<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 October 1, 2000
or
[ ] - Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-19292
BLUEGREEN CORPORATION(R)
--------------------------------------------------------------------------------
(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 9, 2000, there were 26,945,436 shares of Common Stock, $.01 par
value per share, issued, 2,750,300 treasury shares and 24,195,136 shares
outstanding.
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BLUEGREEN CORPORATION(R)
INDEX TO QUARTERLY REPORT ON FORM 10-Q
PART I - FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS AT
APRIL 2, 2000 AND OCTOBER 1, 2000 ........................................... 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - THREE MONTHS
ENDED OCTOBER 3, 1999 AND OCTOBER 1, 2000 ................................... 4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - SIX MONTHS
ENDED OCTOBER 3, 1999 AND OCTOBER 1, 2000 ................................... 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - SIX MONTHS
ENDED OCTOBER 3, 1999 AND OCTOBER 1, 2000 ................................... 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ............................. 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION ............................... 16
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK ............................................... 28
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS ................................................................ 28
ITEM 2. CHANGES IN SECURITIES ............................................................ 28
ITEM 3. DEFAULTS UPON SENIOR SECURITIES .................................................. 28
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .............................. 28
ITEM 5. OTHER INFORMATION ................................................................ 29
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ................................................. 29
SIGNATURES....................................................................................... 29
</TABLE>
NOTE: THE TERMS "BLUEGREEN CORPORATION" AND "BIG CEDAR" ARE REGISTERED IN THE
U.S. PATENT AND TRADEMARK OFFICE.
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>
April 2, October 1,
2000 2000
--------- ----------
(Note) (Unaudited)
--------- ---------
<S> <C> <C>
ASSETS
Cash and cash equivalents (including restricted cash of
approximately $21.1 million and $20.1 million at
April 2, 2000 and October 1, 2000, respectively) ....... $ 65,526 $ 35,101
Contracts receivable, net ................................. 8,403 13,871
Notes receivable, net ..................................... 70,114 117,262
Inventory, net ............................................ 196,509 188,251
Investments in securities ................................. 15,330 14,355
Property and equipment, net ............................... 35,409 39,181
Other assets .............................................. 24,221 33,528
--------- ---------
TOTAL ASSETS ........................................... $ 415,512 $ 441,549
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable .......................................... $ 6,876 $ 6,925
Accrued liabilities and other ............................. 28,776 32,280
Deferred income ........................................... 3,973 4,539
Deferred income taxes ..................................... 13,173 15,948
Receivable-backed notes payable ........................... 11,167 26,415
Lines-of-credit and notes payable ......................... 66,364 63,368
10.50% senior secured notes payable ....................... 110,000 110,000
8.00% convertible subordinated notes payable to related
parties ............................................... 6,000 6,000
8.25% convertible subordinated debentures ................. 34,371 34,371
--------- ---------
TOTAL LIABILITIES ...................................... 280,700 299,846
Contingencies
Minority interest ......................................... 768 3,136
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,000 shares authorized;
none issued ............................................ -- --
Common stock, $.01 par value, 90,000 shares authorized;
26,935 and 26,945 shares issued at April 2, 2000 and
October 1, 2000, respectively .......................... 269 269
Additional paid-in capital ................................ 122,533 122,569
Treasury stock, 2,558 and 2,735 common shares at cost at
April 2, 2000 and October 1, 2000, respectively ........ (12,313) (12,839)
Net unrealized gains on investments available-for-sale, net
of income taxes ........................................ 901 901
Retained earnings ......................................... 22,654 27,667
--------- ---------
TOTAL SHAREHOLDERS' EQUITY ............................. 134,044 138,567
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............. $ 415,512 $ 441,549
========= =========
</TABLE>
Note: The condensed consolidated balance sheet at April 2, 2000 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
-----------------------
October 3, October 1,
1999 2000
-------- --------
<S> <C> <C>
REVENUES:
Sales ............................................. $ 65,653 $ 64,810
Other resort and golf operations revenue .......... 5,658 7,859
Interest income ................................... 4,099 5,317
Gain on sale of notes receivable .................. 884 --
Other income (expense) ............................ 228 (50)
-------- --------
76,522 77,936
COSTS AND EXPENSES:
Cost of sales ..................................... 21,098 20,895
Cost of other resort and golf operations .......... 5,625 6,620
Selling, general and administrative expenses ...... 35,320 42,589
Interest expense .................................. 3,674 3,623
Provision for loan losses ......................... 1,536 1,456
-------- --------
67,253 75,183
-------- --------
Income before income taxes ........................... 9,269 2,753
Provision for income taxes ........................... 3,577 1,060
Minority interest in loss of consolidated subsidiaries (170) (308)
-------- --------
NET INCOME ........................................... $ 5,862 $ 2,001
======== ========
EARNINGS PER COMMON SHARE:
Basic ................................................ $ 0.25 $ 0.08
======== ========
Diluted .............................................. $ 0.22 $ 0.08
======== ========
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES:
Basic ................................................ 23,197 24,226
======== ========
Diluted .............................................. 29,527 25,857
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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BLUEGREEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
--------------------------
October 3, October 1,
1999 2000
---------- ----------
<S> <C> <C>
REVENUES:
Sales ............................................. $ 128,365 $ 127,017
Other resort and golf operations revenue .......... 11,041 15,577
Interest income ................................... 7,891 9,575
Gain on sale of notes receivable .................. 884 --
Other income ...................................... 287 311
--------- ---------
148,468 152,480
COSTS AND EXPENSES:
Cost of sales ..................................... 42,822 42,779
Cost of other resort and golf operations .......... 10,526 13,214
Selling, general and administrative expenses ...... 69,491 79,517
Interest expense .................................. 6,630 7,264
Provision for loan losses ......................... 2,324 2,491
--------- ---------
131,793 145,265
--------- ---------
Income before income taxes ........................... 16,675 7,215
Provision for income taxes ........................... 6,503 2,778
Minority interest in loss of consolidated subsidiaries (115) (576)
--------- ---------
NET INCOME ........................................... $ 10,287 $ 5,013
========= =========
EARNINGS PER COMMON SHARE:
Basic ................................................ $ 0.44 $ 0.21
========= =========
Diluted .............................................. $ 0.38 $ 0.20
========= =========
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES:
Basic ................................................ 23,315 24,293
