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 June 30, 1996
or
[ ] - Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-19292
BLUEGREEN CORPORATION
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(Exact name of registrant as specified in its charter)
Massachusetts 03-0300793
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5295 Town Center Road, Boca Raton, Florida 33486
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(Address of principal executive offices) (Zip Code)
(561) 361-2700
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(Registrant's telephone number, including area code)
Not Applicable
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(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 July 26, 1996, there were 20,573,886 shares of Common Stock, $.01 par
value per share, outstanding.
<PAGE>
BLUEGREEN CORPORATION
Index to Quarterly Report on Form 10-Q
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Part I - Financial Information
Item 1. Financial Statements Page
Consolidated Balance Sheets at
June 30, 1996 and March 31, 1996 ............................................ 3
Consolidated Statements of Operations - Three Months
Ended June 30, 1996 and July 2, 1995 ........................................ 4
Consolidated Statements of Cash Flows -Three Months
Ended June 30, 1996 and July 2, 1995 ........................................ 5
Notes to Consolidated Financial Statements ....................................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................................... 10
Part II - Other Information
Item 1. Legal Proceedings ................................................................ 27
Item 2. Changes in Securities ............................................................ 27
Item 3. Defaults Upon Senior Securities .................................................. 27
Item 4. Submission of Matters to a Vote of Security Holders .............................. 27
Item 5. Other Information ................................................................ 27
Item 6. Exhibits and Reports on Form 8-K ................................................. 27
Signatures.................................................................................... 28
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BLUEGREEN CORPORATION
Consolidated Balance Sheets
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June 30, March 31,
Assets 1996 1996
Cash and cash equivalents (including restricted cash of
approximately $8.8 million and $7.7 million at
June 30, 1996 and March 31, 1996, respectively)........ $ 13,075,183 $ 11,389,141
Contracts receivable, net................................. 12,504,093 12,451,207
Notes receivable, net..................................... 28,495,769 37,013,802
Investment in securities.................................. 11,170,795 9,699,435
Inventory, net............................................ 76,127,541 73,595,014
Property and equipment, net............................... 5,422,748 5,239,100
Debt issuance costs....................................... 1,198,315 1,288,933
Other assets.............................................. 4,602,667 4,286,401
Total assets........................................... $152,597,111 $154,963,033
Liabilities and Shareholders' Equity
Accounts payable.......................................... $ 1,755,393 $ 2,557,797
Accrued liabilities and other............................. 8,319,714 9,889,063
Lines-of-credit and notes payable......................... 29,116,363 17,287,767
Deferred income taxes..................................... 3,202,078 6,067,814
Receivable-backed notes payable........................... 14,816,530 19,723,466
8.25% convertible subordinated debentures.................
34,739,000 34,739,000
Total liabilities...................................... 91,949,078 90,264,907
Commitments and contingencies............................. --- ---
Shareholders' Equity
Preferred stock, $.01 par value, 1,000,000 shares
authorized; none issued................................ --- ---
Common stock, $.01 par value, 90,000,000 shares
authorized; 20,573,461 and 20,533,410 shares
outstanding at June 30, 1996 and March 31, 1996,
respectively...........................................
205,735 205,334
Capital-in-excess of par value............................ 71,369,530 71,296,158
Retained earnings (deficit)............................... (10,927,232) (6,803,366)
Total shareholders' equity................................ 60,648,033 64,698,126
Total liabilities and shareholders' equity............. $152,597,111 $154,963,033
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BLUEGREEN CORPORATION
Consolidated Statements of Operations
(unaudited)
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Three Months Ended
June 30, July 2,
1996 1995
Revenues:
Sales of real estate..................................... $28,782,197 $24,641,264
Interest income and other................................ 1,444,465 2,186,935
30,226,662 26,828,199
Cost and expenses:
Cost of real estate sold................................. 14,453,598 12,191,448
Selling, general and administrative expense.............. 13,052,549 9,873,908
Interest expense......................................... 1,289,204 1,990,138
Provisions for losses.................................... 8,469,053 155,000
37,264,404 24,210,494
Income (loss) from operations............................... ( 7,037,742) 2,617,705
Other income................................................ 48,144 28,340
Income (loss) before income taxes........................... ( 6,989,598) 2,646,045
Provision (benefit) for income taxes........................ ( 2,865,735) 1,058,418
Net income (loss)........................................... $(4,123,863) $ 1,587,627
Income (loss) per common share:
Net income (loss)........................................... $ (.20) $ .07
Weighted average number of common and common
equivalent shares (1).................................... 20,573,461 21,677,792
</TABLE>
(1) The current three month period includes 20,573,461 average common
shares outstanding. The prior year three month period includes 20,486,597
average common shares outstanding plus 1,191,195 average dilutive stock options.
See accompanying notes to consolidated financial statements.
<PAGE>
BLUEGREEN CORPORATION
Consolidated Statements of Cash Flows
(unaudited)
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Three Months Ended
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June 30, July 2,
1996 1995
Operating activities:
Cash received from customers including net
cash collected as servicer of notes receivable
to be remitted to investors............................ $ 23,744,864 $ 24,021,812
Interest received....................................... 1,200,520 1,521,946
Cash paid for land acquisitions and real estate
development............................................ (15,890,603) ( 8,830,551)
Cash paid to suppliers, employees and sales
representatives........................................ (14,418,359) (11,371,313)
Interest paid, net of capitalized interest.............. ( 1,915,282) ( 2,744,466)
Income taxes paid, net of refunds ...................... ( 785,471) ( 168,674)
Proceeds from borrowings collateralized by notes
receivable............................................. 2,229,170 5,523,622
Payments on borrowings collateralized by notes
receivable............................................. ( 7,136,106) ( 2,989,725)
Net proceeds from REMIC transaction..................... 11,783,001 ---
Cash received from investment in securities............ 102,629
---
Net cash provided (used) by operating activities........... ( 1,085,637) 4,962,651
Investing activities:
Net cash flow from purchases and sales of
property and equipment................................. ( 144,863) ( 112,737)
Additions to other long-term assets..................... ( 113,831) ---
Net cash flow used by investing activities................. ( 258,694) ( 112,737)
Financing activities:
Borrowings under line-of-credit facilities.............. 1,580,285 445,781
Payments under line-of-credit facilities................ ( 1,401,768) ( 1,068,632)
Borrowings under secured credit facility................ 3,800,000 ---
Payments on other long-term debt........................ ( 1,021,915) ( 3,653,565)
Proceeds from exercise of employee stock options........ 73,771 102,947
Net cash flow provided (used) by financing activities...... 3,030,373 ( 4,173,469)
Net increase in cash and cash equivalents.................. 1,686,042 676,445
Cash and cash equivalents at beginning of period........... 11,389,141 7,588,475
Cash and cash equivalents at end of period................. 13,075,183 8,264,920
Restricted cash and cash equivalents at end of period...... ( 8,759,405) ( 6,064,723)
Unrestricted cash and cash equivalents at end of period.... $ 4,315,778 $ 2,200,197
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BLUEGREEN CORPORATION
Consolidated Statements of Cash Flows
(unaudited) (continued)
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Three Months Ended
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June 30, July 2,
1996 1995
Reconciliation of net income (loss) to net cash flow
provided (used) by operating activities:
Net income (loss)............................................. $(4,123,863) $ 1,587,627
Adjustments to reconcile net income (loss) to net
cash flow provided (used) by operating activities:
Depreciation and amortization............................. 252,049 471,150
Loss on REMIC transaction................................. 39,202 ---
Loss on sale of property and equipment.................... 2,534 4,894
Provisions for losses..................................... 8,469,053 155,000
Interest accretion on investment in securities............ ( 244,665) ( 616,148)
Proceeds from borrowings collateralized
by notes receivable net of principal
repayments............................................... (4,906,936) 2,533,897
Provision (benefit) for deferred income taxes............. (2,865,735) 1,058,418
(Increase) decrease in operating assets:
Contracts receivable........................................ ( 52,886) 1,406,920
Investment in securities.................................... 102,629 ---
Inventory................................................... (1,545,833) 3,214,598
Other assets................................................ ( 316,270) ( 342,891)
Notes receivable............................................ 6,476,838 ( 1,721,071)
Increase (decrease) in operating liabilities:
Accounts payable, accrued liabilities and other............. (2,371,754) ( 2,789,743)
Net cash flow provided (used) by operating activities............. $(1,085,637) $ 4,962,651
Supplemental schedule of non-cash operating
and financing activities
Inventory acquired through financing........................ $ 8,631,990 $ 7,664,234
Inventory acquired through foreclosure or
deedback in lieu of foreclosure............................ $ 403,623 $( 73,332)
Investment in securities retained in
connection with REMIC transactions........................ $ 1,315,153 $ ---
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BLUEGREEN CORPORATION
Notes to Consolidated Financial Statements
(unaudited)
1. Results of Operations
The accompanying unaudited Consolidated Financial Statements have been
prepared in accordance with generally accepted accounting principles for interim
financial statements 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 generally accepted accounting principles for complete
financial statements.
