Press Release: Silverleaf Resorts, Inc.
March 18, 2002
DALLAS, TX -- Silverleaf Resorts, Inc. Friday announced updated information with regard to its previously announced
liquidity issues and other operational matters.
In February 2001, the Company disclosed significant liquidity issues arising primarily from its failure to close
a new credit facility with its largest secured creditor. Since then, the Company and its financial advisors have
attempted to develop and implement a plan to return the Company to a more stable financial condition. The Company
has remained in default under its credit facilities with its three principal secured lenders, but they have each
agreed to forebear taking any action as a result of the Company's defaults and to continue funding so long as the
Company continues to comply with the terms of interim arrangements with these lenders. Unless extended, these interim
arrangements expire on March 31, 2002. In addition, the Company remains in default with its fourth secured lender,
which has tentatively extended its payment terms.
The Company is also in default with respect to $66.7 million of its 10 1/2% senior subordinated notes due 2008.
The Company will immediately commence an exchange offer with the holders of these existing notes. Under the terms
of the exchange offer, holders will be offered a combination of cash, new notes, and Silverleaf common stock for
their existing notes. The exchange offer may not be consummated unless at least 80% in principal amount of the
existing notes are tendered. Additionally, under the terms of the exchange offer, the indenture related to the
existing notes will be amended to waive existing defaults, eliminate substantially all restrictive covenants, and
subordinate the existing notes to the new notes. If the exchange offer is successful, holders of the existing notes
will acquire 65% of the Company's outstanding common stock. The principal amount of each new note issued will be
only 50% of the principal amount of each existing note exchanged. The interest rate of the new notes will be fixed
between 5% and 8%, depending upon the actual percentage of existing notes exchanged by the pricing date.
The Company has negotiated restructured two-year revolving credit facilities with its three principal secured lenders
as well as a restructured revolving off-balance sheet facility with another financing source. Funding under all
of these facilities is dependent upon successful completion of the exchange offer. If Silverleaf is unable to consummate
the exchange offer, there can be no assurance that it will be able to obtain sufficient financing to continue its
operations.
The Company is reporting revenue of $285.8 million, a net loss of $59.9 million and a net loss per share of $4.65
for the year ended December 31, 2000, compared to restated revenue of $230.4 million, restated net income of $17.7
million and restated net income per share of $1.37 for the year ended December 31, 1999. Amounts reported for the
quarter ended December 31, 2000 were revenue of $68.5 million, a net loss of $45.3 million and a net loss per share
of $3.51, compared to restated revenue of $64.1 million, restated net income of $3.2 million and restated net income
per share of $0.25 for the quarter ended December 31, 1999. At December 31, 2000, due to its announced liquidity
concerns and related uncertainties, the Company incurred one-time charges of $15.5 million to write-down inventories,
$5.4 million to record the impairment of land and land held for sale, $3.1 million to write-off unsold inventory
of vacation intervals from certain managed resorts, and $0.9 million to write-off intangible assets established
in connection with the acquisition of these managed resorts. Additionally, the Company substantially increased
its provision for uncollectible notes in 2000 to provide for poorer performance in the Company's notes receivable
portfolio which resulted from a general downturn in the economy and the elimination of programs that had been in
place to bring delinquent notes current. The additional amount provided was approximately $85 million. In the fourth
quarter of 2000, the Company also wrote-off its receivable from Silverleaf Club and incurred a charge of $7.5 million.
The Company's independent auditors disclaimed an opinion on the consolidated balance sheet of the Company and its
consolidated subsidiaries as of December 31, 2000 and the related consolidated statements of operations, shareholders'
equity, and cash flows for the year ended December 31, 2000 because of pervasive uncertainties regarding the Company's
ability to continue as a going concern.
The Company also announced Friday that it would restate its consolidated financial statements for 1998, 1999, and
the first three quarters of 2000 as a result of adjustments identified in connection with finalizing its December
31, 2000 financial statements. The adjustments recorded in the Company's restated consolidated financial statements
decrease the Company's previously reported net income by $997,000 and $1.6 million for the years ended December
31, 1998 and 1999, respectively. The adjustments decrease the Company's previously reported total assets by $1.0
million and $2.0 million as of December 31, 1998 and 1999, respectively. The adjustments to the Company's previously
announced quarterly results for 2000 decrease the Company's previously reported net income by $311,000, $6.3 million,
and $18.2 million for the quarters ended March 31, 2000, June 30, 2000, and September 30, 2000, respectively. The
adjustments decrease the Company's previously reported total assets by $2.1 million, $9.5 million, and $37.2 million
as of March 31, 2000, June 30, 2000, and September 30, 2000, respectively.
