<PAGE> 1
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 September 27, 1998
or
[ ] - Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-19292
BLUEGREEN 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 Blue Lake Drive, Boca Raton, Florida 33431
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(561) 912-8000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(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 November 6, 1998, there were 23,870,620 shares issued, 597,700
treasury shares and 23,272,920 shares of Common Stock, $.01 par value per share,
outstanding.
<PAGE> 2
BLUEGREEN CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
PART I - FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS PAGE
<S> <C>
CONDENSED CONSOLIDATED BALANCE SHEETS AT
MARCH 29, 1998 AND SEPTEMBER 27, 1998 ....................................... 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - THREE MONTHS
ENDED SEPTEMBER 28, 1997 AND SEPTEMBER 27, 1998 ............................. 4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - SIX MONTHS
ENDED SEPTEMBER 28, 1997 AND SEPTEMBER 27, 1998 ............................. 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - SIX MONTHS
ENDED SEPTEMBER 28, 1997 AND SEPTEMBER 27, 1998 ............................. 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 ............................................................ 31
ITEM 3. DEFAULTS UPON SENIOR SECURITIES .................................................. 31
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .............................. 31
ITEM 5. OTHER INFORMATION ................................................................ 31
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ................................................. 31
SIGNATURES.................................................................................... 32
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BLUEGREEN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 29, SEPTEMBER 27,
1998 1998
---- ----
(NOTE) (UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents (including restricted cash of
approximately $13.2 million and $15.6 million at
March 29, 1998 and September 27, 1998, respectively) $ 31,065 $ 70,320
Contracts receivable, net 15,484 13,900
Notes receivable, net 79,785 67,521
Investment in securities 10,941 14,264
Inventory, net 107,198 126,074
Property and equipment, net 17,223 22,426
Other assets 11,267 19,135
--------- ---------
TOTAL ASSETS $ 272,963 $ 333,640
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable $ 5,265 $ 5,505
Accrued liabilities and other 19,023 21,318
Receivable-backed notes payable 48,694 12,000
Lines-of-credit and notes payable 72,396 17,970
Deferred income 8,392 7,809
Deferred income taxes 8,011 13,519
10.50% senior secured notes payable -- 110,000
8.00% convertible subordinated notes payable to related
parties 6,000 6,000
8.25% convertible subordinated debentures 34,739 34,371
--------- ---------
TOTAL LIABILITIES 202,520 228,492
Minority interest 450 321
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,000 shares authorized;
none issued -- --
Common stock, $.01 par value, 90,000 shares
authorized; 20,761 and 23,870 shares issued at March 29, 1998
and September 27, 1998, respectively 208 239
Additional paid-in capital 71,932 97,246
Treasury stock, 450 common shares at cost at both
March 29, 1998 and September 27, 1998 (1,389) (1,389)
Net unrealized gains on investments available-for-sale, net
of income taxes 405 377
Retained earnings (accumulated deficit) (1,163) 8,354
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 69,993 104,827
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 272,963 $ 333,640
========= =========
</TABLE>
Note: The condensed consolidated balance sheet at March 29, 1998 has been
derived from the audited consolidated financial statements at that date but does
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
BLUEGREEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------
SEPTEMBER 28, SEPTEMBER 27,
1997 1998
---- ----
<S> <C> <C>
REVENUES:
Sales of real estate $ 45,320 $ 61,403
Other resort and golf operations revenue -- 3,470
Interest income 2,233 3,487
-------- --------
47,553 68,360
COSTS AND EXPENSES:
Cost of real estate sold 21,418 21,539
Cost of other resort and golf operations -- 3,025
Selling, general and administrative expense 19,033 30,985
Interest expense 1,999 3,362
Provisions for losses 469 599
-------- --------
42,919 59,510
-------- --------
Income from operations 4,634 8,850
Other income 61 5
-------- --------
Income before income taxes 4,695 8,855
Provision for income taxes 1,925 3,542
Minority interest in loss of consolidated subsidiary -- (147)
-------- --------
NET INCOME $ 2,770 $ 5,460
======== ========
EARNINGS PER COMMON SHARE:
Basic $ 0.14 $ 0.25
======== ========
Diluted $ 0.13 $ 0.21
======== ========
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES:
Basic 20,164 21,915
======== ========
Diluted 24,966 28,965
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
BLUEGREEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------------
SEPTEMBER 28, SEPTEMBER 27,
1997 1998
---- ----
<S> <C> <C>
REVENUES:
Sales of real estate $ 78,412 $ 117,060
Other resort and golf operations revenue -- 5,946
Interest income 4,134 7,249
--------- ---------
82,546 130,255
COSTS AND EXPENSES:
Cost of real estate sold 36,574 42,407
Cost of other resort and golf operations -- 5,277
Selling, general and administrative expense 33,916 58,553
Interest expense 3,786 7,106
Provisions for losses 780 892
--------- ---------
75,056 114,235
--------- ---------
Income from operations 7,490 16,020
Other income 153 2,431
--------- ---------
Income before income taxes 7,643 18,451
Provision for income taxes 3,134 7,381
Minority interest in loss of consolidated subsidiary -- (129)
--------- ---------
Income before extraordinary item 4,509 11,199
Extraordinary loss on early extinguishment of debt, net of
income taxes -- (1,682)
--------- ---------
NET INCOME $ 4,509 $ 9,517
========= =========
EARNINGS PER COMMON SHARE:
Basic:
Income before extraordinary item $ 0.22 $ 0.53
Extraordinary loss on early extinguishment of debt,
net of income taxes -- (0.08)
--------- ---------
Net income $ 0.22 $ 0.45
========= =========
Diluted:
Income before extraordinary item $ 0.22 $ 0.43
Extraordinary loss on early extinguishment of debt,
net of income taxes -- (0.06)
--------- ---------
Net income $ 0.22 $ 0.37
========= =========
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES:
Basic 20,158 21,132
========= =========
Diluted 24,733 28,235
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
BLUEGREEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------------
SEPTEMBER 28, SEPTEMBER 27,
1997 1998
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ..................................................... $ 4,509 $ 9,517
Adjustments to reconcile net income to net
cash flow provided by operating activities:
Extraordinary loss on early extinguishment of debt,
net of taxes .......................................... -- 1,682
Minority interest in loss of consolidated subsidiary ..... -- (129)
Depreciation and amortization ............................ 838 1,271
Gain on sale of notes receivable ......................... -- (2,053)
Gain on sale of property and equipment ................... -- (276)
Provisions for losses .................................... 781 892
Provision for deferred income taxes ...................... 3,133 7,381
Interest accretion on investment in securities ........... (682) (998)
Proceeds from sale of notes receivable ................... -- 31,305
Proceeds from borrowings collateralized by notes
receivable ............................................ 17,501 2,671
Payments on borrowings collateralized by notes receivable (6,461) (2,180)
CHANGE IN OPERATING ASSETS AND LIABILITIES:
Contracts receivable ........................................ (2,393) 1,585
Notes receivable ............................................ (16,885) (26,372)
Inventory ................................................... 10,094 (14,735)
Other assets ................................................ (1,206) (3,127)
Accounts payable, accrued liabilities and other ............. 5,876 2,037
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES ......................... 15,105 8,471
--------- ---------
INVESTING ACTIVITIES:
Purchases of property and equipment ............................ (1,897) (6,697)
Sales of property and equipment ................................ -- 898
Cash received from investment in securities .................... 1,057 786
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES ............................. (840) (5,013)
--------- ---------
FINANCING ACTIVITIES:
Proceeds from issuance of 10.50% senior secured notes payable .. -- 110,000
Proceeds from issuance of 8% convertible subordinated notes
payable ..................................................... 6,000 --
Proceeds from borrowings under line-of-credit facilities
and other notes payable ..................................... 24,726 --
Payments under line-of-credit facilities and other notes payable (31,348) (93,720)
Payment of debt issuance costs ................................. (710) (5,183)
Payments for treasury stock .................................... (19) --
Proceeds from issuance of Common Stock ......................... -- 24,345
Proceeds from exercise of employee and director stock options .. 159 355
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES ......................... (1,192) 35,797
--------- ---------
Net increase in cash and cash equivalents ......................... 13,073 39,255
Cash and cash equivalents at beginning of period .................. 11,597 31,065
--------- ---------
Cash and cash equivalents at end of period ........................ 24,670 70,320
Restricted cash and cash equivalents at end of period ............. (17,301) (15,595)
--------- ---------
Unrestricted cash and cash equivalents at end of period ........... $ 7,369 $ 54,725
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE> 7
BLUEGREEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -- CONTINUED
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------------
SEPTEMBER 28, SEPTEMBER 27,
1997 1998
---- ----
<S> <C> <C>
SUPPLEMENTAL SCHEDULE OF NON-CASH OPERATING, INVESTING
AND FINANCING ACTIVITIES
Inventory acquired through financing ................. $ 10,345 $ 500
============ ======
Inventory acquired through foreclosure or
deedback in lieu of foreclosure ..................... $ 1,503 $3,641
============ ======
Property and equipment acquired through financing..... $ 812 $ --
============ ======
Conversion of 8.25% convertible subordinated
debentures into common stock ....................... $ -- $ 368
============ ======
Sale of notes receivable in exchange for investment
in securities ...................................... $ -- $3,160
============ ======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE> 8
BLUEGREEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1998
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles 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 generally accepted accounting principles 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 six-month periods ended September 27, 1998 are not
necessarily indicative of the results to be expected for the fiscal year ending
March 28, 1999. For further information, refer to the consolidated financial
statements and notes thereto included in Bluegreen Corporation's (the Company's)
Annual Report to Shareholders for the fiscal year ended March 29, 1998.
ORGANIZATION
The Company is a leading marketer of vacation and residential lifestyle choices
through its resort and residential land businesses which are located
predominantly in the Southeastern, Southwestern and Midwestern United States.
The Company's resort business (the Resorts Division) strategically acquires,
develops and markets Timeshare Interests in resorts generally located in
popular, high-volume, "drive-to" vacation destinations. Timeshare Interests
typically entitle the buyer to a fully-furnished vacation residence for an
annual one-week period in perpetuity (Timeshare Interests). The Company
currently markets and sells Timeshare Interests in nine resorts located in the
United States and the Caribbean. The Company's residential land business (the
Residential Land Division) strategically acquires, develops and subdivides
property and markets the subdivided residential lots to retail customers seeking
to build a home in a high quality residential setting. During the six months
ended September 27, 1998, sales of real estate generated by the Company's
Resorts Division and Residential Land Division comprised approximately 43% and
56%, respectively, of the Company's total sales of real estate. The Company also
generates significant interest income by providing financing to individual
purchasers of Timeshare Interests sold by the Resorts Division and, to a lesser
extent, land sold by the Residential Land 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 the condensed consolidated financial statements in conformity
with generally accepted accounting principles 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 PER COMMON SHARE
In February, 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share", which became effective for the Company's quarter ended December 28,
1997. Basic earnings per common share is computed by dividing net income by the
weighted average number of common shares outstanding. Diluted earnings per
common share is computed in the same manner as basic earnings 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 on
March 31, 1997 or the date of issuance, if later. The earnings per common share
and weighted
8
<PAGE> 9
average number of common and common equivalent shares for the three- and
six-month periods ended September 28, 1997 have been restated in accordance with
SFAS No. 128.
The following table sets forth the computation of basic and diluted earnings per
share:
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------------- ----------------------------
SEPTEMBER 28, SEPTEMBER 27, SEPTEMBER 28, SEPTEMBER 27,
1997 1998 1997 1998
---------------------------------------------------
<S> <C> <C> <C> <C>
Basic earnings per share - numerators:
Income before extraordinary item ................. $ 2,770 $ 5,460 $ 4,509 $ 11,199
Extraordinary loss on early extinguishment of
debt, net of income taxes .................... -- -- -- (1,682)
---------------------------------------------------
Net income ....................................... $ 2,770 $ 5,460 $ 4,509 $ 9,517
===================================================
Diluted earnings per share - numerators:
Income before extraordinary item - basic ......... $ 2,770 $ 5,460 $ 4,509 $ 11,199
Effect of dilutive securities (net of tax effects) 437 497 859 999
---------------------------------------------------
Income before extraordinary item - diluted ....... 3,207 5,957 5,368 12,198
Extraordinary loss on early extinguishment of
debt, net of income taxes .................... -- -- -- (1,682)
---------------------------------------------------
Net income - diluted ............................. $ 3,207 $ 5,957 $ 5,368 $ 10,516
===================================================
Denominator:
Denominator for basic earnings per share -
weighted average shares ...................... 20,164 21,915 20,158 21,132
Effect of dilutive securities:
Stock options ................................. 283 1,348 208 1,384
Convertible securities ........................ 4,519 5,702 4,367 5,719
---------------------------------------------------
Dilutive potential common shares ................. 4,802 7,050 4,575 7,103
Denominator for diluted earnings per share -
adjusted weighted-average shares and assumed
conversions .................................... 24,966 28,965 24,733 28,235
===================================================
Basic earnings per common share:
Income before extraordinary item ................. $ 0.14 $ 0.25 $ 0.22 $ 0.53
Extraordinary loss on early extinguishment
of debt, net of income taxes .................. -- -- (0.08)
---------------------------------------------------
Net income ....................................... $ 0.14 $ 0.25 $ 0.22 $ 0.45
===================================================
Diluted earnings per common share:
Income before extraordinary item ................. $ 0.13 $ 0.21 $ 0.22 $ 0.43
Extraordinary loss on early extinguishment
of debt, net of income taxes ................. -- -- (0.06)
---------------------------------------------------
Net income ....................................... $ 0.13 $ 0.21 $ 0.22 $ 0.37
===================================================
</TABLE>
9
<PAGE> 10
COMPREHENSIVE INCOME
As of March 30, 1998, the Company adopted SFAS No. 130, REPORTING COMPREHENSIVE
INCOME. SFAS No. 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of this Statement
had no impact on the Company's net income or shareholders' equity. SFAS No. 130
requires unrealized gains or losses on the Company's available-for-sale
securities, which prior to adoption were reported separately in shareholders'
equity, to be included in other comprehensive income. During the three- and
six-month periods ended September 28, 1997 and September 27, 1998, total
comprehensive income did not differ materially from net income.
SEGMENT INFORMATION
Effective March 30, 1998, the Company adopted SFAS No. 131, DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. SFAS No. 131 superseded SFAS
No. 14, FINANCIAL REPORTING FOR SEGMENTS OF A BUSINESS ENTERPRISE. SFAS No. 131
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports, other than in the initial year of adoption. SFAS No.
131 also establishes standards for related disclosures about products and
services, geographic areas, and major customers. The adoption of SFAS No. 131
did not affect results of operations or financial position, but will affect the
disclosure of segment information in the Company's fiscal 1999 annual financial
statements.
