SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] - Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly period ended December 30, 2001
or
[_] - Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-19292
BLUEGREEN(R) CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 03-0300793
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4960 Conference Way North, Suite 100, Boca Raton, Florida 33431
(Address of principal executive offices) (Zip Code)
(561) 912-8000
(Registrant's telephone number, including area code)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
As of February 11, 2002, there were 27,058,950 shares of Common Stock, $.01 par
value per share, issued, 2,755,300 treasury shares and 24,303,650 shares
outstanding.
BLUEGREEN(R) CORPORATION
Index to Quarterly Report on Form 10-Q
Part I - Financial Information (unaudited)
Item 1. Financial Statements Page
----
Condensed Consolidated Balance Sheets at
April 1, 2001 and December 30, 2001 .......................... 3
Condensed Consolidated Statements of Operations - Three Months
Ended December 31, 2000 and December 30, 2001 ................ 4
Condensed Consolidated Statements of Income - Nine Months
Ended December 31, 2000 and December 30, 2001 ................ 5
Condensed Consolidated Statements of Cash Flows - Nine Months
Ended December 31, 2000 and December 30, 2001 ................ 6
Notes to Condensed Consolidated Financial Statements .............. 8
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition ................ 18
Item 3. Quantitative and Qualitative
Disclosures About Market Risk ................................ 30
Part II - Other Information
Item 1. Legal Proceedings ................................................. 30
Item 2. Changes in Securities ............................................. 30
Item 3. Defaults Upon Senior Securities ................................... 30
Item 4. Submission of Matters to a Vote of Security Holders ............... 30
Item 5. Other Information ................................................. 31
Item 6. Exhibits and Reports on Form 8-K .................................. 31
Signatures................................................................... 32
Note: The term "Bluegreen" is registered in the U.S. Patent and Trademark office
by Bluegreen Corporation.
The term "Big Cedar" is registered in the U.S. Patent and Trademark office
by Big Cedar L.L.C.
2.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BLUEGREEN CORPORATION
Condensed Consolidated Balance Sheets
(amounts in thousands, except per share data)
April 1, December 30,
2001 2001
---- ----
(Note) (unaudited)
ASSETS
Cash and cash equivalents (including restricted cash of
approximately $22.4 million and $24.5 million at
April 1, 2001 and December 30, 2001, respectively) ............... $ 40,016 $ 38,477
Contracts receivable, net ........................................... 18,507 11,826
Notes receivable, net ............................................... 74,796 72,222
Prepaid expenses .................................................... 12,593 12,019
Inventory, net ...................................................... 193,634 194,025
Retained interests in notes receivable sold ......................... 19,898 34,248
Property and equipment, net ......................................... 41,462 48,242
Other assets ........................................................ 18,775 21,629
--------- ---------
Total assets ..................................................... $ 419,681 $ 432,688
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable .................................................... $ 6,245 $ 3,937
Accrued liabilities and other ....................................... 31,171 36,107
Deferred income ..................................................... 5,314 4,627
Deferred income taxes ............................................... 19,329 26,680
Receivable-backed notes payable ..................................... 8,702 15,742
Lines-of-credit and notes payable ................................... 58,918 43,651
10.50% senior secured notes payable ................................. 110,000 110,000
8.00% convertible subordinated notes payable to related
parties ......................................................... 6,000 6,000
8.25% convertible subordinated debentures ........................... 34,371 34,371
--------- ---------
Total liabilities ................................................ 280,050 281,115
Contingencies
Minority interest ................................................... 2,841 2,948
Shareholders' Equity
Preferred stock, $.01 par value, 1,000 shares authorized;
none issued ...................................................... -- --
Common stock, $.01 par value, 90,000 shares authorized;
26,946 and 27,059 shares issued, respectively, at April 1,
2001 and December 30, 2001 ....................................... 269 271
Additional paid-in capital .......................................... 122,564 122,734
Treasury stock, 2,756 common shares at cost at both
April 1, 2001 and December 30, 2001 ............................. (12,885) (12,885)
Other comprehensive income .......................................... 1,471 2,451
Retained earnings ................................................... 25,371 36,054
--------- ---------
Total shareholders' equity ....................................... 136,790 148,625
--------- ---------
Total liabilities and shareholders' equity ....................... $ 419,681 $ 432,688
========= =========
Note: The condensed consolidated balance sheet at April 1, 2001 has been derived
from the audited consolidated financial statements at that date but does not
include all of the information and footnotes required by accounting principles
generally accepted in the United States for complete financial statements.
See accompanying notes to condensed consolidated financial statements.
3.
BLUEGREEN CORPORATION
Condensed Consolidated Statements of Operations
(amounts in thousands, except per share data)
(unaudited)
Three Months Ended
December 31, December 30,
2000 2001
-------- --------
Revenues:
Sales ........................................................... $ 45,485 $ 55,285
Other resort and golf operations revenue ........................ 5,522 5,607
Interest income ................................................. 3,959 3,776
Gain on sale of notes receivable ................................ 2,266 2,185
Other income, net ............................................... 14 --
-------- --------
57,246 66,853
Costs and expenses:
Cost of sales ................................................... 16,050 19,984
Cost of other resort and golf operations ........................ 6,280 5,949
Selling, general and administrative expenses .................... 32,412 33,939
Interest expense ................................................ 4,000 3,032
Provision for loan losses ....................................... 900 788
Other expense, net .............................................. -- 83
-------- --------
59,642 63,775
-------- --------
Income (loss) before income taxes .................................. (2,396) 3,078
Provision (benefit) for income taxes ............................... (922) 1,185
Minority interest in loss of consolidated subsidiary ............... (113) (79)
-------- --------
Net income (loss) .................................................. $ (1,361) $ 1,972
======== ========
Income (loss) per common share:
Basic .............................................................. $ (0.06) $ 0.08
======== ========
Diluted ............................................................ $ (0.06) $ 0.08
======== ========
Weighted average number of common and common equivalent shares:
Basic .............................................................. 24,193 24,297
======== ========
Diluted ............................................................ 24,193 25,838
======== ========
See accompanying notes to condensed consolidated financial statements.
4.
BLUEGREEN CORPORATION
Condensed Consolidated Statements of Income
(amounts in thousands, except per share data)
(unaudited)
Nine Months Ended
December 31, December 30,
2000 2001
---- ----
Revenues:
Sales .............................................................. $ 174,249 $ 184,703
Other resort and golf operations revenue ........................... 19,351 19,184
Interest income .................................................... 13,534 11,855
Gain on sale of notes receivable ................................... 2,266 4,214
Other income, net .................................................. 136 --
--------- ---------
209,536 219,956
Costs and expenses:
Cost of sales ...................................................... 58,829 64,133
Cost of other resort and golf operations ........................... 19,494 17,844
Selling, general and administrative expenses ....................... 111,739 106,345
Interest expense ................................................... 11,265 10,129
Provision for loan losses .......................................... 3,391 3,683
Other expense, net ................................................. -- 277
--------- ---------
204,718 202,411
--------- ---------
Income before income taxes ............................................ 4,818 17,545
Provision for income taxes ............................................ 1,855 6,755
Minority interest in income (loss) of consolidated subsidiaries ....... (689) 107
--------- ---------
Net income ............................................................ $ 3,652 $ 10,683
========= =========
Income per common share:
Basic ................................................................. $ 0.15 $ 0.44
========= =========
Diluted ............................................................... $ 0.15 $ 0.41
========= =========
Weighted average number of common and common equivalent shares:
Basic ................................................................. 24,259 24,240
========= =========
Diluted ............................................................... 25,872 29,968
========= =========
See accompanying notes to condensed consolidated financial statements.
5.
BLUEGREEN CORPORATION
Condensed Consolidated Statements of Cash Flows
(amounts in thousands)
(unaudited)
Nine Months Ended
December 31, December 30,
2000 2001
---- ----
Operating activities:
Net income .................................................................. $ 3,652 $ 10,683
Adjustments to reconcile net income to net cash provided by operating
activities:
Minority interest in income (loss) of consolidated subsidiaries .......... (689) 107
Depreciation and amortization ............................................ 4,548 6,082
Amortization of discount on note payable ................................. 550 310
Gain on sale of notes receivable ......................................... (2,266) (4,214)
Loss on sale of property and equipment ................................... 18 127
Provision for loan losses ................................................ 3,391 3,683
Provision for deferred income taxes ...................................... 1,855 6,755
Interest accretion on retained interests in notes receivable sold ........ (1,780) (2,615)
Proceeds from sales of notes receivable .................................. 58,743 58,158
Proceeds from borrowings collateralized by notes
receivable ........................................................... 33,651 22,734
Payments on borrowings collateralized by notes receivable ................ (33,590) (15,227)
Change in operating assets and liabilities:
Contracts receivable ...................................................... (5,227) 6,681
Notes receivable .......................................................... (71,018) (76,520)
Inventory ................................................................. 19,170 3,958
Other assets .............................................................. (516) (3,021)
Accounts payable, accrued liabilities and other ........................... (873) 1,941
-------- --------
Net cash provided by operating activities ........................................ 9,619 19,622
-------- --------
Investing activities:
Purchases of property and equipment ........................................... (8,171) (10,446)
Sales of property and equipment ............................................... 34 34
Cash received from retained interests in notes receivable sold ................ 3,626 3,552
Long-term prepayment to Bass Pro, Inc. ........................................ (9,000) --
Acquisition of minority interest .............................................. (250) --
Investment in note receivable ................................................. (4,711) (1,685)
Principal payments received on investment in note receivable .................. -- 4,643
-------- --------
Net cash used by investing activities ............................................ (18,472) (3,902)
-------- --------
Financing activities:
Proceeds from borrowings under line-of-credit facilities and
other notes payable ......................................................... 11,121 46,548
Payments under line-of-credit facilities and other notes payable .............. (24,115) (62,478)
Payment of debt issuance costs ................................................ (1,068) (1,485)
Payments for treasury stock ................................................... (572) --
Proceeds from exercise of employee and director stock options ................. 28 156
-------- --------
Net cash used by financing activities ............................................ (14,606) (17,259)
-------- --------
Net decrease in cash and cash equivalents ........................................ (23,459) (1,539)
Cash and cash equivalents at beginning of period ................................. 65,526 40,016
-------- --------
Cash and cash equivalents at end of period ....................................... 42,067 38,477
Restricted cash and cash equivalents at end of period ............................ (19,862) (24,456)
-------- --------
Unrestricted cash and cash equivalents at end of period .......................... $ 22,205 $ 14,021
======== ========
See accompanying notes to condensed consolidated financial statements.
6.
BLUEGREEN CORPORATION
Condensed Consolidated Statements of Cash Flows - - continued
(amounts in thousands)
(unaudited)
Nine Months Ended
December 31, December 30,
2000 2001
---- ----
Supplemental schedule of non-cash operating, investing
and financing activities
Retained interests in notes receivable sold ............. $ 6,170 $13,694
======= =======
Inventory acquired through financing .................... $ 5,807 $ --
======= =======
Property and equipment acquired through financing ....... $ 891 $ 353
======= =======
Inventory acquired through foreclosure or
deedback in lieu of foreclosure ........................ $ 5,167 $ 4,349
======= =======
Contribution of land inventory by minority
interest ............................................ $ 3,230 $ --
======= =======
See accompanying notes to condensed consolidated financial statements.
7.
BLUEGREEN CORPORATION
Notes to Condensed Consolidated Financial Statements
December 30, 2001
(unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
Bluegreen Corporation (the "Company") have been prepared in accordance with
accounting principles generally accepted in the United States for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements.
The financial information furnished herein reflects all adjustments consisting
of normal recurring accruals that, in the opinion of management, are necessary
for a fair presentation of the results for the interim periods. The results of
operations for the three- and nine- month periods ended December 30, 2001 are
not necessarily indicative of the results to be expected for the fiscal year
ending March 31, 2002. For further information, refer to the consolidated
financial statements and notes thereto included in the "Company's Annual Report
to Shareholders for the fiscal year ended April 1, 2001.
Organization
The Company is a leading marketer of vacation and residential lifestyle choices
through its resort and residential land and golf businesses, which are located
predominantly in the southeastern, southwestern and midwestern United States.