========= =========
Diluted .............................................. 29,688 25,940
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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BLUEGREEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
-------------------------
October 3, October 1,
1999 2000
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ..................................................... $ 10,287 $ 5,013
Adjustments to reconcile net income to net
cash flow used by operating activities:
Minority interest in loss of consolidated subsidiaries ...... (115) (576)
Depreciation and amortization ............................... 2,117 2,778
Gain on sale of notes receivable ............................ (884) --
Loss on sale of property and equipment ...................... 89 9
Loss on exchange of REMIC certificates ...................... 179 --
Provision for loan losses ................................... 2,324 2,491
Provision for deferred income taxes ......................... 6,503 2,778
Interest accretion on investments in securities ............. (1,223) (1,188)
Proceeds from sale of notes receivable ...................... 18,742 --
Proceeds from borrowings collateralized by notes
receivable ................................................ 13,065 20,681
Payments on borrowings collateralized by notes receivable . (6,726) (4,886)
CHANGE IN OPERATING ASSETS AND LIABILITIES:
Contracts receivable ......................................... 8,718 (5,467)
Notes receivable ............................................. (39,717) (53,894)
Inventory .................................................... (11,729) 17,308
Other assets ................................................. (4,425) (996)
Accounts payable, accrued liabilities and other .............. (11,493) 4,100
-------- --------
NET CASH USED BY OPERATING ACTIVITIES ............................. (14,288) (11,849)
-------- --------
INVESTING ACTIVITIES:
Acquisition of minority interest ............................... -- (250)
Purchases of property and equipment ............................ (5,670) (4,884)
Sales of property and equipment ................................ 692 34
Cash received from investments in securities ................... 2,699 2,162
Long-term prepayment to Bass Pro, Inc. (see Note 3) ............ -- (9,000)
Loan to related party .......................................... (256) --
Principal payments received on loans to related party .......... 459 --
-------- --------
NET CASH USED BY INVESTING ACTIVITIES ............................. (2,076) (11,938)
-------- --------
FINANCING ACTIVITIES:
Proceeds from borrowings under line-of-credit facilities and
other notes payable .......................................... 14,025 6,500
Payments under line-of-credit facilities and other notes payable (2,541) (12,516)
Payment of debt issuance costs ................................. (1,510) (129)
Payments for treasury stock .................................... (5,419) (527)
Proceeds from exercise of employee and director stock options .. 94 34
-------- --------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES .................. 4,649 (6,638)
-------- --------
Net decrease in cash and cash equivalents ......................... (11,715) (30,425)
Cash and cash equivalents at beginning of period .................. 55,557 65,526
-------- --------
Cash and cash equivalents at end of period ........................ 43,842 35,101
Restricted cash and cash equivalents at end of period ............. (14,370) (20,095)
-------- --------
Unrestricted cash and cash equivalents at end of period ........... $ 29,472 $ 15,006
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
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BLUEGREEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - - CONTINUED
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
----------------------
October 3, October 1,
1999 2000
--------- ----------
<S> <C> <C>
SUPPLEMENTAL SCHEDULE OF NON-CASH OPERATING, INVESTING
AND FINANCING ACTIVITIES
Inventory acquired through financing .................. $ 13,986 $2,112
======== ======
Foreclosure of notes receivable, inventory and
fixed assets following default on notes receivable
from related party ............................... $ 3,965 $ --
======== ======
Exchange of REMIC certificates for notes receivable
and inventory in connection with termination
of REMIC ......................................... $ 4,353 $ --
======== ======
Property and equipment acquired through financing ..... $ -- $ 891
======== ======
Inventory acquired through foreclosure or
deedback in lieu of foreclosure ...................... $ 3,168 $3,708
======== ======
Sale of notes receivable in exchange for investment in
securities ......................................... $ 1,474 $ --
======== ======
Contribution of land inventory by minority
interest .......................................... $ -- $3,230
======== ======
</TABLE>
See accompanying notes to condensed consolidated financial statements
7
<PAGE> 8
BLUEGREEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 1, 2000
(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 October 1, 2000 are not
necessarily indicative of the results to be expected for the fiscal year ending
April 1, 2001. 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 April 2,
2000.
ORGANIZATION
The Company is a leading marketer of vacation and residential lifestyle choices
through its resort and residential land and golf businesses which are located
predominantly in the Southeastern, Southwestern and Midwestern United States.
The Company's resort business (the "Resorts Division") acquires, develops and
markets Timeshare Interests in resorts generally located in popular,
high-volume, "drive-to" vacation destinations. "Timeshare Interests" are of two
types: one which entitles the fixed-week buyer to a fully-furnished vacation
residence for an annual one-week period in perpetuity and the second which
entitles the buyer of the points-based Bluegreen Vacation Club(TM) product to an
annual allotment of "points" in perpetuity (supported by an underlying deeded
fixed timeshare week being held in trust for the buyer). "Points" may be
exchanged by the buyer in various increments for lodging for varying lengths of
time in fully-furnished vacation residences at the Company's participating
resorts. The Company currently develops, markets and sells Timeshare Interests
in ten resorts located in the United States and Aruba. The Company also markets
and sells Timeshare Interests in its resorts at four off-site sales locations.
The Company's residential land and golf business (the "Residential Land and Golf
Division") acquires, develops and subdivides property and markets the subdivided
residential lots to retail customers seeking to build a home in a high quality
residential setting, in some cases on properties featuring a golf course and
related amenities. During the six months ended October 1, 2000, sales generated
by the Company's Resorts Division and Residential Land and Golf Division
comprised approximately 61% and 39%, respectively, of the Company's total sales.
The Company's other resort and golf operations revenues are generated from
resort property management services, resort title services, resort amenity
operations, hotel operations and daily-fee golf course operations. The Company
also generates significant interest income by providing financing to individual
purchasers of Timeshare Interests and, to a nominal extent, land sold by the
Residential Land and Golf Division.
PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts of the
Company, all of its wholly-owned subsidiaries and entities in which the Company
holds a controlling financial interest. All significant intercompany balances
and transactions are eliminated.
USE OF ESTIMATES
The preparation of condensed consolidated financial statements in conformity
with 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.
FISCAL YEAR
The Company's fiscal year consists of 52 or 53 weeks, ending on the Sunday
nearest the last day of March in each year. Fiscal year 2000 was 53 weeks long,
while fiscal year 2001 will be 52 weeks long. The six-month periods ended
October 3, 1999 and October 1, 2000 consisted of 27 weeks and 26 weeks,
respectively.
