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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (7248)	5/20/1999 11:21:00 PM
From: James Clarke	Read Replies (2) \| Respond to of 78476

From the SVR 10-K. Most of the company's assets are these receivables. Then they also have a bunch of inventories. I didn't get far enough to understand how a time share resort can book inventories. Sounds strange to me. I would think this would be a business with a lot of fixed assets, i.e. real estate. I'd be real careful doing the straight net-net calculation on this puppy. Just a suspicion based on very little work, but something doesn't look right here. I'll wait for Mike to clear this up. <<As part of the Vacation Interval sales process, the Company offers potential purchasers financing of up to 90% of the purchase price over a seven to ten year period. The Company has historically financed its operations by borrowing from third-party lending institutions at an advance rate of up to 70% of eligible customer receivables. At December 31, 1998, the Company had a portfolio of approximately 36,075 customer promissory notes totaling approximately $196.9 million with an average yield of 14.2% per annum, which compares favorably to the Company's weighted average cost of borrowings of 9.6% per annum. At December 31, 1998, approximately $8.8 million in principal, or 4.5% of the Company's loans to Silverleaf Owners, were 61 to 120 days past due, and approximately $17.8 million in principal, or 9.0% of the Company's loans to Silverleaf Owners,were more than 120 days past due. The Company provides for uncollectible notes by reserving an amount which management believes is sufficient to cover anticipated losses from customer defaults.>> Yikes. Wouldn't want to be near this one when the economy turns sour. JJC

To: Paul Senior who wrote (7248)	5/20/1999 11:26:00 PM
From: Grommit	Read Replies (1) \| Respond to of 78476

Silverleaf Resorts, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (in thousands, except share and per share amounts) (unaudited) 3-31-99 12-31-98 -------------- ----------------- ASSETS Cash and equivalents $ 13,240 $ 11,355 Restricted cash 873 873 Notes receivable, net 198,082 173,959 Amounts due from affiliates 5,036 4,115 Inventories 82,708 71,694 Land, equipment, buildings, and utilities, net 40,490 34,025 Prepaid and other assets 14,794 16,899 ----------- ----------- Total Assets $ 355,223 $ 312,920 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Accounts payable and accrued expenses $ 14,813 $ 8,144 Unearned revenues 4,138 4,082 Deferred and current income taxes, net 24,039 25,660 Notes payable and capital lease obligations 90,458 58,108 Senior subordinated notes 75,000 75,000 ----------- ----------- Total Liabilities $ 208,448 $ 170,994 ----------- ----------- SHAREHOLDERS' EQUITY Total Shareholders' Equity $ 146,775 $ 141,926 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 355,223 $ 312,920 =========== =========== Weighted average number of diluted shares outstanding 12,889,417 11,537,446 (1) In reading the annual report it sounds like they finance the notes receivable on a recourse basis. Anything over 60 days are not eligible as collateral and the company "must repay". Reserve has decreased over past 2 years to 12% of sales. (2) Would that lower the net receivable, raise cash and the liability not shown on bal sheet? (3) All industry observers mention that default loss risk is quite low because defaulters cannot drive away with or trash the asset. They go back into inventory. (4) Equity of over $11 per share. (5) From prior posting -- 4.5% of the loans 61 to 120 days past due, and 9.0% more than 120 days past due. 13.5% with a reserve of 12%. (6) Risk on a default is that -- 10% down and a few payments do not cover the high variable costs of marketing and sales. (7) Sunterra's financing is non-recourse, so no off bal sheet risks with that company. I think.

To: Paul Senior who wrote (7248)	5/21/1999 5:17:00 PM
From: Allen Furlan	Respond to of 78476

Paul I posted on National Auto Credit( NAKD) last year and would like to bring up the idea to you and the thread once again. This is a situation where an investor has to evaluate a possible reasonable reward with a definable risk. The company is a former NYSE listed stock that has been under an audit review for almost a year. After de-listing and going to the BB the company was able to generate sufficient cash to pacify its lenders. Then out of the blue came a IRS tax refund that was sufficient to essentially pay off its creditors. The audit is still ongoing and the issue is what is the level of reserves required to set aside for claims against the company from a discontinued car rental operation. The company was self insured and sold the business to AVIS about 4 years ago. Apparently the nitty gritty of sorting out a myriad of claims in many states is a difficult and time consuming task for the auditors. Two days ago the company announced the appointment of an excellent choice for CEO(former GE Finance Exec) and the stock has risen from below 1 to 1.19. I dont believe a person of his caliber would take a job with a seriously flawed business prospect, The company continues to originate loans and has a work force of 350 or so. There will be an EDGAR filing on the new ceo next week and I will anxious to review that document. My opinion only,but I think the reward could be a 3 dollar stock this year and the risk could be a 50 cent stock(no less than zero). I have a medium size position but may add more if the EDGAR filing indicates a reasonable stock option incentive for the new CEO.