The Company's resort business (the "Resorts Division") acquires, develops and
markets Timeshare Interests in resorts generally located in popular,
high-volume, "drive-to" vacation destinations. "Timeshare Interests" are of two
types: one which entitles the fixed-week buyer to a fully-furnished vacation
residence for an annual one-week period in perpetuity and the second which
entitles the buyer of the points-based Bluegreen Vacation Club(TM) product to an
annual allotment of "points" in perpetuity (supported by an underlying deeded
fixed timeshare week being held in trust for the buyer). "Points" may be
exchanged by the buyer in various increments for lodging for varying lengths of
time in fully-furnished vacation residences at the Company's participating
resorts. The Company currently develops, markets and sells Timeshare Interests
in twelve resorts located in the United States and Aruba. The Company also
markets and sells Timeshare Interests in its resorts at two off-site sales
locations. The Company's residential land and golf business (the "Residential
Land and Golf Division") acquires, develops and subdivides property and markets
the subdivided residential homesites to retail customers seeking to build a home
in a high quality residential setting, in some cases on properties featuring a
golf course and related amenities. During the nine months ended December 30,
2001, sales generated by the Company's Resorts Division and Residential Land and
Golf Division comprised approximately 60% and 40%, respectively, of the
Company's total sales. The Company's other resort and golf operations revenues
are generated from resort property management services, resort title services,
resort amenity operations, hotel operations and daily-fee golf course
operations. The Company also generates significant interest income by providing
financing to individual purchasers of Timeshare Interests and, to a nominal
extent, land sold by the Residential Land and Golf Division.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the
Company, all of its wholly-owned subsidiaries and entities in which the Company
holds a controlling financial interest. All significant intercompany balances
and transactions are eliminated.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the condensed consolidated financial statements and accompanying notes. Actual
results could differ from those estimates.
Earnings (Loss) Per Common Share
Basic earnings (loss) per common share is computed by dividing net income (loss)
by the weighted average number of common shares outstanding. Diluted earnings
(loss) per common share is computed in the same manner as basic earnings (loss)
per share, but also gives effect to all dilutive stock options using the
treasury stock method and includes an adjustment, if dilutive, to both net
income and shares outstanding as if the Company's 8.00% convertible subordinated
notes payable and 8.25% convertible subordinated debentures were converted into
common stock at the beginning of the periods presented.
8.
The following table sets forth the computation of basic and diluted earnings
(loss) per share:
(in thousands, except per share data) Three Months Ended Nine Months Ended
December 31, December 30, December 31, December 30,
2000 2001 2000 2001
------------------------------------------------------------
Basic earnings (loss) per share - numerator:
Net income (loss) ......................................... $ (1,361) $ 1,972 $ 3,652 $ 10,683
============================================================
Diluted earnings (loss) per share - numerator:
Net income (loss) - basic ................................. $ (1,361) $ 1,972 $ 3,652 $ 10,683
Effect of dilutive securities (net of tax effects) ........ -- 74 221 1,529
------------------------------------------------------------
Net income (loss) - diluted ............................... $ (1,361) $ 2,046 $ 3,873 $ 12,212
============================================================
Denominator:
Denominator for basic earnings (loss) per share -
weighted-average shares .................................. 24,193 24,297 24,259 24,240
Effect of dilutive securities:
Stock options .......................................... -- 10 82 26
Convertible securities ................................. -- 1,531 1,531 5,702
------------------------------------------------------------
Dilutive potential common shares ............................. -- 1,541 1,613 5,728
------------------------------------------------------------
Denominator for diluted earnings (loss) per share -
adjusted weighted-average shares and assumed
conversions .............................................. 24,193 25,838 25,872 29,968
============================================================
Basic earnings (loss) per common share ....................... $ (0.06) $ 0.08 $ 0.15 $ 0.44
============================================================
Diluted earnings (loss) per common share ..................... $ (0.06) $ 0.08 $ 0.15 $ 0.41
============================================================
Sales of Notes Receivable and Related Retained Interests
When the Company sells notes receivable on a non-recourse basis through either a
timeshare receivables purchase facility or a REMIC transaction (land notes
receivable), it retains a residual interest in the future cash flows from the
portfolio sold. Gain or loss on sale of the receivables depends in part on the
previous carrying amount of the notes receivable sold, allocated between the
notes sold and the retained interests based on their relative fair value at the
date of transfer.
The Company's retained interests in the portfolios of notes receivable sold are
carried at fair market value as available-for-sale investments. Unrealized
holding gains or losses on retained interests in notes receivable sold are
included in shareholders' equity, net of income taxes. The Company typically
will revalue its retained interests in notes receivable sold on a semi-annual
basis. Declines in the fair value of the retained interests that are determined
to be other than temporary are charged to operations.
To obtain fair values on the retained interests (both at the point of the
related receivable sale and periodically thereafter), the Company generally
estimates fair value based on the present value of future expected cash flows
estimated using management's best estimates of the key assumptions--default
rates, rates of prepayment, loss severity and discount rates commensurate with
the risks involved.
Recent Accounting Pronouncements
In 1997, the Accounting Standards Executive Committee ("AcSEC") of the American
Institute of Certified Public Accountants ("AICPA") began a project to address
the accounting for timeshare transactions. The proposed guidance is currently in
the drafting stage of the promulgation process and no formal exposure draft has
been issued to date; therefore, the Company is unable to assess the possible
impact of this proposed guidance. Currently, it appears that a final
pronouncement on timeshare transactions would not be effective until the
Company's fiscal year 2005.
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 is effective for the Company's
fiscal year 2002 (beginning April 2, 2001). The adoption of SFAS No. 133 had no
impact on the Company's results of operations and financial position during the
three- and nine-month periods ended December 30, 2001.
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 140
changes certain provisions of SFAS No. 125. SFAS No. 140 is effective
9.
for transfers of financial assets occurring after March 31, 2001. The adoption
of SFAS No. 140 had no impact on the Company's results of operations and
financial position during the three- and nine-month periods ended December 30,
2001.
In September 2000, the Emerging Issues Task Force ("EITF") of the FASB issued
EITF Issue No. 99-20, "Recognition of Interest Income and Impairment on
Purchased and Retained Beneficial Interests in Securitized Financial Assets."
The Issue discusses how a transferor that retains an interest in securitized
financial assets should assess impairment and account for interest income. EITF
Issue No. 99-20 became effective for the Company on April 2, 2001. The adoption
of the Issue had no impact on the Company's results of operations and financial
position during the three- and nine-month periods ended December 30, 2001.
In June 2001, the FASB issued SFAS No. 141, "Business Combinations", and SFAS
No. 142, "Accounting for Goodwill and Other Intangible Assets", effective for
the Company's fiscal year 2003. Under the new rules, goodwill and intangible
assets deemed to have indefinite lives will no longer be amortized but will be
subject to annual impairment tests in accordance with SFAS No. 142. Other
intangible assets will continue to be amortized over their useful lives. The
Company will apply the new rules on accounting for goodwill and other intangible
assets beginning in the first quarter of fiscal 2003 (beginning April 1, 2002).
Application of the nonamortization provisions of the Statement is expected to
result in an increase to net income of $72,000 (less than $0.01 per share) per
year. During fiscal 2003, the Company will perform the first of the required
impairment tests of goodwill as of April 1, 2002 and has not yet determined what
the effect of these tests will be on the earnings and financial position of the
Company.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations". This statement requires entities to record the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred. This statement is effective for the Company's fiscal year 2004. The
new statement is not expected to have a material impact on the results of
operation or financial position of the Company.
In December 2001, the FASB issued SFAS No. 144 on asset impairment that is
applicable to the Company's fiscal 2003 financial statements. The FASB's new
rules on asset impairment supersede FASB Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
and provide a single accounting model for long-lived assets to be disposed of.
The new statement is not expected to have a material impact on the results of
operation or financial position of the Company.
Comprehensive Income (Loss)
The following table discloses the components of the Company's comprehensive
income (loss) for the periods presented:
(in thousands)
Three Months Ended Nine Months Ended
December 31, December 30, December 31, December 30,
2000 2001 2000 2001
----------------------------------------------------------------
Net income (loss) .................................. $(1,361) $ 1,972 $ 3,652 $10,683
Net unrealized gains on investments
available-for-sale, net of income taxes ....... 422 980 422 980
------- ------- ------- -------
Total comprehensive income (loss) .................. $ (939) $ 2,952 $ 4,074 $11,663
======= ======= ======= =======
Reclassifications
Certain prior period amounts have been reclassified to conform to the current
period presentation.
2. Notes Receivable
In October 2000, the Company entered into a timeshare receivables purchase
facility (the "Former Purchase Facility") with two financial institutions. On
June 29, 2001, a subsidiary of the Company sold $17.6 million of timeshare
receivables under the Former Purchase Facility. Gross proceeds from the sale of
these receivables were approximately $16.8 million, of which $10.8 million was
used to pay down the Company's timeshare receivables warehouse facility loan
(see Note 4). The Company recognized a $978,000 gain on the sale of the
receivables and recorded a $2.4 million retained interest in notes receivable
sold and a $133,000 servicing asset, which is included in Other Assets on the
condensed consolidated balance sheet.
10.
In June 2001, the Company executed agreements for a new timeshare receivables
purchase facility (the "Purchase Facility") with a financial institution acting
as the initial purchaser (the "Initial Purchaser"). At the end of the facility
term (August 13, 2002), the Initial Purchaser will attempt to securitize and
sell the receivable portfolio that it purchased. The Purchase Facility utilizes
an owner's trust structure, pursuant to which the Company sells receivables to a
special purpose finance subsidiary of the Company (the "Subsidiary") and the
Subsidiary sells the receivables to an owners' trust without recourse to the
Company or the Subsidiary except for breaches of customary representations and
warranties at the time of sale. Pursuant to the agreements that constitute the
Purchase Facility (collectively, the "Purchase Facility Agreements"), the
Subsidiary may receive $75 million of cumulative purchase price (as more fully
described below) on sales of timeshare receivables to the owner's trust on a
revolving basis, as the principal balance of receivables sold amortizes, in
transactions through August 13, 2002 (subject to certain conditions as more
fully described in the Purchase Facility Agreements). The Purchase Facility has
detailed requirements with respect to the eligibility of receivables for
purchase and fundings under the Purchase Facility are subject to certain
conditions precedent. Under the Purchase Facility, a variable purchase price
expected to approximate 85.00% of the principal balance of the receivables sold,
subject to certain terms and conditions, is paid at closing in cash. The balance
of the purchase price will be deferred until such time as the Initial Purchaser
has received a specified return and all servicing, custodial, agent and similar
fees and expenses have been paid. The Initial Purchaser shall earn a return
equal to the rate equivalent to its borrowing cost (based on then applicable
commercial paper rates) plus 1.05%, subject to the use of alternate return rates
in certain circumstances. In addition, the Initial Purchaser will receive a
0.25% facility fee during the term of the facility. The Purchase Facility also
provides for the sale of land notes receivable, under modified terms.
The Purchasers' obligation to purchase under the Purchase Facility will
terminate upon the occurrence of specified events. The Company acts as servicer
under the Purchase Facility for a fee. The Purchase Facility Agreement includes
various conditions to purchase, covenants, trigger events and other provisions
customary for a transaction of this type.
On September 6, 2001, a subsidiary of the Company sold $17.0 million of
timeshare receivables under the Purchase Facility. Gross proceeds from the sale
of these receivables were approximately $14.5 million. The Company recognized a
$1.1 million gain on the sale of the receivables and recorded a $3.8 million
retained interest in notes receivable sold and a $139,000 servicing asset, which
is included in Other Assets on the condensed consolidated balance sheet.
On October 23, 2001, a subsidiary of the Company sold $18.3 million of timeshare
receivables under the Purchase Facility. Gross proceeds from the sale of these
receivables were approximately $15.6 million. The Company recognized a $1.3
million gain on the sale of the receivables and recorded a $4.1 million retained
interest in notes receivable sold and a $186,000 servicing asset, which is
included in Other Assets on the condensed consolidated balance sheet.
On December 19, 2001, a subsidiary of the Company sold $14.5 million of
timeshare receivables under the Purchase Facility. Gross proceeds from the sale
of these receivables were approximately $12.3 million. The Company recognized a
$919,000 gain on the sale of the receivables and recorded a $3.3 million
retained interest in notes receivable sold and a $147,000 servicing asset, which
is included in Other Assets on the condensed consolidated balance sheet.
The following assumptions were used to measure the initial fair value of the
retained interests for the above sales under both the Former Purchase Facility
and the Purchase Facility: Prepayment rates ranging from 17% to 14% per annum as
the portfolios mature; loss severity rate of 45%; default rates ranging from 6%
to 1% per annum as the portfolios mature; and a discount rate of 14%.
In May 2001, Napa Partners, LLC, a real estate company in Napa, California,
repaid the remaining $4.6 million balance of its loan from the Company and all
accrued interest.
On June 26, 2001, the Company loaned $1.7 million to the Casa Grande Resort
Cooperative Association I (the "Association"), the property owners' association
controlled by the timeshare owners at the La Cabana Beach and Racquet Club
resort in Aruba. This unsecured loan bears interest at Prime plus 1%, payable in
semi-annual installments commencing on December 26, 2001, and matures on June
26, 2003.
3. Inventory
On June 8, 2001, the Company acquired approximately 3,000 Timeshare Interests at
an existing timeshare resort in Surfside, Florida. The purchase price for the
inventory was $7.1 million, which was paid in cash. Renovations of the property
are estimated at $5.5 million and the Company expects to complete the initial
renovations during the second quarter of fiscal 2003. The Company anticipates
that sales of this new inventory will commence during Fiscal 2003. The resort
will be known as the Solara Surfside Resort(TM).