8
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EARNINGS PER COMMON SHARE
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 29, 1999.
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
----------------------- ------------------------
October 3, October 1, October 3, October 1,
1999 2000 1999 2000
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Basic earnings per share - numerator:
Net income ......................................... $ 5,862 $ 2,001 $10,287 $ 5,013
======= ======= ======= =======
Diluted earnings per share - numerator:
Net income - basic ................................. $ 5,862 $ 2,001 $10,287 $ 5,013
Effect of dilutive securities (net of tax effects) . 505 74 1,037 148
------- ------- ------- -------
Net income - diluted ............................... $ 6,367 $ 2,075 $11,324 $ 5,161
======= ======= ======= =======
Denominator:
Denominator for basic earnings per share - weighted-
average shares ................................. 23,197 24,226 23,315 24,293
Effect of dilutive securities:
Stock options ................................... 628 100 671 116
Convertible securities .......................... 5,702 1,531 5,702 1,531
------- ------- ------- -------
Dilutive potential common shares ...................... 6,330 1,631 6,373 1,647
------- ------- ------- -------
Denominator for diluted earnings per share - adjusted
weighted-average shares and assumed conversions .... 29,527 25,857 29,688 25,940
======= ======= ======= =======
Basic earnings per common share ....................... $ 0.25 $ 0.08 $ 0.44 $ 0.21
======= ======= ======= =======
Diluted earnings per common share ..................... $ 0.22 $ 0.08 $ 0.38 $ 0.20
======= ======= ======= =======
</TABLE>
RECENT ACCOUNTING PRONOUNCEMENTS
In March 2000, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 44, ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING STOCK
COMPENSATION, AN INTERPRETATION OF APB OPINION NO. 25. The Company was required
to adopt the Interpretation on July 1, 2000. The adoption of the Interpretation
had no impact on the Company's results of operations for the three- and
six-month periods ended October 1, 2000.
In September 2000, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 140, "ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS
AND EXTINGUISHMENTS OF LIABILITIES." SFAS No. 140 changes certain provisions of
SFAS No. 125. SFAS No. 140 is effective for transfers of financial assets
occurring after March 31, 2000. The Company is currently evaluating the impact
of SFAS No. 140 on its results of operations and financial position.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the current
period presentation.
2. JOINT VENTURES
On June 16, 2000, a wholly-owned subsidiary of the Company entered into an
agreement with Big Cedar(R) L.L.C. ("Big Cedar"), an affiliate of Bass Pro,
Inc., to form a timeshare development, marketing and sales company known as
Bluegreen/Big Cedar Vacations LLC(TM) (the "Joint Venture"). The Joint Venture
will develop, market and sell Timeshare Interests in a 300-unit,
wilderness-themed resort adjacent to the Big Cedar Lodge, a luxury hotel resort
owned by Big Cedar, on Table Rock Lake in Missouri. The Company has committed to
an initial cash capital
9
<PAGE> 10
contribution to the Joint Venture of approximately $3.2 million, of which
$823,000 was funded as of October 1, 2000, in exchange for a 51% ownership
interest in the Joint Venture. The Company's remaining initial cash capital
contribution to the Joint Venture will be funded prospectively as needed by the
Joint Venture, but in any event no later than June 16, 2001. In exchange for a
49% interest in the Joint Venture, Big Cedar has contributed approximately 46
acres of land with a fair market value of $3.2 million to the Joint Venture. See
Note 3 regarding payment of profit distributions to Big Cedar. If needed, the
Company and Big Cedar have committed to a combination of additional capital
contributions and loan guarantees of up to $510,000 and $490,000, respectively.
In addition to its 51% ownership interest, the Company will also receive a
quarterly management fee from the Joint Venture equal to 3% of the Joint
Venture's net sales in exchange for the Company's involvement in the day-to-day
operations of the Joint Venture.
Based on the Company's role as the day-to-day manager of the Joint Venture, its
majority control of the Joint Venture's Management Committee and its controlling
financial interest in the Joint Venture, the accounts of the Joint Venture are
included in the Company's condensed consolidated financial statements. The Joint
Venture has been designated as an unrestricted subsidiary for purposes of the
Indenture governing the Notes referred to in Note 6 and the Joint Venture has
not guaranteed such Notes.
On August 25, 2000, the Company acquired the 50% minority ownership interest in
Bluegreen Properties N.V.(TM) ("BPNV"), the subsidiary which operates the sales
and marketing operation at the La Cabana Beach and Racquet Club(TM) resort in
Oranjestad, Aruba and owns the related Timeshare Interest inventory. The
minority interest was acquired for $250,000 in cash, which approximated the book
value of the minority interest on the acquisition date. Subsequent to the
acquisition, the Company also repaid a $3.0 million loan to an affiliate of the
former joint venture partner in BPNV and wrote off approximately $368,000 of
forgiven accrued interest. The Company now owns 100% of BPNV.
3. MARKETING AGREEMENT
On June 16, 2000, the Company entered into an exclusive, 10-year marketing
agreement with Bass Pro, Inc. ("Bass Pro"), a privately-held retailer of
fishing, marine, hunting, camping and sports gear. Bass Pro is an affiliate of
Big Cedar (see Note 2). Pursuant to the agreement, the Company will have the
right to market its Timeshare Interests at each of Bass Pro's national retail
locations (currently consisting of eleven stores), in Bass Pro's catalogs and on
its web site. The Company will also have access to Bass Pro's customer lists. In
exchange for these services, the Company agreed to pay Bass Pro a commission
ranging from 3.5% to 7.0% on each sale of a Timeshare Interest, net of
cancellations and defaults, that is made to a customer as a result of one of the
Bass Pro marketing channels described above (the "Commission"). The amount of
the Commission is dependent on the level of additional marketing efforts
required by the Company to convert the prospect into a sale and a defined time
frame for such marketing efforts. There is no Commission paid to Bass Pro on
sales made by the Joint Venture.
On June 16, 2000, the Company prepaid $9 million to Bass Pro (the "Prepayment").
The Prepayment will be amortized from future Commissions earned by Bass Pro and
future member distributions otherwise payable to Big Cedar from the earnings of
the Joint Venture as a member thereof. No additional Commissions or member
distributions will be paid in cash to Bass Pro or Big Cedar, respectively, until
the Prepayment has been fully utilized. The Company will periodically evaluate
the Prepayment for indications of impairment. The Prepayment is included in
other assets on the condensed consolidated balance sheet. As of October 1, 2000,
the unamortized balance of the Prepayment was $9 million.