START-UP COSTS
In April, 1998, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 98-5, REPORTING THE COSTS OF START-UP ACTIVITIES.
The SOP is effective for the Company's fiscal 2000, and requires that start-up
costs capitalized prior to January 1, 1999 be written-off and any future
start-up costs to be expensed as incurred. The Company estimates that adopting
this SOP will have no significant impact on its fiscal 2000 results of
operations.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the current
period presentation.
2. ACQUISITION
Effective September 30, 1997, a wholly-owned subsidiary of the Company acquired
all of the issued and outstanding common stock of RDI Group Inc. and Resort
Title Agency, Inc. (collectively "RDI") for a purchase price of $7.5 million
consisting of $6 million cash and a $1.5 million, 9% promissory note due October
3, 1999. The acquisition was accounted for using the purchase method of
accounting and, accordingly, the results of operations of RDI have been included
in the Company's condensed consolidated financial statements from September 30,
1997.
The following pro forma financial information presents the combined results of
operations of the Company and RDI as if the acquisition had occurred on March
31, 1997, after giving effect to certain adjustments, including increased
interest expense on debt related to the acquisition, and related income tax
effects. The pro forma financial information does not necessarily reflect the
results of operations that would have occurred had the Company and RDI
constituted a single entity during such period.
Six months ended September 28, 1997
(unaudited - amounts in thousands, except per share data)
Net revenues $ 97,115
========
Net income $ 6,198
========
Earnings per share:
Basic $ 0.31
========
Diluted $ 0.28
========
10
<PAGE> 11
3. SALE OF NOTES RECEIVABLE
On June 26, 1998 the Company sold approximately $32.4 million aggregate
principal amount of timeshare notes receivable (the Receivables) to Bluegreen
Receivables Finance Corporation III, a wholly-owned special purpose subsidiary
of the Company (BRFC). Concurrently, BRFC sold the Receivables to an
unaffiliated financial institution (the Purchaser) pursuant to an Asset Purchase
Agreement dated as of June 26, 1998 (the Purchase Agreement).
A purchase price equal to approximately 96.4% of the principal balance of the
Receivables sold was paid by the Purchaser at closing in cash. In addition, BRFC
will be entitled to receive a deferred payment after the Purchaser has received
a return equal to the weighted average term treasury rate plus 1.4%, (6.924% for
this sale) and all servicing, custodial and similar fees and expenses have been
paid and a cash reserve account has been funded. The Receivables were sold
without recourse to the Company or BRFC except for breaches of representations
and warranties made at the time of sale. The Company will act as servicer for
the Receivables and will be paid a fee. In connection with the sale, the Company
recognized a $2.1 million gain which is included in other income in the
condensed consolidated statement of income for the six months ended September
27, 1998, and recorded a $3.1 million available-for-sale investment in the
residual cash flow of the receivable pool (i.e., the deferred payment) which is
included in investments in securities in the condensed consolidated balance
sheet as of September 27, 1998.
Under the Purchase Agreement, BRFC will be entitled to sell up to $100 million
aggregate principal amount of timeshare receivables to the Purchaser. The
purchase facility has detailed requirements with respect to the eligibility of
receivables for purchase and a two-year term. The Purchaser's obligation to
purchase under the purchase facility will terminate upon the occurrence of
specified trigger events. The purchase facility includes various conditions to
purchase and other provisions customary for securitizations of this type.
4. INVENTORY
The Company's inventories by geographic region, which consist of real estate
acquired for sale, are summarized below (amounts in thousands).
<TABLE>
<CAPTION>
MARCH 29, 1998
--------------------------------------------------------------
GEOGRAPHIC REGION RESORTS LAND COMMUNITIES TOTAL
- ----------------- ------- ---- ----------- -----
<S> <C> <C> <C> <C>
Southeast............ $35,846 $ 12,911 $2,674 $ 51,431
Southwest............ -- 22,163 -- 22,163
Aruba................ 17,113 -- -- 17,113
Midwest.............. 6,316 6 -- 6,322
Rocky Mountains ..... -- 4,654 -- 4,654
Mid-Atlantic......... -- 3,009 -- 3,009
West ................ -- 2,196 -- 2,196
Other................ -- 310 -- 310
------- ---------- ----------- ----------
Totals............... $59,275 $45,249 $2,674 $107,198
======= ========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 27, 1998
----------------------------------------------------------------
GEOGRAPHIC REGION RESORTS LAND COMMUNITIES TOTAL
- ----------------- ------- ---- ------------ -----
<S> <C> <C> <C> <C>
Southeast............ $52,523 $14,710 $1,913 $ 69,146
Southwest............ -- 25,116 -- 25,116
Aruba................ 16,485 -- -- 16,485
Midwest.............. 8,420 346 -- 8,766
Rocky Mountains ..... -- 1,378 -- 1,378
Mid-Atlantic......... -- 2,412 -- 2,412
West ................ -- 1,715 -- 1,715
Other................ -- 1,056 -- 1,056
----------- --------- ---------- -----------
Totals............... $77,428 $46,733 $1,913 $126,074
=========== ========= ========== ===========
</TABLE>
11
<PAGE> 12
On September 1, 1998, the Company acquired The Lodge Alley Inn, a
privately-held, 89-room resort in Charleston, South Carolina for approximately
$16.5 million in cash. The Company will market and sell the property as
Timeshare Interests, and has included the property in its Resorts Division
inventory as of September 27, 1998.
5. SENIOR SECURED NOTES
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). Interest on the Notes is payable
semiannually on April 1 and October 1 of each year, commencing October 1, 1998.
The Notes are unconditionally guaranteed, jointly and severally, by each of the
Company's subsidiaries (the Subsidiary Guarantors), with the exception of
Bluegreen Properties N.V., Resort Title Agency, Inc., 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).
The net proceeds of the Offering were approximately $106.3 million. In
connection with the Offering, the Company repaid the $22.1 million short-term
borrowing from the two investment banking firms who were the initial purchasers
of the Notes, approximately $28.9 million of line-of-credit and notes payable
balances and approximately $36.3 million of the Company's receivable-backed
notes payable. In addition, the Company paid aggregate accrued interest on the
repaid debt of approximately $1 million and $2.7 million of prepayment
penalties. The remaining net proceeds of the Offering will be used to repay
other obligations of the Company and for working capital purposes. In connection
with the Offering, the Company wrote-off approximately $692,000 of debt issuance
costs related to the extinguished debt and recognized a $1.7 million
extraordinary loss on early extinguishment of debt, net of taxes.
SUPPLEMENTAL GUARANTOR INFORMATION
Management has determined that separate, full financial statements for the
Subsidiary Guarantors and Non-Guarantor Subsidiaries are not required and,
accordingly, are not provided. Supplemental financial information for Bluegreen
Corporation, its combined Non-Guarantor Subsidiaries and its combined Subsidiary
Guarantors is presented below:
12
<PAGE> 13
BLUEGREEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET AT SEPTEMBER 27, 1998
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents ................. $ 50,807 $ 7,458 $ 12,055 $ -- $ 70,320
Contracts receivable, net ................. 428 610 12,862 -- 13,900
Notes receivable, net ..................... 481 4,023 63,017 -- 67,521
Investment in securities .................. -- 14,264 -- -- 14,264
Inventory, net ............................ 13,336 16,485 96,253 -- 126,074
Property and equipment, net ............... 5,803 266 16,357 -- 22,426
Investments in subsidiaries ............... 7,980 -- -- (7,980) --
Intercompany receivable ................... 75,716 359 -- (76,075) --
Other assets .............................. 7,781 1,444 12,910 (3,000) 19,135
--------- --------- --------- --------- ---------
TOTAL ASSETS ........................... $ 162,332 $ 44,909 $ 213,454 $ (87,055) $ 333,640
========= ========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable, accrued liabilities
and other .............................. $ 10,160 $ 8,653 $ 15,819 $ -- $ 34,632
Intercompany payable ...................... -- -- 76,075 (76,075) --
Lines-of-credit and notes payable ......... 117,250 16,971 14,749 (3,000) 145,970
Deferred income taxes ..................... 1,099 785 11,635 -- 13,519
8.25% convertible subordinated debentures . 34,371 -- -- -- 34,371
--------- --------- --------- --------- ---------
TOTAL LIABILITIES ...................... 162,880 26,409 118,278 (79,075) 228,492
Minority interest ......................... -- -- -- 321 321
SHAREHOLDERS' EQUITY
Common stock .............................. 239 7 2 (9) 239
Additional paid-in capital ................ 97,246 494 8,001 (8,495) 97,246
Treasury stock ............................ (1,389) -- -- -- (1,389)
Net unrealized gains ...................... -- 377 -- -- 377
Retained earnings (accumulated deficit) ... (96,644) 17,622 87,173 203 8,354
--------- --------- --------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY ............. (548) 18,500 95,176 (8,301) 104,827
--------- --------- --------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY ............................... $ 162,332 $ 44,909 $ 213,454 $ (87,055) $ 333,640
========= ========= ========= ========= =========
</TABLE>
13
<PAGE> 14
BLUEGREEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 28, 1997
-----------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Sales of real estate .............. $ 7,268 $ -- $ 38,052 $ -- $ 45,320
Management fee revenue ............ 3,998 -- -- (3,998) --
Interest income and other ......... 313 535 1,385 -- 2,233
-------- -------- -------- -------- --------
11,579 535 39,437 (3,998) 47,553
COST AND EXPENSES
Cost of real estate sold .......... 2,026 -- 19,392 -- 21,418
Management fees ................... -- 54 3,944 (3,998) --
Selling, general and administrative
expense ........................ 8,158 110 10,765 -- 19,033
Interest expense .................. 950 111 938 -- 1,999
Provisions for losses ............. -- -- 469 -- 469
-------- -------- -------- -------- --------
11,134 275 35,508 (3,998) 42,919
-------- -------- -------- -------- --------
Income from operations ............ 445 260 3,929 -- 4,634
Other income (expense) ............ (7) -- 68 -- 61
-------- -------- -------- -------- --------
Income before income taxes ........ 438 260 3,997 -- 4,695
Provision for income taxes ........ 179 107 1,639 -- 1,925
-------- -------- -------- -------- --------
Net income .................... $ 259 $ 153 $ 2,358 $ -- $ 2,770
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 27, 1998
------------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Sales of real estate ................... $ 9,785 $ 2,582 $ 49,036 $ -- $ 61,403
Management fee revenue ................. 5,767 -- -- (5,767) --
Other resort and golf operations revenue -- 240 3,230 -- 3,470
Interest income and other .............. 898 752 1,837 -- 3,487
-------- -------- -------- -------- --------
16,450 3,574 54,103 (5,767) 68,360
COST AND EXPENSES
Cost of real estate sold ............... 3,014 599 17,926 -- 21,539
Cost of other resort and golf operations -- 210 2,815 -- 3,025
Management fees ........................ -- 357 5,410 (5,767) --
Selling, general and administrative
expense ............................. 9,962 2,012 19,011 -- 30,985
Interest expense ....................... 2,769 493 100 -- 3,362
Provisions for losses .................. -- 37 562 -- 599
-------- -------- -------- -------- --------
15,745 3,708 45,824 (5,767) 59,510
-------- -------- -------- -------- --------
Income (loss) from operations .......... 705 (134) 8,279 -- 8,850
Other income (expenses) ................ 10 1 (6) -- 5
-------- -------- -------- -------- --------
Income before income taxes ............. 715 (133) 8,273 -- 8,855
Provision (benefit) for income taxes ... 286 (53) 3,309 -- 3,542
Minority interest in loss of
consolidated subsidiary............... -- -- -- (147) (147)
-------- -------- -------- -------- --------
Net income (loss) ................ $ 429 $ (80) $ 4,964 $ 147 $ 5,460
======== ======== ======== ======== ========
</TABLE>
14
<PAGE> 15
BLUEGREEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 28, 1997
-----------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Sales of real estate .............. $ 14,164 $ -- $ 64,248 $ -- $ 78,412
Management fee revenue ............ 6,800 -- -- (6,800) --
Interest income and other ......... 381 1,060 2,693 -- 4,134
-------- -------- -------- -------- --------
21,345 1,060 66,941 (6,800) 82,546
COST AND EXPENSES
Cost of real estate sold .......... 5,652 -- 30,922 -- 36,574
Management fees ................... -- 106 6,694 (6,800) --
Selling, general and administrative
expense ........................ 13,966 124 19,826 -- 33,916
Interest expense .................. 1,770 232 1,784 -- 3,786
Provisions for losses ............. -- -- 780 -- 780
-------- -------- -------- -------- --------
21,388 462 60,006 (6,800) 75,056
-------- -------- -------- -------- --------
Income (loss) from operations ..... (43) 598 6,935 -- 7,490
Other income ...................... 102 -- 51 -- 153
-------- -------- -------- -------- --------
Income before income taxes ........ 59 598 6,986 -- 7,643
Provision for income taxes ........ 24 245 2,865 -- 3,134
-------- -------- -------- -------- --------
Net income .................... $ 35 $ 353 $ 4,121 $ -- $ 4,509
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 27, 1998
---------------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Sales of real estate ................... $ 18,132 $ 5,867 $ 93,061 $ -- $ 117,060
Management fee revenue ................. 11,085 -- -- (11,085) --
Other resort and golf operations revenue -- 507 5,439 -- 5,946
Interest income and other .............. 1,267 1,310 4,672 -- 7,249
--------- --------- --------- --------- ---------
30,484 7,684 103,172 (11,085) 130,255
COST AND EXPENSES
Cost of real estate sold ............... 5,578 1,558 35,271 -- 42,407
Cost of other resort and golf operations -- 519 4,758 -- 5,277
Management fees ........................ -- 768 10,317 (11,085) --
Selling, general and administrative
expense ............................. 17,407 3,729 37,417 -- 58,553
Interest expense ....................... 5,802 1,001 303 -- 7,106
Provisions for losses .................. -- 152 740 -- 892
--------- --------- --------- --------- ---------
28,787 7,727 88,806 (11,085) 114,235
--------- --------- --------- --------- ---------
Income (loss) from operations .......... 1,697 (43) 14,366 -- 16,020
Other income ........................... 288 2,053 90 -- 2,431
--------- --------- --------- --------- ---------
Income before income taxes ............. 1,985 2,010 14,456 -- 18,451
Provision for income taxes ............. 794 804 5,783 -- 7,381
Minority interest in loss of
consolidated subsidiary ............... -- -- -- (129) (129)
--------- --------- --------- --------- ---------
Income before extraordinary item ....... 1,191 1,206 8,673 129 11,199
Extraordinary loss on early
extinguishment of debt, net ......... -- -- (1,682) -- (1,682)
--------- --------- --------- --------- ---------
Net income ....................... $ 1,191 $ 1,206 $ 6,991 $ 129 $ 9,517
========= ========= ========= ========= =========
</TABLE>
15
<PAGE> 16
BLUEGREEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 28, 1997
---------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS CONSOLIDATED
----------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net cash provided (used) by operating activities $ (860) $ (1,177) $ 17,142 $ 15,105
-------- -------- -------- --------
INVESTING ACTIVITIES:
Purchases of property and equipment ............. (304) -- (1,593) (1,897)
Cash received from investment in securities ..... -- 1,057 -- 1,057
-------- -------- -------- --------
Net cash (used) provided by investing activities ... (304) 1,057 (1,593) (840)
-------- -------- -------- --------
FINANCING ACTIVITIES:
Proceeds from issuance of 8% convertible
subordinated notes payable ................... 6,000 -- -- 6,000
Proceeds from borrowings under line-of-
credit facilities and other notes payable .... 6,889 -- 17,837 24,726
Payments under line-of-credit facilities
and other notes payable ...................... (560) -- (30,788) (31,348)
Payment of debt issuance costs .................. (44) (27) (639) (710)
Payments for treasury stock ..................... (19) -- -- (19)
Proceeds from exercise of employee stock options 159 -- -- 159
-------- -------- -------- --------
Net cash provided (used) by financing activities ... 12,425 (27) (13,590) (1,192)
-------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents 11,261 (147) 1,959 13,073
Cash and cash equivalents at beginning of period ... 3,353 3,442 4,802 11,597
-------- -------- -------- --------
Cash and cash equivalents at end of period ......... 14,614 3,295 6,761 24,670
Restricted cash and cash equivalents at end
of period ....................................... (7,245) (3,295) (6,761) (17,301)
-------- -------- -------- --------
Unrestricted cash and cash equivalents at
end of period ................................... $ 7,369 $ -- $ -- $ 7,369
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 27, 1998
-----------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS CONSOLIDATED
----------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net cash provided (used) by operating activities $ (64,163) $ 6,127 $ 66,507 $ 8,471
--------- --------- --------- ---------
INVESTING ACTIVITIES:
Purchases of property and equipment ............ (3,204) (49) (3,444) (6,697)
Sales of property and equipment ................ 864 -- 34 898
Cash received from investment in securities .... -- 786 -- 786
--------- --------- --------- ---------
Net cash (used) provided by investing activities .. (2,340) 737 (3,410) (5,013)
--------- --------- --------- ---------
FINANCING ACTIVITIES:
Proceeds from borrowings under line-of-
credit facilities and other notes payable ... 110,000 -- -- 110,000
Payments under line-of-credit facilities
and other notes payable ..................... (28,837) (4,098) (60,785) (93,720)
Payment of debt issuance costs ................. (4,653) (495) (35) (5,183)
Proceeds from issuance of common stock ......... 24,345 -- -- 24,345
Proceeds from exercise of employee and
director stock options ...................... 355 -- -- 355
--------- --------- --------- ---------
Net cash provided by financing activities ......... 101,210 (4,593) (60,820) 35,797
--------- --------- --------- ---------
Net increase in cash and cash equivalents ......... 34,707 2,271 2,277 39,255
Cash and cash equivalents at beginning of period .. 16,100 5,186 9,779 31,065
--------- --------- --------- ---------
Cash and cash equivalents at end of period ........ 50,807 7,457 12,056 70,320
Restricted cash and cash equivalents at end
of period ....................................... (2,317) (6,762) (6,516) (15,595)
--------- --------- --------- ---------
Unrestricted cash and cash equivalents at
end of period .................................. $ 48,490 $ 695 $ 5,540 $ 54,725
========= ========= ========= =========
</TABLE>
16
<PAGE> 17
6. CONVERTIBLE SUBORDINATED DEBENTURES
During the six months ended September 27, 1998, holders of $368,000 in aggregate
principal amount of the Company's 8.25% convertible subordinated debentures
elected to convert said debentures into an aggregate 44,658 shares of the
Company's Common Stock.