11.
4. Receivable-backed Notes Payable
During the nine months ended December 30, 2001, the Company borrowed an
aggregate $22.2 million pursuant to a timeshare receivables financing warehouse
facility with a financial institution (the "Loan"). The Loan was collateralized
by timeshare receivables and is due, as extended, in February 2002. The Loan
bears interest at LIBOR plus 3.5%, which is paid on a weekly basis. The Company
has repaid approximately $12.9 million of the Loan by using cash generated from
principal and interest payments on the underlying loans and proceeds from the
sale of the underlying receivables (see Note 2).
5. Line-of-Credit Borrowings
In May 2001, the Company borrowed $10 million under its $10 million, unsecured
line-of-credit with a bank (which expired on December 31, 2001) and repaid said
loan in August 2001. The borrowing bore interest at LIBOR plus 2%. The proceeds
were used to fund the acquisition of Timeshare Interests in Surfside, Florida
(see Note 3) and for operations.
During September, October and December 2001, the Company borrowed in each
instance $10 million under the aforementioned line-of-credit and repaid said
loans in September, November and December 2001, respectively. The proceeds from
each draw were used for operations.
On December 19, 2001, the Company obtained a new $12.5 million unsecured
line-of-credit with the same bank. Amounts borrowed under the line bear interest
at LIBOR plus 2%. Interest is due monthly and all principal amounts are due on
December 31, 2002. The Company is allowed to borrow under the line-of-credit
only in amounts less than the remaining availability under its current, active
timeshare receivables purchase facility plus availability under certain
receivable warehouse facilities, less any outstanding letters of credit. Based
on the availability on these receivable facilities as of December 30, 2001, the
Company would have been able to borrow the full amount on the line-of-credit.
The line-of-credit agreement contains certain covenants and conditions typical
of arrangements of this type. As of December 30, 2001, there was no amount
outstanding under the line; however, the Company borrowed $10 million under the
line in February 2002 for use in operations.
6. Supplemental Guarantor Financial Information
On April 1, 1998, the Company consummated a private placement offering (the
"Offering") of $110 million in aggregate principal amount of 10.5% senior
secured notes due April 1, 2008 (the "Notes"). None of the assets of Bluegreen
Corporation secure its obligations under the Notes, and the Notes are
effectively subordinated to secured indebtedness of the Company to any third
party to the extent of assets serving as security therefore. The Notes are
unconditionally guaranteed, jointly and severally, by each of the Company's
subsidiaries (the "Subsidiary Guarantors"), with the exception of Bluegreen/Big
Cedar Vacations, LLC(TM), Bluegreen Properties N.V. (TM), Resort Title Agency,
Inc. (TM), any special purpose finance subsidiary, any subsidiary which is
formed and continues to operate for the limited purpose of holding a real estate
license and acting as a broker, and certain other subsidiaries which have
individually less then $50,000 of assets (collectively, "Non-Guarantor
Subsidiaries"). Supplemental financial information for Bluegreen Corporation,
its combined Non-Guarantor Subsidiaries and its combined Subsidiary Guarantors
is presented below:
12.
CONDENSED CONSOLIDATING BALANCE SHEET AT DECEMBER 30, 2001
(UNAUDITED)
(IN THOUSANDS) COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
ASSETS
Cash and cash equivalents ......................... $ 10,969 $ 19,036 $ 8,472 $ -- $ 38,477
Contracts receivable, net ......................... -- 349 11,477 -- 11,826
Intercompany receivable ........................... 120,295 -- -- (120,295) --
Notes receivable, net ............................. 1,763 6,604 63,855 -- 72,222
Inventory, net .................................... -- 18,434 175,591 -- 194,025
Retained interests in notes receivable
sold ............................................. -- 34,248 -- -- 34,248
Investments in subsidiaries ....................... 7,730 -- 3,230 (10,960) --
Property and equipment, net ....................... 9,670 1,770 36,802 -- 48,242
Other assets ...................................... 9,189 2,618 21,841 -- 33,648
--------- --------- --------- --------- ---------
Total assets ................................... $ 159,616 $ 83,059 $ 321,268 $(131,255) $ 432,688
========= ========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable, deferred income,
accrued liabilities and other .................... $ 10,013 $ 22,223 $ 12,435 $ -- $ 44,671
Intercompany payable .............................. -- 7,309 112,986 (120,295) --
Deferred income taxes ............................. (18,470) 21,571 23,579 -- 26,680
Lines-of-credit and receivable-backed
notes payable .................................... 3,373 6,489 49,531 -- 59,393
10.50% senior secured notes payable ............... 110,000 -- -- -- 110,000
8.00% convertible subordinated notes
payable to related parties .................... 6,000 -- -- -- 6,000
8.25% convertible subordinated
debentures ...................................... 34,371 -- -- -- 34,371
--------- --------- --------- --------- ---------
Total liabilities .............................. 145,287 57,592 198,531 (120,295) 281,115
Minority interest ................................. -- -- -- 2,948 2,948
Total shareholders' equity ............................ 14,329 25,467 122,737 (13,908) 148,625
--------- --------- --------- --------- ---------
Total liabilities and shareholders' equity ............ $ 159,616 $ 83,059 $ 321,268 $(131,255) $ 432,688
========= ========= ========= ========= =========
13.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, 2000
------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
REVENUES
Sales ................................................... $ (360) $ 2,682 $ 43,163 $ -- $ 45,485
Management fee revenue .................................. 5,054 -- -- (5,054) --
Other resort and golf operations revenue ................ -- 903 4,619 -- 5,522
Interest income ......................................... 198 1,004 2,757 -- 3,959
Gain on sale of notes receivable ........................ -- 2,266 -- -- 2,266
Other income (expense) .................................. (7) 14 7 -- 14
-------- -------- -------- -------- --------
4,885 6,869 50,546 (5,054) 57,246
COST AND EXPENSES
Cost of sales ........................................... -- 737 15,313 -- 16,050
Cost of other resort and golf operations ................ -- 449 5,831 -- 6,280
Management fees ......................................... -- -- 5,054 (5,054) --
Selling, general and administrative expenses ............ 6,901 1,847 23,664 -- 32,412
Interest expense ........................................ 2,311 232 1,457 -- 4,000
Provision for loan losses ............................... -- (64) 964 -- 900
-------- -------- -------- -------- --------
9,212 3,201 52,283 (5,054) 59,642
-------- -------- -------- -------- --------
Income (loss) before income taxes ....................... (4,327) 3,668 (1,737) -- (2,396)
Provision (benefit) for income taxes .................... (1,666) 1,556 (812) -- (922)
Minority interest in loss of consolidated
subsidiary .......................................... -- -- -- (113) (113)
-------- -------- -------- -------- --------
Net income (loss) ....................................... $ (2,661) $ 2,112 $ (925) $ 113 $ (1,361)
======== ======== ======== ======== ========
THREE MONTHS ENDED DECEMBER 31, 2001
------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
REVENUES
Sales ................................................... $ -- $ 3,863 $ 51,422 $ -- $ 55,285
Management fees ......................................... 6,054 -- -- (6,054) --
Other resort and golf operations revenue ................ -- 780 4,827 -- 5,607
Interest income ......................................... 115 1,335 2,326 -- 3,776
Gain on sale of notes receivable ......................... -- 2,185 -- -- 2,185
-------- -------- -------- -------- --------
6,169 8,163 58,575 (6,054) 66,853
COST AND EXPENSES
Cost of sales ........................................... -- 1,169 18,815 -- 19,984
Cost of other resort and golf operations ................ -- 360 5,589 -- 5,949
Management fees ......................................... -- 196 5,858 (6,054) --
Selling, general and administrative expenses ............ 4,928 2,764 26,247 -- 33,939
Interest expense ........................................ 2,079 120 833 -- 3,032
Provision for loan losses ............................... -- 40 748 -- 788
Other expense (income) ................................... 10 851 (778) -- 83
-------- -------- -------- -------- --------
7,017 5,500 57,312 (6,054) 63,775
-------- -------- -------- -------- --------
Income (loss) before income taxes ....................... (848) 2,663 1,263 -- 3,078
Provision (benefit) for income taxes .................... (326) 1,126 385 -- 1,185
Minority interest in loss of consolidated
subsidiary .......................................... -- -- -- (79) (79)
-------- -------- -------- -------- --------
Net income (loss) ....................................... $ (522) $ 1,537 $ 878 $ 79 $ 1,972
======== ======== ======== ======== ========
14.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED DECEMBER 31, 2000
-----------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
REVENUES
Sales ................................................ $ -- $ 6,154 $ 168,095 $ -- $ 174,249
Management fee revenue ............................... 19,416 -- -- (19,416) --
Other resort and golf operations revenue ............. -- 2,811 16,540 -- 19,351
Interest income ...................................... 976 3,036 9,522 -- 13,534
Gain on sale of notes receivable ..................... -- 2,266 -- -- 2,266
Other income (expense) ............................... (5) 57 84 -- 136
--------- --------- --------- --------- ---------
20,387 14,324 194,241 (19,416) 209,536
COST AND EXPENSES
Cost of sales ........................................ -- 1,725 57,104 -- 58,829
Cost of other resort and golf operations ............. -- 1,171 18,323 -- 19,494
Management fees ...................................... -- -- 19,416 (19,416) --
Selling, general and administrative expenses ......... 19,580 5,274 86,885 -- 111,739
Interest expense ..................................... 6,193 697 4,375 -- 11,265
Provision for loan losses ............................ -- 58 3,333 -- 3,391
--------- --------- --------- --------- ---------
25,773 8,925 189,436 (19,416) 204,718
--------- --------- --------- --------- ---------
Income (loss) before income taxes .................... (5,386) 5,399 4,805 -- 4,818
Provision (benefit) for income taxes ................. (2,074) 2,342 1,587 -- 1,855
Minority interest in loss of consolidated
subsidiary ....................................... -- -- -- (689) (689)
--------- --------- --------- --------- ---------
Net income (loss) .................................... $ (3,312) $ 3,057 $ 3,218 $ 689 $ 3,652
========= ========= ========= ========= =========
NINE MONTHS ENDED DECEMBER 31, 2001
-----------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
REVENUES
Sales ................................................ $ -- $ 14,540 $ 170,163 $ -- $ 184,703
Management fees ...................................... 20,293 -- -- (20,293) --
Other resort and golf operations revenue ............. -- 2,600 16,584 -- 19,184
Interest income ...................................... 477 3,446 7,932 -- 11,855
Gain on sale of notes receivable ..................... -- 4,214 -- -- 4,214
--------- --------- --------- --------- ---------
20,770 24,800 194,679 (20,293) 219,956
COST AND EXPENSES
Cost of sales ........................................ -- 4,603 59,530 -- 64,133
Cost of other resort and golf operations ............. -- 1,152 16,692 -- 17,844
Management fees ...................................... -- 825 19,468 (20,293) --
Selling, general and administrative expenses ......... 18,461 8,620 79,264 -- 106,345
Interest expense ..................................... 6,252 460 3,417 -- 10,129
Provision for loan losses ............................ -- 140 3,543 -- 3,683
Other expense (income) ............................... 10 775 (508) -- 277
--------- --------- --------- --------- ---------
24,723 16,575 181,406 (20,293) 202,411
--------- --------- --------- --------- ---------
Income (loss) before income taxes .................... (3,953) 8,225 13,273 -- 17,545
Provision (benefit) for income taxes ................. (1,522) 3,226 5,051 -- 6,755
Minority interest in income of consolidated
subsidiary ....................................... -- -- -- 107 107
--------- --------- --------- --------- ---------
Net income (loss) .................................... $ (2,431) $ 4,999 $ 8,222 $ (107) $ 10,683
========= ========= ========= ========= =========
15.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED DECEMBER 31, 2000
-----------------------------------
COMBINED
NON- COMBINED
BLUEGREEN GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
Operating activities:
Net cash provided (used) by operating activities ........... $(20,001) $ 4,724 $ 24,896 $ -- $ 9,619
-------- -------- -------- -------- --------
Investing activities:
Acquisition of minority interest ........................ -- -- (250) -- (250)
Investment in joint venture ............................. -- -- (323) 323 --
Purchases of property and equipment ..................... (563) (571) (7,037) -- (8,171)
Loan to Napa Partners ................................... (4,711) -- -- -- (4,711)
Sales of property and equipment ......................... -- -- 34 -- 34
Cash received from investments in securities ............ -- 3,626 -- -- 3,626
Long-term prepayment to Bass Pro, Inc. .................. -- -- (9,000) -- (9,000)
-------- -------- -------- -------- --------
Net cash provided (used) by investing activities ........... (5,274) 3,055 (16,576) 323 (18,472)
-------- -------- -------- -------- --------
Financing activities:
Proceeds from borrowings under line-of-credit
facilities and other notes payable .................... 6,500 -- 4,621 -- 11,121
Payments under line-of-credit facilities and
other notes payable ................................... (5,192) (5,483) (13,440) -- (24,115)
Payment of debt issuance costs ........................... 7 (959) (116) -- (1,068)
Payments for treasury stock .............................. (572) -- -- -- (572)
Proceeds from issuance of membership interest in
joint venture ......................................... -- 323 -- (323) --
Proceeds from the exercise of employee and
director stock options ................................ 28 -- -- -- 28
-------- -------- -------- -------- --------
Net cash provided (used) by financing activities ........... 771 (6,119) (8,935) (323) (14,606)
-------- -------- -------- -------- --------
Net increase (decrease) in cash and cash
equivalents .......................................... (24,504) 1,660 (615) -- (23,459)
Cash and cash equivalents at beginning of period ........... 43,093 12,458 9,975 -- 65,526
-------- -------- -------- -------- --------
Cash and cash equivalents at end of period ................. 18,589 14,118 9,360 -- 42,067
Restricted cash and cash equivalents at end of period ...... (121) (12,895) (6,846) -- (19,862)
-------- -------- -------- -------- --------
Unrestricted cash and cash equivalents at end of
period ............................................... $ 18,468 $ 1,223 $ 2,514 $ -- $ 22,205
======== ======== ======== ======== ========
NINE MONTHS ENDED DECEMBER 31, 2001
-----------------------------------
COMBINED
NON- COMBINED
BLUEGREEN GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS CONSOLIDATED
Operating activities:
Net cash provided (used) by operating activities ........................ $ (3,095) $ 3,556 $ 19,161 $ 19,622
-------- -------- -------- --------
Investing activities:
Purchases of property and equipment .................................. (1,999) (1,104) (7,343) (10,446)
Sales of property and equipment ...................................... 3 -- 31 34
Cash received from retained interests in notes receivable sold ....... -- 3,552 -- 3,552
Investment in note receivable ........................................ (1,685) -- -- (1,685)
Principal payments received on investment in note receivable ......... 4,643 -- -- 4,643
-------- -------- -------- --------
Net cash provided (used) by investing activities ........................ 962 2,448 (7,312) (3,902)
-------- -------- -------- --------
Financing activities:
Proceeds from borrowings under line-of-credit facilities and other
notes payable ...................................................... 40,375 -- 6,173 46,548
Payments under line-of-credit facilities and other notes payable ..... (40,626) (2,979) (18,873) (62,478)
Payment of debt issuance costs ....................................... (93) (1,114) (278) (1,485)
Proceeds from the exercise of employee and director stock options .... 156 -- -- 156
-------- -------- -------- --------
Net cash used by financing activities ................................... (188) (4,093) (12,978) (17,259)
-------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents .................... (2,321) 1,911 (1,129) (1,539)
Cash and cash equivalents at beginning of period ........................ 13,290 17,125 9,601 40,016
-------- -------- -------- --------
Cash and cash equivalents at end of period .............................. 10,969 19,036 8,472 38,477
Restricted cash and cash equivalents at end of period ................... -- (17,459) (6,997) (24,456)
-------- -------- -------- --------
Unrestricted cash and cash equivalents at end of period ................. $ 10,969 $ 1,577 $ 1,475 $ 14,021
======== ======== ======== ========
16.