The financial information furnished herein reflects all adjustments
consisting of normal recurring accruals which, in the opinion of management, are
necessary for a fair presentation of the results for the interim period. The
three months ended June 30, 1996 also includes provisions for the write-down of
certain inventories to reflect fair value, less costs to dispose, totaling $8.2
million. See Note 5. The results of operations for the three month period ended
June 30, 1996 are not necessarily indicative of the results to be expected for
the entire year. 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 March 31, 1996.
Organization
Bluegreen Corporation (the"Company") is a national leisure product company
currently operating in twenty-one states. The Compan's primary business is (i)
the acquisition, development and sale of recreational and residential land and
(ii) the acquisition and development of timeshare properties which are sold in
weekly intervals. The Company offers financing to its land and timeshare
purchasers.
Land and timeshare products are typically located in scenic areas or
popular vacation destinations throughout the United States. The Company's
products are primarily sold to middle-class individuals with ages ranging from
forty to fifty-five.
Principles of Consolidation
The financial statements include the accounts of Bluegreen Corporation and
all wholly owned subsidiaries. All significant intercompany transactions are
eliminated.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. Contracts Receivable and Revenue Recognition
The Compan's leisure products business is currently operated through three
divisions. The Land Division acquires large acreage tracts of real estate which
are subdivided, improved and sold, typically on a retail basis. The Resorts
Division acquires and develops timeshare property to be sold in vacation
ownership intervals. Vacation ownership is a concept whereby fixed week
intervals or undivided fee simple interests are sold in fully-furnished vacation
units. The Communities Division is engaged in the development and sale of
primary residential homes at selected sites together with land parcels. Revenue
recognition for each of the Company's operating divisions is discussed below.
The Company recognizes revenue on retail land sales when a minimum of 10%
of the sales price has been received in cash, 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 related to the real estate sold.
Other land sales include large-acreage bulk transactions as well as land
sales to investors and developers. The Company recognizes revenue on such other
land sales when the buyer's initial and continuing investment are adequate to
demonstrate a commitment to pay for the property, which requires a minimum of
20% of the sales price to be received in cash, the 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 related to the real estate sold.
With respect to its Resorts Division sales, the Company recognizes revenue
when a minimum of 10% of the sales price has been received in cash,
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 related to the unit sold.
The excess of sales price on land and resort interval sales over legally
binding deposits received is recorded as contracts receivable. Contracts
receivable are converted into cash and/or notes receivable, generally within
sixty days. Contracts which cancel during the rescission period are excluded
from sales of real estate. In cases where all development has not been
completed, the Company recognizes revenue on land and timeshare sales in
accordance with the percentage of completion method of accounting. All related
costs are recorded prior to, or at the time, a sale is recorded.
The Company recognizes revenue on Communities Division sales when the unit
is complete and title is transferred to the buyer.
3. Contingent Liabilities
In the ordinary course of business, the Company has completed various whole
loan sales of its mortgage notes receivables (which arose from land sales) to
banks and financial institutions to supplement its liquidity. At June 30, 1996,
the Company was contingently liable for the outstanding principal balance of
notes receivable previously sold aggregating approximately $1.2 million. As of
such date, delinquency on these loans was not material. In most cases, the
recourse from the purchaser of the loans to the Company terminates when a
customer achieves 30% equity in the property underlying the loan. Equity is
defined as the difference between the purchase price of the property paid by the
customer and the current outstanding balance of the related loan.
4. Provision for Losses
Provisions for losses on real estate are charged to operations when it is
determinined that the investment in such assets is impaired in management's best
judgment. Management considers various factors, including recent selling prices
of comparable parcels, recent offering prices from potential purchasers, overall
market and economic conditions and the estimated cost of disposing of such
property. The Company recorded provisions for losses totaling $8.5 million and
$155,000 for the three months ended June 30, 1996 and July 2, 1995,
respectively. See Note 5 and "Management's Discussion and Analysis of Financial
Condition and Results of Operations", included under Part I, Item 2 herein, for
a further discussion of the provisions for losses.
5. Inventory
The Company's inventory holdings are summarized below by division.
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June 30, 1996 March 31, 1996
Land Division............................... $ 49,266,981 $ 43,388,699
Communities Division........................ 9,334,230 14,177,111
Resorts Division............................ 17,526,330 16,029,204
$ 76,127,541 $ 73,595,014
</TABLE>
Real estate inventory acquired for sale is carried at the lower of cost,
including costs of improvements and amenities incurred subsequent to
acquisition, or estimated fair value net of costs to dispose. Real estate
reacquired through foreclosure or deedback in lieu of foreclosure is recorded at
the lower of unpaid balance of the loan or fair value of the underlying
collateral net of costs to dispose.
During the first quarter of fiscal 1997, management changed its focus for
marketing certain of its inventories. In conjunction with (i) a comprehensive
review of inventories (ii) an analysis of changing market and economic
conditions and other factors affecting the salability and estimated fair value
of such assets and (iii) certain personnel and administrative changes,
management implemented a plan to accelerate the sale of certain inventories
managed under the Communities Division and Land Division. These inventories are
intended to be liquidated through a combination of bulk sales and retail sales
at reduced prices. As a result, management has determined that inventories with
a carrying value of $23.2 million should be written-down by $8.2 million to
reflect the estimated fair value, net of costs to sell. The $8.2 million in
provisions for the three months ended June 30, 1996 includes $4.8 million for
certain Communities Division inventories and $3.4 million for certain Land
Division inventories. Although no assurances can be given, the inventories
subject to write-down are expected to be fully liquidated within the next 12 to
24 months.
See "Management's Discussion and Analysis of Financial Condition - Uses of
Capital and Results of Operations", included under Part I, Item 2 herein, for a
further discussion of the Company's inventories.
6. Real Estate Mortgage Investment Conduit (REMIC) Transaction
On May 15, 1996, the Company sold approximately $13.2 million aggregate
principal amount of its mortgage notes receivable to a limited purpose
subsidiary which then sold the notes receivable to a REMIC trust (the "1996
REMIC Trust"), resulting in aggregate proceeds to the Company of $11.8 million.
The 1996 REMIC Trust issued three classes of REMIC certificates representing
ownership interest in the pool of notes comprising such trust. Collections of
principal and interest on the notes in the 1996 REMIC Trust, net of certain
servicing and trustee fees, are remitted to certificateholders on a monthly
basis based on an established order of priority. In connection with the 1996
REMIC transaction, the Company retained certain subordinated classes of
certificates.
A portion of the proceeds from the transaction was used to repay
approximately $5.6 million of outstanding debt. An additional $263,000 was used
to fund a cash reserve account. The balance of the proceeds, after payment of
issuance expenses, resulted in an increase to the Company's unrestricted cash of
approximately $5.8 million.
<PAGE>
Item 2. Managemen's Discussion and Analysis of Financial Condition and
Results of Operations
The Company desires to take advantage of the new "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. The Act only became
law in late December, 1995 and, except for the Conference Report, no official
interpretations of the Act's provisions have been published. This report
contains forward-looking statements that involve a number of risks and
uncertainties. 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 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 federal, state or local 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.
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.
d) Changes in applicable usury laws or the availability of interest
deductions or other provisions of federal or state tax law.
e) A decreased willingness on the part of banks to extend direct customer
lot financing, which could result in the Company receiving less cash in
connection with the sales of real estate.
f) The inability of the Company to find external sources of liquidity on
favorable terms to support its operations and satisfy its debt and other
obligations.
g) An increase in 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.
h) Costs to develop inventory for sale exceed those anticipated.
Liquidity and Capital Resources
Sources of Capital.
The Company's capital resources are provided from both internal and
external sources. The Company's primary capital resources from internal
operations include (i) downpayments on real estate sales which are financed,
(ii) cash sales of real estate, (iii) principal and interest payments on the
purchase money mortgage loans arising from land sales and contracts for deed
arising from sales of timeshare intervals (collectively "Receivables") and (iv)
proceeds from the sale of, or borrowings collateralized by, Receivables.
Historically, external sources of liquidity have included borrowings under
secured and unsecured lines-of-credit, seller and bank financing of inventory
acquisitions and the issuance of debt and equity securities. Currently, the
primary external sources of liquidity include seller and bank financing of
inventory acquisitions and development, along with borrowings under secured
lines-of-credit. The Company anticipates that it will continue to require
external sources of liquidity to support its operations and satisfy its debt and
other obligations.
Net cash used by the Company's operations was $1.1 million for the quarter
ended June 30, 1996. Net cash provided by the Company's operations was $5.0
million for the quarter ended July 2, 1995. The reduction in cash flow from
operations was attributable to (i) a reduction in cash received from customers
on real estate sales, (ii) an increase in cash paid for land acquisition and
development costs and (iii) an increase in cash paid to suppliers and employees.
