##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended June 30, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from
  to
 Commission file number: 001-13003
 SILVERLEAF RESORTS, INC.
  TEXAS
(State of incorporation)
    
    75-2259890
(I.R.S. Employer
Identification No.)
 1221 RIVER BEND DRIVE, SUITE 120
DALLAS, TEXAS 75247
 214-631-1166
 þ o
 o þ




---



##### Table of Contents



Explanatory Note
  1




---



SILVERLEAF RESORTS, INC.
 INDEX
  
 PagePART I. FINANCIAL INFORMATION (Unaudited)Item 1.
    
    Consolidated Statements of Income for the three months and six months ended June 30, 2005 and 2004
    
    3Consolidated Balance Sheets as of June 30, 2005 and December 31, 2004
    
    4Consolidated
Statement of Shareholders Equity for the six months ended June 30, 2005
    
    5Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and 2004
    
    6Notes to the Condensed Consolidated Financial Statements
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    17Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    25Item 4.
    
    Controls and Procedures
    
    26PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    26Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    27Item 5.
    
    Other Information
    
    27Item 6.
    
    Exhibits and Reports on Form 8-K
    
    27Signatures
    
    28Amendment No. 1 to Second Amended & Restated Revolving Credit AgreementAmendment No. 1 to Inventory & Receivables Revolving Credit AgreementCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906
  2




---



##### Table of Contents



PART I: FINANCIAL INFORMATION (UNAUDITED)
 
 Item 1. Financial Statements
 SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF INCOME
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Revenues:Vacation Interval sales
    
    $
    37,334
    
    
    $
    37,144
    
    
    $
    67,471
    
    
    $
    69,131Sampler sales
    
    
    501
    
    
    
    468
    
    
    
    1,142
    
    
    
    914Total sales
    
    
    37,835
    
    
    
    37,612
    
    
    
    68,613
    
    
    
    70,045Interest income
    
    
    10,113
    
    
    
    9,295
    
    
    
    19,871
    
    
    
    18,222Management fee income
    
    
    450
    
    
    
    300
    
    
    
    900
    
    
    
    600Gain on sales of notes receivable
    
    
    
    
    
    
    154
    
    
    
    669
    
    
    
    580Other income
    
    
    957
    
    
    
    811
    
    
    
    1,382
    
    
    
    1,203Total revenues
    
    
    49,355
    
    
    
    48,172
    
    
    
    91,435
    
    
    
    90,650Costs and Operating Expenses:Cost of Vacation Interval sales
    
    
    6,017
    
    
    
    7,285
    
    
    
    10,735
    
    
    
    13,319Sales and marketing
    
    
    18,153
    
    
    
    18,699
    
    
    
    35,337
    
    
    
    35,166Provision for uncollectible notes
    
    
    6,534
    
    
    
    7,432
    
    
    
    11,808
    
    
    
    13,832Operating, general and administrative
    
    
    7,105
    
    
    
    6,656
    
    
    
    13,833
    
    
    
    12,837Depreciation and amortization
    
    
    744
    
    
    
    890
    
    
    
    1,542
    
    
    
    1,792Interest expense and lender fees
    
    
    4,286
    
    
    
    4,293
    
    
    
    8,671
    
    
    
    8,575Total costs and operating expenses
    
    
    42,839
    
    
    
    45,255
    
    
    
    81,926
    
    
    
    85,521Income before provision for income taxes
and discontinued operations
    
    
    6,516
    
    
    
    2,917
    
    
    
    9,509
    
    
    
    5,129Provision for income taxes
    
    
    (2,285
    )
    
    
    (25
    )
    
    
    (2,884
    )
    
    
    (23
    )Net income from continuing operations
    
    
    4,231
    
    
    
    2,892
    
    
    
    6,625
    
    
    
    5,106Discontinued OperationsIncome from discontinued operations (net of taxes)
    
    
    
    
    
    
    160
    
    
    
    128
    
    
    