7. Contingencies
In the ordinary course of its business, the Company from time to time becomes
subject to claims or proceedings relating to the purchase, subdivision, sale
and/or financing of real estate. Additionally, from time to time, the Company
becomes involved in disputes with existing and former employees. The Company
believes that substantially all of the claims and proceedings are incidental to
its business.
In addition to its other ordinary course litigation, the Company became a
defendant in two proceedings during fiscal 1999. First, an action was filed
against the Company on December 15, 1998. The plaintiff has asserted that the
Company is in breach of its obligations under, and has made certain
misrepresentations in connection with, a contract under which the Company acted
as marketing agent for the sale of undeveloped property owned by the plaintiff.
The plaintiff also alleges fraud, negligence and violation by the Company of an
alleged fiduciary duty owed to plaintiff. Among other things, the plaintiff
alleges that the Company failed to meet certain minimum sales requirements under
the marketing contract and failed to commit sufficient resources to the sale of
the property. The original complaint sought damages in excess of $18 million and
certain other remedies, including punitive damages. Subsequently, based on the
testimony of the plaintiff's expert witnesses, the sought damages were reduced
to approximately $15 million. During fiscal 2001, the court dismissed the
plaintiff's claims related to promissory estoppel, covenant of good faith and
fair dealing, breach of fiduciary duty and negligence. In addition, the court
dismissed the claims alleged by a sister company of the plaintiff. The
dismissals discussed above further reduced the plaintiff's claims for damages to
approximately $8 million, subject to the plaintiff's right of appeal. The
Company is continuing to evaluate this action and its potential impact, if any,
on the Company and accordingly cannot predict the outcome with any degree of
certainty. However, based upon all of the facts presently under consideration of
management, the Company believes that it has substantial defenses to the
allegations in this action and intends to defend this matter vigorously. The
Company does not believe that any likely outcome of this case will have a
material adverse effect on the Company's financial condition or results of
operations.
Second, an action was filed on July 10, 1998 against two subsidiaries of the
Company and various other defendants. The Company itself is not named as a
defendant. The Company's subsidiaries acquired certain real property (the
"Property"). The Property was acquired subject to certain alleged oil and gas
leasehold interests and rights (the "Interests") held by the plaintiffs in the
action (the "Plaintiffs"). The Company's subsidiaries developed the Property and
have resold homesites to numerous customers. The Plaintiffs allege, among other
things, breach of contract, slander of title and that the Company's subsidiaries
and their purchasers have unlawfully trespassed on easements and otherwise
violated and prevented the Plaintiffs from exploiting the Interests. The
Plaintiffs claim damages in excess of $40 million, as well as punitive or
exemplary damages in an amount of at least $50 million and certain other
remedies. During fiscal 2001, the court advised the parties in open court that
the Company's motion for summary judgment was granted, thus dismissing all of
the Plaintiff's claims for damages, subject to the Plaintiffs' right of appeal.
During February 2002, the court documented and entered this aforementioned
motion for summary judgment.
On August 21, 2000, the Company received a Notice of Field Audit Action (the
"Notice") from the State of Wisconsin Department of Revenue (the "DOR") alleging
that two subsidiaries now owned by the Company failed to collect and remit sales
and use taxes to the State of Wisconsin during the period from January 1, 1994
through September 30, 1997 totaling $1.9 million. The majority of the assessment
is based on the subsidiaries not charging sales tax to purchasers of Timeshare
Interests at the Company's Christmas Mountain Village(TM) resort. In addition to
the assessment, the Notice indicated that interest would be charged, but no
penalties would be assessed. As of December 30, 2001, aggregate interest was
approximately $1.4 million. The Company filed a Petition for Redetermination
(the "Petition") on October 19, 2000, and, if the Petition is unsuccessful, the
Company intends to vigorously appeal the assessment. The Company acquired the
subsidiaries that were the subject of the Notice in connection with the
acquisition of RDI Group, Inc. ("RDI") on September 30, 1997. Under the RDI
purchase agreement, the Company has the right to set off payments owed by the
Company to RDI's former stockholders pursuant to a $1.0 million outstanding note
payable balance and to make a claim against such stockholders for $500,000
previously paid for any breach of representations and warranties. The Company
has notified the former stockholders that it intends to exercise these rights to
mitigate any settlement with the DOR in this matter. In addition, the Company
believes that, if necessary, amounts paid to the State of Wisconsin pursuant to
the Notice, if any, may be further funded through collections of sales tax from
the consumers who effected the assessed timeshare sales with RDI without paying
sales tax on their purchases. Based on management's assessment of the Company's
position in the Petition, the Company's right of set off with the former RDI
stockholders and other factors discussed above, management does not believe that
the possible sales tax pursuant to the Notice will have a material adverse
impact on the Company's results of operations or financial position, and
therefore no amounts have been accrued related to this matter.
17.
8. Business Segments
The Company has two reportable business segments. The Resorts Division acquires,
develops and markets Timeshare Interests at the Company's resorts and the
Residential Land and Golf Division acquires large tracts of real estate that are
subdivided, improved (in some cases to include a golf course and related
amenities on the property) and sold, typically on a retail basis.
Required disclosures for the Company's business segments are as follows (in
thousands):
Residential
Resorts Land and Golf Totals
------------------------------------------------
As of and for the three months ended December 31, 2000
Sales $ 28,558 $ 16,927 $ 45,485
Other resort and golf operations revenue 5,055 467 5,522
Depreciation expense 506 238 744
Field operating profit 762 537 1,299
Inventory, net 98,284 93,843 192,127
As of and for the three months ended December 30, 2001
Sales $ 32,272 $ 23,013 $ 55,285
Other resort and golf operations revenue 5,009 598 5,607
Depreciation expense 639 286 925
Field operating profit 1,617 3,841 5,458
Inventory, net 88,726 105,299 194,025
For the nine months ended December 31, 2000
Sales $108,276 $ 65,973 $174,249
Other resort and golf operations revenue 17,870 1,481 19,351
Depreciation expense 1,360 686 2,046
Field operating profit 8,361 9,229 17,590
For the nine months ended December 30, 2001
Sales $110,846 $ 73,857 $184,703
Other resort and golf operations revenue 17,475 1,709 19,184
Depreciation expense 1,820 802 2,622
Field operating profit 14,970 14,209 29,179
Field operating profit for reportable segments reconciled to consolidated income
(loss) before income taxes is as follows (in thousands):
Three Months Ended Nine Months Ended
------------------------------------------------------------------
December 31, December 30, December 31, December 30,
2000 2001 2000 2001
------------------------------------------------------------------
Field operating profit for reportable segments $ 1,299 $ 5,458 $ 17,590 $ 29,179
Interest income 3,959 3,776 13,534 11,855
Gain on sale of notes receivable 2,266 2,185 2,266 4,214
Other income (expense) 14 (83) 136 (277)
Corporate general and administrative expenses (5,034) (4,438) (14,052) (13,614)
Interest expense (4,000) (3,032) (11,265) (10,129)
Provision for loan losses (900) (788) (3,391) (3,683)
-------- -------- -------- --------
Consolidated income (loss) before income taxes $ (2,396) $ 3,078 $ 4,818 $ 17,545
======== ======== ======== ========
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
The Company desires to take advantage of the "safe harbor" provisions of the
Private Securities Reform Act of 1995 (the "Act") and is making the following
statements pursuant to the Act in order to do so. Certain statements herein and
elsewhere in this report and the Company's other filings with the Securities and
Exchange Commission constitute "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended. Such statements may be identified by
forward-looking words such as "may", "intend", "expect", "anticipate",
"believe", "will", "should", "project", "estimate", "plan" or other comparable
terminology. All
18.
statements, trend analyses and other information relative to the market for the
Company's products and trends in the Company's operations or results are
forward-looking statements. Such forward-looking statements are subject to known
and unknown risks and uncertainties, many of which are beyond the Company's
control, that could cause the actual results, performance or achievements of the
Company, or industry trends, to differ materially from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Given these uncertainties, investors are cautioned not to place
undue reliance on such forward-looking statements and no assurance can be given
that the plans, estimates and expectations reflected in such statements will be
achieved. The Company wishes to caution readers that the following important
factors, among others, in some cases have affected, and in the future could
affect, the Company's actual results and could cause the Company's actual
consolidated results to differ materially from those expressed in any
forward-looking statements made by, or on behalf of, the Company:
a) Changes in national, international or regional economic conditions that can
affect the real estate market, which is cyclical in nature and highly
sensitive to such changes, including, among other factors, levels of
employment and discretionary disposable income, consumer confidence,
available financing and interest rates.
b) The imposition of additional compliance costs on the Company as the result
of changes in any environmental, zoning or other laws and regulations that
govern the acquisition, subdivision and sale of real estate and various
aspects of the Company's financing operation or the failure of the Company
to comply with any law or regulation. Also the risks that changes in or the
failure of the Company to comply with laws and regulations governing the
marketing (including telemarketing) of the Company's inventories and
services will adversely impact the Company's ability to make sales in any
of its current or future markets at its current relative marketing cost.
c) Risks associated with a large investment in real estate inventory at any
given time (including risks that real estate inventories will decline in
value due to changing market and economic conditions and that the
development and carrying costs of inventories may exceed those
anticipated).
d) Risks associated with an inability to locate suitable inventory for
acquisition, or with a shortage of available inventory in the Company's
principal markets.
e) Risks associated with delays in bringing the Company's inventories to
market due to, among other things, changes in regulations governing the
Company's operations, adverse weather conditions or changes in the
availability of development financing on terms acceptable to the Company.
f) Changes in applicable usury laws or the availability of interest deductions
or other provisions of federal or state tax law.
g) A decreased willingness on the part of banks to extend direct customer
homesite financing, which could result in the Company receiving less cash
in connection with the sales of real estate and/or lower sales.
h) The inability of the Company to locate external sources of liquidity on
favorable terms to support its operations, acquire, carry and develop land
and timeshare inventories and satisfy its debt and other obligations.
i) The inability of the Company to locate sources of capital on favorable
terms for the pledge and/or sale of land and timeshare notes receivable,
including the inability to consummate or fund securitization transactions.
j) An increase in prepayment rates, delinquency rates or defaults with respect
to Company-originated loans or an increase in the costs related to
reacquiring, carrying and disposing of properties reacquired through
foreclosure or deeds in lieu of foreclosure.
k) Costs to develop inventory for sale and/or selling, general and
administrative expenses materially exceed (i) those anticipated or (ii)
levels necessary in order for the Company to be profitable.
l) An increase or decrease in the number of land or resort properties subject
to percentage-of-completion accounting, which requires deferral of profit
recognition on such projects until development is substantially complete.
m) The failure of the Company to satisfy the covenants contained in the
indentures governing certain of its debt instruments and/or other credit
agreements, which, among other things, place certain restrictions on the
Company's ability to incur debt, incur liens, make investments and pay
dividends.
n) The risk of the Company incurring an unfavorable judgement in any
litigation, and the impact of any related monetary or equity damages.
