.7) Provision for income taxes, as reported - 9.7 ------ ------ Core income before provision for income taxes 13.2 22.8 Provision for income taxes at 38.5% core rate (5.1) (8.8) ------ ------ ------ ------ Core Net Income $8.1 $14.0 $17.0 $17.5 ====== ====== ====== ====== Core Fully Diluted EPS $0.21 $0.36 $0.43 $0.45 ====== ====== ====== ====== *T The Company is forecasting 2006 net income in the range of $17.0 million to $17.5 million, or $0.43 to $0.45 per diluted share. This represents a 21% to 25% increase compared to 2005 core net income of $14.0 million, or $0.36 per diluted share. In 2004, the Company's core net income was $8.1 million, or $0.21 per diluted share. About Silverleaf Resorts Based in Dallas, Texas, 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 Year Ended December 31, December 31, ----------------------- ----------------------- 2005 2004 2005 2004 ----------- ----------- ----------- ----------- Revenues: Vacation Interval sales $37,112 $32,177 $146,416 $138,046 Sampler sales 864 666 2,623 2,150 ----------- ----------- ----------- ----------- Total sales 37,976 32,843 149,039 140,196 Interest income 9,216 10,268 38,154 37,843 Management fee income 505 300 1,856 1,201 Gain on sales of notes receivable - 1,335 6,457 1,915 Other income 471 511 6,402 2,522 ----------- ----------- ----------- ----------- Total revenues 48,168 45,257 201,908 183,677 Costs and Operating Expenses: Cost of Vacation Interval sales 5,920 5,478 23,427 24,964 Sales and marketing 19,681 18,248 74,667 71,890 Provision for uncollectible notes 5,566 5,631 23,649 26,811 Operating, general and administrative 6,861 6,253 28,038 25,639 Depreciation and amortization 566 952 2,723 3,588 Interest expense and lender fees 4,488 4,484 17,253 17,627 ----------- ----------- ----------- ----------- Total costs and operating expenses 43,082 41,046 169,757 170,519 Income before provision for income taxes and discontinued operations 5,086 4,211 32,151 13,158 Provision for income taxes (1,536) - (9,725) (23) ----------- ----------- ----------- ----------- Net income from continuing operations 3,550 4,211 22,426 13,135 Discontinued Operations Gain on sale of discontinued operations (net of taxes) - - 613 - Income from discontinued operations (net of taxes) - 121 128 624 ----------- ----------- ----------- ----------- Net income from discontinued operations - 121 741 624 Net income $3,550 $4,332 $23,167 $13,759 =========== =========== =========== =========== Basic income per share: Net income from continuing operations $0.10 $0.12 $0.61 $0.35 =========== =========== =========== =========== Net income from discontinued operations $- $- $0.02 $0.02 =========== =========== =========== =========== Net income $0.10 $0.12 $0.63 $0.37 =========== =========== =========== =========== Diluted income per share: Net income from continuing operations $0.09 $0.11 $0.57 $0.33 =========== =========== =========== =========== Net income from discontinued operations $- $- $0.02 $0.02 =========== =========== =========== =========== Net income $0.09 $0.11 $0.59 $0.35 =========== =========== =========== =========== Weighted average basic shares outstanding: 37,190,670 36,860,238 36,986,926 36,852,133 =========== =========== =========== =========== Weighted average diluted shares outstanding: 39,259,107 39,015,786 39,090,921 38,947,854 =========== =========== =========== =========== SILVERLEAF RESORTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) (Unaudited) December 31, December 31, ASSETS 2005 2004 ------------- ------------ Cash and cash equivalents $10,990 $10,935 Restricted cash 4,893 3,428 Notes receivable, net of allowance for uncollectible notes of $52,479 and $52,506, respectively 177,572 196,466 Accrued interest receivable 2,243 2,207 Investment in special purpose entities 22,802 5,173 Amounts due from affiliates 680 288 Inventories 117,597 109,303 Land, equipment, buildings, and utilities, net 10,441 24,375 Land held for sale 495 2,991 Prepaid and other assets 14,083 14,340 ------------- ------------ TOTAL ASSETS $361,796 $369,506 ============= ============ LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Accounts payable and accrued expenses $9,556 $7,980 Accrued interest payable 1,354 1,302 Amounts due to affiliates 544 929 Unearned revenues 5,310 4,634 Taxes payable 1,268 - Deferred taxes payable, net 8,485 - Notes payable and capital lease obligations 177,269 218,310 Senior subordinated notes 33,175 34,883 ------------- ------------ Total Liabilities 236,961 268,038 ------------- ------------ 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, 37,494,304 shares issued, 37,494,304 shares outstanding at December 31, 2005, and 36,860,238 shares outstanding at December 31, 2004 375 372 Additional paid-in capital 112,207 116,614 Retained earnings (deficit) 12,253 (10,914) Treasury stock, at cost, 0 shares at December 31, 2005 and 388,768 shares at December 31, 2004 - (4,604) ------------- ------------ Total Shareholders' Equity 124,835 101,468 ------------- ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $361,796 $369,506 ============= ============ *T