7. LINE-OF-CREDIT
On September 23, 1998, the Company entered into a $5 million, unsecured
line-of-credit with a bank. Amounts borrowed under the line will bear interest
at LIBOR plus 1.5%. Interest is due monthly, with all principal amounts due on
July 31, 1999. Through September 27, 1998, the Company has not borrowed any
amounts under the line.
8. SALE OF COMMON STOCK
On August 14, 1998, the Company entered into a Securities Purchase Agreement
(the Stock Agreement) by and among the Company, Morgan Stanley Real Estate
Investors III, L.P., Morgan Stanley Real Estate Fund III, L.P., (MSREF), MSP
Real Estate Fund, L.P., and MSREF III Special Fund, L.P., (collectively, the
Funds) pursuant to which the Funds purchased 2,941,177 shares of the Company's
common stock, par value $.01 per share (the Common Stock), representing
approximately 12.6% of the outstanding Common Stock at August 14, 1998, for an
aggregate of $25 million.
Pursuant to the Stock Agreement, subject to certain conditions thereto, the
Company has the right to require the Funds, during the 18-month period
commencing on August 14, 1998 (the Commitment Period), to purchase from the
Company up to an additional 2,941,176 shares of Common Stock (the Remaining
Shares) at a purchase price per share equal to $8.50. If, on or prior to the
expiration of the Commitment Period, the Company has not offered to sell to the
Funds all of the Remaining Shares and the Company has satisfied certain
conditions, or if a Change of Control of the Company occurs (as defined in the
Stock Agreement) during the Commitment Period, the Funds will have the right to
purchase any or all of the Remaining Shares not previously sold to the Funds at
a purchase price per share equal to $8.50.
In accordance with the rules of the New York Stock Exchange, the Stock Agreement
requires that the stockholders of the Company approve any issuance of shares of
Common Stock to the Funds which result in the issuance of a number of shares of
Common Stock greater than 20% of the outstanding Common Stock on August 14,
1998. Pursuant to a Proxy Statement dated October 21, 1998, the Company is
seeking shareholder approval at a special shareholders' meeting to be held on
November 20, 1998, to issue the remaining unissued shares under the Stock
Agreement.
Subject to certain exceptions, the Funds have agreed not to offer, sell,
transfer, assign, pledge or hypothecate any shares of Common Stock issued to
them, prior to the earlier of (i) August 14, 2000 or (ii) six months following
the date on which the Funds have purchased all the shares of Common Stock to be
purchased by them under the Stock Agreement, but in no event earlier than
February 14, 2000.
17
<PAGE> 18
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 under this
Item 2 and elsewhere in this report 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 forward-looking statements
are 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.
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.
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 lot
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 find 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 find sources of capital on favorable terms
for the pledge of land and timeshare notes receivable.
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 exceeding those anticipated.
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.
18
<PAGE> 19
m) The failure of the Company to satisfy the covenants contained in the
indentures governing certain of its debt instruments and other credit
agreements which, among other things, place certain restrictions on the
Company's ability to incur debt, incur liens and pay dividends.
n) The failure of the Company's computer and non-information technology
systems to be "Year 2000" compliant.
The following discussion should be read in conjunction with the condensed
consolidated financial statements and related notes thereto included in the
Company's Annual Report to Shareholders for the fiscal year ended March 29,
1998.
GENERAL
Real estate markets are 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. 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 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 revenue in accordance with the percentage of
completion method of accounting. Under this method of revenue recognition,
income is recognized as work progresses. Measures of progress are based on the
relationship of costs incurred to date to expected total costs.
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 real estate and development costs and allocated to
cost of real estate sold as the respective revenue is recognized.
Effective September 30, 1997, a wholly-owned subsidiary of the Company acquired
all of the issued and outstanding common stock of RDI Group Inc. and Resort
Title Agency, Inc. (collectively RDI) for a purchase price of $7.5 million,
consisting of $6 million cash and a $1.5 million, 9% promissory note due October
3, 1999. The acquisition was accounted for using the purchase method of
accounting and, accordingly, the results of operations of RDI have been included
in the Company's condensed consolidated financial statements from September 30,
1997.
On December 15, 1997, the Company invested $250,000 of capital in Bluegreen
Properties N.V. (BPNV), an entity organized in Aruba that previously had no
operations, in exchange for a 50% ownership interest. Concurrently, the Company
and an affiliate of the other 50% owner of BPNV (who is not an affiliate of the
Company), each loaned BPNV $3 million pursuant to promissory notes due on
December 15, 2000 and bearing interest at the prime rate plus 1%. BPNV then
acquired from a third party approximately 8,000 unsold timeshare intervals at
the La Cabana Beach & Racquet Club (the Aruba Resort), a fully developed
timeshare resort in Oranjestad, Aruba in exchange for $6 million cash and the
assumption of approximately $16.6 million of interest-free debt from a bank in
Aruba. The debt was recorded by BPNV at approximately $12.5 million, which
reflects a discount based on an imputed interest rate of 12%. The debt is to be
repaid over five years through release-prices as intervals are sold, subject to
minimum monthly payments of approximately $278,000. In addition to its 50%
ownership interest, the Company will receive a quarterly management fee from
BPNV equal to 7% of BPNV's net sales in exchange for the Company's involvement
in the day-to-day operations of BPNV. The Company also has majority control of
BPNV's board of directors and has a controlling financial interest in BPNV.
Therefore, the accounts of BPNV are included in the Company's consolidated
financial statements from December 15, 1997.
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. As the Company's timeshare revenues grow as a percentage of total
revenues and in more diverse geographic areas, the Company believes that the
fluctuations in revenues due to seasonality may be mitigated. 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
19
<PAGE> 20
continue to invest in multi-year, capital-intensive projects. No assurances can
be given that the amount of revenue deferred under the percentage of completion
accounting method will not increase.
The Company believes that inflation and changing prices have not had a material
impact on its revenues and results of operations during the six months ended
September 28, 1997 or September 27, 1998. Based on the current economic climate,
the Company does not expect that inflation and changing prices will have a
material impact on the Company's revenues or results of operations. 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 rate the Company
charges on its new receivables.
During the periods covered by this discussion, the Company's real estate
operations were managed under three divisions and much of this discussion is
organized by such divisions. The Resorts Division manages the Company's
timeshare operations and the Residential Land Division acquires large tracts of
real estate which are subdivided, improved and sold, typically on a retail
basis. The Company's Communities Division, markets factory-built manufactured
homes and lot packages and undeveloped lots. In the first quarter of fiscal 1997
(June 1996), the Company decided to focus on the expansion of the Resorts
Division and the Residential Land Division in certain locations. Consistent with
this strategy, the Company does not intend to acquire any additional
communities-related inventories and present Communities Division inventories are
being liquidated through a combination of bulk sales and retail sales. As of and
for the six month period ended September 27, 1998, the Communities Division
represented less than 2% of consolidated inventory and sales of real estate.
Therefore, no separate discussion with respect to the Communities Division is
contained herein relative to the three- and six-month periods ended September
27, 1998 due to immateriality.
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 income historically has been comprised of gains on
sales of loans. On June 26, 1998, the Company sold approximately $32.4 million
aggregate principal amount of timeshare note receivables (the Receivables) to
Bluegreen Receivables Finance Corporation III, a wholly-owned special purpose
subsidiary of the Company (BRFC). Concurrently, BRFC sold the Receivables to an
unaffiliated financial institution (the Purchaser) pursuant to an Asset Purchase
Agreement (the Purchase Agreement). Under the Purchase Agreement, BRFC will be
entitled to sell up to $100 million aggregate principal amount of timeshare
receivables to the Purchaser. The purchase facility has detailed requirements
with respect to the eligibility of receivables for purchase and a two-year term.
A purchase price equal to approximately 96.4% of the principal balance of the
Receivables sold was paid by the Purchaser at closing in cash. In addition, BRFC
will be entitled to receive a deferred payment after the Purchaser has received
a return equal to the weighted average term treasury rate plus 1.4% and all
servicing, custodial and similar fees and expenses have been paid and a cash
reserve account has been funded. The Receivables were sold without recourse to
the Company or BRFC except for breaches of representations and warranties made
at the time of sale. The Company will act as servicer for the Receivables and
will be paid a fee. In connection with the sale, the Company recognized a $2.1
million gain which is included in other income in the condensed consolidated
statement of income for the six months ended September 27, 1998 and a $3.1
million available-for-sale investment in the residual cash flow of the
receivable pool (i.e., the deferred payment) which is included in investments in
securities in the condensed consolidated balance sheet as of September 27, 1998.
Based on the unused capacity under the Purchase Agreement, management
anticipates that the portion of the Company's revenues comprising gains on sales
will increase and will comprise a greater portion of net income in certain
interim periods. The amount of gains recorded is based in part on management's
estimates of future prepayment and default 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, interest
would be less than expected and earnings would be charged in the current period.
If actual defaults and/or losses with respect to loans sold are greater than
estimated, charge-offs would exceed previously estimated amounts and earnings
would be charged in the current period.
20
<PAGE> 21
RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
RESORTS RESIDENTIAL LAND COMMUNITIES TOTAL
------------------ ----------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
THREE MONTHS ENDED SEPTEMBER 28, 1997
Sales of real estate $14,612 100.0% $29,732 100.0% $ 976 100.0% $ 45,320 100.0%
Cost of real estate sold (1) 3,764 25.8% 16,635 55.9% 1,019 104.4% 21,418 47.3%
------- ------ ------- ------ ------ ------ -------- ------
Gross profit 10,848 74.2% 13,097 44.1% (43) (4.4)% 23,902 52.7%
Field selling, general and
administrative expense (2) 8,776 60.1% 7,485 25.2% 49 5.0% 16,310 36.0%
------- ------ ------- ------ ------- ------ -------- ------
Field operating profit (loss) (3) $ 2,072 14.2% $ 5,612 18.9% $ (92) (9.4)% $ 7,592 16.7%
======== ======= ======= ====== ======= ======= ======== ======
THREE MONTHS ENDED SEPTEMBER 27, 1998
Sales of real estate $25,899 100.0% $34,689 100.0% $ 815 100.0% $ 61,403 100.0%
Cost of real estate sold (1) 5,970 23.1% 14,849 42.8% 720 88.3% 21,539 35.1%
----- ------ ------- ----- ------ ------ -------- ------
Gross profit 19,929 76.9% 19,840 57.2% 95 11.7% 39,864 64.9%
Field selling, general and
administrative expense (2) 17,966 69.3% 9,251 26.7% 170 20.9% 27,387 44.6%
------ ----- -------- ----- ------ ------ ------- ------
Field operating profit (loss) (3) $ 1,963 7.6% $10,589 30.5% $ (75) (9.2)% $ 12,477 20.3%
======= ==== ======= ====== ======== ======= ======== ======
SIX MONTHS ENDED SEPTEMBER 28, 1997
Sales of real estate $23,570 100.0% $51,802 100.0% $3,040 100.0% $ 78,412 100.0%
Cost of real estate sold (1) 6,072 25.7% 27,423 52.9% 3,079 101.2% 36,574 46.6%
--------- ------- ------- ------ ------- ------ -------- ------
Gross profit 17,498 74.3% 24,379 47.1% (39) (1.2)% 41,838 53.4%
Field selling, general and
administrative expense (2) 14,628 62.1% 13,948 26.9% 130 4.3% 28,706 36.6%
------- ------ ------- ------ ------- ------ -------- ------
Field operating profit (loss) (3) $ 2,870 12.2% $10,431 20.2% $ (169) (5.5)% $ 13,132 16.8%
======= ====== ======= ====== ======= ======= ======== ======
SIX MONTHS ENDED SEPTEMBER 27, 1998
Sales of real estate $49,860 100.0% $65,327 100.0% $1,873 100.0% $117,060 100.0%
Cost of real estate sold (1) 12,187 24.4% 28,669 43.9% 1,551 82.8% 42,407 36.2%
------- ------ ------- ------- ------ ------ --------- ------
Gross profit 37,673 75.6% 36,658 56.1% 322 17.2% 74,653 63.8%
Field selling, general and
administrative expense (2) 32,702 65.6% 17,851 27.3% 351 18.7% 50,904 43.5%
------- ------ ------- ------ ------- ------ ------- ------
Field operating profit (loss) (3) $ 4,971 10.0% $18,807 28.8% $ (29) (1.5)% $ 23,749 20.3%
======= ===== ======= ====== ======= ======= ======== ======
</TABLE>
- ---------
(1) COST OF REAL ESTATE SOLD REPRESENTS THE COST OF INVENTORY INCLUDING THE
COST OF IMPROVEMENTS, AMENITIES AND, IN CERTAIN CASES, CAPITALIZED
INTEREST.