19.
o) Risks associated with selling Timeshare Interests in foreign countries
including, but not limited to, compliance with legal regulations, labor
relations and vendor relationships.
p) The risk that the Company's sales and marketing techniques are not
successful, and the risk that the Bluegreen Vacation Club(TM) is not
accepted by consumers or imposes limitations on the Company's operations,
or is adversely impacted by legal or other requirements.
q) The risk that any contemplated transactions currently under negotiation
will not close or conditions to funding under existing facilities will not
be satisfied.
r) Risks that the Company's joint ventures will not be as successful as
anticipated and that the Company will be required to make capital
contributions to such ventures in amounts greater than anticipated.
s) Risks that any currently proposed or future changes in accounting
principles will have an adverse impact on the Company.
t) Risks that a short-term or long-term decrease in the amount of vacation
travel, including but not limited to air travel, by American consumers will
have an adverse impact on the Company's timeshare sales.
The Company does not undertake and expressly disclaims any duty to update
or revise forward-looking statements, even if the Company's situation may
change in the future.
General
Real estate markets are cyclical in nature and highly sensitive to changes in
national, regional and international economic conditions, including, among other
factors, levels of employment and discretionary disposable income, consumer
confidence, available financing and interest rates. While a downturn in the
economy in general or in the market for real estate could have a material
adverse effect on the Company, the Company does not believe that current general
economic conditions have materially impacted the Company's financial position or
results of operations as of and for the three- and nine-month periods ended
December 30, 2001.
The Company recognizes revenue on residential land and Timeshare Interest sales
when a minimum of 10% of the sales price has been received in cash, the refund
or rescission period has expired, collectibility of the receivable representing
the remainder of the sales price is reasonably assured and the Company has
completed substantially all of its obligations with respect to any development
relating to the real estate sold. In cases where all development has not been
completed, the Company recognizes income in accordance with the
percentage-of-completion method of accounting. Under this method of income
recognition, income is recognized as work progresses. Measures of progress are
based on the relationship of costs incurred to date to expected total costs. The
Company has been dedicating greater resources to more capital-intensive
residential land and timeshare projects. As development on more of these larger
projects is begun, and based on the Company's strategy to pre-sell projects when
minimal development has been completed, the amount of income deferred under the
percentage-of-completion method of accounting may increase significantly.
Costs associated with the acquisition and development of timeshare resorts and
residential land properties, including carrying costs such as interest and
taxes, are capitalized as inventory and are allocated to cost of real estate
sold as the respective revenues are recognized.
The Company has historically experienced and expects to continue to experience
seasonal fluctuations in its gross revenues and net earnings. This seasonality
may cause significant fluctuations in the quarterly operating results of the
Company, with the majority of the Company's gross revenues and net earnings
historically occurring in the first and second quarters of the fiscal year. As
the Company's timeshare revenues grow as a percentage of total revenues, the
Company believes that the fluctuations in revenues due to seasonality may be
mitigated in part. In addition, other material fluctuations in operating results
may occur due to the timing of development and the Company's use of the
percentage-of-completion method of accounting. Management expects that the
Company will continue to invest in projects that will require substantial
development (with significant capital requirements). There can be no assurances
that historical seasonal trends in quarterly revenues and earnings will continue
or be mitigated by the Company's efforts.
The Company believes that inflation and changing prices have not had a material
impact on its revenues and results of operations during the three- or nine-month
periods ended December 31, 2000 or December 30, 2001, other than to the extent
that the Company continually challenges and has historically increased the sales
prices of its timeshare interests annually. Based on prior history, the Company
does not expect that inflation will have a material impact on the Company's
revenues or
20.
results of operations in the foreseeable future. To the extent inflationary
trends affect short-term interest rates, a portion of the Company's debt service
costs may be affected as well as the interest rate the Company charges on its
new receivables from its customers.
The Company believes that the terrorist attacks on September 11, 2001 in the
United States and subsequent events that have decreased the amount of vacation
air travel by Americans have not, to date, had a material adverse impact on the
Company's sales in its domestic sales offices. With the exception of the La
Cabana Beach and Racquet Club(TM) in Aruba, guests at the Company's Bluegreen
Vacation Club(TM) destination resorts more typically drive, rather than fly, to
these resorts due to the accessibility of the resorts. While there was an
adverse impact on sales at the La Cabana resort in September, based on current
conditions the Company does not believe that there will be a long-term adverse
impact on its sales in Aruba from decreased air travel, partially due to the
fact that a significant portion of Aruba's tourist traffic comes from South
America. There can be no assurances, however, that a long-term decrease in air
travel or increase in anxiety regarding actual or possible future terrorist
attacks would not have a material adverse impact on the Company's results of
operations in some future period.
The Company's real estate operations are managed under two divisions. The
Resorts Division manages the Company's timeshare operations and the Residential
Land and Golf Division acquires large tracts of real estate, which are
subdivided, improved (in some cases to include a golf course on the property)
and sold, typically on a retail basis.
Inventory is carried at the lower of cost, including costs of improvements and
amenities incurred subsequent to acquisition, or fair value, net of costs to
dispose.
A portion of the Company's revenues historically has been and, although no
assurances can be given, is expected to continue to be comprised of gains on
sales of loans. The gains are recorded in the Company's revenues and retained
interests in the portfolio are recorded on its balance sheet at the time of
sale. The amount of gains recorded is based in part on management's estimates of
future prepayment, default and loss severity rates and other considerations in
light of then-current conditions. If actual prepayments with respect to loans
occur more quickly than was projected at the time such loans were sold, as can
occur when interest rates decline, interest would be less than expected and
earnings would be charged in the future when the retained interests are
realized, except for the effect of reduced interest accretion on the Company's
retained interest, which would be recognized each period the retained interests
are held. If actual defaults or other factors discussed above with respect to
loans sold are greater than estimated, charge-offs would exceed previously
estimated amounts and earnings would be charged in the future when the retained
interests are realized. There can be no assurances that the carrying value of
the Company's retained interests in notes receivable sold will be fully realized
or that future loan sales will result in gains. Declines in the fair value of
the retained interests that are determined to be other than temporary are
charged to operations.
Results of Operations
(Dollars in thousands) Residential
Resorts Land and Golf Total
------- ------------- -----
Three Months Ended December 31, 2000
Sales $ 28,558 100% $ 16,927 100% $ 45,485 100%
Cost of sales (6,196) (22) (9,854) (58) (16,050) (35)
-------- -------- --------
Gross profit 22,362 78 7,073 42 29,435 65
Other resort and golf operations revenue 5,055 18 467 3 5,522 12
Cost of resort and golf operations (5,517) (19) (763) (5) (6,280) (14)
Selling and marketing expenses (18,789) (66) (4,324) (26) (23,113) (51)
Field general and administrative expenses (1) (2,349) (8) (1,916) (11) (4,265) (9)
-------- -------- --------
Field operating profit $ 762 3% $ 537 3% $ 1,299 3%
======== ======== ========
Three Months Ended December 30, 2001
Sales $ 32,272 100% $ 23,013 100% $ 55,285 100%
Cost of sales (7,638) (24) (12,346) (54) (19,984) (36)
-------- -------- --------
Gross profit 24,634 76 10,667 46 35,301 64
Other resort and golf operations revenue 5,009 16 598 3 5,607 10
Cost of resort and golf operations (5,091) (16) (858) (4) (5,949) (11)
Selling and marketing expenses (20,341) (63) (4,350) (19) (24,691) (45)
Field general and administrative expenses (1) (2,594) (8) (2,216) (10) (4,810) (9)
-------- -------- --------
Field operating profit $ 1,617 5% $ 3,841 17% $ 5,458 10%
======== ======== ========
21.
(Dollars in thousands) Residential
Resorts Land and Golf Total
------- ------------- -----
Nine Months Ended December 31, 2000
Sales $108,276 100% $65,973 100% $174,249 100%
Cost of sales (23,485) (22) (35,344) (54) (58,829) (34)
-------- -------- --------
Gross profit 84,791 78 30,629 46 115,420 66
Other resort and golf operations revenue 17,870 17 1,481 2 19,351 11
Cost of resort and golf operations (17,235) (16) (2,259) (3) (19,494) (11)
Selling and marketing expenses (68,519) (63) (14,262) (22) (82,781) (48)
Field general and administrative expenses (1) (8,546) (8) (6,360) (10) (14,906) (9)
--------- --------- ---------
Field operating profit $ 8,361 8% $ 9,229 14% $ 17,590 10%
========= ======== =========
Nine Months Ended December 30, 2001
Sales $110,846 100% $73,857 100% $184,703 100%
Cost of sales (25,726) (23) (38,407) (52) (64,133) (35)
-------- -------- --------
Gross profit 85,120 77 35,450 48 120,570 65
Other resort and golf operations revenue 17,475 16 1,709 2 19,184 10
Cost of resort and golf operations (15,646) (14) (2,198) (3) (17,844) (9)
Selling and marketing expenses (64,021) (58) (14,572) (20) (78,593) (43)
Field general and administrative expenses (1) (7,958) (7) (6,180) (8) (14,138) (8)
--------- --------- ---------
Field operating profit $ 14,970 14% $14,209 19% $ 29,179 16%
======== ======= =========
(1) General and administrative expenses attributable to corporate overhead have
been excluded from the tables. Corporate general and administrative
expenses totaled $5.0 million and $4.4 million for the three months ended
December 31, 2000 and December 30, 2001, respectively, and $14.1 million
and $13.6 million for the nine months ended December 31, 2000 and December
30, 2001, respectively.
Sales
Consolidated sales increased 22% from $45.5 million for the three months ended
December 31, 2000 (the "2001 Quarter") to $55.3 million for the three months
ended December 30, 2001 (the "2002 Quarter"). Consolidated sales increased 6%
from $174.2 million for the nine months ended December 31, 2000 (the "2001
Period") to $184.7 million for the nine months ended December 30, 2001 (the
"2002 Period"). Both Resort Division and Residential Land and Golf Division
sales increased during the 2002 Quarter and 2002 Period, as more fully discussed
below.
As of December 30, 2001, approximately $4.6 million in estimated income on sales
of $9.5 million was deferred under percentage-of-completion accounting. At April
1, 2001, approximately $5.3 million in estimated income on sales of $11.5
million was deferred. All such amounts are included on the Condensed
Consolidated Balance Sheets under the caption Deferred Income. The Company
believes that such deferred income reflects its ability to acquire inventory,
provide customers with the assurance that the projects have insurance bonds for
the completion of development and pre-sell to customers prior to expending a
significant portion of the projects' development costs.
Resorts Division. During the 2001 Quarter and the 2002 Quarter, the Resorts
Division contributed $28.6 million or 63% and $32.3 million or 58%,
respectively, of the Company's total consolidated sales. During the 2001 Period
and the 2002 Period, the Resorts Division contributed $108.3 million or 62% and
$110.8 million or 60%, respectively, of the Company's total consolidated sales.
The table set forth below outlines the number of timeshare sales transactions
and the average sales price per sale for the Resorts Division for the periods
indicated, before giving effect to the percentage-of-completion method of
accounting.