4. RECEIVABLE-BACKED NOTE PAYABLE AND SUBSEQUENT SALE OF RECEIVABLES
On July 18, 2000, the Company borrowed an additional $20.7 million pursuant to a
timeshare receivables financing facility with a financial institution (the
"Loan"). The Loan was collateralized by $22.2 million of timeshare receivables
and is due in October 2001. The Loan bears interest at LIBOR plus 3%, which is
paid on a weekly basis. As of October 1, 2000, a total of $20.4 million is
outstanding under this financing facility.
On October 16, 2000, the Company sold $31.8 million of timeshare receivables
under a new, $90.0 million timeshare receivables purchase facility. Gross
proceeds from the sale of these receivables were approximately $30.1 million, of
which $15.8 was used to pay down the Loan.
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5. LINE-OF CREDIT BORROWING
On September 25, 2000, the Company borrowed $5 million under its $10 million,
unsecured line-of-credit with a bank. The borrowing bears interest at LIBOR plus
1.75% and is due on December 31, 2000. The proceeds were used for operations.
The $5 million debt was still outstanding at October 1, 2000.
6. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
On April 1, 1998, the Company consummated a private placement offering (the
"Offering") of $110 million in aggregate principal amount of 10.5% senior
secured notes due April 1, 2008 (the "Notes"). None of the assets of Bluegreen
Corporation secure its obligations under the Notes, and the Notes are
effectively subordinated to secured indebtedness of the Company to any third
party to the extent of assets serving as security therefore. The Notes are
unconditionally guaranteed, jointly and severally, by each of the Company's
subsidiaries (the "Subsidiary Guarantors"), with the exception of Bluegreen/Big
Cedar Vacations, LLC(TM), Bluegreen Properties N.V. (TM), Resort Title Agency,
Inc. (TM), any special purpose finance subsidiary, any subsidiary which is
formed and continues to operate for the limited purpose of holding a real estate
license and acting as a broker, and certain other subsidiaries which have
individually less then $50,000 of assets (collectively, "Non-Guarantor
Subsidiaries"). Supplemental financial information for Bluegreen Corporation,
its combined Non-Guarantor Subsidiaries and its combined Subsidiary Guarantors
is presented below:
CONDENSED CONSOLIDATING BALANCE SHEET AT OCTOBER 1, 2000
(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 .............. $ 12,304 $ 11,511 $ 11,286 $ -- $ 35,101
Contracts receivable, net .............. -- 263 13,608 -- 13,871
Intercompany receivable ................ 158,500 -- -- (158,500) --
Notes receivable, net .................. 352 7,362 109,548 -- 117,262
Inventory, net ......................... -- 15,613 172,638 -- 188,251
Investments in securities .............. -- 14,355 -- -- 14,355
Investments in subsidiaries ............ 7,730 -- 3,230 (10,960) --
Property and equipment, net ............ 8,584 531 30,066 -- 39,181
Other assets ........................... 10,687 4,863 17,978 -- 33,528
--------- --------- --------- --------- ---------
Total assets ........................ $ 198,157 $ 54,498 $ 358,354 $(169,460) $ 441,549
========= ========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Liabilities
Accounts payable, deferred income,
accrued liabilities and other ........ $ 13,111 $ 14,265 $ 16,368 $ -- $ 43,744
Intercompany payable ................... -- 10,346 148,154 (158,500) --
Deferred income taxes .................. 3,373 2,371 10,204 -- 15,948
Lines-of-credit and receivable-backed
notes payable ......................... 8,720 12,180 68,883 -- 89,783
10.50% senior secured notes payable .... 110,000 -- -- -- 110,000
8.00% convertible subordinated notes
payable to related parties ............ 6,000 -- -- -- 6,000
8.25% convertible subordinated
debentures ............................ 34,371 -- -- -- 34,371
--------- --------- --------- --------- ---------
Total liabilities ................... 175,575 39,162 243,609 (158,500) 299,846
Minority interest ...................... -- -- -- 3,136 3,136
Total shareholders' equity ................. 22,582 15,336 114,745 (14,096) 138,567
--------- --------- --------- --------- ---------
Total liabilities and shareholders' equity . $ 198,157 $ 54,498 $ 358,354 $(169,460) $ 441,549
========= ========= ========= ========= =========
</TABLE>
11
<PAGE> 12
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended October 3, 1999
------------------------------------------------------------------------------
Combined Combined
Bluegreen Non-guarantor Subsidiary
Corporation Subsidiaries Guarantors Eliminations Consolidated
------------ ------------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
REVENUES
Sales ................................... $ 8,438 $ 2,255 $ 54,960 $ -- $ 65,653
Management fee revenue .................. 6,551 -- -- (6,551) --
Other resort and golf operations revenue -- 775 4,883 -- 5,658
Interest income ......................... 211 865 3,023 -- 4,099
Other income ............................ 147 909 56 -- 1,112
-------- -------- -------- -------- --------
15,347 4,804 62,922 (6,551) 76,522
COST AND EXPENSES
Cost of sales ........................... 2,458 607 18,033 -- 21,098
Cost of other resort and golf operations -- 316 5,309 -- 5,625
Management fees ......................... -- 390 6,161 (6,551) --
Selling, general and administrative
expenses .............................. 11,987 1,662 21,671 -- 35,320
Interest expense ........................ 2,864 675 135 -- 3,674
Provision for loan losses ............... -- 127 1,409 -- 1,536
-------- -------- -------- -------- --------
17,309 3,777 52,718 (6,551) 67,253
-------- -------- -------- -------- --------
Income (loss) before income taxes ....... (1,962) 1,027 10,204 -- 9,269
Provision (benefit) for income taxes .... (760) 398 3,939 -- 3,577
Minority interest in loss of consolidated
subsidiary .......................... -- -- -- (170) (170)
-------- -------- -------- -------- --------
Net income (loss) ....................... $ (1,202) $ 629 $ 6,265 $ 170 $ 5,862
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended October 1, 2000
------------------------------------------------------------------------------
Combined Combined
Bluegreen Non-guarantor Subsidiary
Corporation Subsidiaries Guarantors Eliminations Consolidated
------------ ------------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
REVENUES
Sales ................................... $ 360 $ 2,033 $ 62,417 $ -- $ 64,810
Management fee revenue .................. 6,990 -- -- (6,990) --
Other resort and golf operations revenue -- 1,187 6,672 -- 7,859
Interest income ......................... 314 1,120 3,883 -- 5,317
Other (expense) income .................. (152) 23 79 -- (50)
-------- -------- -------- -------- --------
7,512 4,363 73,051 (6,990) 77,936