(2) GENERAL AND ADMINISTRATIVE EXPENSES ATTRIBUTABLE TO CORPORATE OVERHEAD HAVE
BEEN EXCLUDED FROM THE TABLES. CORPORATE GENERAL AND ADMINISTRATIVE
EXPENSES TOTALED $2.7 MILLION AND $3.6 MILLION FOR THE THREE MONTHS ENDED
SEPTEMBER 28, 1997 AND SEPTEMBER 27, 1998, RESPECTIVELY, AND $5.2 MILLION
AND $7.6 MILLION FOR THE SIX MONTHS ENDED SEPTEMBER 28, 1997 AND SEPTEMBER
27, 1998, RESPECTIVELY.
(3) THE TABLES PRESENTED ABOVE OUTLINE SELECTED FINANCIAL DATA. ACCORDINGLY,
INTEREST INCOME, INTEREST EXPENSE, PROVISIONS FOR LOSSES, OTHER INCOME AND
INCOME TAXES HAVE BEEN EXCLUDED.
SALES. Consolidated sales of real estate increased 35.5% from $45.3 million for
the three-month period ended September 28, 1997 (the 1998 Quarter) to $61.4
million for the three-month period ended September 27, 1998 (the 1999 Quarter).
Consolidated sales of real estate increased 49.3% from $78.4 million for the
six-month period ended September 28, 1997 (the 1998 Period) to $117.1 million
for the six-month period ended September 27, 1998 (the 1999 Period). Increases
in residential land and resorts (Timeshare Interest) sales during the 1999
Quarter and 1999 Period were partially offset by lower Communities Division
sales.
As of September 27, 1998, approximately $15.7 million in sales or $7.8 million
in estimated income was deferred under percentage of completion accounting. At
March 29, 1998, approximately $16.9 million of sales or $8.4 million in
estimated income was deferred. These amounts are included on the condensed
consolidated balance sheets under the caption deferred income.
RESORTS DIVISION
During the 1998 and 1999 Quarters, sales of Timeshare Interests contributed
$14.6 million or 32.2% and $25.9 million or 42.2%, respectively, of the
Company's total consolidated revenues from the sale of real estate. During the
1998 and 1999 Periods, sales of Timeshare Interests contributed $23.6 million or
30.1% and $49.9 million or
21
<PAGE> 22
42.6%, respectively, of the Company's total consolidated revenues from the sale
of real estate.
The following tables set forth information for sales of Timeshare Interests
associated with the Company's Resorts Division for the periods indicated, BEFORE
giving effect to the percentage of completion method of accounting.
<TABLE>
<CAPTION>
THREE MONTHS ENDED, SIX MONTHS ENDED,
------------------------------- ------------------------------
SEPTEMBER 28, SEPTEMBER 27, SEPTEMBER 28, SEPTEMBER 27,
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Number of Timeshare Interests sold 1,856 3,311 2,836 6,105
Average sales price per
Timeshare Interest $8,536 $8,650 $8,980 $8,702
Gross margin 74.2% 76.9% 74.3% 75.6%
</TABLE>
The increase in Timeshare Interest sales during the 1999 Quarter was partially
due to the acquisition of RDI effective September 30, 1997, which contributed
approximately $6.5 million in Timeshare Interest sales (752 Timeshare Interests
sold) during the 1999 Quarter. Also, BPNV, which commenced operations on
December 15, 1997, generated approximately $2.6 million in Timeshare Interest
sales (378 Timeshare Interests sold) during the 1999 Quarter. The increase in
the number of Timeshare Interests sold during the 1999 Quarter was also
partially due to increased numbers of Timeshare Interests sold at the Company's
other resorts during the 1999 Quarter, as follows:
<TABLE>
<CAPTION>
# OF TIMESHARE INTERESTS SOLD
------------------------------------
RESORT 1998 QUARTER 1999 QUARTER INCREASE
------ ------------ ------------ --------
<S> <C> <C> <C>
Laurel Crest (Pigeon Forge, TN) 340 528 188
Shore Crest (Myrtle Beach, SC) 468 513 45
MountainLoft (Gatlinburg, TN) 416 463 47
</TABLE>
The increase in Timeshare Interest sales during the 1999 Period was partially
due to the acquisition RDI, which contributed approximately $11.2 million in
Timeshare Interest sales (1,347 Timeshare Interests sold) during the 1999
Period. Also, BPNV, generated approximately $5.9 million in Timeshare Interest
sales (827 Timeshare Interests sold) during the 1999 Period. The increase in the
number of Timeshare Interests sold during the 1999 Period was also partially due
to increased numbers of Timeshare Interests sold at the Company's other resorts
during the 1999 Period, as follows:
<TABLE>
<CAPTION>
# OF TIMESHARE INTERESTS SOLD
-----------------------------------
RESORT 1998 PERIOD 1999 PERIOD INCREASE
------ ----------- ----------- --------
<S> <C> <C> <C>
Laurel Crest (Pigeon Forge, TN) 615 928 313
Harbour Lights (Myrtle Beach, SC) 366 645 279
Falls Village (Branson, MO) 265 497 232
MountainLoft (Gatlinburg, TN) 723 851 128
Shore Crest (Myrtle Beach, SC) 865 949 84
</TABLE>
This increase in Timeshare Interest sales at existing resorts is primarily due
to the maturation of projects and the increased effectiveness of marketing
programs. In addition, the Company recently opened off-site sales offices (i.e.,
located separate from a resort location) in Cleveland, Ohio and Orlando,
Florida, which contributed to the increase in Timeshare Interest sales during
both the 1999 Quarter and Period. The Company anticipates opening additional
off-site sales offices in major cities around the country to market and sell its
Timeshare Interests and points-based Vacation Club program. There can be no
assurances that the Company's off-site sales office program will be developed as
planned or that the program will be successful.
The increase in average sales price per Timeshare Interest during the 1999
Quarter was due primarily to increases in average selling prices between the
1998 Quarter and 1999 Quarter at the Company's Falls Village and Harbour Lights
resorts. The average sales price at Falls Village increased from $6,615 to
$8,998 during the 1998 Quarter and 1999 Quarter, respectively. The average sales
price at Harbour Lights increased from $7,321 to $8,592 during the 1998 Quarter
and 1999 Quarter, respectively. This increase in average sales price also
contributed to the increase in the gross profit margin for the Resorts division
from 74.2% to 76.9% during the 1998 Quarter and 1999 Quarter, respectively.
22
<PAGE> 23
The decrease in average sales price per Timeshare Interest during the 1999
Period was due primarily to the acquisition of RDI and sales of Timeshare
Interests in Aruba, which averaged sales prices per Timeshare Interest of $8,304
and $7,094, respectively, during the 1999 Period. The Company's average sales
price per Timeshare Interest, excluding RDI and Aruba, was $9,164 during the
1999 Period.
Field operating profit (FOP) decreased from 14.2% to 7.6% during the 1998
Quarter and 1999 Quarter, respectively, and from 12.2% to 10.0% during the 1998
Period and 1999 Period, respectively. The decrease in FOP during the 1999
Quarter was primarily due to the deferral of revenues of $2.9 million and FOP of
$1.2 million under percentage-of-completion accounting. Other factors include
the deferral of approximately $571,000 of revenues with no corresponding
deferral of commission expense under a sales and marketing agreement whereby
BPNV sells Timeshare Interests on behalf of a third-party in Aruba. These
deferred revenues in Aruba will be recognizable once certain documents regarding
the third-party's Timeshare Interests have been processed by the Aruban
government. In addition, start-up operations at the Company's off-site sales
offices in Cleveland, Ohio and Orlando, Florida generated a total field
operating loss of $947,000 during the 1999 Quarter. The Resorts Division's FOP
during the 1999 Quarter and 1999 Period excluding the impact of
percentage-of-completion accounting, the deferred revenue in Aruba and the
start-up operations at the new off-site sales offices would have increased to
15.9% and 15.0%, respectively.
During the 1999 Quarter, other resort and golf operations revenue and related
costs were approximately $3.5 million and $3.0 million, respectively. During the
1999 Period, other resort and golf operations revenue and related costs were
approximately $5.9 million and $5.3 million, respectively. Other resort services
include the resort property management services, resort title services and
certain retail amenity and lodging operations acquired in connection with the
RDI. Golf revenues and costs include the results of operating Bluegreen's daily
fee golf courses. There were no resort service operations during the 1998
Quarter or 1998 Period and golf operations during these periods were
insignificant.
RESIDENTIAL LAND DIVISION
During the 1998 and 1999 Quarters, residential land sales contributed $29.7
million or 65.6% and $34.7 million or 56.4%, respectively, of the Company's
total consolidated revenues from the sale of real estate. During the 1998 and
1999 Periods, residential land sales contributed $51.8 million or 66.1% and
$65.3 million or 55.8%, respectively, of the Company's total consolidated
revenues from the sale of real estate.
The table set forth below outlines the number of parcels sold and the average
sales price per parcel for the Residential Land Division for the periods
indicated, BEFORE giving effect to the percentage of completion method of
accounting.
<TABLE>
<CAPTION>
THREE MONTHS ENDED, SIX MONTHS ENDED,
--------------------------------- ----------------------------------
SEPTEMBER 28, SEPTEMBER 27, SEPTEMBER 28, SEPTEMBER 27,
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Number of parcels sold 724 555 1,264 1,179
Average sales price per parcel $42,915 $46,863 $46,168 $48,240
Gross margin 44.1% 57.2% 47.1% 56.1%
</TABLE>
The aggregate number of parcels sold decreased from the 1998 Quarter to the 1999
Quarter and from the 1998 Period to the 1999 Period primarily due to the
following:
o The primary reason for the decrease in the number of parcels sold during
the 1999 Quarter and 1999 Period represented a positive event. The sale of
scattered inventory in areas of the country which are no longer part of the
Company's focused residential land business decreased from 78 sales to 34
sales in the 1998 Quarter and 1999 Quarter, respectively, and from 151
sales to 83 sales in the 1998 Period and 1999 Period, respectively. This
reduction in the sales of scattered inventory parcels had a positive impact
on gross margins in both the 1999 Quarter and Period as these sales are
usually made at reduced gross margins in order to dispose of such
inventory. In total, the number of these lots available for sale has
decreased from 311 parcels at September 28, 1997 to only 142 parcels at
September 27, 1998, with the remaining parcels being geographically located
throughout the Northeast, Midwest and South. This inventory is carried at
net realizable value on the Company's condensed consolidated balance sheet
at September 27, 1998.
o Lot sales at the Company's Winding River property in Southport, North
Carolina decreased from 90 parcels sold to 76 parcels sold during the 1998
Quarter and 1999 Quarter, respectively. The decrease is primarily due to
the mix of product sold in the project during the 1998 Quarter (primarily a
higher volume of smaller, interior lots) vs. the 1999 Quarter (primarily
premium lots).
23
<PAGE> 24
o Sales at the Company's White Oak Estates project near Houston, Texas
decreased from 79 parcels sold to 32 parcels sold during the 1998 Quarter
and 1999 Quarter, respectively, primarily due to the excessively hot summer
season reducing the number of prospects touring the project. In addition,
periods of excessive rainfall also delayed the completion of certain roads
in the project, which also impacted the ability to tour prospects at the
project.
o The Company's Ranches of Sonterra property in Ruidoso, New Mexico generated
sales of 64 parcels and 39 parcels during the 1998 Period and 1999 Period,
respectively, and sales of 29 parcels and 22 parcels during the 1998
Quarter and 1999 Quarter, respectively. The decrease is due to this project
nearing maturity, which usually involves a reduction in sales staff. Only
56 lots remain in this project, which are expected to be sold over the next
six months.
The average sales price per parcel increased during both the 1999 Quarter and
1999 Period as compared to the 1998 Quarter and 1998 Period. Average sales
prices increased approximately $2,000 per lot sold in the Company's properties
located near Dallas, Texas, Ruidoso, New Mexico and Southport, North Carolina
when comparing the 1998 Period to the 1999 Period. Average sales prices
increased approximately $9,000 per lot sold from $45,157 to $54,045 at Winding
River Plantation, when comparing the 1998 Quarter to the 1999 Quarter. In
addition, average sales prices in the Company's Rocky Mountain region increased
from approximately $27,000 to $134,000 due to the opening of a new project, The
Meadows at Castlewood.
In addition to the factors discussed above, overall sales for the Residential
Land Division increased due to the Company's ability to recognize revenue
previously deferred under percentage-of-completion accounting as certain major
projects in Texas and Tennessee reached substantial completion during the 1999
Quarter and 1999 Period.
The average gross margin for the Residential Land Division was 44.1% and 57.2%
for the 1998 and 1999 Quarters, respectively. The average gross margin increased
primarily due to increased gross margin generated by the Company's Southwestern
region (which includes Texas and New Mexico) from 57.6% during the 1998 Quarter
to 62.5% during the 1999 Quarter. In addition, the reduction of sales of
scattered properties had a positive impact on gross margin during the 1999
Quarter, as previously discussed.