Three Months Ended Nine Months Ended
------------------ -----------------
December 31, December 30, December 31, December 30,
2000 2001 2000 2001
---- ---- ---- ----
Number of timeshare sales transactions 3,085 3,134 11,588 10,907
Average sales price per timeshare sale $9,256 $10,921 $9,212 $10,560
Gross margin 78% 76% 78% 77%
The increase in sales during the 2002 Quarter was primarily due to $2.0 million
of sales (which is net of $1.3 million in sales being deferred under the
percentage-of-completion accounting method) at the Big Cedar Wilderness
Club(TM), which is being developed and sold by a 51%-owned, consolidated
subsidiary of the Company. Big Cedar Wilderness Club(TM) started sales in
December 2000, and therefore had only nominal sales in the 2001 Quarter. Sales
at the Company's resort sales offices which were operating throughout both the
2001 Quarter and the 2002 Quarter increased based on a higher average
22.
sales price per transaction due in part to a price increase in fiscal 2002 as
well as the Company's ability to sell higher point-valued inventory through the
Bluegreen Vacation Club(TM).
The increase in sales during the 2002 Period was primarily due to $6.6 million
of sales (which is net of $2.0 million in sales being deferred under the
percentage-of-completion accounting method) at the Big Cedar Wilderness
Club(TM). Big Cedar Wilderness Club(TM) started sales in December 2000, and
therefore had only nominal sales in the 2001 Period. Sales at the Company's
resort sales offices which were operating throughout both the 2001 Period and
the 2002 Period increased based on a higher average sales price per transaction
due in part to a price increase in fiscal 2002 as well as the Company's ability
to sell higher point-valued inventory through the Bluegreen Vacation Club(TM).
These increases were partially offset by the Company closing its offsite sales
office serving the Cleveland, Ohio market in the first quarter of fiscal 2002.
Sales generated by the Cleveland office during the 2001 Quarter and 2001 Period
were approximately $892,000 and $6.3 million, respectively, as compared to $0
and $1.3 million during the 2002 Quarter and 2002 Period, respectively. In
addition, the 2001 Quarter and 2001 Period included $837,000 and $4.4 million,
respectively, of sales from the Company's offsite sales office serving the
Louisville, Kentucky market with no corresponding sales during the 2002 Quarter
and 2002 Period as the Louisville office was closed during fiscal 2001 due to
continued operating losses.
The Resorts Division's gross margin decreased by 2%-points during the 2002
Quarter as compared to the 2001 Quarter and by 1%-point during the 2002 Period
as compared to the 2001 Period. These decreases are due to the relative costs of
the specific resort inventory mix being sold in the respective periods.
The cost of other resort services decreased during both the 2002 Quarter and
2002 Period as compared to the 2001 Quarter and 2001 Period, respectively, due
to lower aggregate maintenance fees and developer subsidies paid by the Company
to support the resort properties in which it holds timeshare interest
inventories. As the Company sells timeshare interests, its relative share of the
cost of maintaining the various resort properties decreases as the Company's
timeshare buyers support more of the properties' upkeep through annual
maintenance fee payments to the property owners' associations that are
financially responsible for operating the resorts.
Selling and marketing expenses for the Resorts Division decreased as a
percentage of sales for the Resorts Division from 66% to 63% during the 2001
Quarter and 2002 Quarter, respectively, and from 63% to 58% during the 2001
Period and 2002 Period, respectively. The decrease is due to the Company
adopting a plan which is intended to improve the efficiencies of its marketing
programs within the Resorts Division, including but not limited to fully
implementing its marketing agreement with Bass Pro, Inc., a privately-held
retailer of fishing, marine, hunting, camping and sports gear; improving and
increasing the sales tour generation from the Company's in-house, referral and
owner marketing programs; the centralization of most resort marketing operations
at the Company's headquarters; the continued centralization of the Company's
telemarketing operations in South Florida; the implementation of a centralized
resort marketing customer relationship management system; continuing to monitor
and, if necessary, eliminate marginally performing sales operations; and
implementing a Company-wide initiative to reduce costs and increase efficiency
in all areas. There can be no assurances that the Company's efforts in this
regard will be successful or that selling and marketing expenses for the Resorts
Division will not increase as a percentage of sales. Another contributing factor
for the decrease in these expenses during the 2002 Period was that the selling
and marketing expenses for the previously closed Louisville and Cleveland sales
offices were 87% and 74%, respectively, of that office's respective sales during
the 2001 Period.
Field general and administrative expenses for the Resorts Division decreased 7%
during the 2002 Period as compared to the 2001 Period primarily due to closing
of the Louisville and Cleveland offices and the Company's cost control efforts.
Residential Land and Golf Division. During the 2001 Quarter and the 2002
Quarter, residential land and golf sales contributed $16.9 million or 37% and
$23.0 million or 42%, respectively, of the Company's total consolidated sales.
During the 2001 Period and the 2002 Period, residential land and golf sales
contributed $66.0 million or 38% and $73.9 million or 40%, respectively, of the
Company's total consolidated sales. As noted below, the number of homesites sold
decreased during the 2002 Quarter and 2002 Period as compared to the 2001
Quarter and 2001 Period, respectively. However, the increase in the Residential
Land and Golf Division's sales was primarily due to the impact of the
percentage-of-completion method of accounting and adjustments for sales in the
rescission period, which had an aggregate positive $5.9 million impact on sales
in the 2002 Quarter as opposed to a negative $1.2 million impact on sales in the
2001 Quarter and an aggregate positive $8.3 million impact on sales in the 2002
Period as opposed to a positive $2.6 million impact on sales in the 2001 Period.
The timing of the recognition of sales under the percentage-of-completion method
of accounting coincides with the periods when development takes place on the
Company's projects as opposed to when sales are made or sales proceeds are
received.
23.
The table set forth below outlines the number of homesites sold and the average
sales price per homesite for the Residential Land and Golf Division for the
periods indicated, before giving effect to the percentage-of-completion method
of accounting, rescission period adjustments and bulk sales.
Three Months Ended Nine Months Ended
------------------ -----------------
December 31, December 30, December 31, December 30,
2000 2001 2000 2001
---- ---- ---- ----
Number of homesites sold 322 274 1,150 1,092
Average sales price per homesite $54,084 $62,615 $53,939 $60,028
Gross margin 42% 46% 46% 48%
The aggregate number of homesites sold decreased during the 2002 Quarter as
compared to the 2001 Quarter and during the 2002 Period as compared to the 2001
Period due primarily to certain projects in the Company's Arizona region
approaching sell-out and therefore generating fewer sales and due to projects in
the Texas Hill Country area which sold out during fiscal 2001 and therefore
generated no sales during the 2002 Quarter. Also, the Company generated
decreased sales at two of its larger projects, specifically the Lake Ridge at
Joe Pool Lake(TM) project near Dallas, Texas and the Winding River
Plantation(TM) project in Bolivia, North Carolina. These decreases were
partially offset by sales generated at The Preserve at Jordan Lake(TM) near
Chapel Hill, North Carolina, which opened in December 2000. The project will
surround an 18-hole, Davis Love III signature championship golf course. The
Preserve at Jordan Lake(TM) is the Company's latest addition to its Bluegreen
Golf portfolio of properties and it generated sales (before the impact of
percentage-of-completion accounting) of $4.5 million and $16.4 million during
the 2002 Quarter and 2002 Period, respectively.
Average sales price per homesite increased during the 2002 Quarter and 2002
Period as compared to the comparable prior year periods, primarily due to sales
at The Preserve at Jordan Lake(TM), which averaged approximately $91,900 per
homesite during the 2002 Period, and sales at The Waterstone(TM) project in
Boerne, Texas, which began sales during the latter part of fiscal 2001 and had
an average sales price per homesite sold of approximately $97,000 during the
2002 Period.
Selling and marketing expenses for the Residential Land & Golf Division
decreased as a percentage of sales during the 2002 Quarter and 2002 Period as
compared to the 2001 Quarter and 2001 Period, respectively, due to lower selling
and marketing costs experienced at The Preserve at Jordan Lake(TM) project due
to the demand for the homesites in this community and the efficiencies of
marketing such a project near the burgeoning Raleigh-Durham market.
Interest Income
Interest income was $4.0 million and $3.8 million for the 2001 Quarter and 2002
Quarter, respectively and was $13.5 million and $11.9 million for the 2001
Period and 2002 Period, respectively. The Company's interest income is earned
from its notes receivable, securities retained pursuant to sales of notes
receivable (including REMIC transactions) and cash and cash equivalents. The
decrease in the 2002 Period is due to the Company carrying a higher average note
receivable balance, which generated higher interest income, during the 2001
Period as the Company did not sell any timeshare notes receivable through its
timeshare receivables purchase facility until the third quarter of fiscal 2001.
Gain on Sale of Notes Receivable
The Company recognized gains on the sale of timeshare notes receivables of $2.3
million, $2.2 million, $2.3 million and $4.2 million during the 2001 Quarter,
2002 Quarter, 2001 Period and 2002 Period, respectively. The Company sold $67.4
million and $62.7 million of timeshare notes receivable during the 2002 Period
and 2001 Period, respectively. Another factor that increased the gain on sale of
theses receivables during the 2002 Period as compared to the 2001 Period was the
decrease in commercial paper rates during the respective periods. The return
earned by the parties who purchased these approximately 15% fixed-face rate
receivables is based on variable commercial paper rates, so as interest rates
decrease the available interest spread increases which in turn increases the
value of the Company's retained interest in the receivable pools sold and hence
increases the Company's gain on sale. See Note 2 of Notes to Condensed
Consolidated Financial Statements for additional discussion of the Company's
note receivable sales.
Corporate General and Administrative Expenses
The Company's corporate general and administrative ("G&A") expenses consist
primarily of expenses incurred to administer the various support functions at
the Company's corporate headquarters, including accounting, human resources,
information technology, mergers and acquisitions, mortgage servicing, treasury,
etc. Corporate G&A totaled $5.0 million and $4.4 million during the 2001 Quarter
and 2002 Quarter, respectively, and $14.1 million and $13.6 million during the
2001 Period and 2002
24.
Period, respectively. The decrease during the 2002 Quarter as compared to the
2001 Quarter are primarily due to decreased legal expenses and increased
servicing fees received on timeshare note receivable pools sold, which are
serviced by the Company's mortgage operation, to offset mortgage servicing
expenses.
Interest Expense
Interest expense was $4.0 million and $3.0 million for the 2001 Quarter and 2002
Quarter, respectively, and was $11.3 million and $10.1 million for the 2001
Period and 2002 Period, respectively. Interest expense decreased due to lower
outstanding balances on prior years' acquisition and development borrowings and
lower interest rates on variable rate debt.
Provision for Loan Losses
The Company recorded a provision for loan losses totaling $900,000 and $788,000
during the 2001 Quarter and 2002 Quarter, respectively, and totaling $3.4
million and $3.7 million during the 2001 Period and 2002 Period, respectively.
The allowance for loan losses by division as of April 1, 2001 and December 30,
2001 was (amounts in thousands):
Residential
Resorts Land and
Division Golf Division Other Total
--------------------------------------------------------------------
April 1, 2001
Notes receivable $ 64,245 $ 9,001 $ 5,136 $ 78,382
Less: allowance for loan losses (3,058) (416) (112) (3,586)
-------- ------- ------- --------
Notes receivable, net $ 61,187 $ 8,585 $ 5,024 $ 74,796
======== ======= ======= ========
Allowance as a % of gross notes receivable 4.8% 4.6% 2.2% 4.6%
======== ======= ======= ========
December 30, 2001
Notes receivable $ 67,255 $ 7,413 $ 1,887 $ 76,555
Less: allowance for loan losses (3,894) (327) (112) (4,333)
-------- ------- ------- --------
Notes receivable, net $ 63,361 $ 7,086 $ 1,775 $ 72,222
======== ======= ======= ========
Allowance as a % of gross notes receivable 5.8% 4.4% 5.9% 5.7%
======== ======= ======= ========
The allowance for loan losses for the Resorts Division has increased as a
percentage of outstanding notes receivable due to an increase in the related
annual default rate from 7.18% to 7.81% as of April 1, 2001 and December 30,
2001, respectively. The Company uses various analytical analyses in order to
compute its allowance for loan losses, including review of delinquency rates,
annual default rates, loss severity factors, etc. Management believes that its
allowance for loan losses is adequate, although there can be no assurances.
Other notes receivable primarily consists of the loan to Casa Grande Cooperative
Association I (see Note 2 of Notes to Condensed Consolidated Financial
Statements).
Other Income (Expense)
Other income (expense) is a net amount, which primarily includes the
amortization of timeshare receivable purchase facility up-front fees, gains and
losses on the disposal of fixed assets and down payments that customers
contractually forfeited upon the cancellation of a timeshare sale. The Company
recognized other income of $14,000 and other expense of $83,000 during the 2001
Quarter and 2002 Quarter, respectively. The Company recognized other income of
$136,000 and other expense of $277,000 during the 2001 Period and 2002 Period,
respectively. The decrease during the 2002 Period as compared to the 2001 Period
relates to the increased amortization of timeshare receivable purchase facility
up-front fees from $490,000 to $886,000 during the 2001 Period and 2002 Period,
respectively, as higher up-front fees were paid on the Company's current
timeshare receivable purchase facility as compared to last year's facility.