During the current three month period, sales of real estate increased over the
comparable period last year. However, the composition of current quarter sales
changed to include a greater percentage of timeshare sales. Approximately 85% of
the principal balance of timeshare sales has historically been internally
financed by the Company. See related discussion in the paragraph below. As a
result, cash received from customers was $277,000 lower than during the first
quarter last year. In addition, cash paid for land acquisition and development
increased by $7.1 million from the first quarter of last year to the first
quarter of the current year. During the current quarter, a slightly greater
percentage of acquisition and development costs were paid in cash in lieu of
borrowing under lines-of-credit or obtaining seller or similar financial
institution financing. In addition, increased development has occurred under the
Company's Resorts Division which has been the subject of expansion. See "Uses of
Capital". Along with higher acquisition and development spending, cash paid to
suppliers and employees (including sales representatives) increased by $3.0
million from the first quarter last year to the current year quarter. A
significant percentage of selling, general and administrative expenses ("S,G&A")
is variable relative to sales and profitability levels, and therefore, increases
with growth in sales of real estate. In addition, due to the start-up nature of
certain properties managed under the Resorts Division, S,G&A is
disproportionately high. The increases in cash paid for acquisition and
development costs and cash paid to suppliers and employees were partially offset
by the proceeds from a Real Estate Mortgage Investment Conduit ("REMIC")
transaction completed in May, 1996 together with borrowings (net of payments)
collateralized by Receivables, which generated $4.3 million more in cash than
during the first quarter of last year.
During the three months ended June 30, 1996 and the three months ended July
2, 1995, the Company received in cash $20.6 million or 72% and $20.6 million or
79%, respectively, of its sales of real estate that closed during these periods.
The decrease in the percentage of cash received from the three months ended July
2, 1995 to the three months ended June 30, 1996 is primarily attributable to an
increase in timeshare sales over the same period; approximately 85% of the
principal balance of such sales has historically been internally financed by the
Company. Timeshare sales accounted for 21% of consolidated sales of real estate
during the three months ended June 30, 1996, compared to 12% of consolidated
sales during the three months ended July 2, 1995. Management had previously
expected the percentage of sales received in cash to decrease due to the recent
introduction of a fixed interest rate program offered to qualified land
customers. However, this program has had an immaterial effect on the
relationship between cash versus financed land sales during the three months
ended June 30, 1996. Management does expect the percentage of sales received in
cash to decrease during the remainder of fiscal 1997 due to anticipated
increases in timeshare sales as a percentage of consolidated sales.
Receivables arising from land and timeshare real estate sales generally are
pledged to institutional lenders or sold in connection with private placement
REMIC financings. The Company typically pledges its Receivables as a source of
bridge financing until it has originated a sufficient quantity of Receivables to
make it cost effective to sell them through a private placement REMIC financing.
REMICs are considered the Company's permanent financing. The Company currently
is advanced 90% of the face amount of the eligible notes when pledged to
lenders. The Company classifies the indebtedness secured by Receivables as
receivable-backed notes payable on the Consolidated Balance Sheet. When the
Company sells its Receivables through private placement REMIC transactions, it
typically retains only subordinated securities which are classified under
investment in securities on the Consolidated Balance Sheet. See further
discussion of REMIC transactions under"Sources of Capital" later herein. During
the three months ended June 30, 1996 and the three months ended July 2, 1995,
the Company borrowed $2.2 million and $5.5 million, respectively, through the
pledge of Receivables. During the three months ended June 30, 1996, the Company
raised an additional $11.8 million, net of transaction costs and prior to the
retirement of debt, from sales of Receivables under a private placement REMIC
transaction. The discussion below provides additional information with respect
to credit facilities secured by Receivables and the sale of Receivables through
private placement transactions.
The Company has a revolving credit facility of $20.0 million with a
financial institution secured by land inventory and land Receivables. The
interest rate charged on borrowings secured by such inventory and Receivables is
prime plus 2.75% and prime plus 2.0%, respectively. At June 30, 1996, the
outstanding principal balance under the facility was $7.7 million, comprised of
$5.6 million secured by inventory and $2.1 million secured by Receivables. The
Company repays loans made under the inventory portion of the facility through
lot release payments as the collateral is sold. In addition, the Company is
required to meet certain minimum debt amortization on the outstanding inventory
secured debt. The indebtedness secured by land inventory has maturities that
range from December, 1996 to June, 1997. All principal and interest payments
received from the pledged Receivables are applied to the principal and interest
due under the Receivables portion of this facility. Furthermore, at no time may
Receivable related indebtedness exceed 90% of the face amount of eligible
pledged Receivables. The Company is obligated to pledge additional Receivables
or make additional principal payments on the Receivable related indebtedness in
order to maintain this collateralization rate. Repurchases and additional
principal payments have not been material to date. The indebtedness secured by
Receivables matures ten years from the date of the last advance. The ability to
receive advances under the inventory portion of the facility expires in October,
1996 and the ability to receive advances under the Receivables portion of the
facility expired in July, 1996. The Company is currently engaged in discussions
with the lender about the renewal of the facility. No assurances can be given
that the facility will be renewed on terms satisfactory to the Company, if at
all.
The Company also has a $20.0 million credit facility with this same lender
which provides for acquisition, development, construction and Receivables
financing for the first and second phases of a multi-phase timeshare project in
Gatlinburg, Tennessee. The interest rate charged on borrowings secured by
inventory and timeshare Receivables is prime plus 2.0%. At June 30, 1996, the
outstanding principal balance under the facility was $9.1 million, comprised of
$600,000 secured by inventory and $8.5 million secured by Receivables. The
Company is required to repay the portion of the loan secured by inventory
through two equal annual installments of $300,000 each in December, 1996 and
December, 1997. All principal and interest payments received from the pledged
Receivables are applied to the principal and interest due under the Receivables
portion of this facility. Furthermore, at no time may the Receivable related
indebtedness exceed 90% of the face amount of pledged Receivables. The Company
is obligated to pledge additional Receivables or make additional principal
payments on the Receivable related indebtedness in order to maintain this
collateralization rate. Repurchases and additional principal payments have not
been material to date. The indebtedness secured by Receivables matures seven
years from the date of the last advance. The ability to borrow under the
facility expires in November, 1998.
The Company has another credit facility with this same lender which
provides for acquisition, development, construction and Receivables financing on
a second timeshare resort located in Pigeon Forge, Tennessee in the amount of
$6.2 million. The interest rate charged on borrowings secured by inventory and
timeshare Receivables is prime plus 2.0%. At June 30, 1996, the outstanding
principal balance under the facility was $1.9 million, comprised of $1.2 million
secured by inventory and $730,000 secured by Receivables. The Company is
required to repay the portion of the loan secured by inventory through three
annual principal payments of $400,000 in July, 1996, $400,000 in July, 1997 and
$410,000 in July, 1998. All principal and interest payments received from the
pledged Receivables are applied to the principal and interest due under the
Receivables portion of this facility. Furthermore, at no time may Receivable
related indebtedness exceed 90% of the face amount of pledged Receivables. The
Company is obligated to pledge additional Receivables or make additional
principal payments on the Receivable related indebtedness in order to maintain
this collateralization rate. Repurchases and additional principal payments have
not been material to date. The indebtedness secured by Receivables matures seven
years from the date of the last advance. The ability to borrow under the
facility expires in July, 1998.
The Company has a $13.5 million secured line-of-credit with a South
Carolina financial institution for the construction and development of Phase I
of its Myrtle Beach timeshare resort. The Myrtle Beach oceanfront property was
acquired during the second quarter of fiscal 1996, and Phase I represents an
oceanfront building planned to include 114 residential units. The interest rate
charged under the facility is prime plus .5%. At June 30, 1996, there was
$914,000 outstanding under the facility. The indebtedness is due in May, 1997.
The Company also has a $23.5 million line-of-credit with a financial
institution. The credit line provides for "take-out" of the construction lender
discussed in the preceding paragraph in the amount of $13.5 million as well as
$10.0 million for the pledge of Myrtle Beach timeshare Receivables. The interest
rate charged under the line-of-credit is the three-month London Interbank
Offered Rate ("LIBOR") plus 4.25%. Management expects the first advance under
the Receivables facility to occur in August, 1996 and the "take-out" advance to
occur in March, 1997.
The Company has a $15.0 million revolving credit facility with another
financial institution secured by land Receivables and land inventory. The
Company uses the facility as a temporary warehouse for the pledge of receivables
until it accumulates sufficient quantity of Receivables to sell under private
placement REMIC transactions. Under the terms of this facility, the Company is
entitled to advances secured by Receivables equal to 90% of the outstanding
principal balance of eligible pledged Receivables and advances of up to $5.0
million secured by land inventory to finance real estate acquisition and
development costs. The interest rate charged on borrowings secured by
Receivables and inventory is prime plus 2.0%. At June 30, 1996, the outstanding
principal balance under the facility was $780,000 secured by inventory. The
Company is required to pay the financial institution 55% of the contract price
of land sales associated with pledged inventory when any such inventory is sold
until the land indebtedness is paid in full. The Company repaid the Receivable
related indebtedness in May, 1996 with a portion of the proceeds from a private
placement REMIC transaction. See Note 6. With respect to future borrowings under
the Receivable related portion of the facility, all principal and interest
payments received on pledged Receivables will be applied to principal and
interest due under the Receivables portion of this facility. The facility
expires in October, 1998.