The average gross margin for the Residential Land Division was 47.1% and 56.1%
for the 1998 and 1999 Periods, respectively. The average gross margin increased
primarily due to increased gross margin generated by the Company's Southwestern
region (which includes Texas and New Mexico) from 57.9% during the 1998 Period
to 63.4% during the 1999 Period. In addition, the reduction of sales of
scattered properties had a positive impact on gross margin during the Period.
The Company's Investment Committee approves all property acquisitions. In order
to be approved for purchase by the Investment Committee, all residential land
properties are expected to achieve certain minimum economics including a minimum
gross margin. No assurances can be given that such minimum economics will be
achieved.
INTEREST INCOME
Interest income increased 56.1% from $2.2 million for the 1998 Quarter to $3.5
million for the 1999 Quarter. Interest income increased 75.4% from $4.1 million
for the 1998 Period to $7.2 million for the 1999 Period. The Company's interest
income is earned from its receivable portfolio, securities retained pursuant to
REMIC financings and cash and cash equivalents. The increase in interest income
is primarily due to an increase in the average note receivable balance during
the 1999 Quarter as compared to the 1998 Quarter. This increase in the average
note receivable balance is due primarily to the increase in the sales of
Timeshare Interests as the Company provides financing on approximately 89% of
its Timeshare Interest sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE (S,G&A EXPENSE)
The Company's S,G&A Expense consists primarily of marketing costs, advertising
expenses, sales commissions and corporate overhead. S,G&A Expense totaled $19.0
million and $31.0 million for the 1998 Quarter and the 1999 Quarter,
respectively. S,G&A Expense totaled $33.9 million and $58.6 million for the 1998
Period and the 1999 Period, respectively. A significant portion of S,G&A Expense
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 Expense (including corporate administrative expense) increased from 42% in
the 1998 Quarter to 50% in the 1999
24
<PAGE> 25
Quarter and from 43% to 50% in the 1998 period and 1999 period, respectively.
This percentage increase is due primarily to the increase in Resorts Division
sales as a percentage of consolidated sales of real estate, as selling and
marketing expenses are greater for the timeshare industry as compared to the
residential land business. However, as Resorts Division revenues increased at a
faster rate than the related S,G&A Expense, the Company's operating margin
increased from 10% in the 1998 Quarter and Period to 14% in the 1999 Quarter
and Period, respectively.
INTEREST EXPENSE
Interest expense totaled $2.0 million and $3.4 million for the 1998 Quarter and
1999 Quarter, respectively. Interest expense totaled $3.8 million and $7.1
million for the 1998 Period and 1999 Period, respectively. The 68.2% and 87.8%
increases in interest expense for the 1999 Quarter and 1998 Period,
respectively, were primarily due to an increase in the average outstanding debt
balance from $102.5 million to $171.1 million during the 1998 Period and 1999
Period, respectively. The increase in the average debt balance is primarily due
to approximately $26.0 million of debt incurred or assumed in connection with
the acquisition of RDI, $15.5 million of debt incurred or assumed by BPNV, the
$21.7 million net increase in debt in connection with the issuance of the
Company's $110 million senior secured notes payable and increased borrowings
associated with the Company's receivable-backed notes payable and the
acquisition and development of the Company's resort and residential land
projects since September 28, 1997.
PROVISIONS FOR LOSSES
The Company recorded provisions for loan losses and for real estate taxes and
other costs associated with delinquent customers of $469,000 and $599,000 during
the 1998 Quarter and 1999 Quarter, respectively, and $780,000 and $892,000
during the 1998 Period and 1999 Period, respectively. The increase in the
provision is attributable to the overall increase in the notes receivable
balance since September 28, 1997 caused by increased sales of Timeshare
Interests by the Resorts Division, offset by a decrease in Resorts Division
loans due to the sale of $32.4 million of timeshare notes receivable on June 26,
1998.
The allowance for loan losses by division as of March 29, 1998 and September
27, 1998 is (amounts in thousands):
MARCH 29, 1998
<TABLE>
<CAPTION>
RESIDENTIAL
RESORTS DIVISION LAND DIVISION TOTAL
---------------- ------------- ----------
<S> <C> <C> <C>
Notes Receivable $ 67,430 $ 14,459 $ 81,889
Less: Allowance for Loan Losses (1,635) (469) (2,104)
---------- ---------- ----------
Notes Receivable, net $65,795 $13,990 $79,785
========== ========== ==========
Allowance as a % of gross notes receivable 2.4% 3.2% 2.6%
==== ==== ====
</TABLE>
SEPTEMBER 27, 1998
<TABLE>
<CAPTION>
RESIDENTIAL
RESORTS DIVISION LAND DIVISION TOTAL
---------------- ------------- ----------
<S> <C> <C> <C>
Notes Receivable $ 57,137 $ 12,289 $ 69,426
Less: Allowance for Loan Losses (1,519) (386) (1,905)
---------- ---------- ----------
Notes Receivable, net $55,618 $11,903 $67,521
========== ========== ==========
Allowance as a % of gross notes receivable 2.7% 3.1% 2.7%
==== ==== ====
</TABLE>
OTHER INCOME
Other income increased from $153,000 to $2.4 million during the 1998 Period and
1999 Period, respectively. The increase is primarily due to the $2.1 million
gain on sale of the timeshare notes receivable previously discussed and
approximately $300,000 of gains on sales of property and equipment, both
recorded during the 1999 Period.
25
<PAGE> 26
EXTRAORDINARY ITEM
The Company recognized a $1.7 million extraordinary loss on early extinguishment
of debt, net of taxes, during the 1999 Period. See further discussion under
"Liquidity and Capital Resources - Note Offering".
SUMMARY
Based on the factors discussed above, the Company's net income increased from
$2.8 million to $5.5 million in the 1998 Quarter and 1999 Quarter, respectively,
and from $4.5 million to $9.5 million in the 1998 Period and 1999 Period,
respectively.
CHANGES IN FINANCIAL CONDITION
Cash and cash equivalents increased $13.1 million and $39.3 million during the
1998 Period and 1999 Period, respectively.
Net cash provided by the Company's operations was $15.1 million and $8.5 million
for the 1998 Period and 1999 Period, respectively. The decrease in cash flow
from operations during the 1999 Period was primarily due to the acquisition of
Timeshare Interest inventory in Charleston, South Carolina for approximately
$16.5 million in cash, the funding of a $1.2 million vs. a $3.1 million increase
in other assets during the 1998 Period and 1999 Period, respectively, and the
funding of a $16.9 million vs. a $26.4 million increase in notes receivable
during the 1998 Period and 1999 Period, respectively. These decreases were
partially offset by a net increase of $20.8 million from the sale and
hypothecation of the Company's notes receivables during the 1999 Period as
compared to the 1998 Period.
Net cash used by investing activities was $840,000 and $5.0 million for the 1998
Period and 1999 Period, respectively. The increase in cash used by investing
activities during the 1999 Period was primarily due to an additional $4.8
million in purchases of property and equipment, primarily $2.2 million for
furniture and leasehold improvements at the Company's new corporate headquarters
and an additional $2.0 million in fixed asset spending related to the Company's
daily fee golf courses. This was partially offset by $898,000 of proceeds from
the sale of fixed assets during the 1999 Period, primarily the Company's
corporate airplane. The airplane has subsequently been replaced through an
operating lease arrangement.
Net cash used by financing activities was $1.2 million for the 1998 Period. Net
cash provided by financing activities was $35.8 million for the 1999 Period. The
increase in net cash provided by financing activities during the 1999 Period was
due to the proceeds from the issuance of the Company's $110.0 million senior
secured notes and the issuance of 2.9 million shares of the Company's Common
Stock to affiliates of Morgan Stanley Dean Witter and Company, Inc. for net cash
proceeds of approximately $24.3 million. These increases were partially offset
by the payment of approximately $5.2 million of debt issuance costs during the
1999 Period, the early extinguishment of approximately $91.8 million of
lines-of-credit and other notes payable (including prepayment penalties and
accrued interest), and approximately $2.0 million of payments on lines-of-credit
in the normal course of business.
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 of real estate, (ii) down payments on real estate and timeshare
sales which are financed, (iii) principal and interest payments on the purchase
money mortgage loans arising from residential land sales and contracts for deed
arising from sales of Timeshare Interests (collectively Receivables) and (iv)
proceeds from the sale of, or borrowings collateralized by, notes receivable.
Historically, external sources of liquidity have included borrowings under
secured 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 and satisfy its debt and other
obligations to provide funds for future strategic acquisitions, primarily for
the Resorts Division.
26
<PAGE> 27
NOTE OFFERING
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). Interest on the Notes is payable
semiannually on April 1 and October 1 of each year, commencing October 1, 1998.
The net proceeds of the Offering were approximately $106.3 million. In
connection with the Offering, the Company repaid the $22.1 million short-term
borrowing from the two investment banking firms who were the initial purchasers
of the Notes, approximately $28.9 million of line-of-credit and notes payable
balances and approximately $36.3 million of the Company's receivable-backed
notes payable. In addition, the Company paid aggregate accrued interest on the
repaid debt of approximately $1 million and $2.7 million of prepayment
penalties. The remaining net proceeds of the Offering will be used to repay
other obligations of the Company and for working capital purposes. In connection
with the Offering, the Company wrote-off approximately $692,000 of debt issuance
costs related to the extinguished debt and recognized a $1.7 million
extraordinary loss on early extinguishment of debt, net of taxes.
CREDIT FACILITIES FOR TIMESHARE RECEIVABLES AND TIMESHARE INVENTORIES
The Company has maintained various credit facilities with financial
institutions that provided for receivable financing for its timeshare projects.
In connection with the Offering, the Company retired all outstanding
indebtedness related to timeshare receivable and inventory financings, except
for debt associated with receivables previously sold to financial institutions
with recourse by RDI and debt related to Aruba, which were approximately $6.4
million and $14.0 million, respectively at September 27, 1998. The Company
terminated the existing credit facilities for timeshare receivable and
inventory financings concurrent with the closing of the Offering.
The Company has obtained a two-year, $35 million timeshare receivables warehouse
loan facility with a financial institution. Loans under the warehouse facility
will bear interest at LIBOR plus 2.75%. 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
95% of the outstanding principal balance of eligible notes arising primarily
from the sale of completed Timeshare Interests. The warehouse facility includes
affirmative, negative and financial covenants, and events of default. As of
September 27, 1998, the Company has not incurred any debt under the warehouse
facility.
On June 26, 1998, the Company executed a timeshare receivables purchase facility
with the same financial institution. Under the purchase facility (the Purchase
Facility), a special purpose finance subsidiary of the company will sell up to
$100 million aggregate principal amount of timeshare receivables to the
financial institution in a securitization transaction. The Purchase Facility has
detailed requirements with respect to the eligibility of receivables for
purchase. Under the Purchase Facility, a purchase price equal to approximately
97% (subject to adjustment in certain circumstances) of the principal balance of
the receivables sold will be paid at closing in cash, with a portion deferred
until such time as the purchaser has received a return equal to the
weighted-average term treasury rate plus 1.4% and all servicing, custodial and
similar fees and expenses have been paid and a cash reserve account has been
funded. Should the Company fail to sell to such financial institution during the
term of the Purchase Facility notes receivable with cumulative present value of
at least $100 million, the return to the purchaser will increase by .05% for
each $10 million shortfall, to a maximum applicable margin of 1.60%. The
Company's special purpose finance subsidiary will be required to maintain a
specified overcollaterlization level and a cash reserve account. Receivables
will be sold without recourse to the Company or its special purpose finance
subsidiary except for breaches of representations and guaranties made at the
time of sale. The financial institution's obligation to purchase under the
Purchase Facility will terminate upon the occurrence of specified trigger
events. The Company will act as servicer under the Purchase Facility for a fee,
and will be required to make advances to the financial institution to the extent
it believes such advances will be recoverable. The Purchase Facility includes
various conditions to purchase and other provisions customary for a
securitization of this type. The Purchase Facility has a term of two years.
On June 26, 1998, the Company completed its first sale under the Purchase
Facility. The Company sold approximately $32.4 million aggregate principal
amount of timeshare receivables for a purchase price equal to 96.4% of the
principal balance and recognized a $2.1 million gain. As a result of the sale,
the Company recorded a $3.1 million available-for-sale investment in the
residual cash flow of the receivable pool (i.e. the deferred payment).
27
<PAGE> 28
In addition, the same financial institution referred to in the preceding
paragraphs has provided the Company with a $25 million acquisition and
development facility for its timeshare inventories. The facility includes a
two-year draw down period and has a term of seven years. 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 the three-month LIBOR plus 3.0%. With
respect to any inventory financed under the facility, the Company will be
required to have provided equity of at least 15% of the approved project costs.
In connection with the facility, the Company will also be required to pay
certain fees and expenses to the financial institution. As of September 27,
1998, the Company has not incurred any debt under the acquisition and
development facility.
CREDIT FACILITIES FOR RESIDENTIAL LAND RECEIVABLES AND RESIDENTIAL LAND
INVENTORIES
The Company has an existing $20.0 million revolving credit facility with a
financial institution for the pledge of Residential Land Division Receivables.
The Company uses the facility as a temporary warehouse until it accumulates a
sufficient quantity of residential land receivables to sell under private
placement REMIC transactions. Under the terms of this facility, the Company is
entitled to advances secured by eligible Residential Land Division receivables
up to 90% of the outstanding principal balance. In addition, up to $8.0 million
of the facility can be used for land acquisition and development purposes. The
interest rate charged on outstanding borrowings ranges from prime plus 0.5% to
1.5%. At September 27, 1998, the outstanding principal balances under the
receivables and development portions of this facility were $5.6 million and $1.9
million, respectively. 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 in September 2000. Any outstanding
indebtedness is due in September 2002.
Over the past three years, the Company has received 80% to 90% 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
lot 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 property 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 lot releases. The release price is usually defined as a pre-determined
percentage of the gross selling price (typically 25% to 50%) of the parcels 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.
The Company has obtained from a financial institution a $35 million revolving
credit facility. The Company expects to use this facility to finance the
acquisition and development of residential land projects and to finance land
receivables. The facility when drawn upon will be secured by the real property
(and personal property related thereto) with respect to which borrowings are
made, with the lender 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 expected to be
approximately prime plus 1.5%.
The Company estimates that the total cash required to complete preparation for
the sale of its residential land and timeshare property inventory as of
September 27, 1998 is approximately $144.5 million, 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 and cash generated
from operations. There can be no assurances that the Company will be able to
obtain the financing necessary to complete the foregoing plans.
The Company's credit facilities and the Indenture entered into in connection
with the Note Offering include certain covenants restricting, among other
things, the incurrence of debt, the payment of dividends and other restricted
payments, the incurrence of liens, and transactions with affiliates. Certain
current and future credit facilities do or
28
<PAGE> 29
will include financial covenants. No assurances can be given that such
covenants will not limit the Company's ability to satisfy or refinance its
obligations or otherwise adversely affect the Company's operations.