    289Net income
    
    $
    4,231
    
    
    $
    3,052
    
    
    $
    6,753
    
    
    $
    5,395Basic income per share:Net income from continuing operations
    
    $
    0.11
    
    
    $
    0.08
    
    
    $
    0.18
    
    
    $
    0.14Income from discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0.01Net income
    
    $
    0.11
    
    
    $
    0.08
    
    
    $
    0.18
    
    
    $
    0.15Diluted income per share:Net income from continuing operations
    
    $
    0.11
    
    
    $
    0.08
    
    
    $
    0.17
    
    
    $
    0.13Income from discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0.01Net income
    
    $
    0.11
    
    
    $
    0.08
    
    
    $
    0.17
    
    
    $
    0.14Weighted average basic shares outstanding:
    
    
    36,937,648
    
    
    
    36,846,319
    
    
    
    36,899,620
    
    
    
    36,843,938Weighted average diluted shares outstanding:
    
    
    38,933,675
    
    
    
    38,935,602
    
    
    
    38,874,506
    
    
    
    38,905,570
  3




---



##### Table of Contents



SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 
 June 30,
    
    December 31,2005
    
    2004ASSETSCash and cash equivalents
    
    $
    7,605
    
    
    $
    10,935Restricted cash
    
    
    5,215
    
    
    
    3,428Notes receivable, net of allowance for uncollectible notes of
$55,636 and $52,506, respectively
    
    
    203,357
    
    
    
    196,466Accrued interest receivable
    
    
    2,293
    
    
    
    2,207Investment in special purpose entity
    
    
    2,000
    
    
    
    5,173Amounts due from affiliates
    
    
    188
    
    
    
    288Inventories
    
    
    114,761
    
    
    
    109,303Land, equipment, buildings, and utilities, net
    
    
    11,137
    
    
    
    24,375Land held for sale
    
    
    2,991
    
    
    
    2,991Prepaid and other assets
    
    
    13,263
    
    
    
    14,340TOTAL ASSETS
    
    $
    362,810
    
    
    $
    369,506LIABILITIES AND SHAREHOLDERS EQUITYLIABILITIESAccounts payable and accrued expenses
    
    $
    8,408
    
    
    $
    7,980Accrued interest payable
    
    
    1,299
    
    
    
    1,302Amounts due to affiliates
    
    
    669
    
    
    
    929Unearned revenues
    
    
    6,682
    
    
    
    4,634Income taxes payable
    
    
    1,692
    
    
    
    Notes payable and capital lease obligations
    
    
    201,780
    
    
    
    218,310Senior subordinated notes
    
    
    34,029
    
    
    
    34,883Total Liabilities
    
    
    254,559
    
    
    
    268,038COMMITMENTS AND CONTINGENCIESSHAREHOLDERS EQUITYPreferred 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 June 30,
2005, and 36,860,238 shares outstanding at December 31, 2004
    
    
    372
    
    
    
    372Additional paid-in capital
    
    
    115,522
    
    
    
    116,614Retained deficit
    
    
    (4,161
    )
    
    
    (10,914
    )Treasury stock, at cost, 294,058 shares at June 30, 2005 and 388,768
shares at December 31, 2004
    
    
    (3,482
    )
    
    
    (4,604
    )Total Shareholders Equity
    
    
    108,251
    
    
    
    101,468TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    362,810
    
    
    $
    369,506
  4




---



##### Table of Contents



SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
   Common StockNumber of
    
    $0.01
    
    AdditionalShares
    
    Par
    
    Paid-in
    
    Retained
    
    Treasury StockIssued
    
    Value
    
    Capital
    
    Deficit
    
    Shares
    
    Cost
    
    TotalJanuary 1, 2005
    
    
    37,249,006
    
    
    $
    372
    
    
    $
    116,614
    
    
    $
    (10,914
    )
    
    
    388,768
    
    
    $
    (4,604
    )
    
    $
    101,468Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    (1,092
    )
    
    
    
    
    