In addition to the land and resorts financing described above, the Company
has outstanding indebtedness under a line-of-credit secured by a Florida project
managed under the Communities Division. At June 30, 1996, the aggregate
outstanding indebtedness under the facility totaled $952,000. The indebtedness
matures in May, 1998. The ability to borrow under the credit agreement has
expired and the Company does not intend to renew the facility.
Along with inventory and Receivables financing under credit arrangements
described above, the Company regularly seeks term financing for the acquisition
of its real estate from sellers, banks or similar financial institutions.
Accordingly, the aggregate amount of inventory acquisition and development costs
obtained through term financing and lines-of-credit during the three months
ended June 30, 1996 and the three months ended July 2, 1995 totaled $11.4
million or 44% and $7.7 million or 47%, respectively. The slight increase in the
percentage of acquisition and development costs paid in cash during the three
months ended June 30, 1996 reflects additional internal capital generated from
proceeds of a REMIC transaction.
The table set forth below summarizes the credit facilities discussed
earlier as well as other notes payable.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Lines-of-Credit Receivable-
and Notes Backed
Description of Credit Arrangement Payable Notes Payable Total
$20.0 million revolving credit facility....... $ 2,117,068 $ 5,624,532 $ 7,741,600
$20.0 million credit facility................. 600,000 8,462,178 9,062,178
$6.2 million credit facility.................. 1,210,000 729,820 1,939,820
$13.5 million creditfacility.................. 913,772 --- 913,772
$23.5 million creditfacility.................. --- --- ---
$15.0 million creditfacility.................. 779,573 --- 779,573
$1.0 million credit facility.................. 952,349 --- 952,349
Term indebtedness secured by fixed assets..... 1,323,133 --- 1,323,133
Term indebtedness secured by land inventory... 21,220,468 21,220,468
Total......................................... $29,116,363 $14,816,530 $43,932,893
</TABLE>
See "Uses of Capital" and "Results of Operations" below for a further
discussion of the Company's Land, Resorts and Communities Divisions.
The Company is required to comply with certain covenants under several of
its debt agreements discussed above, including, without limitation, the
following financial covenants:
I. Maintain net worth of at least $42.0 million.
II. Maintain a leverage ratio of not more than 4.0 to 1.0. The leverage
ratio is defined as consolidated indebtedness of the Company divided by
consolidated net worth.
III. Maintain an adjusted leverage ratio of not more than 2.0 to 1.0. The
adjusted leverage ratio is defined as consolidated indebtedness of the Company
excluding the convertible subordinated debentures divided by consolidated net
worth including the convertible subordinated debentures.
IV. Limit selling, general and administrative expenses to 50% of gross
sales revenue from sales of real estate.
The Company was in compliance with each of such covenants at June 30, 1996
and for each reporting period during the prior fiscal year.
In recent years, private placement REMIC financings have provided
substantial capital resources to the Company. In these transactions, (i) the
Company sells or otherwise absolutely transfers a pool of mortgage loans to a
newly-formed special purpose subsidiary, (ii) the subsidiary sells the mortgage
loans to a trust in exchange for certificates representing the entire beneficial
ownership in the trust and (iii) the subsidiary sells one or more senior classes
of the certificates to an institutional investor in a private placement and
retains the remaining certificates, which remaining certificates are
subordinated to the senior classes. The certificates are not registered under
the Securities Act of 1933, as amended, and may not be offered or sold in the
United States absent registration or an applicable exemption from registrations.
The certificates are issued pursuant to a pooling and servicing agreement (the
"Pooling Agreement"). Collections on the mortgage pool, net of certain servicing
and trustee fees, are remitted to the certificateholders on a monthly basis in
the order of priority specified in the applicable Pooling Agreement. The Company
acts as servicer under the Pooling Agreement and is paid an amortized servicing
fee of .5% of the scheduled principal balance of those rates in the mortgage
pool on which the periodic payment of principal and interest is collected in
full. Under the terms of the Pooling Agreement, the Company has the obligation
to repurchase or replace mortgage loans in the pool with respect to which there
was a breach of the Company's representations and warranties contained in the
Pooling Agreement at the date of sale, which breach materially and adversely
affects the rights of certificateholders. In addition, the Company, as servicer,
is required to make advances of delinquent payments to the extent deemed
recoverable. However, the certificates are not obligations of the Company, the
subsidiary or any of their affiliates and the Company has no obligation to
repurchase or replace the mortgage loans solely due to delinquency.
On May 15, 1996, the Company sold, or otherwise absolutely transferred and
assigned, $13.2 million aggregate principal amount of mortgage notes receivable
(the "1996 Mortgage Pool") to a subsidiary of the Company and the subsidiary
sold the 1996 Mortgage Pool to a REMIC Trust (the "1996 REMIC Trust").
Simultaneous with the sale, the 1996 REMIC Trust issued three classes of Fixed
Rate REMIC Mortgage Pass-Through Certificates.
The 1996 REMIC Trust was comprised primarily of a pool of fixed and
adjustable rate first mortgage loans secured by property sold by the Company. On
May 15, 1996, the subsidiary sold the Class A Certificates issued under the
Pooling Agreement to an institutional investor for aggregate proceeds of
approximately $11.8 million in a private placement transaction and retained the
Class B and Class R Certificates. A portion of the proceeds from the transaction
was used to repay approximately $5.6 million of outstanding debt. An additional
$263,000 was used to fund a cash reserve account. The balance of the proceeds,
after payment of transaction expenses and fees, resulted in an increase of $5.8
million in the Company's unrestricted cash.
In addition to the sources of capital available under credit facilities
discussed above, the balance of the Company's unrestricted cash and cash
equivalents was $4.3 million at June 30, 1996. Based upon existing credit
relationships, the current financial condition of the Company and its operating
plan, management believes the Company has, or can obtain, adequate financial
resources to satisfy its anticipated capital requirements.
Uses of Capital.
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 obligations.
The Company's net inventory was $76.1 million at June 30, 1996 and $73.6
million at March 31, 1996. Management recognizes the inherent risk of carrying
increased levels of inventory. In addition, during the first quarter of fiscal
1997, management changed its focus for marketing certain of its inventories. In
conjunction with (i) a comprehensive review of inventories (ii) an analysis of
changing market and economic conditions and other factors affecting the
salability and estimated fair value of such assets and (iii) certain personnel
and administrative changes, management implemented a plan to accelerate the sale
of certain inventories managed under the Communities Division and Land Division.
These inventories are intended to be liquidated through a combination of bulk
sales and retail sales at reduced prices. As a result, management has determined
that inventories with a carrying value of $23.2 million should be written-down
by $8.2 million to reflect the estimated fair value, net of costs to sell. The
$8.2 million in provisions for the three months ended June 30, 1996 includes
$4.8 million for certain Communities Division inventories and $3.4 million for
certain Land Division inventories. Although no assurances can be given, the
inventories subject to write-down are expected to be fully liquidated within the
next 12 to 24 months. See "Results of Operations".
With respect to its inventory holdings, the Company requires capital to (i)
improve land intended for recreational, vacation, retirement or primary homesite
use by purchasers, (ii) develop timeshare property and (iii) fund its housing
operation in certain locations.
The Company estimates that the total cash required to complete preparation
for the retail sale of the consolidated inventories owned as of June 30, 1996 is
approximately $105.4 million, exclusive of the cost of any manufactured/modular
homes not yet acquired or under contract for sale, which the Company is unable
to determine at this time. The Company anticipates spending an estimated $42.7
million of the capital development requirements during the remainder of fiscal
1997. The allocation of anticipated cash requirements to the Company's operating
divisions is discussed below.
Land Division: The Company expects to spend $39.8 million to improve land
which typically includes expenditures for road and utility construction, surveys
and engineering fees, including $19.2 million to be spent during the remainder
of fiscal 1997.
Resorts Division: The Company expects to spend $63.6 million for building
materials, amenities and other infrastructure costs such as road and utility
construction, surveys and engineering fees, including $21.4 million to be spent
during the remainder of fiscal 1997. See earlier discussion of lines-of-credit
for the financing of Resorts Division property under "Sources of Capital".
Communities Division: The Company expects to spend $2.1 million for the
purchase of factory built manufactured homes currently under contract for sale,
building materials and other infrastructure costs, including road and utility
construction, surveys and engineering fees. The Company attempts to pre-qualify
prospective home purchasers and secures a purchase contract prior to commencing
unit construction to reduce standing inventory risk. The total cash requirement
of $2.1 million is expected to be spent during the remainder of fiscal 1997.