OTHER CREDIT FACILITIES
On September 23, 1998, the Company entered into a $5 million, unsecured
line-of-credit with a bank. Amounts borrowed under the line will bear interest
at LIBOR plus 1.5%. Interest is due monthly, with all principal amounts due on
July 31, 1999. Through September 27, 1998, the Company has not borrowed any
amounts under the line.
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; 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 Division on larger more capital intensive projects
particularly in those regions where the Company believes the market for its
products is strongest, such as the Southeast, Southwest, Rocky Mountains and
Western regions of the United States and to replenish its residential land
inventory in such regions as existing projects are sold-out.
The Company believes that the net proceeds from the Offering, anticipated cash
generated from operations, anticipated future permitted borrowings under
existing or proposed credit facilities and anticipated future sales of notes
receivable under existing purchase facilities will be sufficient to meet the
Company's working capital, capital expenditures and debt service requirements
for the foreseeable future. Based on outstanding borrowings at September 27,
1998, and the credit facilities described above, the Company has approximately
$112.5 million of available credit at its disposal, subject to customary
conditions and eligible collateral. The Company may, in the future, require
additional credit facilities or issuances of other corporate debt or equity
securities in connection with acquisitions or otherwise. Any debt 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 management deems prudent. There can
be no assurance that the proposed credit facilities will be consummated on the
terms described herein, if at all, 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 include customary conditions to funding, eligibility
requirements for collateral, certain financial and other affirmative and
negative covenants, including, among others, limits on the incurrence of
indebtedness, covenants concerning net worth, fixed charge coverage
requirements, debt to equity ratios and events of default. 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.
IMPACT OF YEAR 2000
Some of the Company's older computer programs were written using two digits
rather than four to define the applicable year. As a result, those computer
programs have time-sensitive software that recognizes a date using "00" as the
year 1900 rather than the year 2000. This could cause a system failure and
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, or engage in similar
normal business activities.
The Company has completed an assessment relative to the modification or
replacement of portions of its software so that its computer systems will
function properly with respect to dates in the year 2000 and thereafter. The
Company is also in the process of identifying and reviewing its non-information
technology systems with respect to Year 2000 issues. In addition, the Company
has initiated communication with third parties to determine the extent to which
the Company's interface systems are vulnerable to those third parties' failure
to remediate their own Year 2000 issues. The total "Year 2000" project cost is
estimated at approximately $400,000, which consists of costs to be incurred to
acquire upgraded software that will be capitalized. It is anticipated that these
costs will be paid for using cash from operations.
29
<PAGE> 30
The project is estimated to be completed not later than June 30, 1999, which is
prior to any anticipated impact on the Company's operating systems. The Company
believes that with modifications to existing software and conversions to new
software, the Year 2000 issue will not pose significant operational problems for
its computer systems. However, if such modifications and conversions are not
made, or are not completed timely, the Year 2000 issue could have a material
impact on the operations of the Company.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, and similar uncertainties.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
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.
In addition to its other ordinary course litigation, the Company has
recently become a defendant in two proceedings. First, an action was
filed in Colorado state court against the Company on September 15, 1998
(the Company has removed the action to the Federal District Court in
Denver). The plaintiff, Hartsel Springs Ranch of Colorado, Inc., 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 complaint seeks damages in excess of $18
million and certain other remedies, including punitive damages.
Second, an action (the Texas Action) was filed on July 10, 1998 in the
District Court for the State of Texas in the County of Montgomery
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 in Texas (the Texas
Property). The Texas Property was acquired subject to certain alleged
oil and gas leasehold interests and rights (the Interests) held by the
plaintiffs in the Texas Action, Contract Oil & Gas Service Company and
Michael Galloway (collectively, the Texas Plaintiffs). The Company's
subsidiaries developed the Texas Property and have resold parcels to
numerous customers. The Texas 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 Texas Plaintiffs
from exploiting the Interests. The Texas 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.
The Company is in the early stages of evaluating these actions and
their potential impact, if any, on the Company and accordingly cannot
predict the outcomes 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
each of the actions and intends to defend each of these matters
vigorously. The Company does not believe that any likely outcome of
either case will have a material adverse effect on the Company's
financial condition or results of operations.
30
<PAGE> 31
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Information with respect to the Company's Annual Meeting of
Shareholders held on July 28, 1998 was included in the Company's
Quarterly Report on Form 10-Q for the quarterly period ended June 28,
1998.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.132 Loan Agreement and Promissory Note dated September 23, 1998, by
and among the Registrant, certain subsidiaries of the Registrant and
First Union National Bank, for the $5 million, unsecured revolving
line-of-credit due July 31, 1999.
27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated August 14, 1998
reporting under Item 5 thereof that the Company entered into a
Securities Purchase Agreement dated as of August 14, 1998 by and among
the Company, Morgan Stanley Real Estate Investors III, L.P., Morgan
Stanley Real Estate Fund III, L.P., (MSREF), MSP Real Estate Fund,
L.P., and MSREF III Special Fund, L.P., (collectively, the Funds)
pursuant to which the Funds purchased 2,941,177 shares of the Company's
common stock, par value $.01 per share for an aggregate of $25 million.
Such Form 8-K included the Purchase Agreement, Registration Rights
Agreement, Voting and Cooperation Agreement and Amended and Restated
By-Laws related to this transaction, as Exhibits.
31
<PAGE> 32
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: November 6, 1998 By: /s/ GEORGE F. DONOVAN
-------------------------------------
George F. Donovan
President and
Chief Executive Officer
Date: November 6, 1998 By: /s/ JOHN F. CHISTE
-------------------------------------
John F. Chiste
Senior Vice President,
Treasurer and Chief Financial Officer
(Principal Financial Officer)
Date: November 6, 1998 By: /s/ ANTHONY M. PULEO
-------------------------------------
Anthony M. Puleo
Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
32
<PAGE> 1
(LOGO) EXHIBIT 10.132
LOAN AGREEMENT
First Union National Bank
214 North Hogan Street - FL0070
Jacksonville, Florida 32202
(Hereinafter referred to as the "Bank")
Bluegreen Corporation
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Resorts Management, Inc.
f/k/a RDI Resort Services Corporation
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Resorts, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Holding Corporation (Texas)
4960 Blue Lake Drive
Boca Raton, Florida 33431
Properties of the Southwest One, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Properties of the Southwest, L.P.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Asset Management Corporation
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Carolina Land, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Corporation of Montana
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Corporation of Tennessee
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Corporation of the Rockies
4960 Blue Lake Drive
Boca Raton, Florida 33431
<PAGE> 2
Bluegreen Properties of Virginia, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Communities, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Resorts International, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Carolina National Golf Club, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Leisure Capital Corporation
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Properties of the West, Inc.
f/k/a Properties of the West, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
BG/RDI Acquisition Corp.
4960 Blue Lake Drive
Boca Raton, Florida 33431
RDI Group, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Dellona Enterprises, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Resorts of Florida, Inc.
f/k/a Resort Development International, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Vacations Unlimited, Inc.
f/k/a RDI Resources, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
(INDIVIDUALLY AND COLLECTIVELY "BORROWER")
This Loan Agreement ("Agreement") is entered into September 23, 1998, by and
between Bank and Borrower.
Borrower has applied to Bank for a loan or loans (individually and
collectively, the "Loan") evidenced by one or more promissory notes (whether
one or more, the "Note") as follows:
Line of Credit - in the principal amount of $5,000,000.00 which is evidenced by
the Promissory Note dated September 23, 1998 ("Line of Credit Note"), under
which Borrower may borrow, repay, and
<PAGE> 3
reborrow, from time to time, so long as the total indebtedness outstanding at
any one time does not exceed the principal amount minus the sum of (i) the
amount available to be drawn plus (ii) the amount of unreimbursed drawings
under all letters of credit issued by Bank for the account of Borrower. The
Loan proceeds are to be used by Borrower solely for working capital and to
issue letters of credit from time to time. The total amount of letters of
credit to be issued under the Line of Credit Note shall not exceed
$1,000,000.00 at any time nor have maturities greater than July 31, 1999.
Bank's obligation to advance or readvance under the Line of Credit Note shall
terminate if Borrower is in Default under the Line of Credit Note.
This Agreement applies to the Loan and all Loan Documents. The terms "Loan
Documents" and "Obligations," as used in this Agreement, are defined in the
Note. The term "Borrower" shall include its Subsidiaries and Affiliates. As
used in this Agreement as to Borrower, "Subsidiary" shall mean any corporation
of which more than 50% of the issued and outstanding voting stock is owned
directly or indirectly by Borrower. As to Borrower, "Affiliate" shall have the
meaning as defined in 11 U.S.C. ss. 101, except that the term "debtor" therein
shall be substituted by the term "Borrower" herein.
Relying upon the covenants, agreements, representations and warranties
contained in this Agreement, Bank is willing to extend credit to Borrower upon
the terms and subject to the conditions set forth herein, and Bank and Borrower
agree as follows:
REPRESENTATIONS. Borrower represents that from the date of this Agreement and
until final payment in full of the Obligations: ACCURATE INFORMATION. All
information now and hereafter furnished to Bank is and will be true, correct
and complete. Any such information relating to Borrower's financial condition
will accurately reflect Borrower's financial condition as of the date(s)
thereof, (including all contingent liabilities of every type), and Borrower
further represents that its financial condition has not changed materially or
adversely since the date(s) of such documents. AUTHORIZATION;
NON-CONTRAVENTION. The execution, delivery and performance by Borrower and any
guarantor, as applicable, of this Agreement and other Loan Documents to which
it is a party are within its power, have been duly authorized by all necessary
action taken by the duly authorized officers of Borrower and any guarantors
and, if necessary, by making appropriate filings with any governmental agency
or unit and are the legal, binding, valid and enforceable obligations of
Borrower and any guarantors; and do not (i) contravene, or constitute (with or
without the giving of notice or lapse of time or both) a violation of any
provision of applicable law, a violation of the organizational documents of
Borrower or any guarantor, or a default under any agreement, judgment,
injunction, order, decree or other instrument binding upon or affecting
Borrower or any guarantor, (ii) result in the creation or imposition of any
lien (other than the lien(s) created by the Loan Documents) on any of
Borrower's or guarantor's assets, or (iii) give cause for the acceleration of
any obligations of Borrower or any guarantor to any other creditor. ASSET
OWNERSHIP. Borrower has good and marketable title to all of the properties and
assets reflected on the balance sheets and financial statements supplied Bank
by Borrower, and all such properties and assets are free and clear of
mortgages, security deeds, pledges, liens, charges, and all other encumbrances,
except as otherwise disclosed in the Borrower's Form 10-Q for the period ended
June 28, 1998 ("Permitted Liens"). To Borrower's knowledge, no default has
occurred under any Permitted Liens and no claims or interests adverse to
Borrower's present rights in its properties and assets have arisen. DISCHARGE
OF LIENS AND TAXES. Borrower has duly filed, paid and/or discharged all taxes
or other claims which may become a lien on any of its property or assets,
except to the extent that such items are being appropriately contested in good
faith and an adequate reserve for the payment thereof is being maintained.
SUFFICIENCY OF CAPITAL. Borrower is not, and after consummation of this
Agreement and after giving effect to all indebtedness incurred and liens
created by Borrower in connection with the Loan, will not be, insolvent within
the meaning of 11 U.S.C. ss. 101(32). COMPLIANCE WITH LAWs. Borrower is in
compliance in all respects with all federal, state and local laws, rules and
regulations applicable to its properties, operations, business, and finances,
including, without limitation, any federal or state laws relating to liquor
(including 18 U.S.C. ss. 3617, ET SEQ.) or narcotics (including 21 U.S.C.ss.
801, ET SEq.) and/or any commercial crimes; all applicable federal, state and
local laws and regulations intended to protect the environment; and the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), if
applicable. ORGANIZATION AND AUTHORITY. Each corporate or limited liability
company
<PAGE> 4
Borrower and any guarantor, as applicable, is duly created, validly existing
and in good standing under the laws of the state of its organization, and has
all powers, governmental licenses, authorizations, consents and approvals
required to operate its business as now conducted. Each corporate or limited
liability company Borrower and any guarantor, if any, is duly qualified,
licensed and in good standing in each jurisdiction where qualification or
licensing is required by the nature of its business or the character and
location of its property, business or customers, and in which the failure to so
qualify or be licensed, as the case may be, in the aggregate, could have a
material adverse effect on the business, financial position, results of
operations, properties or prospects of Borrower or any such guarantor. NO
LITIGATION. There are no pending or threatened suits, claims or demands against
Borrower or any guarantor that have not been disclosed to Bank by Borrower in
writing. ERISA. Each employee pension benefit plan, as defined in ERISA,
maintained by Borrower meets, as of the date hereof, the minimum funding
standards of ERISA and all applicable regulations thereto and requirements
thereof, and of the Internal Revenue Code of 1954, as amended. No "Prohibited
Transaction" or "Reportable Event" (as both terms are defined by ERISA) has
occurred with respect to any such plan.
AFFIRMATIVE COVENANTS. Borrower agrees that from the date of this Agreement and
until final payment in full of the Obligations, unless Bank shall otherwise
consent in writing, Borrower will: BUSINESS CONTINUITY. Conduct its business in
substantially the same manner and locations as such business is now and has
previously been conducted. MAINTAIN PROPERTIES. Maintain, preserve and keep its
property in good repair, working order and condition, making all needed
replacements, additions and improvements thereto, to the extent allowed by this
Agreement. ACCESS TO BOOKS & RECORDS. Allow Bank, or its agents, during normal
business hours, access to the books, records and such other documents of
Borrower as Bank shall reasonably require, and allow Bank to make copies
thereof at Bank's expense. INSURANCE. Maintain adequate insurance coverage with
respect to its properties and business against loss or damage of the kinds and
in the amounts customarily insured against by companies of established
reputation engaged in the same or similar businesses including, without
limitation, commercial general liability insurance, workers compensation
insurance, and business interruption insurance; all acquired in such amounts
and from such companies as Bank may reasonably require. NOTICE OF DEFAULT AND
OTHER NOTICES. (a) Notice of Default. Furnish to Bank immediately upon becoming
aware of the existence of any condition or event which constitutes a Default
(as defined in the Loan Documents) or any event which, upon the giving of
notice or lapse of time or both, may become a Default, written notice
specifying the nature and period of existence thereof and the action which
Borrower is taking or proposes to take with respect thereto. (b) Other Notices.