COST AND EXPENSES
Cost of sales ........................... -- 557 20,338 -- 20,895
Cost of other resort and golf operations -- 389 6,231 -- 6,620
Management fees ......................... -- -- 6,990 (6,990) --
Selling, general and administrative
expenses .............................. 6,925 1,831 33,833 -- 42,589
Interest expense ........................ 1,582 1 2,040 -- 3,623
Provision for loan losses ............... -- -- 1,456 -- 1,456
-------- -------- -------- -------- --------
8,507 2,778 70,888 (6,990) 75,183
-------- -------- -------- -------- --------
Income (loss) before income taxes ....... (995) 1,585 2,163 -- 2,753
Provision (benefit) for income taxes .... (383) 701 742 -- 1,060
Minority interest in loss of consolidated
subsidiary .......................... -- -- -- (308) (308)
-------- -------- -------- -------- --------
Net income (loss) ....................... $ (612) $ 884 $ 1,421 $ 308 $ 2,001
======== ======== ======== ======== ========
</TABLE>
12
<PAGE> 13
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended October 3, 1999
------------------------------------------------------------------------------
Combined Combined
Bluegreen Non-guarantor Subsidiary
Corporation Subsidiaries Guarantors Eliminations Consolidated
------------ ------------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
REVENUES
Sales ................................... $ 15,644 $ 5,525 $ 107,196 $ -- $ 128,365
Management fee revenue .................. 12,890 -- -- (12,890) --
Other resort and golf operations revenue -- 1,231 9,810 -- 11,041
Interest income ......................... 503 1,785 5,603 -- 7,891
Other income ............................ 153 922 96 -- 1,171
--------- --------- --------- --------- ---------
29,190 9,463 122,705 (12,890) 148,468
COST AND EXPENSES
Cost of sales ........................... 4,871 1,466 36,485 -- 42,822
Cost of other resort and golf operations -- 599 9,927 -- 10,526
Management fees ......................... -- 854 12,036 (12,890) --
Selling, general and administrative
expenses .............................. 22,151 3,701 43,639 -- 69,491
Interest expense ........................ 5,224 1,119 287 -- 6,630
Provision for loan losses ............... -- 90 2,234 -- 2,324
--------- --------- --------- --------- ---------
32,246 7,829 104,608 (12,890) 131,793
--------- --------- --------- --------- ---------
Income (loss) before income taxes ....... (3,056) 1,634 18,097 -- 16,675
Provision (benefit) for income taxes .... (1,192) 637 7,058 -- 6,503
Minority interest in loss of consolidated
subsidiary .......................... -- -- -- (115) (115)
--------- --------- --------- --------- ---------
Net income (loss) ....................... $ (1,864) $ 997 $ 11,039 $ 115 $ 10,287
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended October 1, 2000
------------------------------------------------------------------------------
Combined Combined
Bluegreen Non-guarantor Subsidiary
Corporation Subsidiaries Guarantors Eliminations Consolidated
------------ ------------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
REVENUES
Sales ................................... $ 360 $ 3,472 $ 123,185 $ -- $ 127,017
Management fee revenue .................. 14,362 -- -- (14,362) --
Other resort and golf operations revenue -- 1,908 13,669 -- 15,577
Interest income ......................... 778 2,032 6,765 -- 9,575
Other income ............................ 2 43 266 -- 311
--------- --------- --------- --------- ---------
15,502 7,455 143,885 (14,362) 152,480
COST AND EXPENSES
Cost of sales ........................... -- 988 41,791 -- 42,779
Cost of other resort and golf operations -- 722 12,492 -- 13,214
Management fees ......................... -- -- 14,362 (14,362) --
Selling, general and administrative
expenses .............................. 12,679 3,427 63,411 -- 79,517
Interest expense ........................ 3,882 465 2,917 -- 7,264
Provision for loan losses ............... -- 122 2,369 -- 2,491
--------- --------- --------- --------- ---------
16,561 5,724 137,342 (14,362) 145,265
--------- --------- --------- --------- ---------
Income (loss) before income taxes ....... (1,059) 1,731 6,543 -- 7,215
Provision (benefit) for income taxes .... (408) 786 2,400 -- 2,778
Minority interest in loss of consolidated
subsidiary ........................... -- -- -- (576) (576)
--------- --------- --------- --------- ---------
Net income (loss) ....................... $ (651) $ 945 $ 4,143 $ 576 $ 5,013
========= ========= ========= ========= =========
</TABLE>
13
<PAGE> 14
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended October 3, 1999
--------------------------------------------------------------
Combined Combined
Bluegreen Non-guarantor Subsidiary
Corporation Subsidiaries Guarantors Consolidated
----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net cash used by operating activities ................. $ (1,627) $ (2,760) $ (9,901) $(14,288)
-------- -------- -------- --------
INVESTING ACTIVITIES:
Purchases of property and equipment ................ (1,288) (24) (4,358) (5,670)
Sales of property and equipment .................... -- -- 692 692
Cash received from investments in securities ....... -- 2,699 -- 2,699
Loan to related party .............................. -- -- (256) (256)
Principal payments received on loan to related party -- -- 459 459
-------- -------- -------- --------
Net cash (used) provided by investing activities ...... (1,288) 2,675 (3,463) (2,076)
-------- -------- -------- --------
FINANCING ACTIVITIES:
Borrowings under line-of-credit facilities and notes
payable .......................................... -- -- 14,025 14,025
Payments under line-of-credit facilities
and other notes payable ......................... (72) (1,359) (1,110) (2,541)
Payment of debt issuance costs ..................... (864) (79) (567) (1,510)
Payments for treasury stock ........................ (5,419) -- -- (5,419)
Proceeds from exercise of employee and
director stock options ........................... 94 -- -- 94
-------- -------- -------- --------
Net cash provided (used) by financing activities ...... (6,261) (1,438) 12,348 4,649
-------- -------- -------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS ............. (9,176) (1,523) (1,016) (11,715)
Cash and cash equivalents at beginning of period ...... 36,710 8,690 10,157 55,557
-------- -------- -------- --------
Cash and cash equivalents at end of period ............ 27,534 7,167 9,141 43,842
Restricted cash and cash equivalents at end of period . (1,430) (7,167) (5,773) (14,370)
-------- -------- -------- --------
Unrestricted cash and cash equivalents at end of period $ 26,104 $ -- $ 3,368 $ 29,472
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended October 1, 2000
--------------------------------------------------------------
Combined Combined