Minority Interest in Income (Loss) of Consolidated Subsidiaries
Minority interest in income (loss) of consolidated subsidiaries represents the
portion of the Company's consolidated income after income taxes that is not
included in retained earnings as these earnings belong to a third-party that
owns a minority interest in a consolidated subsidiary. During the 2001 Period,
the Company consolidated two subsidiaries which were partially owned by minority
interests, specifically Bluegreen Properties N.V. ("BPNV"), the subsidiary which
owns and sells timeshare interests at the La Cabana Beach and Racquet Club(TM)
in Aruba, in which the Company then owned a 50% ownership interest, and
Bluegreen/Big Cedar Vacations, LLC (the "Joint Venture"), the developer of the
Big Cedar
25.
Wilderness Club(TM) in Ridgedale, Missouri, in which the Company holds a 51%
ownership interest. By the 2002 Period, the Company had purchased the minority
interest in BPNV, and therefore the only subsidiary that was still partially
owned by a minority interest during the 2002 Period was the Joint Venture.
Minority interest operations changed from a minority interest loss of $113,000
to a minority interest loss of $79,000 in the 2001 Quarter and 2002 Quarter,
respectively, and from a minority interest loss of $689,000 to a minority
interest income of $107,000 in the 2001 Period and 2002 Period, respectively.
This change is primarily due to the aforementioned purchase of the minority
ownership interest in BPNV during fiscal 2001, as BPNV generated losses during
the 2001 Period. The minority interest income (which decreases the Company's
consolidated net income) in the 2002 Period was due to the profitability of the
Joint Venture.
Summary
Based on the factors discussed above, the Company's net income increased 245%
from a net loss of $1.4 million to net income of $2.0 million in the 2001
Quarter and 2002 Quarter, respectively, and 193% from $3.7 million to $10.7
million in the 2001 Period and 2002 Period, respectively.
Changes in Financial Condition
Consolidated assets of the Company increased $13.0 million from April 1, 2001 to
December 30, 2001. This increase is primarily due to a net $14.4 million
increase in retained interests in notes receivable sold related primarily to the
retained interests in the $67.4 million of timeshare receivables sold during the
2002 Period (see Note 2 of Notes to Condensed Consolidated Financial
Statements). This increase was partially offset by a decrease in cash and cash
equivalents of $1.5 million, more fully described on the Condensed Consolidated
Statement of Cash Flows.
Consolidated liabilities increased $1.1 million from April 1, 2001 to December
30, 2001. The increase is primarily due to a $4.9 million increase in accrued
liabilities related to cash held by the Company in its capacity as a mortgage
servicer for the notes receivable portfolios previously sold to third parties,
for which the Company retains servicing rights. This increase was partially
offset by a $2.3 million decrease in accounts payable and a $687,000 decrease in
income deferred under the percentage-of-completion method of accounting.
Total shareholders' equity increased $11.8 million during the 2002 Period,
primarily due to net income of $10.7 million and net unrealized gains of
$980,000 which were recognized on the Company's retained interests in notes
receivable sold. The Company's book value per common share increased from $5.65
to $6.12 at April 1, 2001 and December 30, 2001, respectively. The
debt-to-equity ratio decreased from 1.60:1 to 1.41:1 at April 1, 2001 and
December 30, 2001, respectively.
Liquidity and Capital Resources
The Company's capital resources are provided from both internal and external
sources. The Company's primary capital resources from internal operations are:
(i) cash sales, (ii) down payments on homesite and timeshare sales which are
financed, (iii) proceeds from the sale of, or borrowings collateralized by,
notes receivable, (iv) principal and interest payments on the purchase money
mortgage loans and contracts for deed arising from sales of Timeshare Interests
and residential land homesites (collectively "Receivables") and (v) net cash
generated from other resort services and golf operations. Historically, external
sources of liquidity have included non-recourse sales of Receivables, borrowings
under secured and unsecured lines-of-credit, seller and bank financing of
inventory acquisitions and the issuance of debt securities. The Company's
capital resources are used to support the Company's operations, including (i)
acquiring and developing inventory, (ii) providing financing for customer
purchases, (iii) meeting operating expenses and (iv) satisfying the Company's
debt, and other obligations. The Company anticipates that it will continue to
require external sources of liquidity to support its operations, satisfy its
debt and other obligations and to provide funds for future strategic
acquisitions, primarily for the Resorts Division.
Credit Facilities for Timeshare Receivables and Inventories
The Company's ability to sell and/or borrow against its notes receivable from
timeshare buyers is a critical factor in the Company's continued liquidity. The
timeshare business involves making sales of a product pursuant to which a buyer
is only required to pay 10% of the purchase in cash up front, yet selling,
marketing and administrative expenses are primarily cash expenses and which, in
the Company's case for the 2002 Period, approximate 65% of sales. Having
facilities for the sale and hypothecation of these timeshare receivables is
critical to meet the Company's short and long-term cash needs.
26.
In June 2001, the Company executed agreements for a new timeshare receivables
purchase facility (the "Purchase Facility") with a financial institution acting
as the initial purchaser (the "Initial Purchaser"). At the end of the facility
term (August 13, 2002), the Initial Purchaser will attempt to securitize and
sell the receivable portfolio that it purchased. The Purchase Facility utilizes
an owner's trust structure, pursuant to which the Company sells receivables to a
special purpose finance subsidiary of the Company (the "Subsidiary") and the
Subsidiary sells the receivables to an owners' trust without recourse to the
Company or the Subsidiary except for breaches of customary representations and
warranties at the time of sale. Pursuant to the agreements that constitute the
Purchase Facility (collectively, the "Purchase Facility Agreements"), the
Subsidiary may receive $75 million of cumulative purchase price (as more fully
described below) on sales of timeshare receivables to the owner's trust on a
revolving basis, as the principal balance of receivables sold amortizes, in
transactions through August 13, 2002 (subject to certain conditions as more
fully described in the Purchase Facility Agreements). The Purchase Facility has
detailed requirements with respect to the eligibility of receivables for
purchase and fundings under the Purchase Facility are subject to certain
conditions precedent. Under the Purchase Facility, a variable purchase price
expected to approximate 85.00% of the principal balance of the receivables sold,
subject to certain terms and conditions, is paid at closing in cash. The balance
of the purchase price will be deferred until such time as the Initial Purchaser
has received a specified return and all servicing, custodial, agent and similar
fees and expenses have been paid. The Initial Purchaser shall earn a return
equal to the rate equivalent to its borrowing cost (based on then applicable
commercial paper rates) plus 1.05%, subject to use of alternate return rates in
certain circumstances. In addition, the Initial Purchaser will receive a 0.25%
facility fee during the term of the facility. The Purchase Facility also
provides for the sale of land notes receivable, under modified terms.
The Purchasers' obligation to purchase under the Purchase Facility may terminate
upon the occurrence of specified events. The Company acts as servicer under the
Purchase Facility for a fee. The Purchase Facility Agreement includes various
conditions to purchase, covenants, trigger events and other provisions customary
for a transaction of this type. Through February 11, 2002, the Company sold
$69.4 million of aggregate principal balance of notes receivable under the
Purchase Facility for a cumulative purchase price of $59.0 million. The
remaining amount of purchase price that can be obtained through the Purchase
Facility upon the sale of additional notes receivable is approximately $19.4
million, based on the remaining facility limit as adjusted for cash already
received by the Initial Purchaser on receivables previously sold (the $75
million facility limit is on a revolving basis).
The Company is constantly seeking new timeshare receivable purchase facilities
to replace expiring facilities. The Company is currently considering two written
term sheets and is discussing terms for new timeshare receivable purchase
facilities with three different finance providers. Factors which could adversely
impact the Company's ability to obtain new or additional timeshare receivable
purchase facilities include, but are not limited to, a downturn in general
economic conditions; negative trends in the commercial paper or LIBOR markets;
increases in interest rates; a decrease in the number of financial institutions
willing to engage in such facilities; and a deterioration in the performance of
the Company's timeshare notes receivable, specifically increased delinquency,
default and loss severity rates. There can be no assurances that the Company
will obtain a new purchase facility to replace the Purchase Facility when it is
completed or expires.
The Company has a timeshare receivables warehouse loan facility, which, as
extended expires on February 16, 2002, with a financial institution (the
"Warehouse Facility"). Loans under the Warehouse Facility bear interest at LIBOR
plus 3.5%. The Warehouse Facility has detailed requirements with respect to the
eligibility of receivables for inclusion and other conditions to funding. The
borrowing base under the Warehouse Facility is 90% of the outstanding principal
balance of eligible notes arising from the sale of Timeshare Interests except
for eligible notes generated by Bluegreen Properties N.V. (TM), for which the
borrowing base is 80%. The Warehouse Facility includes affirmative, negative and
financial covenants and events of default. During the 2002 Period, the Company
borrowed an aggregate $22.2 million under the Warehouse Facility, of which the
Company repaid an aggregate $12.9 million by using cash generated from principal
and interest payments on the underlying loans and proceeds from the sale of the
underlying receivables under a previous timeshare receivables purchase facility
with the same financial institution. The remaining balance of the Warehouse
Facility, as well as any such future borrowings, will be repaid as principal and
interest payments are collected on the timeshare notes receivable, but in no
event later than February 16, 2002. The maximum principal amount that may be
outstanding prospectively under the Warehouse Facility is $15.0 million. As of
December 30, 2001, there was $10.6 million outstanding under the Warehouse
Facility. The Company is currently negotiating an extension and increase of the
Warehouse Facility. There can be no assurances that the Company's negotiations
will be successful.
In addition, the lender under the Warehouse Facility has provided the Company
with a $28.0 million acquisition and development facility for its timeshare
inventories (the "A&D Facility"). The draw down period on the A&D Facility has
expired and outstanding borrowings under the A&D Facility mature no later than
July 2006. Principal will be repaid through agreed-upon release prices as
Timeshare Interests are sold at the financed resort, subject to minimum required
amortization. The indebtedness under the facility bears interest at LIBOR plus
3%. On September 14, 1999, the Company borrowed approximately $14.0 million
under the A&D facility. The outstanding principal of this loan must be repaid by
November 1,
27.
2005, through agreed-upon release prices as Timeshare Interests in the Company's
Lodge Alley Inn(TM) resort in Charleston, South Carolina are sold, subject to
minimum required amortization. On December 20, 1999, the Company borrowed
approximately $13.9 million under the acquisition and development facility. The
principal of this loan must be repaid by January 1, 2006, through agreed-upon
release prices as Timeshare Interests in the Company's Shore Crest II(TM) resort
are sold, subject to minimum required amortization. The outstanding balance
under the A&D Facility at December 30, 2001 was $11.4 million. The Company is
currently negotiating an extension and increase of the A&D Facility. There can
be no assurances that the Company's negotiations will be successful.
Under an existing, $30 million, revolving credit facility with a financial
institution for the pledge of Residential Land and Golf Division receivables,
the Company can also borrow up to $10 million for the pledge of timeshare
receivables. See the next paragraph for further details on this facility.
Credit Facilities for Residential Land and Golf Receivables and Inventories
The Company has a $30.0 million revolving credit facility with a financial
institution for the pledge of Residential Land and Golf Division receivables,
with up to $10 million of the total facility available for Land and Golf
Division inventory borrowings and up to $10 million of the total facility
available for the pledge of timeshare receivables. The interest rate charged on
outstanding borrowings ranges from prime plus 0.5% to 1.0%, with 7.0% being the
minimum interest rate. At December 30, 2001, the outstanding principal balance
under this facility was approximately $4.2 million, all of which related to
Residential Land and Golf Division receivables borrowings. All principal and
interest payments received on pledged receivables are applied to principal and
interest due under the facility. The ability to borrow under the facility
expires on December 31, 2003. Any outstanding indebtedness is due on December
31, 2005.
The Company has a $35.0 million revolving credit facility, which expires in
March 2002, with a financial institution. The Company uses this facility to
finance the acquisition and development of residential land projects and,
potentially, to finance land receivables. The facility is secured by the real
property (and personal property related thereto) with respect to which
borrowings are made, with the lender required to advance up to a specified
percentage of the value of the mortgaged property and eligible pledged
receivables, provided that the maximum outstanding amount secured by pledged
receivables may not exceed $20.0 million. The interest charged on outstanding
borrowings is prime plus 1.25%. On September 14, 1999, in connection with the
acquisition of 1,550 acres adjacent to the Company's Lake Ridge at Joe Pool
Lake(TM) residential land project in Dallas, Texas ("Lake Ridge II"), the
Company borrowed approximately $12.0 million under the revolving credit
facility. Principal payments are effected through agreed-upon release prices as
homesites in Lake Ridge II and in another recently purchased section of Lake
Ridge are sold. The principal of this loan must be repaid by September 14, 2004.