The table to follow outlines certain information with respect to the
estimated funds expected to be spent to fully develop property owned as of June
30, 1996. The real estate market is cyclical in nature and highly sensitive to
changes in national and regional economic conditions, including, among other
factors, levels of employment and discretionary disposable income, consumer
confidence, available financing and interest rates. No assurances can be given
that actual costs will not exceed those reflected in the table or that
historical gross margins which the Company has experienced will not decline in
the future as a result of changing economic and market conditions, reduced
consumer demand or other factors.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Geographic Region Land Resorts Communities Total
Southwest.................... $26,173,224 $ --- $ 9,866 $26,183,090
Rocky Mountains ............. 1,834,150 --- 109 1,834,259
West......................... 4,309,240 --- --- 4,309,240
Midwest...................... 134,665 40,325,962 --- 40,460,627
Southeast.................... 6,441,354 23,252,113 2,080,008 31,773,475
Northeast.................... 525 --- --- 525
Mid-Atlantic................. 873,130 873,130
--- ---
Total estimated spending..... 39,766,288 63,578,075 2,089,983 105,434,346
Net inventory at
June 30, 1996.............. 49,266,981 17,526,330 9,334,230 76,127,541
Total estimated cost basis
of fully developed
inventory.................. $89,033,269 $81,104,405 $11,424,213 $181,561,887
</TABLE>
The Company's net inventory summarized by division as of June 30, 1996 and
March 31, 1996 is set forth below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
June 30, 1996
--------------------------------------------------------------------
Geographic Region Land Resorts Communities Total
Southwest............ $22,176,456 $ --- $ 143,200 $22,319,656
Rocky Mountains ..... 9,363,612 --- 17,239 9,380,851
West ................ 6,348,634 --- --- 6,348,634
Midwest.............. 4,663,705 11,940,748 --- 16,604,453
Southeast............ 4,193,790 5,585,582 9,173,791 18,953,163
Northeast............ 704,045 --- --- 704,045
Mid-Atlantic......... 1,797,635 --- --- 1,797,635
Canada............... 19,104
19,104 --- ---
Totals............... $49,266,981 $17,526,330 $ 9,334,230 $76,127,541
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
March 31, 1996
--------------------------------------------------------------------
Geographic Region Land Resorts Communities Total
Southwest............ $15,118,191 $ --- $ 142,790 $15,260,981
Rocky Mountains ..... 9,299,344 --- 50,800 9,350,144
West ................ 5,923,972 --- --- 5,923,972
Midwest.............. 6,293,008 10,839,389 --- 17,132,397
Southeast............ 2,252,239 5,189,815 13,983,521 21,425,575
Northeast............ 1,982,895 --- --- 1,982,895
Mid-Atlantic......... 2,490,025 --- --- 2,490,025
Canada............... 29,025 --- --- 29,025
Totals............... $43,388,699 $16,029,204 $ 14,177,111 $73,595,014
</TABLE>
The Company attempts to maintain inventory at a level adequate to support
anticipated sales of real estate in its various operating regions. Significant
changes in the composition of the Company's inventories as of June 30, 1996 are
discussed below.
The Company's aggregate Land Division inventory increased by $5.9 million
from March 31, 1996 to June 30, 1996. The increase in land holdings is primarily
attributable to certain large acquisitions in the Southwestern and Southeastern
regions of the country, partially offset by provisions for the write-down of
certain inventories totaling $3.4 million. See Note 5 under Item I, Part 1 and
"Management's Discussion and Analysis - Results of Operations". In the
Southwest, the Company acquired 3,600 acres located in Texas for $6.5 million.
In the Southeast, the Company acquired 1,000 acres located in North Carolina for
$2.4 million. Both projects are intended to be used as primary and secondary
homesites and the term to sell-out is estimated to be five years. The Company
also acquired 4,450 acres in the Rocky Mountain region for $1.4 million. This
acquisition was partially offset by sales activity, including a large acreage
bulk sale for $705,000 which represented approximately 2,600 acres with a
carrying value of $421,000. Although no assurances can be given, management
expects that the carrying value of its land holdings in the Southwest, Rocky
Mountains, West, Midwest and Southeast will remain relatively constant during
fiscal 1997. At the same time, the Company plans to continue to reduce its land
holdings in the Northeastern and certain parts of the Mid-Atlantic regions due
to continued overall soft economic and real estate market conditions.
The Company's aggregate resort inventory increased by $1.5 million. The
increase is attributable to additional infrastructure development at each of the
Company's two Tennessee resorts and the Myrtle Beach, South Carolina resort,
partially offset by sales activity at the projects. Resorts Division inventory
as of June 30, 1996 consisted of land inventory of $6.0 million and unit
construction-in-progress and other amenities of $11.6 million. Resorts Division
inventory as of March 31, 1996 consisted of land inventory of $6.1 million and
unit construction-in-progress and other amenities of $9.9 million.
The Company's aggregate communities inventory decreased by $4.9 million
from March 31, 1996 to June 30, 1996. The decrease in land inventory which
resulted from sales activity and $4.8 million in provisions for losses was
offset by additional housing unit construction-in-progress associated with the
Company's manufactured and modular home developments in North Carolina. As
previously disclosed, the Company does not intend to acquire any additional
communities related inventories and present operations will be terminated
through a combination of retail sales efforts and the bulk sale of the remaining
assets. Communities Division inventory as of June 30, 1996, consisted of land
inventory of $4.9 million and $4.4 of housing unit construction-in-progress.
Communities Division inventory as of March 31, 1996, consisted of land inventory
of $10.5 million and $3.7 of housing unit construction-in-progress.
The Company offers financing of up to 90% of the purchase price of land
real estate sold to all purchasers of its properties who qualify for such
financing. The Company also offers financing of up to 90% of the purchase price
to timeshare purchasers. During the three months ended June 30, 1996 and the
three months ended July 2, 1995, the Company received 28% and 21%, respectively,
of its consolidated sales of real estate which closed during the period in the
form of Receivables. The increase in the percentage of sales financed by the
Company from the three months ended July 2, 1995 to the three months ended June
30, 1996 is primarily attributable to an increase in timeshare sales over the
same period; approximately 85% of timeshare sales has historically been
internally financed by the Company. Timeshare sales accounted for 21% of
consolidated sales of real estate during the three months ended June 30, 1996,
compared to 12% of consolidated sales during the three months ended July 2,
1995. Management had previously expected the percentage of sales financed by the
Company to increase due to the recent introduction of a fixed interest rate
program offered to qualified land customers. However, this program has had an
immaterial effect on the relationship between cash versus financed land sales
during the three months ended June 30, 1996.
At June 30, 1996, $17.6 million of Receivables were pledged as collateral
to secure Company indebtedness, while $11.8 million of Receivables were not
pledged or encumbered. At March 31, 1996, $27.0 million of Receivables were
pledged as collateral to secure Company indebtedness while $10.9 million of
Receivables were not pledged or encumbered. Proceeds from home sales under the
Company's Communities Division are received entirely in cash. The table below
provides further information on the Company's land and timeshare Receivables at
June 30, 1996 and March 31, 1996.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
(Dollars in Millions)
June 30, 1996 March 31, 1996
--------------------------------- ---------------------------------
Receivables Land Timeshare Total Land Timeshare Total
Encumbered......................... $ 7.5 $10.1 $17.6 $ 18.4 $ 8.6 $ 27.0
Unencumbered....................... 7.2 4.6 11.8 7.8 3.1 10.9
Total.............................. $14.7 $14.7 $29.4 $ 26.2 $11.7 $ 37.9
</TABLE>
The reduction in encumbered land Receivables from March 31, 1996 to June
30, 1996 was primarily attributable to the repayment of receivable-backed debt
and the sale of notes pursuant to the 1996 REMIC transaction. See "Sources of
Capital".
The table below provides information with respect to the loan-to-value
ratio of land and timeshare Receivables held by the Company at June 30, 1996 and
March 31, 1996. Loan-to-value ratio is defined as unpaid balance of the loan
divided by the contract purchase price.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
June 30, 1996 March 31, 1996
------------------------ ------------------------
Receivables Land Timeshare Land Timeshare
Loan-to-Value Ratio............. 54% 76% 63% 75%
</TABLE>
Because the Company sold a substantial portion of its less seasoned land
Receivables in connection with the 1996 REMIC, the related loan-to-value ratio
was lower at June 30, 1996 than at March 31, 1996.
In cases of default by a customer on a land mortgage note, the Company may
forgive the unpaid balance in exchange for title to the parcel securing such
note. Real estate acquired through foreclosure or deed in lieu of foreclosure is
recorded at the lower of fair value, less costs to dispose or balance of the
loan. Timeshare loans represent contracts for deed. Accordingly, no foreclosure
process is required. Following a default on a timeshare note, the purchaser
ceases to have any right to use the applicable unit and the timeshare interval
can be resold to a new purchaser.