Bluegreen Non-guarantor Subsidiary
Corporation Subsidiaries Guarantors Eliminations Consolidated
----------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net cash (used) provided by operating activities ... $(36,215) $ 1,246 $ 23,120 $ -- $(11,849)
-------- -------- -------- -------- --------
INVESTING ACTIVITIES:
Acquisition of minority interest ................ -- -- (250) -- (250)
Investment in joint venture ..................... -- -- (323) 323 --
Purchases of property and equipment ............. (448) (277) (4,159) -- (4,884)
Sales of property and equipment ................. -- -- 34 -- 34
Cash received from investments in securities .... -- 2,162 -- -- 2,162
Long-term prepayment to Bass Pro, Inc. .......... -- -- (9,000) -- (9,000)
-------- -------- -------- -------- --------
Net cash (used) provided by investing activities ... (448) 1,885 (13,698) 323 (11,938)
-------- -------- -------- -------- --------
FINANCING ACTIVITIES:
Proceeds from borrowings under line-of-credit
facilities and other notes payable ............ 6,500 -- -- -- 6,500
Payments under line-of-credit facilities and
other notes payable ........................... (130) (4,275) (8,111) -- (12,516)
Payment of debt issuance costs ................... (3) (126) -- -- (129)
Payments for treasury stock ...................... (527) -- -- -- (527)
Proceeds from issuance of membership interest in
joint venture ................................. -- 323 -- (323) --
Proceeds from the exercise of employee and
director stock options ........................ 34 -- -- -- 34
-------- -------- -------- -------- --------
Net cash (used) provided by financing activities ... 5,874 (4,078) (8,111) (323) (6,638)
-------- -------- -------- -------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (30,789) (947) 1,311 -- (30,425)
Cash and cash equivalents at beginning of period ... 43,093 12,458 9,975 -- 65,526
-------- -------- -------- -------- --------
Cash and cash equivalents at end of period ......... 12,304 11,511 11,286 -- 35,101
Restricted cash and cash equivalents at end of
period ............................................ (62) (11,511) (8,522) -- (20,095)
-------- -------- -------- -------- --------
Unrestricted cash and cash equivalents at end of
period ............................................ $ 12,242 $ -- $ 2,764 $ -- $ 15,006
======== ======== ======== ======== ========
</TABLE>
14
<PAGE> 15
7. CONTINGENCIES
In addition to its other ordinary course litigation, the Company became a
defendant in two proceedings during fiscal 1999. First, an action was filed
against the Company on December 15, 1998. The plaintiff has asserted that the
Company is in breach of its obligations under, and has made certain
misrepresentations in connection with, a contract under which the Company acted
as marketing agent for the sale of undeveloped property owned by the plaintiff.
The plaintiff also alleges fraud, negligence and violation by the Company of an
alleged fiduciary duty owed to plaintiff. Among other things, the plaintiff
alleges that the Company failed to meet certain minimum sales requirements under
the marketing contract and failed to commit sufficient resources to the sale of
the property. The complaint seeks damages in excess of $18 million and certain
other remedies, including punitive damages.
Second, an action was filed on July 10, 1998 against two subsidiaries of the
Company and various other defendants. The Company itself is not named as a
defendant. The Company's subsidiaries acquired certain real property (the
"Property"). The Property was acquired subject to certain alleged oil and gas
leasehold interests and rights (the "Interests") held by the plaintiffs in the
action (the "Plaintiffs"). The Company's subsidiaries developed the Property and
have resold parcels to numerous customers. The Plaintiffs allege, among other
things, breach of contract, slander of title and that the Company's subsidiaries
and their purchasers have unlawfully trespassed on easements and otherwise
violated and prevented the Plaintiffs from exploiting the Interests. The
Plaintiffs claim damages in excess of $40 million, as well as punitive or
exemplary damages in an amount of at least $50 million and certain other
remedies.
The Company is continuing to evaluate 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.
On August 21, 2000, the Company received a Notice of Field Audit Action (the
"Notice") from the State of Wisconsin Department of Revenue (the "DOR") alleging
that two subsidiaries now owned by the Company failed to collect and remit sales
and use taxes to the State of Wisconsin during the period from January 1, 1994
through September 30, 1997 totaling $1.9 million. The majority of the assessment
is based on the subsidiaries not charging sales tax to purchasers of Timeshare
Interests at the Company's Christmas Mountain Village(TM) resort. In addition to
the assessment, the Notice indicated that interest would be charged, but no
penalties would be assessed. As of August 21, 2000, interest totaled $971,000.
The Company filed a Petition for Redetermination (the "Petition") on October 19,
2000, and, if the Petition is unsuccessful, the Company intends to vigorously
appeal the assessment. The Company acquired the subsidiaries that were the
subject of the Notice in connection with the acquisition of RDI Group, Inc.
("RDI") on September 30, 1997. Under the RDI purchase agreement, the Company has
the right to set off payments owed by the Company to RDI's former stockholders
pursuant to a $1.0 million outstanding note payable balance and to make a claim
against such stockholders for $500,000 previously paid for any breach of
representations and warranties. The Company has notified the former stockholders
that it intends to exercise these rights to mitigate any settlement with the DOR
in this matter. In addition, the Company believes that, if necessary, amounts
paid to the State of Wisconsin pursuant to the Notice, if any, may be further
funded through collections of sales tax from the consumers who effected the
assessed timeshare sales with RDI without paying sales tax on their purchases.
Based on management's assessment of the Company's position in the Petition, the
Company's right of set off with the former RDI stockholders and other factors
discussed above, management does not believe that the possible sales tax
pursuant to the Notice will have a material adverse impact on the Company's
results of operations or financial position.
8. BUSINESS SEGMENTS
The Company has two reportable business segments. The Resorts Division acquires,
develops and markets Timeshare Interests at the Company's resorts and the
Residential Land and Golf Division acquires large tracts of real estate which
are subdivided, improved (in some cases to include a golf course and related
amenities on the property) and sold, typically on a retail basis.