    
    (94,710
    )
    
    
    1,122
    
    
    
    30Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,753
    
    
    
    
    
    
    
    
    
    
    
    6,753June 30,2005
    
    
    37,249,006
    
    
    $
    372
    
    
    $
    115,522
    
    
    $
    (4,161
    )
    
    
    294,058
    
    
    $
    (3,482
    )
    
    $
    108,251
  5




---



##### Table of Contents



SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
   Six Months Ended June 30,2005
    
    2004OPERATING ACTIVITIES:Net income
    
    $
    6,753
    
    
    $
    5,395Adjustments to reconcile net income to net cash provided by operating activities:Income from discontinued operations, net of taxes
    
    
    (128
    )
    
    
    (289
    )Provision for uncollectible notes
    
    
    11,808
    
    
    
    13,832Depreciation and amortization
    
    
    1,542
    
    
    
    1,792Gain on sales of notes receivable
    
    
    (669
    )
    
    
    (580
    )Proceeds from sales of notes receivable
    
    
    6,021
    
    
    
    9,559Cash effect from changes in assets and liabilities:Restricted cash
    
    
    (1,787
    )
    
    
    (2,028
    )Notes receivable
    
    
    (23,655
    )
    
    
    (27,760
    )Accrued interest receivable
    
    
    (86
    )
    
    
    (39
    )Investment in special purpose entity
    
    
    3,173
    
    
    
    (868
    )Amounts due from affiliates
    
    
    624
    
    
    
    947Inventories
    
    
    (5,858
    )
    
    
    2,803Prepaid and other assets
    
    
    961
    
    
    
    (2,482
    )Accounts payable and accrued expenses
    
    
    422
    
    
    
    646Accrued interest payable
    
    
    (3
    )
    
    
    109Unearned revenues
    
    
    1,170
    
    
    
    828Income taxes payable
    
    
    1,692
    
    
    
    Net cash provided by operating activities  continuing operations
    
    
    1,980
    
    
    
    1,865Net cash used in operating activities  discontinued operations
    
    
    (841
    )
    
    
    (44
    )INVESTING ACTIVITIES:Purchases of land, equipment, buildings, and utilities
    
    
    (216
    )
    
    
    (180
    )Proceeds from sale of discontinued operations
    
    
    13,101
    
    
    
    Net cash provided by (used in) investing activities
    
    
    12,885
    
    
    
    (180
    )FINANCING ACTIVITIES:Proceeds from borrowings from unaffiliated entities
    
    
    72,696
    
    
    
    44,300Payments on borrowings to unaffiliated entities
    
    
    (90,080
    )
    
    
    (45,383
    )Proceeds from exercise of stock options
    
    
    30
    
    
    
    10Net cash used in financing activities
    
    
    (17,354
    )
    
    
    (1,073
    )Net change in cash and cash equivalents
    
    
    (3,330
    )
    
    
    568CASH AND CASH EQUIVALENTS:Beginning of period
    
    
    10,935
    
    
    
    4,093End of period
    
    $
    7,605
    
    
    $
    4,661SUPPLEMENTAL CASH FLOW INFORMATION:Interest paid, net of amounts capitalized
    
    $
    7,894
    
    
    $
    8,430Income taxes paid
    
    $
    750
    
    
    $
    SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Equipment acquired under capital leases
    
    $
    62
    
    
    $
    
  6




---



##### Table of Contents



SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 Note 1  Background
  Form 10-K.
 Note 2  Significant Accounting Policies Summary
 Basis of Presentation 
 Principles of Consolidation 
 Revenue and Expense Recognition 
     7




---



##### Table of Contents



Cash and Cash Equivalents 
 Restricted Cash
 Investment in Special Purpose Entity
 Provision for Uncollectible Notes 
    8




---



##### Table of Contents



Inventories 
   Land, Equipment, Buildings, and Utilities
 Prepaid and Other Assets
 Income Taxes
 Earnings Per Share
 Stock-Based Compensation
 9




