Silverleaf Resorts, Inc. (NASDAQ: SVLF) today reported
the following results for its third quarter ended September 30,
2010.
Financial highlights for the quarter ended September 30,
2010:
- Net Income of $1.6 million or diluted
earnings per share of $0.04
- Vacation Interval sales of $53.2
million
2010 Third Quarter Results
Net income for the quarter ended September 30, 2010 was $1.6
million, or diluted earnings per share of $0.04, compared to a net
loss of $3.9 million, or loss per share of $0.10, for the quarter
ended September 30, 2009. Excluding recognition of $18.5 million
additional provision for estimated uncollectible revenue in the
quarter ended September 30, 2009, net income and diluted earnings
per share for that quarter would have been $7.2 million and $0.18,
respectively.
Vacation Interval sales were $53.2 million in the third quarter
of 2010 compared to $70.4 million in the comparable prior-year
period. 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 58.7% and 62.2% of total
Vacation Interval sales in the quarters ended September 30, 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 third
quarter of 2010 compared to 52.2% in the third quarter of 2009. The
ratio was substantially higher in the third quarter of 2009 as
cancellations during the first nine months of 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
20.9% of the gross notes receivable portfolio as of
September 30, 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 third quarter of 2010 were $58.5
million compared to $52.8 million for the third quarter of 2009,
primarily attributable to the $4.4 million increase in net
sales.
Cost of Vacation Interval sales was 10.8% of Vacation Interval
sales for the third quarter of 2010 compared to 7.3% in the 2009
comparable period. This increase primarily resulted from revisions
made to future relative sales value for the third quarters of both
2010 and 2009 which had a greater impact on decreasing cost of
sales in the third quarter of 2009.
Sales and marketing expense as a percentage of Vacation Interval
sales was 53.0% for the third quarter of 2010 compared to 47.3% for
the comparable prior-year period. The increase was primarily
attributable to the decrease in sales to existing customers, 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 $7.8 million for the
third quarter of 2010 from $9.2 million for the third quarter of
2009. Interest expense and lender fees as a percentage of interest
income increased to 54.9% for the third quarter of 2010 compared to
44.5% for the same period of 2009. Overall, interest expense and
lender fees increased $2.1 million for the third quarter of 2010
compared to the same period of 2009 primarily due to an increase in
lender fees related to the Silverleaf Finance VII, LLC (“SF-VII”)
securitization closed in the second quarter of 2010 and amendments
to the Company’s other senior loan agreements since September 2009.
In addition, the weighted average cost of borrowings increased to
7.8% for the three months ended September 30, 2010 from 5.6% for
the three months ended September 30, 2009 which was primarily
related to SF-VII.
2010 Year-to-Date Results
Net income for the nine months ended September 30, 2010 was $6.6
million, or diluted earnings per share of $0.17, compared to net
income of $3.4 million, or diluted earnings per share of $0.09, for
the nine months ended September 30, 2009. Excluding recognition of
$18.5 million additional provision for estimated uncollectible
revenue in 2009, net income and diluted earnings per share for the
nine months ended September 30, 2009 would have been $14.5 million
and $0.37, respectively.
Vacation Interval sales were $157.6 million in the first nine
months of 2010 compared to $194.2 million in the comparable
prior-year period. 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 57.6% and 62.2% of
total Vacation Interval sales in the first nine months of 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% for the first nine
months of 2010 compared to 35.1% for the same period of 2009.
Cancellations during the first nine months of 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
20.9% of the gross notes receivable portfolio as of
September 30, 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 first nine months of 2010 were
$171.8 million compared to $183.7 million for the first nine months
of 2009, primarily attributable to the $13.1 million reduction in
net sales.
Cost of Vacation Interval sales was 8.7% of Vacation Interval
sales for the first nine months of 2010 compared to 9.7% in the
2009 comparable period. This decrease primarily resulted from
increased sales of lower cost-basis product during the first nine
months of 2010 compared to the first nine months of 2009.
Sales and marketing expense as a percentage of Vacation Interval
sales was 54.1% for the nine-month period ended September 30, 2010
compared to 50.0% for the comparable prior-year period. The
increase was primarily attributable to the decrease in sales to
existing customers, 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 $25.5 million for
the first nine months of 2010 compared to $26.3 million for the
first nine months of 2009. Interest expense and lender fees as a
percentage of interest income increased to 50.6% for the first nine
months of 2010 compared to 45.4% for the same period of 2009.
Overall, interest expense and lender fees increased $4.3 million in
the first nine months of 2010 compared to the same period of 2009
primarily due to an increase in lender fees related to the SF-VII
securitization and amendments to the Company’s other senior loan
agreements since September 2009. In addition, the weighted average
cost of borrowings increased to 7.0% for the nine months ended
September 30, 2010 from 6.0% for the nine months ended September
30, 2009.