Promptly notify Bank in writing of (i) any material adverse change in its
financial condition or its business; (ii) any default under any material
agreement, contract or other instrument to which it is a party or by which any
of its properties are bound, or any acceleration of the maturity of any
indebtedness owing by Borrower; (iii) any material adverse claim against or
affecting Borrower or any part of its properties; (iv) the commencement of, and
any material determination in, any litigation with any third party or any
proceeding before any governmental agency or unit affecting Borrower; and (v)
at least 30 days prior thereto, any change in Borrower's name or address as
shown above, and/or any change in Borrower's structure. COMPLIANCE WITH OTHER
AGREEMENTS. Comply with all terms and conditions contained in this Agreement,
and any other Loan Documents, and swap agreements, if applicable, as defined in
the Note. PAYMENT OF DEBTS. Pay and discharge when due, and before subject to
penalty or further charge, and otherwise satisfy before maturity or
delinquency, all obligations, debts, taxes, and liabilities of whatever nature
or amount, except those which Borrower in good faith disputes. REPORTS AND
PROXIES. Deliver to Bank, promptly, a copy of all financial statements,
reports, notices, and proxy statements, sent by Borrower to stockholders, and
all regular or periodic reports required to be filed by Borrower with any
governmental agency or authority. OTHER FINANCIAL INFORMATION. Deliver promptly
such other information regarding the operation, business affairs, and financial
condition of Borrower which Bank may reasonably request. NON-DEFAULT
CERTIFICATE FROM BORROWER. Deliver to Bank, with the Financial Statements
required herein, a certificate signed by Borrower, if Borrower is an
individual, or by a principal financial officer of Borrower warranting that no
"Default" as specified in the Loan Documents nor any event which, upon the
giving of notice or lapse of time or both, would constitute such a Default, has
occurred. ESTOPPEL CERTIFICATE. Furnish, within 15 days after request by Bank,
a written statement duly acknowledged of the amount due under the Loan and
whether offsets or defenses exist against the Obligations.
<PAGE> 5
NEGATIVE COVENANTS. Borrower agrees that from the date of this Agreement and
until final payment in full of the Obligations, unless Bank shall otherwise
consent in writing, Borrower will not: DEFAULT ON OTHER CONTRACTS OR
OBLIGATIONS. Default on any material contract with or obligation when due to a
third party or default in the performance of any obligation to a third party
incurred for money borrowed. JUDGMENT ENTERED. Permit the entry of any monetary
judgment or the assessment against, the filing of any tax lien against, or the
issuance of any writ of garnishment or attachment against any property of or
debts due Borrower. GOVERNMENT INTERVENTION. Permit the assertion or making of
any seizure, vesting or intervention by or under authority of any government by
which the management of Borrower or any guarantor is displaced of its authority
in the conduct of its respective business or such business is curtailed or
materially impaired. PREPAYMENT OF OTHER DEBT. Retire its $110,000,000.00
Senior Secured Notes due April 1, 2008 in advance of its legal obligation to do
so. RETIRE OR REPURCHASE CAPITAL STOCK. Retire or otherwise acquire any of its
capital stock.
FINANCIAL COVENANTS. Borrower, on a consolidated Basis, agrees to the following
provisions from the date hereof until final payment in full of the Obligations,
unless Bank shall otherwise consent in writing: ADJUSTED TANGIBLE NET WORTH.
Borrower shall, at all times, maintain an Adjusted Tangible Net Worth of at
least $85,000,000.00. "Adjusted Tangible Net Worth" shall mean the total assets
minus total liabilities. For purposes of this computation, the aggregate amount
of any intangible assets of Borrower including, without limitation, goodwill,
franchises, licenses, patents, trademarks, trade names, copyrights, service
marks, and brand names, shall be subtracted from total assets, and total
liabilities shall exclude debt subordinated to Bank. ADJUSTED TOTAL LIABILITIES
TO ADJUSTED TANGIBLE NET WORTH RATIO. Borrower shall, at all times, maintain a
ratio of Adjusted Total Liabilities to Adjusted Tangible Net Worth of not more
than 2.00 to 1.00. For purposes of this computation, "Adjusted Total
Liabilities" shall mean the sum of total liabilities, including capitalized
leases and all reserves for deferred taxes and other deferred sums appearing on
the liabilities side of a balance sheet, in accordance with generally accepted
accounting principles applied on a consistent basis, excluding debt
subordinated to Bank. DEPOSIT RELATIONSHIP. Borrower shall maintain its primary
depository account with Bank. COMPLIANCE CERTIFICATE. Borrower shall furnish
Bank with a quarterly covenant compliance certificate demonstrating Borrower's
compliance with the above Financial Covenants.
ANNUAL FINANCIAL STATEMENTS. Borrower shall deliver to Bank, within 90 days
after the close of each fiscal year, audited financial statements reflecting
its operations during such fiscal year, including, without limitation, a
balance sheet, profit and loss statement and statement of cash flows, with
supporting schedules; all on a consolidated and consolidating basis and in
reasonable detail, prepared in conformity with generally accepted accounting
principles, applied on a basis consistent with that of the preceding year. All
such statements shall be examined by an independent certified public accountant
acceptable to Bank. The opinion of such independent certified public accountant
shall not be acceptable to Bank if qualified due to any limitations in scope
imposed by Borrower or its Subsidiaries, if any. Any other qualification of the
opinion by the accountant shall render the acceptability of the financial
statements subject to Bank's approval.
PERIODIC FINANCIAL STATEMENTS. Borrower shall deliver to Bank unaudited
management-prepared quarterly financial statements, including, without
limitation, a balance sheet, profit and loss statement and statement of cash
flows, with supporting schedules, as soon as available and in any event within
45 days after the close of each such period; all in reasonable detail and
prepared in conformity with generally accepted accounting principles, applied
on a basis consistent with that of the preceding year. Such statements shall be
certified as to their correctness by a principal financial officer of Borrower
and in each case, if audited statements are required, subject to audit and
year-end adjustments.
FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Bank such
information as Bank may reasonably request from time to time, including without
limitation, financial statements and information pertaining to Borrower's
financial condition. Such information shall be true, complete, and accurate.
<PAGE> 6
YEAR 2000 COMPATIBILITY. Borrower shall take all action necessary to assure
that Borrower's computer based systems are able to operate and effectively
process data including dates on and after January 1, 2000. At the request of
Bank, Borrower shall provide Bank assurance acceptable to Bank of Borrower's
Year 2000 compatibility.
CONDITIONS PRECEDENT. The obligations of Bank to make the Loan and any advances
pursuant to this Agreement are subject to the following conditions precedent:
ADDITIONAL DOCUMENTS. Receipt by Bank of such additional supporting documents
as Bank or its counsel may reasonably request. OPINION OF COUNSEL. On or prior
to the date of any borrowing hereunder, Bank shall have received a written
opinion of the counsel of Borrower acceptable to Bank that includes
confirmation of the following: (a) The accuracy of the representations set
forth in this Agreement in the Representations Subparagraphs entitled
"Authorization; Non-Contravention"; "Compliance with Laws", and "Organization
and Authority". (b) This Agreement and other Loan Documents have been duly
executed and delivered by Borrower and constitute the legal, valid and binding
obligations of Borrower, enforceable in accordance with their terms. (c) No
registration with, consent of, approval of, or other action by, any federal,
state or other governmental authority or regulatory body to the execution and
delivery of this Agreement, the borrowing under this Agreement or other Loan
Documents, is required by law, or, if so required, such registration has been
made, and consent or approval given or such other appropriate action taken. (d)
The Loan is not usurious. (e) The Loan Documents create the priority of lien on
or security interest in the Collateral (as defined in the Loan Documents) that
is contemplated by the Loan Documents.
IN WITNESS WHEREOF, Borrower and Bank, on the day and year first written above,
have caused this Agreement to be executed under seal.
Bluegreen Corporation
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, Senior Vice President
Bluegreen Resorts Management, Inc.
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
Bluegreen Resorts, Inc.
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
Bluegreen Holding Corporation (Texas)
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
<PAGE> 7
Properties of the Southwest One, Inc.
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, Executive Vice President
Properties of the Southwest, L.P.
By: Properties of the Southwest One, Inc.,
its: General Partner
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, Executive Vice President
Bluegreen Asset Management Corporation
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
Bluegreen Carolina Land, Inc.
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
Bluegreen Corporation of Montana
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
Bluegreen Corporation of Tennessee
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
Bluegreen Corporation of the Rockies
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
<PAGE> 8
Bluegreen Corporation of Virginia, Inc.
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
Bluegreen Communities, Inc.
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
Bluegreen Resorts International, Inc.
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
Carolina National Golf Club, Inc.
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
Leisure Capital Corporation
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
Bluegreen Properties of the West, Inc.
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
BG/RDI Acquisition Corp.
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
<PAGE> 9
RDI Group, Inc.
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, Secretary
Dellona Enterprises, Inc.
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, Secretary
Bluegreen Resorts of Florida, Inc.
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, Secretary
Bluegreen Vacations Unlimited, Inc.
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
First Union National Bank
CORPORATE By: /s/ KAREN LEIKERT
SEAL ------------------------------------------------
Karen Leikert, Vice President
<PAGE> 10
(LOGO) EXHIBIT 10.132
PROMISSORY NOTE
September 23, 1998
$5,000,000.00
Bluegreen Corporation
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Resorts Management, Inc.
f/k/a RDI Resort Services Corporation
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Resorts, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Holding Corporation (Texas)
4960 Blue Lake Drive
Boca Raton, Florida 33431
Properties of the Southwest One, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Properties of the Southwest, L.P.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Asset Management Corporation
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Carolina Land, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Corporation of Montana
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Corporation of Tennessee
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Corporation of the Rockies
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Properties of Virginia, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
<PAGE> 11
Bluegreen Communities, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Resorts International, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Carolina National Golf Club, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Leisure Capital Corporation
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Properties of the West, Inc.
f/k/a Properties of the West, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
BG/RDI Acquisition Corp.
4960 Blue Lake Drive
Boca Raton, Florida 33431
RDI Group, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Dellona Enterprises, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Resorts of Florida, Inc.
f/k/a Resort Development International, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Vacations Unlimited, Inc.
f/k/a RDI Resources, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
(INDIVIDUALLY AND COLLECTIVELY "BORROWER"))
First Union National Bank
214 North Hogan Street - FL0070
Jacksonville, Florida 32202
(HEREINAFTER REFERRED TO AS THE "BANK")
Borrower promises to pay to the order of Bank, in lawful money of the United
States of America, at its office indicated above or wherever else Bank may
specify, the sum of Five Million and No/100 Dollars ($5,000,000.00) or such sum
as may be advanced and outstanding from time to time with interest on the
unpaid principal balance at the rate and on the terms provided in this
Promissory Note (including all renewals, extensions or modifications hereof,
this "Note").
<PAGE> 12
INTEREST RATE. Interest shall accrue on the unpaid principal balance of this
Note from the date hereof at the LIBOR Market Index Rate plus 1.5% as that rate
may change from day to day in accordance with changes in the LIBOR Market Index
Rate ("Interest Rate"). "LIBOR Market Index Rate", for any day, is the rate for
1 month U.S. dollar deposits as reported on Telerate page 3750 as of 11:00
a.m., London time, on such day, or if such day is not a London business day,
then the immediately preceding London business day (or if not so reported, then
as determined by Bank from another recognized source or interbank quotation).
DEFAULT RATE. In addition to all other rights contained in this Note, if a
Default (defined herein) occurs and as long as a Default continues, all
outstand~ing Obligations shall bear interest at the Interest Rate plus 3%
("Default Rate"). The Default Rate shall also apply from acceleration until the
Obligations or any judgment thereon is paid in full.
INTEREST AND FEE(S) COMPUTATION. (ACTUAL/360). Interest and fees, if any, shall
be computed on the basis of a 360-day year for the actual number of days in the
applicable period ("Actual/360 Computation"). The Actual/360 Computation
determines the annual effective yield by taking the stated (nominal) rate for a
year's period and then dividing said rate by 360 to determine the daily
periodic rate to be applied for each day in the applicable period. Application
of the Actual/360 Computation produces an annualized effective rate exceeding
that of the nominal rate.
REPAYMENT TERMS. This Note shall be due and payable in consecutive monthly
payments of accrued interest only commencing on October 23, 1998, and on the
same day of each month thereafter until fully paid. In any event, all principal
and accrued interest shall be due and payable on July 31, 1999.
APPLICATION OF PAYMENTS. Monies received by Bank from any source for
application toward payment of the Obligations shall be applied to accrued
interest and then to principal. If a Default occurs, monies may be applied to
the Obligations in any manner or order deemed appropriate by Bank.
If any payment received by Bank under this Note or other Loan Documents is
rescinded, avoided or for any reason returned by Bank because of any adverse
claim or threatened action, the returned payment shall remain payable as an
obligation of all persons liable under this Note or other Loan Documents as
though such payment had not been made.
DEFINITIONS. LOAN DOCUMENTS. The term "Loan Documents" used in this Note and
other Loan Documents refers to all documents executed in connection with the
loan evidenced by this Note and any prior notes which evidence all or any
portion of the loan evidenced by this Note, and may include, without
limitation, a commitment letter that survives closing, a loan agreement, this
Note, guaranty agreements, security agreements, security instruments, financing
statements, mortgage instruments, any renewals or modifications, whenever any
of the foregoing are executed, but does not include swap agreements (as defined
in 11 U.S.C. ss. 101). OBLIGATIONs. The term "Obligations" used in this Note
refers to any and all indebtedness and other obligations under this Note, all
other obligations under any other Loan Document(s), and all obligations under
any swap agreements as defined in 11 U.S.C. ss. 101 between Borrower and Bank
whenever executed. CERTAIN OTHER TERMs. All terms that are used but not
otherwise defined in any of the Loan Documents shall have the definitions
provided in the Uniform Commercial Code.
LATE CHARGE. If any payments are not timely made, Borrower shall also pay to
Bank a late charge equal to 5% of each payment past due for 10 or more days.
Acceptance by Bank of any late payment without an accompanying late charge
shall not be deemed a waiver of Bank's right to collect such late charge or to
collect a late charge for any subsequent late payment received.
<PAGE> 13
If this Note is secured by owner-occupied residential real property located
outside the state in which the office of Bank first shown above is located, the
late charge laws of the state where the real property is located shall apply to
this Note and the late charge shall be the highest amount allowable under such
laws. If no amount is stated thereunder, the late charge shall be 5% of each
payment past due for 10 or more days.
ATTORNEYS' FEES AND OTHER COLLECTION COSTS. Borrower shall pay all of Bank's
reasonable expenses incurred to enforce or collect any of the Obligations,
including, without limitation, reasonable arbitration, paralegals', attorneys'
and experts' fees and expenses, whether incurred without the commencement of a
suit, in any trial, arbitration, or administrative proceeding, or in any
appellate or bankruptcy proceeding.
USURY. If at any time the effective interest rate under this Note would, but
for this paragraph, exceed the maximum lawful rate, the effective interest rate
under this Note shall be the maximum lawful rate, and any amount received by
Bank in excess of such rate shall be applied to principal and then to fees and
expenses, or, if no such amounts are owing, returned to Borrower.