---



##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net income, as reported
    
    $
    4,231
    
    
    $
    3,052
    
    
    $
    6,753
    
    
    $
    5,395Stock-based compensation
expense recorded under the
intrinsic value method
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Pro forma stock-based
compensation expense
computed under the fair
value method
    
    
    (57
    )
    
    
    (78
    )
    
    
    (122
    )
    
    
    (156
    )Pro forma net income
    
    $
    4,174
    
    
    $
    2,974
    
    
    $
    6,631
    
    
    $
    5,239Net income per share, basicAs reported
    
    $
    0.11
    
    
    $
    0.08
    
    
    $
    0.18
    
    
    $
    0.15Pro forma
    
    $
    0.11
    
    
    $
    0.08
    
    
    $
    0.18
    
    
    $
    0.14Net income per share, dilutedAs reported
    
    $
    0.11
    
    
    $
    0.08
    
    
    $
    0.17
    
    
    $
    0.14Pro forma
    
    $
    0.11
    
    
    $
    0.08
    
    
    $
    0.17
    
    
    $
    0.13
  Use of Estimates
 Reclassifications
 Recent Accounting Pronouncements
   10




---



##### Table of Contents



Note 3  Earnings Per Share
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Weighted average shares outstanding  basic
    
    
    36,937,648
    
    
    
    36,846,319
    
    
    
    36,899,620
    
    
    
    36,843,938Issuance of shares from stock options exercisable
    
    
    2,543,013
    
    
    
    2,777,147
    
    
    
    2,543,013
    
    
    
    2,777,147Repurchase of shares from stock options proceeds
    
    
    (546,986
    )
    
    
    (687,864
    )
    
    
    (568,127
    )
    
    
    (715,515
    )Weighted average shares outstanding  diluted
    
    
    38,933,675
    
    
    
    38,935,602
    
    
    
    38,874,506
    
    
    
    38,905,570
 11




---



##### Table of Contents



Note 4 Notes Receivable
   Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Balance, beginning of period
    
    $
    246,687
    
    
    $
    240,192
    
    
    $
    248,972
    
    
    $
    241,751Sales
    
    
    32,511
    
    
    
    33,684
    
    
    
    58,505
    
    
    
    60,477Collections
    
    
    (16,566
    )
    
    
    (15,361
    )
    
    
    (32,717
    )
    
    
    (30,010
    )Receivables charged off
    
    
    (3,639
    )
    
    
    (1,316
    )
    
    
    (7,749
    )
    
    
    (6,819
    )Sold notes receivable
    
    
    
    
    
    
    (4,525
    )
    
    
    (8,018
    )
    
    
    (12,725
    )Balance, end of period
    
    $
    258,993
    
    
    $
    252,674
    
    
    $
    258,993
    
    
    $
    252,674
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Balance, beginning of period
    
    $
    52,741
    
    
    $
    48,565
    
    
    $
    52,506
    
    
    $
    48,372Provision for credit losses
    
    
    6,534
    
    
    
    7,432
    
    
    
    11,808
    
    
    
    13,832Receivables charged off
    
    
    (3,639
    )
    
    
    (1,316
    )
    
    
    (7,749
    )
    
    
    (6,819
    )Allowance related to notes sold
    
    
    
    
    
    
    (371
    )
    
    
    (929
    )
    
    
    (1,075
    )Balance, end of period
    
    $
    55,636
    
    
    $
    54,310
    
    
    $
    55,636
    
    
    $
    54,310
  Note 5  Debt
  June 30,
    
    December 31,2005
    
    2004$55.9 million loan agreement, which contains certain financial
covenants, due March 2007, principal and interest payable from the
proceeds obtained on customer notes receivable pledged as collateral for
the note (the loan agreement is limited to a $44.6 million revolver with
an interest rate of LIBOR plus 3% with a 6% floor, revolving through
March 2006, and a $11.3 million term loan with an interest rate of 8%)
    