Reserve for loan losses as a percentage of period end notes receivable was
3.1% and 2.4% at June 30, 1996 and March 31, 1996, respectively. The adequacy of
the Company's reserve for loan losses is determined by management and reviewed
on a regular basis considering, among other factors, historical frequency of
default, loss experience, present and expected economic conditions as well as
the quality of Receivables. The increase in the reserve for loan losses as a
percent of period end loans is primarily the result of a reduction in
Receivables held due to the REMIC transaction. See "Sources of Capital".
At June 30, 1996, approximately 8% or $2.5 million of the aggregate $30.6
million principal amount of loans which were held by the Company or by third
parties under financings for which the Company had a recourse liability, were
more than 30 days past due. Of the $30.6 million principal amount of loans,
$29.4 million were held by the Company, while approximately $1.2 million were
associated with programs under which the Company has a limited recourse
liability. In most cases of limited recourse liability, the recourse to the
Company terminates when the principal balance of the loan becomes 70% or less of
the original selling price of the property underlying the loan. At March 31,
1996, approximately 7% or $2.8 million of the aggregate $39.2 million principal
amount of loans which were held by the Company or by third parties under
financings for which the Company had a recourse liability, were more than 30
days past due. Factors contributing to delinquency (including the economy and
levels of unemployment in some geographic areas) are believed to be similar to
those experienced by other lenders. While the dollar amount of delinquency
declined slightly from March 31, 1996 to June 30, 1996, the amount of
Receivables decreased substantially. This caused an increase in the delinquency
rate as a percent of Receivables. The reduction in Receivables was the result of
the sale of notes under the 1996 REMIC. See "Sources of Capital".
In July, 1996, the Company's Board of Directors authorized the repurchase
of up to 500,000 shares of the Company's common stock in the open market from
time to time subject to the Company's financial condition and liquidity, the
terms of its credit agreements, market conditions and other factors. As of July
31, 1996, 27,800 shares had been repurchased at an aggregate cost of $89,825.
Results of Operations.
Three Months Ended - June 30, 1996
The following discussion should be read in conjunction with the
Consolidated Financial Statements and related Notes thereto included in the
Company's Annual Report to Shareholders for the fiscal year ended March 31,
1996. See also Note 5 under Part I, Item 1 and the discussion of provisions for
losses later herein.
The real estate market is cyclical in nature and highly sensitive to
changes in national and regional economic conditions, including, among other
factors, levels of employment and discretionary disposable income, consumer
confidence, available financing and interest rates. Management believes that
general economic conditions have strengthened in many of its principal markets
of operation with the exception of the Northeast, and certain areas of the
Mid-Atlantic region. A downturn in the economy in general or in the market for
real estate could have a material adverse affect on the Company.
The following tables set forth selected financial data for the business
units comprising the consolidated operations of the Company for the three months
ended June 30, 1996 and July 2, 1995.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Three Months Ended June 30, 1996
Land Communities Resorts(3) Total
Sales of real $20,557 100.0% $2,210 100.0% $6,015 100.0% $28,782 100.0%
estate...
Cost of real estate
sold................. 10,248 49.9% 2,151 97.3% 2,055 34.2% 14,454 50.2%
Gross profit......... 10,309 50.1% 59 2.7% 3,960 65.8% 14,328 49.8%
Field selling,
general and
administrative 6,392 31.1% 451 20.4% 3,949 65.7% 10,792 37.5%
expense (1)..........
Field operating
profit (loss) (2).... $3,917 19.0% $ (392) (17.7)% $ 11 .1% $3,536 12.3%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Three Months Ended July 2, 1995
Land Communities Resorts (3) Total
Sales of real $18,091 100.0% $3,618 100.0% $2,932 100.0% $24,641 100.0%
estate...
Cost of real estate
sold................. 8,111 44.8% 3,188 88.1% 892 30.4% 12,191 49.5%
Gross profit......... 9,980 55.2% 430 11.9% 2,040 69.6% 12,450 50.5%
Field selling,
general and
administrative
expense (1).......... 5,999 33.2% 581 16.1% 1,731 59.1% 8,311 33.7%
Field operating
profit (loss) (2).... $3,981 22.0% $ (151) (4.2)% $ 309 10.5% $4,139 16.8%
</TABLE>
(1) General and administrative expenses attributable to corporate overhead
have been excluded from the tables.
(2) The tables presented above outline selected financial data.
Accordingly, provisions for losses, interest income, interest expense, other
income and income taxes have been excluded.
(3) The Resorts Division had $382,000 and $89,000 of operating profits
which were deferred under the percentage of completion method of accounting as
of June 30, 1996 and July 2, 1995, respectively.
Consolidated sales of real estate increased 14% to $28.8 million for the
three months ended June 30, 1996 compared to $24.6 million for the three months
ended July 2, 1995. The discussion and tables to follow set forth additional
information on the business units comprising the consolidated operating results.
See Contracts Receivable and Revenue Recognition under Note 2 to the
Consolidated Financial Statements included under Part I, Item 1.
Land Division
The following table sets forth certain information for sales of parcels
associated with the Company's Land Division for the periods indicated, before
giving effect to the percentage of completion method of accounting. Accordingly,
the application of multiplying the number of parcels sold by the average sales
price per parcel yields aggregate sales different than that reported on the
earlier table (outlining sales revenue by business unit after applying
percentage of completion accounting to sales transactions). See Contracts
Receivable and Revenue Recognition under Note 2 to the Consolidated Financial
Statements included under Part I, Item 1.
<TABLE>
<CAPTION>
<S> <C> <C>
Three Months Ended
June 30, July 2,
1996 1995
Number of parcels sold......................... 574 495
Average sales price per parcel................. $35,273 $ 36,547
Average sales price per parcel excluding one large
acreage bulk sale in the Rocky Mountains in the
current period................................. $34,104 $36,547
Gross margin................................... 50% 55%
</TABLE>
The table set forth below outlines the numbers of parcels sold and the
average sales price per parcel for the Company's Land Division by geographic
region for the fiscal periods indicated.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended
June 30, 1996 July 2, 1995
Average Average
Number of Sales Price Number of Sales Price
Geographic Region Parcels Sold Per Parcel Parcels Sold Per Parcel
Southwest......... 290 $ 36,575 222 $ 42,673
Rocky Mountains. 40 $ 54,532 48 $ 33,387
Midwest........... 71 $ 22,398 62 $ 38,674
Southeast......... 99 $ 36,830 41 $ 56,486
West.............. 2 $125,000 --- $ ---
Northeast......... 18 $ 14,481 47 $ 8,494
Mid-Atlantic...... 54 $ 31,624 68 $ 27,099
Canada............ --- $ --- 7 $ 8,412
Totals............ 574 $ 35,273 495 $ 36,547
</TABLE>
The number of parcels sold in the Southwest increased during the current
period due to more sales made from the Company's Houston, Texas and Dallas,
Texas projects than during the prior year quarter. The average sales price per
parcel in the Southwest decreased during the current period due to a change in
the sales mix resulting in fewer waterfront parcel sales (which traditionally
have supported higher retail sales prices).
The number of parcels sold in the Rocky Mountains region decreased during
the current period due to fewer sales from the Company's Colorado properties,
partially offset by more sales in Idaho and Montana. The average sales price per
parcel in the Rocky Mountains region increased during the current quarter
primarily due to the bulk sale of acreage in Colorado representing 2,600 acres.
The bulk sale totaled $705,000 and yielded a gross margin of 40%. The average
sales price per parcel excluding the bulk sale was $37,955.
The number of parcels sold in the Midwest increased from the Company's two
Tennessee lake properties. However, the current quarter reflects a greater
number of less expensive parcel sales.
In the Southeast, the Company sold a greater number of less expensive
parcels from its North Carolina properties during the current quarterly period.
In the West, the Company sold two parcels from its Arizona property. The
Company acquired the acreage outside of Prescott in fiscal 1996 and sales
commenced in the fourth fiscal quarter of last year.
The Company continues to liquidate its land inventory in the Northeast,
Canada and certain parts of the Mid-Atlantic region. The Company has reduced its
presence in these areas in response to economic conditions and reduced consumer
demand. See discussion of provisions for losses later herein.
The decrease in the average gross margin for the Land Division from 55% for
the quarter last year to 50% for the current quarter was attributable to (i) a
reduction in gross margins in the Rocky Mountains region from 55% for the
quarter last year to 42% for the current quarter (ii) a reduction in gross
margins in the Company's New Mexico property from 53% for the quarter last year
to 49% for the current quarter and (iii) an average gross margin of 30% on the
Company's western property located in Arizona. The Company has experienced
certain cost over runs on phase I of the multi-phase Arizona project. There are
11 lots remaining in phase I. Although no assurances can be give, the remaining
phases of the project are expected to produce significantly higher gross
margins.
The Company's Investment Committee, consisting of executive officers,
approves all property acquisitions. In order to be approved for purchase by the
Committee, all land properties under contract for purchase are expected to
achieve certain minimum economics including a minimum gross margin.