Required disclosures for the Company's business segments are as follows (in
thousands):
15
<PAGE> 16
<TABLE>
<CAPTION>
Residential
Resorts Land and Golf Totals
-------- ------------- --------
<S> <C> <C> <C>
AS OF AND FOR THE THREE MONTHS ENDED OCTOBER 3, 1999
Sales .............................................. $ 35,917 $ 29,736 $ 65,653
Other resort and golf operations revenue ........... 4,847 811 5,658
Depreciation expense ............................... 338 227 565
Field operating profit ............................. 4,066 10,060 14,126
Inventory, net ..................................... 106,074 66,205 172,279
AS OF AND FOR THE THREE MONTHS ENDED OCTOBER 1, 2000
Sales .............................................. $ 43,620 $ 21,190 $ 64,810
Other resort and golf operations revenue .......... 7,515 344 7,859
Depreciation expense ............................... 446 237 683
Field operating profit ............................. 4,771 2,678 7,449
Inventory, net ..................................... 102,515 85,736 188,251
FOR THE SIX MONTHS ENDED OCTOBER 3, 1999
Sales .............................................. $ 68,194 $ 60,171 $128,365
Other resort and golf operations revenue ........... 9,510 1,531 11,041
Depreciation expense ............................... 587 418 1,005
Field operating profit ............................. 7,557 18,152 25,709
FOR THE SIX MONTHS ENDED OCTOBER 1, 2000
Sales .............................................. $ 77,971 $ 49,046 $127,017
Other resort and golf operations revenue ........... 14,563 1,014 15,577
Depreciation expense ............................... 855 448 1,303
Field operating profit ............................. 7,600 8,692 16,292
</TABLE>
Field operating profit for reportable segments reconciled to consolidated income
before income taxes (in thousands) is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------------- --------------------------
October 3, October 1, October 3, October 1,
1999 2000 1999 2000
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Field operating profit for reportable segments $ 14,126 $ 7,449 $ 25,709 $ 16,292
Interest income .............................. 4,099 5,317 7,891 9,575
Gain on sale of notes receivable ............. 884 -- 884 --
Other income (expense) ....................... 228 (50) 287 311
Corporate general and administrative expenses (4,858) (4,884) (9,142) (9,208)
Interest expense ............................. (3,674) (3,623) (6,630) (7,264)
Provision for loan losses .................... (1,536) (1,456) (2,324) (2,491)
-------- -------- -------- --------
Consolidated income before income taxes ...... $ 9,269 $ 2,753 $ 16,675 $ 7,215
======== ======== ======== ========
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The Company desires to take advantage of the "safe harbor" provisions of the
Private Securities Reform Act of 1995 (the "Act") and is making the following
statements pursuant to the Act in order to do so. Certain statements herein and
elsewhere in this report and the Company's other filings with the Securities and
Exchange Commission constitute "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended. Such statements may be identified by
forward-looking words such as "may", "intend", "expect", "anticipate",
"believe", "will", "should", "project", "estimate", "plan" or other comparable
terminology. All statements, trend analyses and other information relative to
the market for the Company's products and trends in the Company's operations or
results are forward-looking statements. Such forward-looking statements are
subject to known and unknown risks and uncertainties, many of which are beyond
the Company's control, that could cause the actual results, performance or
achievements of the Company, or industry trends, to differ materially from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Given these uncertainties, investors are cautioned
not to place undue reliance on such forward-looking statements and no assurance
can be given that the plans, estimates and expectations reflected
16
<PAGE> 17
in such statements will be achieved. The Company wishes to caution readers that
the following important factors, among others, in some cases have affected, and
in the future could affect, the Company's actual results and could cause the
Company's actual consolidated results to differ materially from those expressed
in any forward-looking statements made by, or on behalf of, the Company:
a) Changes in national, international or regional economic conditions that can
affect the real estate market, which is cyclical in nature and highly
sensitive to such changes, including, among other factors, levels of
employment and discretionary disposable income, consumer confidence,
available financing and interest rates.
b) The imposition of additional compliance costs on the Company as the result
of changes in any environmental, zoning or other laws and regulations that
govern the acquisition, subdivision and sale of real estate and various
aspects of the Company's financing operation or the failure of the Company
to comply with any law or regulation.
c) Risks associated with a large investment in real estate inventory at any
given time (including risks that real estate inventories will decline in
value due to changing market and economic conditions and that the
development and carrying costs of inventories may exceed those
anticipated).
d) Risks associated with an inability to locate suitable inventory for
acquisition, or with a shortage of available inventory in the Company's
principal markets.
e) Risks associated with delays in bringing the Company's inventories to
market due to, among other things, changes in regulations governing the
Company's operations, adverse weather conditions or changes in the
availability of development financing on terms acceptable to the Company.
f) Changes in applicable usury laws or the availability of interest deductions
or other provisions of federal or state tax law.
g) A decreased willingness on the part of banks to extend direct customer 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 locate external sources of liquidity on
favorable terms to support its operations, acquire, carry and develop land
and timeshare inventories and satisfy its debt and other obligations.
i) The inability of the Company to locate sources of capital on favorable
terms for the pledge and/or sale of land and timeshare notes receivable,
including the inability to consummate securitization transactions.
j) An increase in prepayment rates, delinquency rates or defaults with respect
to Company-originated loans or an increase in the costs related to
reacquiring, carrying and disposing of properties reacquired through
foreclosure or deeds in lieu of foreclosure.
k) Costs to develop inventory for sale and/or selling, general and
administrative expenses materially exceed 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.
m) The failure of the Company to satisfy the covenants contained in the
indentures governing certain of its debt instruments and/or other credit
agreements, which, among other things, place certain restrictions on the
Company's ability to incur debt, incur liens, make investments and pay
dividends.
n) The risk of the Company incurring an unfavorable judgement in any
litigation, and the impact of any related monetary or equity damages.
o) Risks associated with selling Timeshare Interests in foreign countries
including, but not limited to, compliance with legal regulations, labor
relations and vendor relationships.
17
<PAGE> 18
p) The risk that the Company's sales and marketing techniques are not
successful, and the risk that the Company's Vacation Club is not accepted
by consumers or imposes limitations on the Company's operations, or is
adversely impacted by legal or other requirements.
q) The risk that any contemplated transactions currently under negotiation
will not close.