    $
    33,834
    
    
    $
    37,514$11.3 million term loan with an interest rate of 8%, due in March 2007
    
    
    
    
    
    
    9,991$55.1 million loan agreement, which contains certain financial
covenants, due March 2007, principal and interest payable from the
proceeds obtained on customer notes receivable pledged as collateral for
the note (the loan agreement is limited to a $44.1 million revolver with
an interest rate of LIBOR plus 3% with a 6% floor, revolving through
March 2006, and a $11.0 million term loan with an interest rate of 8%)
    
    
    33,769
    
    
    
    37,039$11.0 million term loan with an interest rate of 8%, due in March 2007
    
    
    
    
    
    
    9,852$7.9 million loan agreement, which contains certain financial covenants,
due March 2007, principal and interest payable from the proceeds
obtained on customer notes receivable pledged as collateral for the note
(the loan agreement is limited to a $6.2
million revolver with an interest rate of Prime plus 3% with a 6% floor,
revolving through March 2006, and a $1.7 million term
loan with an interest rate of 8%)
    
    
    5,057
    
    
    
    5,250
 12




---



##### Table of Contents



June 30,
    
    December 31,2005
    
    2004$1.7 million term loan with an interest rate of 8%, due in March 2007
    
    
    
    
    
    
    1,415$66.4 million conduit loan, due March 2014, principal and interest
payable from the proceeds obtained on customer notes receivable pledged
as collateral for the note, at an interest rate of 7.035%
    
    
    43,980
    
    
    
    50,299$26.3 million conduit loan, due September 2011, principal and interest
payable from the proceeds obtained on customer notes receivable pledged
as collateral for the note, at an interest rate of 7.9%
    
    
    24,602
    
    
    
    $40.4 million loan agreement, which contains certain financial
covenants, due March 2009, principal and interest payable from the
proceeds obtained on customer notes receivable pledged as collateral for
the note (the loan agreement is limited to a $25 million revolver with
an interest rate of the higher of Prime or Federal Funds plus 2.75% with
a 6% floor, revolving through March 2006)
    
    
    17,725
    
    
    
    18,689$50 million revolving loan agreement, which contains certain financial
covenants, revolving through and due April 2008, principal and interest
payable from the proceeds obtained on customer notes receivable pledged
as collateral for the note, at an interest rate of LIBOR plus 4.25%
    
    
    4,864
    
    
    
    $70 million loan agreement, capacity reduced by amounts outstanding
under the $10 million inventory loan agreement and the $9 million
supplemental revolving loan agreement, which contains certain financial
covenants, due February 2006, principal and interest payable from the
proceeds obtained on customer notes receivable pledged as collateral for
the note, at an interest rate of LIBOR plus 2.65% with a 6.0% floor
(additional draws are no longer available under this facility)
    
    
    
    
    
    
    9,080$9 million supplemental revolving loan agreement, which contains certain
financial covenants, due March 2007, principal and interest payable from
the proceeds obtained on customer notes receivable pledged as collateral
for the note, at an interest rate of LIBOR plus 2.67% with a 6% floor
    
    
    
    
    
    
    5,735$10 million revolving loan agreement, which contains certain financial
covenants, revolving through March 2006, due March 2009, collateralized
by either notes receivable or inventory, interest payable monthly, at an
interest rate of the higher of Prime plus 2% or Federal Funds plus 4.75%
with a 6.0% floor
    
    
    9,500
    
    
    
    10,000$10 million inventory loan agreement, which contains certain financial
covenants, revolving through March 2007, due March 2009, interest
payable monthly, at an interest rate of LIBOR plus 3.25%
    
    
    10,000
    
    
    
    10,000$8 million inventory loan agreement, which contains certain financial
covenants, revolving through March 2007, due March 2009, interest
payable monthly, at an interest rate of Prime plus 3% with a 6% floor
(the loan agreement is limited to $6 million)
    
    
    
    
    