DEFAULT. If any of the following occurs, a default ("Default") under this Note
shall exist: NONPAYMENT; NONPERFORMANCE. The failure of timely payment or
performance of the Obligations or Default under this Note or any other Loan
Documents. FALSE WARRANTY. A warranty or representation made or deemed made in
the Loan Documents or furnished Bank in connection with the loan evidenced by
this Note proves materially false, or if of a continuing nature, becomes
materially false. CROSS DEFAULT. At Bank's option, any default in payment or
performance of any obligation under any other loans, contracts or agreements of
Borrower, any Subsidiary or Affiliate of Borrower, any general partner of or
the holder(s) of the majority ownership interests of Borrower with Bank or its
affiliates ("Affiliate" shall have the meaning as defined in 11 U.S.C. ss. 101,
except that the term "debtor" therein shall be substituted by the term
"Borrower" herein; "Subsidiary" shall mean any business in which Borrower
holds, directly or indirectly, a controlling interest). CESSATION; BANKRUPTCY.
The death of, appointment of guardian for, dissolution of, termination of
existence of, loss of good standing status by, appointment of a receiver for,
assignment for the benefit of creditors of, or commencement of any bankruptcy
or insolvency proceeding by or against the Borrower, its Subsidiaries or
Affiliates, if any, or any general partner of or the holder(s) of the majority
ownership interests of Borrower, or any party to the Loan Documents. MATERIAL
CAPITAL STRUCTURE OR BUSINESS ALTERATION. Without prior written consent of
Bank, (i) a material alteration in the kind or type of Borrower's business or
that of Borrower's Subsidiaries or Affiliates, if any; (ii) the sale of
substantially all of the business or assets of Borrower, any of Borrower's
Subsidiaries or Affiliates or guarantor or a material portion (10% or more) of
such business or assets if such a sale is outside the ordinary course of
business of Borrower, or any of Borrower's Subsidiaries or Affiliates or any
guarantor or more than 50% of the outstanding stock or voting power of or in
any such entity in a single transaction or a series of transactions; (iii) the
acquisition of substantially all of the business or assets or more than 50% of
the outstanding stock or voting power of any other entity; or (iv) should any
Borrower, or any of Borrower's Subsidiaries or Affiliates or any guarantor
enter into any merger or consolidation.
REMEDIES UPON DEFAULT. If a Default occurs under this Note or any Loan
Documents, Bank may at any time thereafter, take the following actions: BANK
LIEN. Foreclose its security interest or lien against Borrower's accounts
without notice. ACCELERATION UPON DEFAULT. Accelerate the maturity of this Note
and all other Obligations, and all of the Obligations shall be immediately due
and payable. CUMULATIVE. Exercise any rights and remedies as provided under the
Note and other Loan Documents, or as provided by law or equity.
FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Bank such
information as Bank may reasonably request from time to time, including without
limitation, financial statements and information pertaining to Borrower's
financial condition. Such information shall be true, complete, and accurate.
<PAGE> 14
YEAR 2000 COMPATIBILITY. Borrower shall take all action necessary to ensure
that Borrower's computer based systems are able to operate and effectively
process data including dates on and after January 1, 2000. At the request of
Bank, Borrower shall provide Bank assurance acceptable to Bank of Borrower's
Year 2000 compatibility.
LINE OF CREDIT ADVANCES. Borrower may borrow, repay and reborrow, and Bank may
advance and readvance under this Note respectively from time to time until the
maturity hereof (each an "Advance" and together the "Advances"), so long as the
total indebtedness outstanding under this Note at any one time does not exceed
the principal amount stated on the face of this Note minus the sum of (i) the
amount available to be drawn plus (ii) the amount of unreimbursed drawings
under all letters of credit issued by Bank for the account of Borrower. The
total amount of letters of credit to be issued under the Line of Credit Note
shall not exceed $1,000,000.00 at any time. Bank's obligation to make Advances
under this Note shall terminate if Borrower is in Default or a representation
in any of the Loan Documents is false or has become false. As of the date of
each proposed Advance, Borrower shall be deemed to represent that each
representation made in the Loan Documents is true as of such date. 45-DAY
PAYOUT. During the term of the Note, Borrower agrees to pay down the
outstanding balance to a maximum of $100.00 for 45 consecutive days annually.
If Borrower subscribes to Bank's cash management services and such services are
applicable to this line of credit, the terms of such service shall control the
manner in which funds are transferred between the applicable demand deposit
account and the line of credit for credit or debit to the line of credit.
WAIVERS AND AMENDMENTS. No waivers, amendments or modifications of this Note
and other Loan Documents shall be valid unless in writing and signed by an
officer of Bank. No waiver by Bank of any Default shall operate as a waiver of
any other Default or the same Default on a future occasion. Neither the failure
nor any delay on the part of Bank in exercising any right, power, or remedy
under this Note and other Loan Documents shall operate as a waiver thereof, nor
shall a single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.
Each Borrower or any person liable under this Note waives presentment, protest,
notice of dishonor, demand for payment, notice of intention to accelerate
maturity, notice of acceleration of maturity, notice of sale and all other
notices of any kind. Further, each agrees that Bank may extend, modify or renew
this Note or make a novation of the loan evidenced by this Note for any period
and grant any releases, compromises or indulgences with respect to any
collateral securing this Note, or with respect to any other Borrower or any
other person liable under this Note or other Loan Documents, all without notice
to or consent of each Borrower or each person who may be liable under this Note
or other Loan Documents and without affecting the liability of Borrower or any
person who may be liable under this Note or other Loan Documents.
MISCELLANEOUS PROVISIONS. ASSIGNMENT. This Note and other Loan Documents shall
inure to the benefit of and be binding upon the parties and their respective
heirs, legal representatives, successors and assigns. Bank's interests in and
rights under this Note and other Loan Documents are freely assignable, in whole
or in part, by Bank. In addition, nothing in this Note or any of the Loan
Documents shall prohibit Bank from pledging or assigning this Note or any of
the Loan Documents or any interest therein to any Federal Reserve Bank.
Borrower shall not assign its rights and interest hereunder without the prior
written consent of Bank, and any attempt by Borrower to assign without Bank's
prior written consent is null and void. Any assignment shall not release
Borrower from the Obligations. APPLICABLE LAW; CONFLICT BETWEEN DOCUMENTS. This
Note and other Loan Documents shall be governed by and construed under the laws
of the state named in Bank's address shown above without regard to that state's
conflict of laws principles. If the terms of this Note should conflict with the
terms of the loan agreement or any commitment letter that survives closing, the
terms of this Note shall control. BORROWER'S ACCOUNTS. Except as prohibited by
law, Borrower grants Bank a security interest in all of Borrower's accounts
with Bank and any of its affiliates. JURISDICTION. Borrower irrevocably agrees
to non-exclusive personal jurisdiction in the state named in Bank's address
shown above. SEVERABILITY. If any provision of this Note or of the other Loan
Documents shall be prohibited or invalid under applicable
<PAGE> 15
law, such provision shall be ineffective but only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Note or other such document. NOTICES. Any
notices to Borrower shall be sufficiently given, if in writing and mailed or
delivered to the Borrower's address shown above or such other address as
provided hereunder, and to Bank, if in writing and mailed or delivered to Bank's
office address shown above or such other address as Bank may specify in writing
from time to time. In the event that Borrower changes Borrower's address at any
time prior to the date the Obligations are paid in full, Borrower agrees to
promptly give written notice of said change of address by registered or
certified mail, return receipt requested, all charges prepaid. PLURAL; CAPTIONS.
All references in the Loan Documents to Borrower, guarantor, person, document or
other nouns of reference mean both the singular and plural form, as the case may
be, and the term "person" shall mean any individual, person or entity. The
captions contained in the Loan Documents are inserted for convenience only and
shall not affect the meaning or interpretation of the Loan Documents. BINDING
CONTRACT. Borrower by execution of and Bank by acceptance of this Note agree
that each party is bound to all terms and provisions of this Note. ADVANCES.
Bank in its sole discretion may make other Advances under this Note pursuant
hereto. POSTING OF PAYMENTS. All payments received during normal banking hours
after 2:00 p.m. local time at the office of Bank first shown above shall be
deemed received at the opening of the next banking day. JOINT AND SEVERAL
OBLIGATIONS. Each Borrower is jointly and severally obligated under this Note.
FEES AND TAXES. Borrower shall promptly pay all documentary, intangible
recordation and/or similar taxes on this transaction whether assessed at closing
or arising from time to time.
ARBITRATION. Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any claim or controversy arising out of
or relating to the Loan Documents between parties hereto (a "Dispute") shall be
resolved by binding arbitration conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and the Federal Arbitration Act. Disputes
may include, without limitation, tort claims, counterclaims, a dispute as to
whether a matter is subject to arbitration, claims brought as class actions, or
claims arising from documents executed in the future. A judgment upon the award
may be entered in any court having jurisdiction. Notwithstanding the foregoing,
this arbitration provision does not apply to disputes under or related to swap
agreements. SPECIAL RULES. All arbitration hearings shall be conducted in the
city named in the address of Bank first stated above. A hearing shall begin
within 90 days of demand for arbitration and all hearings shall conclude within
120 days of demand for arbitration. These time limitations may not be extended
unless a party shows cause for extension and then for no more than a total of
60 days. The expedited procedures set forth in Rule 51 ET SEQ. of the
Arbitration Rules shall be applicable to claims of less than $1,000,000.00.
Arbitrators shall be licensed attorneys selected from the Commercial Financial
Dispute Arbitration Panel of the AAA. The parties do not waive applicable
Federal or state substantive law except as provided herein. PRESERVATION AND
LIMITATION OF REMEDIES. Notwithstanding the preceding binding arbitration
provisions, the parties agree to preserve, without diminution, certain remedies
that any party may exercise before or after an arbitration proceeding is
brought. The parties shall have the right to proceed in any court of proper
jurisdiction or by self-help to exercise or prosecute the following remedies,
as applicable: (i) all rights to foreclose against any real or personal
property or other security by exercising a power of sale or under applicable
law by judicial foreclosure including a proceeding to confirm the sale; (ii)
all rights of self-help including peaceful occupation of real property and
collection of rents, set-off, and peaceful possession of personal property;
(iii) obtaining provisional or ancillary remedies including injunctive relief,
sequestration, garnishment, attachment, appointment of receiver and filing an
involuntary bankruptcy proceeding; and (iv) when applicable, a judgment by
confession of judgment. Any claim or controversy with regard to any party's
entitlement to such remedies is a Dispute. WAIVER OF EXEMPLARY DAMAGES. The
parties agree that they shall not have a remedy of punitive or exemplary
damages against other parties in any Dispute and hereby waive any right or
claim to punitive or exemplary damages they have now or which may arise in the
future in connection with any Dispute whether the Dispute is resolved by
arbitration or judicially. WAIVER OF JURY TRIAL. THE PARTIES ACKNOWLEDGE THAT
BY AGREEING TO BINDING ARBITRATION THEY HAVE IRREVOCABLY WAIVED ANY RIGHT THEY
MAY HAVE TO JURY TRIAL WITH REGARD TO A DISPUTE.
<PAGE> 16
IN WITNESS WHEREOF, Borrower, on the day and year first above written, has
caused this Note to be executed under seal.
Bluegreen Corporation
Taxpayer Identification Number: 03-0300793
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, Senior Vice President
Bluegreen Resorts Management, Inc.
Taxpayer Identification Number: 65-0520217
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
Bluegreen Resorts, Inc.
Taxpayer Identification Number: 65-0520212
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
Bluegreen Holding Corporation (Texas)
Taxpayer Identification Number: 65-0796382
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
Properties of the Southwest One, Inc.
Taxpayer Identification Number: 03-0315835
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, Executive Vice President
Properties of the Southwest, L.P.
By: Properties of the Southwest One, Inc.,
its: General Partner
Taxpayer Identification Number: 65-0796380
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, Executive Vice President
<PAGE> 17
Bluegreen Asset Management Corporation
Taxpayer Identification Number: 03-0325365
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
Bluegreen Carolina Land, Inc.
Taxpayer Identification Number: 03-0317601
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
Bluegreen Corporation of Montana
Taxpayer Identification Number: 81-0400702
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
Bluegreen Corporation of Tennessee
Taxpayer Identification Number: 03-0316460
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
Bluegreen Corporation of the Rockies
Taxpayer Identification Number: 65-0349373
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
Bluegreen Corporation of Virginia, Inc.
Taxpayer Identification Number: 52-1752664
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
<PAGE> 18
Bluegreen Communities, Inc.
Taxpayer Identification Number: 65-0484313
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
Bluegreen Resorts International, Inc.
Taxpayer Identification Number: 65-0803615
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
Carolina National Golf Club, Inc.
Taxpayer Identification Number: 62-1667685
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
Leisure Capital Corporation
Taxpayer Identification Number: 03-0327285
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
Bluegreen Properties of the West, Inc.
Taxpayer Identification Number: 59-3300205
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
BG/RDI Acquisition Corp.
Taxpayer Identification Number: 65-0776572
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
RDI Group, Inc.
Taxpayer Identification Number: 59-2504187
<PAGE> 19
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, Secretary
Dellona Enterprises, Inc.
Taxpayer Identification Number: 39-1130446
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, Secretary
Bluegreen Resorts of Florida, Inc.
Taxpayer Identification Number: 59-2151678
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, Secretary
Bluegreen Vacations Unlimited, Inc.
Taxpayer Identification Number: 65-0433722
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ------------------------------------------------
Patrick E. Rondeau, President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-28-1999
<PERIOD-START> MAR-30-1998
<PERIOD-END> SEP-27-1998
<CASH> 70,320
<SECURITIES> 14,264
<RECEIVABLES> 84,072
<ALLOWANCES> 2,651
<INVENTORY> 126,074
<CURRENT-ASSETS> 0<F1>
<PP&E> 30,556
<DEPRECIATION> 8,131
<TOTAL-ASSETS> 333,640
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 180,340
0
0
<COMMON> 239
<OTHER-SE> 104,588
<TOTAL-LIABILITY-AND-EQUITY> 333,640
<SALES> 117,060
<TOTAL-REVENUES> 130,255
<CGS> 42,407
<TOTAL-COSTS> 47,684
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 892
<INTEREST-EXPENSE> 7,106
<INCOME-PRETAX> 18,451
<INCOME-TAX> 7,381
<INCOME-CONTINUING> 11,199
<DISCONTINUED> 0
<EXTRAORDINARY> (1,682)
<CHANGES> 0
<NET-INCOME> 9,517
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0.37
<FN>
<F1>THE COMPANY HAS AN UNCLASSIFIED BALANCE SHEET
</FN>
</TABLE>