The specific items, that resulted in adjustments are summarized as follows:
A summary of the significant effects of the restatement is included below. The Company has begun the process
of preparing the amended reports necessary to restate its previously released financial statements. Silverleaf
intends to file these amended reports with the Securities and Exchange Commission as soon as is practicable.
Based in Dallas, Texas, Silverleaf Resorts, Inc. currently owns and/or operates 19 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. Silverleaf has a managed ownership base
of over 124,000.
This release contains certain forward-looking statements that involve risks and uncertainties and actual results
many differ materially from those anticipated. The Company is subject to specific risks associated with the timeshare
industry, the regulatory environment, and various economic factors. Additionally, anticipated results are dependent
upon the Company's ability to identify and acquire or develop other operations under terms that are beneficial
to the Company and its shareholders. Other risk factors are more fully discussed under ``Cautionary Statements''
in the Company's SEC reports, including the Company's 1999 annual report on Form 10K (pages 29 through 35 thereof).
Silverleaf Resorts, Inc.
Adjustments to Consolidated Financial Statements
(Unaudited)
A summary of the effects of adjustments on the Company's
statements of operations for the years ended December 31, 1998 and
1999 and the nine months ended September 30, 2000 is as follows (in
thousands):
Nine Months
Year Ended Ended
December 31, Sept. 30,
--------------------- ---------
1998 1999 2000
---- ---- ----
Revenues As Previously Reported $ 160,755 $ 230,758 $ 211,745
Revision to downgrade policy -- -- 4,231
Delayed cancellation of rescinded
sales (531) (337) 910
Deferral of sales within the
rescission period (733) 231 585
Incorrect application of
membership dues payments -- -- (104)
Revision to interest income
related to loan amortization -- -- 936
Revision to sampler revenue
recognition policy (1,083) (20) (726)
Reconciliation of lender debt -- (189) (267)
--------- --------- ---------
Total adjustments (2,347) (315) 5,565
Revenues As Restated $ 158,408 $ 230,443 $ 217,310
========= ========= =========
Costs and Expenses As Previously
Reported $ 130,945 $ 199,402 $ 195,701
Increased provision for
uncollectible notes -- -- 38,530
Revision to downgrade policy -- -- 4,231
Delayed cancellation of
rescinded sales (169) (79) 263
Deferral of sales within the
rescission period (365) 157 249
Incorrect application of
membership dues payments -- -- (44)
Revision to sampler revenue
recognition policy (387) 1,127 26
Reconciliation of lender debt (189) 289 194
Litigation costs -- 43 1,041
Revision to prepaid customer
lists policy -- -- 388
Other miscellaneous items 382 703 449
--------- --------- ---------
Total adjustments (728) 2,240 45,327
Costs and Expenses As Restated $ 130,217 $ 201,642 $ 241,028
========= ========= =========
Income before provision for income
taxes as previously reported $ 29,810 $ 31,356 $ 16,044
Total adjustments (1,619) (2,555) (39,762)
--------- --------- ---------
Income (loss) before provision for
income taxes as restated $ 28,191 $ 28,801 $ (23,718)
========= ========= =========
Provision for income taxes as
previously reported $ 11,432 $ 12,072 $ 6,178
Total adjustments (622) (982) (14,966)
--------- --------- ---------
Provision (benefit) for income
taxes as restated $ 10,810 $ 11,090 $ (8,788)
========= ========= =========
Net income as previously reported $ 18,378 $ 19,284 $ 10,182
Total adjustments (997) (1,573) (24,796)
--------- --------- ---------
Net income (loss) as restated $ 17,381 $ 17,711 $ (14,614)
========= ========= =========
A summary of the significant effects of the restatement on the
Company's consolidated financial statements for the years ended
December 31, 1998 and 1999, and as of December 31, 1999 is as follows
(in thousands):
Year Ended December 31,
-----------------------------------------
1998 1999
---- ----
As As
Previously As Previously As
Reported Restated Reported Restated
---------- --------- --------- ---------
Vacation Interval Sales $135,582 $134,413 $191,207 $192,767
Sampler sales 2,768 1,356 $ 4,250 1,665
Total revenues 160,755 158,408 230,758 230,443
Total costs and expenses 130,945 130,217 199,402 201,642
Income before provision for
income taxes 29,810 28,191 31,356 28,801
Net income 18,378 17,381 19,284 17,711
Earnings per share - basic 1.45 1.38 1.50 1.37
Earnings per share - diluted 1.45 1.37 1.50 1.37
Net cash used in operating
activities 17,633 99,512 7,705 120,971
Net cash used in investing
activities 94,475 12,552 123,093 10,480
December 31, 1999
--------------------
As
Previously As
Reported Restated
---------- ---------
Notes receivable, net $286,581 $282,290
Accrued interest receivable (a) 2,255
Land held for sale (a) 1,078
Prepaid and other assets 17,203 16,947
Accounts payable and accrued expenses 15,539 13,398
Accrued interest payable (a) 2,621
Unearned revenues 5,601 7,998
Deferred income taxes, net 28,251 26,256
Notes payable and capital lease obligations 194,171 194,468
Retained earnings 56,737 53,543
Total shareholders' equity 161,210 158,016
(a) - Not previously presented separately
The restatement also resulted in a decrease in retained earnings
of $624,000 as of January 1, 1998.