    
    6,000$5 million inventory term loan agreement, which contains certain
financial covenants, due March 2007, interest payable monthly, at an
interest rate of Prime plus 3% with a 6% floor
    
    
    4,445
    
    
    
    $15 million inventory loan agreement, which contains certain financial
covenants, revolving through and due April 2008, interest payable
monthly, at an interest rate of Prime plus 3%
    
    
    8,500
    
    
    
    Various notes, due from January 2006 through January 2010, collateralized
by various assets with interest rates ranging from 2.1% to 12.4%
    
    
    5,341
    
    
    
    7,122Total notes payable
    
    
    201,617
    
    
    
    217,986Capital lease obligations
    
    
    163
    
    
    
    324Total notes payable and capital lease obligations
    
    
    201,780
    
    
    
    218,3108.0% senior subordinated notes, due 2010, interest payable semiannually
on April 1 and October 1, guaranteed by all of the Companys present and
future domestic restricted subsidiaries
    
    
    24,671
    
    
    
    24,6716.0% senior subordinated notes, due 2007, interest payable semiannually
on April 1 and October 1, guaranteed by all of the Companys present and
future domestic restricted subsidiaries
    
    
    3,796
    
    
    
    3,796101/2% senior subordinated notes, subordinate to the 6.0% senior
subordinated notes above, due 2008, interest payable semiannually on
April 1 and October 1, guaranteed by all of the Companys present and
future domestic restricted subsidiaries
    
    
    2,146
    
    
    
    2,146Interest on the 6.0% senior subordinated notes, due 2007, and the 8.0%
senior subordinated notes, due 2010, interest payable semiannually
through October 2007 on April 1 and October 1, guaranteed by all of the
Companys present and future domestic restricted subsidiaries
    
    
    3,416
    
    
    
    4,270Total senior subordinated notes
    
    
    34,029
    
    
    
    34,883Total
    
    $
    235,809
    
    
    $
    253,193
   13




---



##### Table of Contents



Note 6  Subsidiary Guarantees
   June 30,
    
    December 31,2005
    
    2004Other assets
    
    $
    2
    
    
    $
    2Total assets
    
    $
    2
    
    
    $
    2Investment by parent (includes equity and amounts due to parent)
    
    $
    2
    
    
    $
    2Total liabilities and equity
    
    $
    2
    
    
    $
    2
 Note 7 Discontinued Operations
  June 30,
    
    December 31,2005
    
    2004Cash
    
    $
    
    
    
    $
    841Amount due from affiliates
    
    
    
    
    
    
    150Land, equipment, buildings, and utilities, net
    
    
    
    
    
    
    11,912Prepaid and other assets
    
    
    
    
    
    
    55Total assets
    
    $
    
    
    
    $
    12,958Accounts payable
    
    $
    
    
    
    $
    70Total liabilities
    
    $
    
    
    
    $
    70
   14




---



##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004REVENUE:Other income
    
    $
    
    
    
    $
    731
    
    
    $
    438
    
    
    $
    1,358COSTS AND OPERATING EXPENSES:Other expense
    
    
    
    
    
    
    357
    
    
    
    278
    
    
    
    660Depreciation and amortization
    
    
    
    
    
    
    213
    
    
    
    
    
    
    
    408Interest expense
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Total costs and operating expenses
    
    
    
    
    
    
    571
    
    
    
    278
    
    
    
    1,069Income from discontinued operations
    
    
    
    
    
    
    160
    
    
    
    160
    
    
    
    289Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    (32
    )
    
    
    Net income from discontinued operations
    
    $
    
    
    
    $
    160
    
    
    $
    128
    
    
    $
    289
 Note 8 Commitments and Contingencies
 Holiday Hills Condominium Association, Inc. et al v. Silverleaf Resorts, Inc. et al
 Ozark Mountain Condominium Association, Inc. et al v. Silverleaf Resorts, Inc.,
 15




---



##### Table of Contents



Note 9  Subsequent Events
  
   16




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
   Results of Operations
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004As a percentage of total revenues:Vacation Interval sales
    