Balance Sheet
At September 30, 2010, senior credit facilities provided for
loans of up to $501.6 million, of which $107.9 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 addition, the
Company completed the extension of four of its senior revolving
credit facilities in the first nine months of 2010. Considering the
completion of the new term securitization, the extension of the
four senior credit facilities, forecasted sales, and limited
expansion plans, the Company’s senior credit facilities provide
adequate liquidity through mid-2011. At September 30, 2010, the
Company’s senior debt consisted of 46% fixed-rate debt and 54%
variable-rate debt. However, the majority of the Company’s
variable-rate debt is subject to interest-rate floors between 6.00%
and 8.00%.
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 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 2009 Annual Report on
Form 10-K filed on March 8, 2010.
For more information or to visit the Company’s website, click
here:
http://www.b2i.us/irpass.asp?BzID=1358&Nav=0&S=0&L=1
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in
thousands, except share and per share amounts) (Unaudited)
Three Months Ended Nine Months Ended September 30,
September 30, 2010 2009 2010 2009
Revenues:
Vacation Interval sales $ 53,162 $ 70,427 $ 157,557 $ 194,217
Estimated uncollectible revenue (15,072 ) (36,741 )
(44,668 ) (68,216 ) Net sales 38,090 33,686 112,889
126,001 Interest income 17,267 16,591 51,639 48,148
Management fee income 630 930 1,891 2,791 Other income 2,489
1,578 5,337 6,777
Total revenues 58,476 52,785 171,756 183,717
Costs and
Operating Expenses: Cost of Vacation Interval sales 5,719 5,125
13,777 18,882 Sales and marketing 28,161 33,293 85,283 97,024
Operating, general and administrative 10,882 11,797 30,967 35,673
Depreciation 1,629 1,641 4,875 4,594 Interest expense and lender
fees: Related to receivables-based credit facilities 7,835 5,362
20,816 16,604 Related to other indebtedness 1,650
2,026 5,307 5,242 Total
costs and operating expenses 55,876 59,244
161,025 178,019 Income
before provision for income taxes 2,600 (6,459 ) 10,731 5,698
Provision for income taxes (975 ) 2,584
(4,099 ) (2,258 )
Net income $ 1,625 $
(3,875 ) $ 6,632 $ 3,440
Basic net income
per share $ 0.04 $ (0.10 ) $ 0.17 $ 0.09
Diluted net income per share $ 0.04 $ (0.10 )
$ 0.17 $ 0.09
Weighted average basic common
shares outstanding 37,864,792 38,146,943
37,973,619 38,146,943
Weighted average diluted common shares outstanding
38,718,291 38,146,943 38,853,865
39,027,021
SILVERLEAF RESORTS,
INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in
thousands, except share and per share amounts)
September 30, December 31, ASSETS 2010 2009 (Unaudited)
Cash and cash equivalents (including from
VIEs of $10 and $11, respectively)
$ 8,414 $ 13,905
Restricted cash (including from VIEs of
$24,608 and $18,903, respectively)
26,357 20,668
Notes receivable, net of allowance for
uncollectible notes of $95,826 and $94,585, respectively (including
from VIEs of $209,617 and $204,813, respectively)
362,222 354,659 Accrued interest receivable (including from VIEs of
$2,483 and $2,427, respectively) 4,511 4,686 Amounts due from
affiliates (including from VIEs of ($183) and ($192), respectively)
14,165 1,587 Inventories 183,208 196,010 Land, equipment,
buildings, and leasehold improvements, net 47,871 51,117 Prepaid
and other assets (including from VIEs of $10,115 and $9,420,
respectively) 28,149 23,856 TOTAL
ASSETS $ 674,897 $ 666,488 LIABILITIES AND
SHAREHOLDERS' EQUITY LIABILITIES
Accounts payable and accrued expenses
(including from VIEs of $20 and $22, respectively)
$ 9,732 $ 8,527 Accrued interest payable (including from VIEs of
$1,369 and $813, respectively) 2,557 2,264 Unearned samplers 7,304
6,501 Income taxes payable 712 706 Deferred income taxes 37,539
35,342
Notes payable and capital lease
obligations (including from VIEs of $212,412 and $191,395,
respectively)
401,496 395,017 Senior subordinated notes 8,855
17,956 Total Liabilities 468,195
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 September 30, 2010 and 38,146,943
shares issued and outstanding at December 31, 2009
381 381 Additional paid-in capital 113,769 113,447 Retained
earnings 92,979 86,347
Treasury stock, at cost, 378,291 shares at
September 30, 2010 and none at December 31, 2009
(427 ) - Total Shareholders' Equity 206,702
200,175 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $
674,897 $ 666,488 The abbreviation "VIEs" above
represents Variable Interest Entities.
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