The sale of certain inventory acquired prior to the formation of the
Investment Committee and sales of inventory reacquired through foreclosure or
deed in lieu of foreclosure will continue to adversely affect overall gross
margins. Specifically, the Company anticipates little or no gross margin on the
sale of the remaining $704,000 of net inventory in the Northeast. During the
three months ended June 30, 1996, the Company recorded provisions for the
write-down of certain land inventories. See Note 5 under Part I, Item 1 and
discussion of provision for losses later herein. In addition, the Company has
experienced lower gross margins during the current quarterly period in the Rocky
Mountains region (which includes Colorado, Idaho and Montana). The Company has
experienced gross margins generally ranging from 40% to 50% on its Colorado
projects and gross margins are generally not expected to exceed this range on
the remaining Colorado inventories. The Company also owns a land property in New
Mexico (classified under the Southwest region in the earlier tables). The
Company expects the multi-phase project to generate an average gross margin of
42% over its sell-out. No assurances can be given that the Company can maintain
historical or anticipated gross margins.
Resorts Division
During the three months ended June 30, 1996 and July 2, 1995, sales of
timeshare intervals contributed $6.0 million or 21% and $2.9 million or 12%,
respectively, of the Company's total consolidated revenues from the sale of real
estate.
The following table sets forth certain information for sales of intervals
associated with the Company's Resorts Division for the periods indicated, before
giving effect to the percentage of completion method of accounting. Accordingly,
the application of multiplying the number of intervals sold by the average sales
price per interval yields aggregate sales different than that reported on the
earlier table (outlining sales revenue by business unit after applying
percentage of completion accounting to sales transactions).
<TABLE>
<CAPTION>
<S> <C> <C>
Three Months Ended
June 30, July 2,
1996 1995
Number of intervals sold.............. 848 308
Average sales price per interval...... $8,108 $7,750
Gross Margin.......................... 66% 70%
</TABLE>
The number of timeshare intervals sold increased to 848 for the current
quarter compared to 308 for the comparable quarter of the previous fiscal year.
During the prior year, all interval sales were generated from the Company's
first resort in Gatlinburg, Tennessee. During the current year quarter, 370
intervals were sold from the Gatlinburg resort, an additional 259 intervals were
sold from the Company's second resort in neighboring Pigeon Forge, Tennessee and
219 intervals were sold from the Company's resort in Myrtle Beach, South
Carolina .
Gross margins on interval sales decreased from 70% for the first quarter of
last year to 66% for the current quarter. As indicated above, all sales from the
prior year quarter were from the Company's Gatlinburg, Tennessee resort. During
the current quarter, gross margins from the Company's resorts in Gatlinburg,
Pigeon Forge and Myrtle Beach were 63%, 71% and 70%, respectively. The reduction
in gross margins from the Company's Gatlinburg, Tennessee resort was
attributable to cost over-runs incurred on certain unit construction and
amenities of the project.
Communities Division
During the three months ended June 30, 1996, the Company's Communities
Division contributed $2.2 million in sales revenue, or approximately 8% of total
consolidated revenues from the sale of real estate. During the three months
ended July 2, 1995, the Communities Division generated $3.6 million in sales
revenue, or approximately 15% of total consolidated revenues from the sales of
real estate.
The following table sets forth certain information for sales associated
with the Company's Communities Division for the periods indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Three Months Ended
June 30, July 2,
1996 1995
Number of homes/lots sold.................... 30 39
Average sales price.......................... $73,659 $92,783
Gross margin................................. 3% 12%
</TABLE>
The reduction in the average sales price was primarily attributable to a
greater number of lot-only sales and a lower number of site-built homes in the
current year quarter. The $2.2 million in current quarter sales was comprised of
17 manufactured homes with an average sales price of $81,448, an additional 2
site-built homes with an average sales price of $265,950 and 11 sales of lots at
an average sales price of $26,659. The $3.6 million in prior year sales was
comprised of 22 manufactured homes with an average sales price of $72,433, an
additional 7 site-built homes with an average sales price of $255,416 and 10
sales of lots at an average sales price of $23,708. The reduction in the gross
margin is attributable to the Company's manufactured home development in North
Carolina. During the three months ended June 30, 1996, the Company recorded
provisions for the write-down of certain communities related inventories. See
Note 5 under Part I, Item 1 and discussion of provision for losses later herein.
The tables set forth below outline sales by geographic region and division
for the three months ended on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Three Months Ended June 30, 1996
Geographic Region Land Communities Resorts Total %
Southwest............ $10,917,854 $ --- $ --- $10,917,854 37.9%
Rocky Mountains...... 2,185,264 133,750 --- 2,319,014 8.1%
Midwest.............. 1,590,255 --- 5,372,240 6,962,495 24.2%
Southeast............ 3,646,178 2,076,010 642,320 6,364,508 22.1%
West................. 250,000 --- --- 250,000 .9%
Northeast............ 260,650 --- --- 260,650 .9%
Mid-Atlantic......... 1,707,676 --- --- 1,707,676 5.9%
Canada............... --- ---
--- --- ---
Totals............... $20,557,877 $2,209,760 $6,014,560 $28,782,197 100.0%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Three Months Ended July 2, 1995
Geographic Region Land Communities Resorts Total %
Southwest............ $9,473,480 $ 526,617 $ --- $10,000,097 40.6%
Rocky Mountains...... 1,602,591 101,950 --- 1,704,541 6.9%
Midwest.............. 2,733,271 --- 2,932,185 5,665,456 23.0%
Southeast............ 1,980,430 2,989,946 --- 4,970,376 20.2%
Northeast............ 399,200 --- --- 399,200 1.6%
Mid-Atlantic......... 1,842,708 --- --- 1,842,708 7.5%
Canada............... 58,886 --- --- 58,886 .2%
Totals............... $18,090,566 $3,618,513 $2,932,185 $24,641,264 100.0%
</TABLE>
Interest income decreased 34% to $1.4 million for the three months ended
June 30, 1996 compared to $2.2 million for the three months ended July 2, 1995.
The Company's interest income is earned from its Receivables, securities
retained pursuant to REMIC financings and cash and cash equivalents. The table
set forth below outlines interest income earned from assets for the periods
indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Three Months Ended
June 30, July 2,
Interest income and other: 1996 1995
Receivables held and servicing fees
from whole-loan sales.......................... $ 1,063,473 $1,434,062
Securities retained in connection with REMIC
financings including REMIC servicing fee....... 331,590 689,536
Loss on REMIC transactions........................ ( 39,202) ---
Cash and cash equivalents......................... 88,604 63,337
Totals............................................ $1,444,465 $2,186,935
</TABLE>
The table to follow sets forth the average interest bearing assets for the
periods indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Three Months Ended
June 30, July 2,
Average interest bearing assets 1996 1995
Receivables ...................................... $ 32,053,220 $ 36,520,248
Securities retained in connection with REMIC
financings ...................................... 10,676,925 13,122,104
Cash and cash equivalents......................... 8,674,336 7,332,844
Totals............................................ $ 51,404,481 $ 56,975,196
</TABLE>
The Company completed its most recent REMIC transaction in May, 1996. The
$13.2 million of loans comprising the Mortgage Pool were previously owned by the
Company. Of the $13.2 million of notes receivable, $7.1 were pledged to an
institutional lender and $6.1 million were unencumbered. Because of more
favorable terms offered under the 1996 REMIC, the Company retired its
indebtedness associated with the pledged Receivables. As a result of the REMIC
transaction, the Company recognized less interest income during the current
quarter due to lower average Receivables held. See Note 6 to the Consolidated
Financial Statements included under Part I, Item 1. See also discussion of
interest expense below.
In addition to the REMIC transaction completed in May, 1996, the Company
completed a REMIC transaction in July, 1995. The $68.1 million of loans
comprising the Mortgage Pool were previously owned by the REMIC trust
established by the Company in 1992 ($46.8 million) or pledged by a receivables
subsidiary, or the Company, to an institutional lender ($21.3 million). Because
of more favorable terms offered under the 1995 REMIC, the Company retired the
securities issued pursuant to the 1992 REMIC and included substantially all of
the Receivables in the current year REMIC transaction. Accordingly, the average
securities held for the quarter ended June 30, 1996 was lower than the
comparable quarter of the prior year.