    
    75.7
    %
    
    
    77.1
    %
    
    
    73.8
    %
    
    
    76.3
    %Sampler sales
    
    
    1.0
    %
    
    
    1.0
    %
    
    
    1.2
    %
    
    
    1.0
    %Total sales
    
    
    76.7
    %
    
    
    78.1
    %
    
    
    75.0
    %
    
    
    77.3
    %Interest income
    
    
    20.5
    %
    
    
    19.3
    %
    
    
    21.8
    %
    
    
    20.1
    %Management fee income
    
    
    0.9
    %
    
    
    0.6
    %
    
    
    1.0
    %
    
    
    0.7
    %Gain on sale of notes receivable
    
    
    0.0
    %
    
    
    0.3
    %
    
    
    0.7
    %
    
    
    0.6
    %Other income
    
    
    1.9
    %
    
    
    1.7
    %
    
    
    1.5
    %
    
    
    1.3
    %Total revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %As a percentage of Vacation Interval sales:Cost of Vacation Interval sales
    
    
    16.1
    %
    
    
    19.6
    %
    
    
    15.9
    %
    
    
    19.3
    %Provision for uncollectible notes
    
    
    17.5
    %
    
    
    20.0
    %
    
    
    17.5
    %
    
    
    20.0
    %As a percentage of total sales:Sales and marketing
    
    
    48.0
    %
    
    
    49.7
    %
    
    
    51.5
    %
    
    
    50.2
    %As a percentage of total revenues:Operating, general and administrative
    
    
    14.4
    %
    
    
    13.8
    %
    
    
    15.1
    %
    
    
    14.2
    %Depreciation and amortization
    
    
    1.5
    %
    
    
    1.8
    %
    
    
    1.7
    %
    
    
    2.0
    %As a percentage of interest income:Interest expense and lender fees
    
    
    42.4
    %
    
    
    46.2
    %
    
    
    43.6
    %
    
    
    47.1
    %
 17




---



##### Table of Contents



Results of Operations for the Three Months Ended June 30, 2005 and 2004
 Revenues
   Three Months Ended June 30, 2005
    
    Three Months Ended June 30, 2004Average
    
    
    
    
    
    
    
    
    
    Average$ Sales
    
    Intervals
    
    Price
    
    $ Sales
    
    Intervals
    
    PriceInterval Sales to New Customers
    
    $
    16,033
    
    
    
    1,314
    
    
    $
    12,201
    
    
    $
    18,440
    
    
    
    1,581
    
    
    $
    11,663Upgrade Interval Sales to Existing Customers
    
    
    8,959
    
    
    
    1,023
    
    
    
    8,757
    
    
    
    7,239
    
    
    
    1,102
    
    
    
    6,569Additional Interval Sales to Existing Customers
    
    
    12,342
    
    
    
    1,309
    
    
    
    9,429
    
    
    
    11,465
    
    
    
    1,369
    
    
    
    8,375Total
    
    $
    37,334
    
    
    
    
    
    
    
    
    
    
    $
    37,144
       Cost of Sales
  18




---



##### Table of Contents



Sales and Marketing
   Provision for Uncollectible Notes
  Operating, General and Administrative
  Depreciation and Amortization
  Interest Expense and Lender Fees
  Income before Provision for Income Taxes and Discontinued Operations
 19




---



##### Table of Contents



Provision for Income Taxes
  Net Income from Continuing Operations
  Income from Discontinued Operations
  Net Income
  Results of Operations for the Six Months Ended June 30, 2005 and 2004
 Revenues
   Six Months Ended June 30, 2005
    
    Six Months Ended June 30, 2004Average
    
    
    
    
    
    
    
    
    
    Average$ Sales
    
    Intervals
    
    Price
    
    $ Sales
    
    Intervals
    
    PriceInterval Sales to New Customers
    
    $
    31,042
    
    
    