A summary of the significant effects of the restatement on the
Company's condensed consolidated financial statements for the nine
months ended September 30, 2000, each of the fiscal 1999 quarters, and
the fiscal 2000 quarters ended March 31, 2000, June 30, 2000, and
September 30, 2000, is as follows (in thousands):
Nine Months Ended
September 30, 2000
----------------------
As
Previously As
Reported Restated
--------- ---------
Vacation interval sales $ 174,876 $ 181,421
Sampler sales 4,172 2,537
Total revenues 211,745 217,310
Provision for uncollectible notes 17,488 60,128
Total costs and expenses 195,701 241,028
Income (loss) before income taxes
and extraordinary item 16,044 (23,718)
Income (loss) before
extraordinary item 9,866 (14,930)
Net income 10,182 (14,614)
Earnings (loss) per share before
extraordinary item -- basic and diluted .77 (1.16)
Earnings (loss) per share
-- basic and diluted .79 (1.14)
Net cash provided by
(used in) operating activities 6,857 (95,478)
Net cash provided by
(used in) financing activities (103,779) (1,688)
Quarter Ended
--------------------------------------
March 31, 1999 June 30, 1999
------------------ ------------------
As As
Previously As Previously As
Reported Restated Reported Restated
-------- -------- -------- --------
Total revenues $ 49,080 $ 49,419 $ 56,373 $ 55,098
Total costs and
expenses 41,195 42,309 47,468 47,485
Income before provision
for income taxes 7,885 7,110 8,905 7,613
Net income 4,849 4,372 5,477 4,682
Earnings per share
-- basic and diluted .38 .34 .42 .36
Quarter Ended
--------------------------------------
September 30, 1999 December 31, 1999
------------------ ------------------
As As
Previously As Previously As
Reported Restated Reported Restated
-------- -------- -------- --------
Total revenues $ 61,534 $61,862 $63,771 $64,065
Total costs and
expenses 52,710 53,023 58,029 58,825
Income before provision
for income taxes 8,824 8,839 5,743 5,240
Net income 5,427 5,436 3,532 3,222
Earnings per share
-- basic and diluted .42 .42 .27 .25
Quarter Ended
--------------------------------------
March 31, 2000 June 30, 2000
------------------ ------------------
As As
Previously As Previously As
Reported Restated Reported Restated
-------- -------- -------- --------
Total revenues $ 64,906 $ 65,393 $ 71,319 $ 70,882
Total costs and
expenses 61,857 62,909 65,395 75,033
Income (loss)
before provision
(benefit) for income
taxes and
extraordinary item 3,049 2,484 5,924 (4,151)
Income (loss) before
extraordinary item 1,875 1,564 3,643 (2,607)
Net income (loss) 1,875 1,564 3,959 (2,291)
Earnings (loss) per
share before
extraordinary item --
basic and diluted .15 .12 .29 (.20)
Earnings (loss) per
share -- basic and
diluted .15 .12 .31 (.18)
Quarter Ended
-------------------
September 30, 2000
-------------------
As As
Previously Restated
Reported
-------- --------
Total revenues $ 75,519 $ 81,034
Total costs and
expenses 68,449 103,086
Income (loss)
before provision
(benefit) for income
taxes and
extraordinary item 7,070 (22,052)
Income (loss) before
extraordinary item 4,348 (13,888)
Net income (loss) 4,348 (13,888)
Earnings (loss) per
share before
extraordinary item --
basic and diluted .34 (1.08)
Earnings (loss) per
share -- basic and
diluted .34 (1.08)
---------------------------------------
Contact:
Silverleaf Resorts, Inc., Dallas
Harry J. White, Jr., 214/631-1166
Chief Financial Officer