S,G&A expense totaled $13.1 million and $9.9 million for the three months
ended June 30, 1996 and July 2, 1995, respectively. A significant portion of
S,G&A expenses is variable relative to sales and profitability levels, and
therefore, increases with growth in sales of real estate. As a percentage of
sales of real estate, S,G&A expenses increased from 40% for the quarter last
year to 45% for the current year quarter. The increase as a percentage of sales
was largely the result of higher S,G&A expenses for the Communities and Resorts
Division. The table to follow sets forth comparative S,G&A expense information
for the periods indicated.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Three Months Ended June 30, 1996
Land Communities Resorts Total
Sales of real estate...... $20,557 100.0% $2,210 100.0% $6,015 100.0% $28,782 100.0%
Field selling,
general and administrative
expense (1)............... 6,392 31.1% 451 20.4% 3,949 65.7% 10,792 37.5%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Three Months Ended July 2, 1995
Land Communities Resorts Total
Sales of real estate...... $18,091 100.0% $3,618 100.0% $2,932 100.0% $24,641 100.0%
Field selling,
general and administrative
expense (1)............... 5,999 33.2% 581 16.1% 1,731 59.1% 8,311 33.7%
</TABLE>
(1) Corporate general and administrative expenses of $2.3 million and $1.6
million for the three months ended June 30, 1996 and July 2, 1995 have been
excluded from the table.
Interest expense totaled $1.3 million and $2.0 million for the three months
ended June 30, 1996 and July 2, 1995, respectively. The 45% decrease in interest
expense for the current period was primarily attributable to an increase in the
amount of interest capitalized to inventory. The Company capitalized interest
totaling $255,000 during the three months last year, compared to $603,000 for
the three months this year. The increase in capitalized interest is the direct
result of the Company acquiring certain inventory which requires significant
development with longer sell-out periods. In addition to the favorable impact
from increased capitalized interest, the average outstanding indebtedness for
the current quarterly period declined over the comparable quarter last year. The
effective cost of borrowing also declined from 11.3% for the quarter ending July
2, 1995 to 10.2% for the quarter this year. The lower average outstanding
indebtedness was primarily attributable to the retirement of debt pursuant to
the Company's 1996 REMIC transaction. See Note 6 to the Consolidated Financial
Statements included under Part I, Item 1. The table set forth below outlines the
components of interest expense for the periods indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Three Months Ended
June 30, July 2,
Interest expense on: 1996 1995
Receivable-backed notes payable................... $ 419,118 $572,169
Lines of credit and notes payable................. 532,399 615,639
8.25% convertible subordinated debentures......... 716,492 716,492
Other financing costs............................. 223,906 340,923
Capitalization of interest........................ (602,711) (255,085)
Totals............................................ $1,289,204 $1,990,138
</TABLE>
The table to follow sets forth the average indebtedness for the periods
indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Three Months Ended
June 30, July 2,
Average indebtedness 1996 1995
Receivable-backed notes payable................... $ 15,724,081 $ 20,557,812
Lines of credit and notes payable................. 23,517,121 23,685,552
8.25% convertible subordinated debentures......... 34,739,000 34,739,000
Totals............................................ $ 73,980,202 $ 78,982,364
</TABLE>
During the first quarter of fiscal 1997, management changed its focus for
marketing certain of its inventories. In conjunction with (i) a comprehensive
review of inventories (ii) an analysis of changing market and economic
conditions and other factors affecting the salability and estimated fair value
of such assets and (iii) certain personnel and administrative changes,
management implemented a plan to accelerate the sale of certain inventories
managed under the Communities Division and Land Division. These inventories are
intended to be liquidated through a combination of bulk sales and retail sales
at reduced prices. As a result, management has determined that inventories with
a carrying value of $23.2 million should be written-down by $8.2 million to
reflect the estimated fair value, net of costs to sell. The $8.2 million in
provisions for the three months ended June 30, 1996 includes $4.8 million for
certain Communities Division inventories and $3.4 million for certain Land
Division inventories. Although no assurances can be given, the inventories
subject to write-down are expected to be fully liquidated within the next 12 to
24 months.
The Company's Communities Division primarily consists of three North
Carolina properties acquired in 1988. The Company began marketing home/lot
packages in 1995 to accelerate sales at the properties. However, the projects
have been slow-moving and yielding low gross profits and little to no operating
profits. Therefore, the Company has adopted a plan to aggressively pursue
opportunities for the bulk sale of a portion of these assets and has reduced
retail selling prices of certain home/lot packages to increase sales activity.
As previously disclosed, the Company does no plan to acquire any additional
communities related inventories.
A majority of the Land Division parcels subject to write-down are scattered
lots acquired through foreclosure or deedback in lieu of foreclosure as well as
odd lots from former projects. Most are located in the Northeast and
Mid-Atlantic region of the country where the Company continues to experience
reduced consumer demand due to slow economic conditions and increased
competition in certain areas of these regions due to an over-supply of similar
land inventories being marketed by smaller, local operations. The write-downs
accommodate retail price reductions which management believes will stimulate
sales activity.
The Company recorded provisions for loan losses totaling $183,000 for the
three months ended June 30, 1996 in addition to a provision for $86,000 for real
estate taxes and other costs associated with delinquent customers. During the
three months ended July 2, 1995, the Company recorded provisions for loan losses
of $155,000. During the three months ended June 30, 1996 and July 2, 1995, the
Company charged-off $168,000 and $125,000, respectively, to its reserve for loan
losses. An additional $37,000 was charged-off against the reserve for advanced
real estate taxes and other costs for the three months ended June 30, 1996. No
provision or charge-offs for advanced real estate taxes was recorded for the
three months ended July 2, 1995. The Company's internal financing does not
require customers to escrow real estate taxes. Losses associated with this
practice have not been material to date.
Income (loss) from consolidated operations was ($7.0) million and $2.6
million for the three months ended June 30, 1996 and July 2, 1995, respectively.
The reduction for the current quarter was primarily the result of lower gross
margins, higher S,G&A expense and increased provisions for losses.
Gains and losses from sources other than normal operating activities of the
Company are reported separately as other income (expense). Other income for the
three months ended June 30, 1996 and July 2, 1995 was not material to the
Company's results of operations.
The Company recorded a tax benefit of 41% of the pre-tax loss for the
quarter ended June 30, 1996. The Company recorded a tax provision of 41% of
pre-tax income for the quarter ended July 2, 1995.
Net income (loss) was (4.1) million and $1.6 million for the three months
ended June 30, 1996 and July 2, 1995, respectively. As discussed earlier, the
reduction for the current quarter was primarily the result of lower gross
margins, higher S,G&A expense and increased provisions for losses.
<PAGE>
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.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders held on July 25, 1996, the
shareholders voted to fix the number of Directors of the Company at six and
elect the directors named in the proxy materials dated June 20, 1996. The
results of voting were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Shares Voted
---------------- ----------------- ----------------- ----------------
For Against Abstain Total
Fix number of directors of the
Company for the ensuing year at six 17,418,608 429,158 38,334 17,886,100
Elect each of the following persons
as directors of the Company:
Joseph C. Abeles 17,445,476 440,624 --- 17,886,100
George F. Donovan 17,537,130 348,970 --- 17,886,100
Ralph A. Foote 17,532,276 353,824 --- 17,886,100
Frederick M. Myers 17,449,632 436,468 --- 17,886,100
Stuart A. Shikiar 17,434,721 451,379 --- 17,886,100
Bradford T. Whitmore 17,455,445 430,655 --- 17,886,100
</TABLE>
In addition to the shares voted as outlined above, there were 2,654,989
non-votes.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K dated May 15, 1996 under item 5
which reported a private placement sale transaction. See Note 6 to the
Consolidated Financial Statements included under
Items I, Part 1. The Company also filed a report on Form 8-K dated July 11,
1996 which reported the approval by the Board of Directors to repurchase up to
500,000 shares of Common Stock.
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: August 14, 1996 By: /S/ GEORGE F. DONOVAN
George F. Donovan
President and Chief Executive Officer
Date: August 14, 1996 By: /S/ ALAN L. MURRAY
Alan L. Murray
Treasurer and Chief Financial Officer
(Principal Financial Officer)
Date: August 14, 1996 By: /S/ MARYJO WIEGAND
MaryJo Wiegand
Vice President and Controller
(Principal Accounting Officer)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Mar-30-1997
<PERIOD-START> Apr-01-1996
<PERIOD-END> Jun-30-1996
<CASH> 13,075,183
<SECURITIES> 11,170,795
<RECEIVABLES> 40,088,582
<ALLOWANCES> 911,280
<INVENTORY> 76,127,541
<CURRENT-ASSETS> 5,800,982
<PP&E> 10,477,501
<DEPRECIATION> 5,054,753
<TOTAL-ASSETS> 152,597,111
<CURRENT-LIABILITIES> 21,650,000
<BONDS> 34,739,000
0
0
<COMMON> 205,735
<OTHER-SE> 60,442,298
<TOTAL-LIABILITY-AND-EQUITY> 152,597,111
<SALES> 28,782,197
<TOTAL-REVENUES> 30,226,662
<CGS> 14,453,598
<TOTAL-COSTS> 14,453,598
<OTHER-EXPENSES> 13,052,549
<LOSS-PROVISION> 8,469,053
<INTEREST-EXPENSE> 1,289,204
<INCOME-PRETAX> (6,989,598)
<INCOME-TAX> (2,865,735)
<INCOME-CONTINUING> (4,123,863)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,123,863)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
</TABLE>