    2,594
    
    
    $
    11,967
    
    
    $
    33,345
    
    
    
    2,983
    
    
    $
    11,178Upgrade Interval Sales to Existing Customers
    
    
    13,918
    
    
    
    1,673
    
    
    
    8,319
    
    
    
    16,915
    
    
    
    2,430
    
    
    
    6,961Additional Interval Sales to Existing Customers
    
    
    22,511
    
    
    
    2,502
    
    
    
    8,997
    
    
    
    18,871
    
    
    
    2,249
    
    
    
    8,391Total
    
    $
    67,471
    
    
    
    
    
    
    
    
    
    
    $
    69,131
   20




---



##### Table of Contents



Cost of Sales
  Sales and Marketing
   Provision for Uncollectible Notes
  21




---



##### Table of Contents



Operating, General and Administrative
  Depreciation and Amortization
  Interest Expense and Lender Fees
  Income before Provision for Income Taxes and Discontinued Operations
  Provision for Income Taxes
  Net Income from Continuing Operations
  Income from Discontinued Operations
  22




---



##### Table of Contents



Net Income
  Liquidity and Capital Resources
 Sources of Cash.
  Uses of Cash.
    23




---



##### Table of Contents



Off-Balance-Sheet Arrangements.
  Taxes.
   24




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
   Credit Risk
   Interest Rate Risk 
 Availability of Funding Sources 
 Geographic Concentration 
 25




---



##### Table of Contents



Item 4. Controls and Procedures
   
 PART II: OTHER INFORMATION
 
 Item 1. Legal Proceedings
 Holiday Hills Condominium Association, Inc. et al v. Silverleaf Resorts, Inc. et al
 Ozark Mountain Condominium Association, Inc. et al v. Silverleaf Resorts, Inc.,
  26




---



##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders
   Nominee
    
    For
    
    WithheldJ. Richard Budd, III.
    
    36,526,281
    
    76,888James B. Francis, Jr.
    
    36,527,381
    
    75,788Herbert B. Hirsch
    
    36,527,381
    
    75,788Robert E. Mead
    
    36,520,031
    
    83,138Rebecca Janet Whitmore
    
    36,526,281
    
    76,888
  For
    
    Against
    
    Abstain28,236,384
    
    942,429
    
    5,235
  For
    
    Against
    
    Abstain36,478,280
    
    120,188
    
    4,701
 
 Item 5. Other Information
  
 Item 6. Exhibits and Reports on Form 8-K
 (a)
    
    Exhibits filed herewith.
 10.1
    
    
    Amendment No. 1 to Second Amended and Restated Revolving Credit Agreement dated as of
July 1, 2005 between the Registrant and Sovereign Bank.10.2
    
    
    Amendment No. 1 to Inventory and Receivables Revolving Credit Agreement dated
as of July 1, 2005 between the Registrant and Sovereign Bank.31.1
    
    
    Certification of CEO Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of CFO Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of CEO Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of CFO Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
 (b)
    
    Reports on Form 8-K
  27




---



##### Table of Contents



SIGNATURES
  Dated: August 12, 2005
    
    By:
    
    /s/ ROBERT E. MEADRobert E. Mead
      Chairman of the Board and
      Chief Executive OfficerDated: August 12, 2005
    
    By:
    
    /s/ HARRY J. WHITE, JR.Harry J. White, Jr.
      Chief Financial Officer
 28




---



##### Table of Contents



INDEX TO EXHIBITS
 Exhibit No.
    
    Description10.1
    
    Amendment No. 1 to Second Amended and Restated Revolving Credit Agreement dated as of July 1,
2005 between the Registrant and Sovereign Bank.10.2
    
    Amendment No. 1 to Inventory and Receivables Revolving Credit Agreement dated as of July 1,
2005 between the Registrant and Sovereign Bank.31.1
    
    Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of CEO Pursuant to Section 906 of the
Sarbanes-Oxley Act of 200232.2
    
    Certification of CFO Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
 29