On October 6, 1999, in connection with the acquisition of 6,966 acres for the
Company's Mystic Shores(TM) residential land project in Canyon Lake, Texas, the
Company borrowed $11.9 million under the revolving credit facility. On May 5,
2000, the Company borrowed an additional $2.1 million under this facility in
order to purchase an additional 435 acres for the Mystic Shores(TM) project.
Principal payments on these loans are effected through agreed-upon release
prices as homesites in Mystic Shores(TM) are sold. The principal under the $11.9
million and $2.1 million loans for Mystic Shores(TM) must be repaid by October
6, 2004 and May 5, 2004, respectively. The aggregate outstanding balance on the
revolving credit facility was $17.6 million at December 30, 2001.
On September 24, 1999, the Company obtained two lines-of-credit with a bank for
the purpose of acquiring and developing a new residential land and golf course
community in New Kent County, Virginia, known as Brickshire(TM). The
lines-of-credit have an aggregate borrowing capacity of approximately $15.8
million. On September 27, 1999, the Company borrowed approximately $2.0 million
under one of the lines-of-credit in connection with the acquisition of the
Brickshire(TM) property. During December 2000, the Company borrowed an
additional $2.0 million under the lines-of-credit. The outstanding balances
under the lines-of-credit bore interest at prime plus 0.5% and interest was due
monthly. Principal payments were effected through agreed-upon release prices as
homesites in Brickshire(TM) were sold, subject to minimum required quarterly
amortization commencing on April 30, 2002. All borrowings under the
lines-of-credit must be repaid by January 31, 2004. The loan was secured by the
Company's residential land homesite inventory in Brickshire(TM). As of December
30, 2001, there was no balance outstanding on the lines-of-credit.
Concurrent with obtaining the Brickshire(TM) lines-of-credit discussed above,
the Company also obtained from the same bank a $4.2 million line-of-credit for
the purpose of developing a golf course on the Brickshire(TM) property (the
"Golf Course Loan"). Through December 2001, the Company borrowed an aggregate
$4.0 million under the Golf Course Loan. The outstanding balances under the Golf
Course Loan bears interest at prime plus 0.5% and interest is due monthly.
Principal payments are payable in equal monthly installments of $35,000. The
principal must be repaid by October 1, 2005. The loan is secured by the
Brickshire(TM) golf course property. As of December 30, 2001, $3.8 million was
outstanding under the Golf Course Loan.
28.
On August 2, 2001, the Company obtained a revolving line-of-credit with a bank
for the purpose of developing the Company's golf course community in Raleigh,
North Carolina known as The Preserve at Jordan Lake(TM). The line-of-credit has
an aggregate borrowing capacity of approximately $6.7 million. Through December
2001, the Company borrowed an aggregate $4.8 million under the line-of-credit.
The outstanding balances under the lines-of-credit bear interest at prime plus
1.0% and interest is due monthly. Principal payments are effected through
agreed-upon release prices as homesites in The Preserve at Jordan Lake(TM) are
sold. All borrowings under the lines-of-credit must be repaid by July 30, 2003,
assuming that the Company pays an additional $75,000 fee by July 30, 2002. The
loan is secured by the Company's residential land homesite inventory in The
Preserve at Jordan Lake (TM). As of December 30, 2001, there was $359,000
outstanding on the line-of-credit.
Over the past three years, the Company has received approximately 90% to 99% of
its land sales proceeds in cash. Accordingly, in recent years the Company has
reduced the borrowing capacity under credit agreements secured by land
receivables. The Company attributes the significant volume of cash sales to an
increased willingness on the part of certain local banks to extend more direct
customer homesite financing. No assurances can be given that local banks will
continue to provide such customer financing.
Historically, the Company has funded development for road and utility
construction, amenities, surveys and engineering fees from internal operations
and has financed the acquisition of residential land and golf properties through
seller, bank or financial institution loans. Terms for repayment under these
loans typically call for interest to be paid monthly and principal to be repaid
through homesite releases. The release price is usually defined as a
pre-determined percentage of the gross selling price (typically 25% to 50%) of
the homesites in the subdivision. In addition, the agreements generally call for
minimum cumulative annual amortization. When the Company provides financing for
its customers (and therefore the release price is not available in cash at
closing to repay the lender), it is required to pay the creditor with cash
derived from other operating activities, principally from cash sales or the
pledge of receivables originated from earlier property sales.
Other Credit Facility
The Company has a $12.5 million unsecured line-of-credit with a bank. Amounts
borrowed under the line bear interest at LIBOR plus 2%. Interest is due monthly
and all principal amounts are due on December 31, 2002. The Company is only
allowed to borrow under the line-of-credit in amounts less than the remaining
availability under its current, active timeshare receivables purchase facility
plus availability under certain receivable warehouse facilities, less any
outstanding letters of credit. The line-of-credit agreement contains certain
covenants and conditions typical of arrangements of this type. As of December
30, 2001, there was no amount outstanding under the line, however the Company
borrowed $10 million under the line in February 2002. This line-of-credit is an
important source of short-term liquidity for the Company, as it allows the
Company to fund through its timeshare receivables purchase facility less
frequently than it otherwise would.
Summary
The Company intends to continue to pursue a growth-oriented strategy,
particularly with respect to its Resorts Division. In connection with this
strategy, the Company may from time to time acquire, among other things,
additional resort properties and completed Timeshare Interests; land upon which
additional resorts may be built; management contracts; loan portfolios of
Timeshare Interest mortgages; portfolios which include properties or assets
which may be integrated into the Company's operations; interests in joint
ventures; and operating companies providing or possessing management, sales,
marketing, development, administration and/or other expertise with respect to
the Company's operations in the timeshare industry. In addition, the Company
intends to continue to focus the Residential Land and Golf Division on larger,
more capital intensive projects particularly in those regions where the Company
believes the market for its products is strongest, such as new golf communities
in the Southeast and other areas and continued growth in the Company's
successful regions in Texas.
The Company estimates that the total cash required to complete preparation for
the sale of its residential land and golf and timeshare property inventory as of
December 30, 2001 is approximately $262.7 million (based on current costs) with
such amount expected to be incurred over a five-year period. The Company plans
to fund these expenditures primarily with available capacity on existing or
proposed credit facilities, receivables purchase facilities and cash generated
from operations. There can be no assurances that the Company will be able to
obtain the financing or generate the cash from operations necessary to complete
the foregoing plans or that actual costs will not exceed those estimated.
The Company believes that its existing cash, anticipated cash generated from
operations, anticipated future permitted borrowings under existing or proposed
credit facilities and anticipated future sales of notes receivable under the
timeshare receivables purchase facility (or any replacement facility) will be
sufficient to meet the Company's anticipated working capital, capital
expenditure and debt service requirements for the foreseeable future. The
Company will be required to renew or replace credit facilities that will expire
in fiscal 2002 and fiscal 2003. The Company will, in the future, also require
additional credit facilities or issuances of other corporate debt or equity
securities in connection with acquisitions or otherwise. Any debt
29.
incurred or issued by the Company may be secured or unsecured, bear fixed or
variable rate interest and may be subject to such terms as the lender may
require and management deems prudent. There can be no assurances that the credit
facilities or receivables purchase facilities which have expired or which are
scheduled to expire in the near term will be renewed or replaced or that
sufficient funds will be available from operations or under existing, proposed
or future revolving credit or other borrowing arrangements or receivables
purchase facilities to meet the Company's cash needs, including, without
limitation, its debt service obligations.
The Company's credit facilities, indentures, receivables purchase facilities and
other outstanding debt instruments include customary conditions to funding,
eligibility requirements for collateral, cross-default and other acceleration
provisions, certain financial and other affirmative and negative covenants,
including, among others, limits on the incurrence of indebtedness, limits on the
repurchase of securities, payment of dividends, investments in joint ventures
and other restricted payments, the incurrence of liens, transactions with
affiliates, covenants concerning net worth, fixed charge coverage requirements,
debt-to-equity ratios and events of default or termination. No assurances can be
given that such covenants will not limit the Company's ability to raise funds,
satisfy or refinance its obligations or otherwise adversely affect the Company's
operations. In addition, the Company's future operating performance and ability
to meet its financial obligations will be subject to future economic conditions
and to financial, business and other factors, many of which will be beyond the
Company's control.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
For a complete description of the Company's foreign currency and interest rate
related market risks, see the discussion in the Company's Annual Report on Form
10-K for the year ended April 1, 2001. There has not been a material change in
the Company's exposure to foreign currency and interest rate risks since April
1, 2001.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In the ordinary course of its business, the Company from time to time becomes
subject to claims or proceedings relating to the purchase, subdivision, sale
and/or financing of real estate. Additionally, from time to time, the Company
becomes involved in disputes with existing and former employees. The Company
believes that substantially all of the above are incidental to its business.
Certain other litigation involving the Company is described in the Company's
Annual Report on Form 10-K for the year ended April 1, 2001. Subsequent to the
filing of such Form 10-K, there have been no material developments with respect
to such litigation, except as noted below:
As previously described in the Company's April 1, 2001 Annual Report on Form
10-K, an action was filed on July 10, 1998 against two subsidiaries of the
Company and various other defendants. The Company itself was not named as a
defendant. The Company's subsidiaries acquired certain real property (the
"Property"). The Property was acquired subject to certain alleged oil and gas
leasehold interests and rights (the "Interests") held by the plaintiffs in the
action (the "Plaintiffs"). The Company's subsidiaries developed the Property and
have resold homesites to numerous customers. The Plaintiffs alleged, among other
things, breach of contract, slander of title and that the Company's subsidiaries
and their purchasers have unlawfully trespassed on easements and otherwise
violated and prevented the Plaintiffs from exploiting the Interests. The
Plaintiffs claim damages in excess of $40 million, as well as punitive or
exemplary damages in an amount of at least $50 million and certain other
remedies. During fiscal 2001, the court advised the parties in open court that
the Company's motion for summary judgment was granted, thus dismissing all of
the Plaintiff's claims for damages, subject to the Plaintiffs' right of appeal.
During February 2002, the court documented and entered this aforementioned
motion for summary judgment.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
30.
Item 5. Other Information
Pursuant to a consent solicitation that expired on December 28, 2001, the
Company obtained consents from a majority of the holders of its 10.5%
Senior Secured Notes due April 1, 2008 (the "Notes") regarding certain
proposed amendments to the Indenture for the Notes. The amendments will
provide the Company with greater flexibility in the financing of its
Bluegreen/Big Cedar Vacations LLC(TM) joint venture and with future
securitization transactions. The amendments to the Indenture:
o provide that Bluegreen/Big Cedar Vacations, LLCO, the Company's
51%-owned joint venture that sells Timeshare Interests in the Big
Cedar Wilderness ClubO resort, may incur indebtedness without being
required to guarantee the Notes;
o provide that any Receivables Subsidiary (as defined in the Indenture)
may incur debt arising in connection with any receivables
securitization or financing transactions; and
o permit certain arm's-length transactions between the Company and
Bluegreen/Big Cedar Vacations, LLCO to proceed without the potentially
expensive and time-consuming requirement that the Company obtain a
written fairness opinion from an independent investment banking,
accounting or appraisal firm.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.11 - Fourth Supplemental Indenture dated as of December 31, 2001 to
the Indenture Dated as of April 1, 1998 among the Registrant,
certain of its subsidiaries and SunTrust Bank (formerly
SunTrust Bank, Central Florida, National Association), as
Notes Trustee, relating to the Company's $110 million
aggregate principal amount of 10 1/2% Senior Secured Notes due
2008.
10.133 - Amendment Number Two to Loan and Security Agreement dated as
of November 9, 2001, by and between the Registrant and
Foothill Capital Corporation.
10.153 - Amended and Restated Loan Agreement dated December 31, 2001 by
and among the Registrant, certain subsidiaries of the
Registrant and First Union National Bank, for the $12.5
million, unsecured, revolving line-of-credit due December 31,
2002.
10.154 - Amended and Restated Promissory Note dated December 31, 2001
by and among the Registrant, certain subsidiaries of the
Registrant and First Union National Bank, for the $12.5
million, unsecured, revolving line-of-credit due December 31,
2002.
(b) Reports on Form 8-K
None.
31.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BLUEGREEN CORPORATION
(Registrant)
Date: February 11, 2002 By: /S/ GEORGE F. DONOVAN
-------------------------------------
George F. Donovan
President and
Chief Executive Officer
Date: February 11, 2002 By: /S/ JOHN F. CHISTE
-------------------------------------
John F. Chiste
Senior Vice President,
Treasurer and Chief Financial Officer
(Principal Financial Officer)
Date: February 11, 2002 By: /S/ ANTHONY M. PULEO
-------------------------------------
Anthony M. Puleo
Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
32.