The Company does not undertake and expressly disclaims any duty to update or
revise forward-looking statements, even if the Company's situation may change in
the future.
GENERAL
Real estate markets are cyclical in nature and highly sensitive to changes in
national, regional and international economic conditions, including, among other
factors, levels of employment and discretionary disposable income, consumer
confidence, available financing and interest rates. 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 income in accordance with the
percentage-of-completion method of accounting. Under this method of income
recognition, income is recognized as work progresses. Measures of progress are
based on the relationship of costs incurred to date to expected total costs. The
Company has been dedicating greater resources to more capital-intensive
residential land and timeshare projects. As development on more of these larger
projects is begun, and based on the Company's strategy to pre-sell projects when
minimal development has been completed, the amount of income deferred under the
percentage-of-completion method of accounting may increase significantly.
Costs associated with the acquisition and development of timeshare resorts and
residential land properties, including carrying costs such as interest and
taxes, are capitalized as inventory and are allocated to cost of real estate
sold as the respective revenues are recognized.
The Company has historically experienced and expects to continue to experience
seasonal fluctuations in its gross revenues and net earnings. This seasonality
may cause significant fluctuations in the Quarterly operating results of the
Company, with the majority of the Company's gross revenues and net earnings
historically occurring in the first and second Quarters of the fiscal year. As
the Company's timeshare revenues grow as a percentage of total revenues, the
Company believes that the fluctuations in revenues due to the seasonality may be
mitigated in part. In addition, other material fluctuations in operating results
may occur due to the timing of development and the Company's use of the
percentage-of-completion method of accounting. Management expects that the
Company will continue to invest in projects that will require substantial
development (with significant capital requirements). There can be no assurances
that historical seasonal trends in Quarterly revenues and earnings will continue
or be mitigated by the Company's efforts.
The Company believes that inflation and changing prices have not had a material
impact on its revenues and results of operations during the three- and six-month
periods ended October 3, 1999 or October 1, 2000. 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 in the
foreseeable future. To the extent inflationary trends affect short-term interest
rates, a portion of the Company's debt service costs may be affected as well as
the interest rate the Company charges on its new receivables from its customers.
The Company's real estate operations are managed under two divisions. The
Resorts Division manages the Company's timeshare operations and the Residential
Land and Golf Division acquires large tracts of real estate which are
subdivided, improved (in some cases to include a golf course on the property)
and sold, typically on a retail basis.
Inventory is carried at the lower of cost, including costs of improvements and
amenities incurred subsequent to acquisition, or fair value, net of costs to
dispose.
A portion of the Company's revenues historically has been and, although no
assurances can be given, is expected to continue to be comprised of gains on
sales of loans. The gains are recorded in the Company's revenues and retained
interests in the portfolio are recorded on its balance sheet (as investments in
securities) at the time of sale. The amount
18
<PAGE> 19
of gains recorded is based in part on management's estimates of future
prepayment, default and loss severity rates and other considerations in light of
then-current conditions. If actual prepayments with respect to loans occur more
quickly than was projected at the time such loans were sold, as can occur when
interest rates decline, interest would be less than expected and earnings would
be charged in the future when the retained interests are realized, except for
the effect of reduced interest accretion on the Company's retained interest,
which would be recognized each period the retained interests are held. If actual
defaults or other factors discussed above with respect to loans sold are greater
than estimated, charge-offs would exceed previously estimated amounts and
earnings would be charged in the future when the retained interests are
realized. There can be no assurances that the carrying value of the Company's
investments in securities will be fully realized or that future loan sales will
result in gains. Declines in the fair value of the retained interests that are
determined to be other than temporary are charged to operations.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
(Dollars in Thousands) Residential
Resorts Land and Golf Total
---------------------- --------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
THREE MONTHS ENDED OCTOBER 3, 1999
Sales ....................................... $ 35,917 100.0% $ 29,736 100.0% $ 65,653 100.0%
Cost of sales ............................... (8,367) (23.3) (12,731) (42.8) (21,098) (32.1)
--------- ------- --------- ------- --------- -------
Gross profit ................................ 27,550 76.7 17,005 57.2 44,555 67.9
Other resort and golf operations revenue .... 4,847 13.5 811 2.7 5,658 8.6
Cost of other resort and golf operations .... (4,582) (12.8) (1,043) (3.5) (5,625) (8.6)
Selling and marketing expenses .............. (20,868) (58.1) (4,562) (15.3) (25,430) (38.7)
Field general and administrative expenses (1) (2,881) (8.0) (2,151) (7.2) (5,032) (7.7)
--------- ------- --------- ------- --------- -------
Field operating profit ...................... $ 4,066 11.3 $ 10,060 33.9 $ 14,126 21.5
========= ======= ========= ======= ========= =======
THREE MONTHS ENDED OCTOBER 1, 2000
Sales ....................................... $ 43,620 100.0% $ 21,190 100.0% $ 64,810 100.0%
Cost of sales ............................... (9,380) (21.5) (11,515) (54.3) (20,895) (32.2)
--------- ------- --------- ------- --------- -------
Gross profit ................................ 34,240 78.5 9,675 45.7 43,915 67.8
Other resort and golf operations revenue .... 7,515 17.2 344 1.6 7,859 12.1
Cost of resort and golf operations .......... (5,920) (13.6) (700) (3.3) (6,620) (10.2)
Selling and marketing expenses .............. (27,807) (63.7) (4,521) (21.3) (32,328) (49.9)
Field general and administrative expenses (1) (3,257) (7.5) (2,120) (10.0) (5,377) (8.3)
--------- ------- --------- ------- --------- -------
Field operating profit ...................... $ 4,771 10.9 $ 2,678 12.7 $ 7,449 11.5
========= ======= ========= ======= ========= =======
SIX MONTHS ENDED OCTOBER 3, 1999
Sales ....................................... $ 68,194 100.0% $ 60,171 100.0% $ 128,365 100.0%
Cost of sales ............................... (15,914) (23.3) (26,908) (44.7) (42,822) (33.4)
--------- ------- --------- ------- --------- -------
Gross profit ................................ 52,280 76.7 33,263 55.3 85,543 66.6
Other resort and golf operations revenue .... 9,510 13.9 1,531 2.5 11,041 8.6
Cost of resort and golf operations .......... (8,574) (12.6) (1,952) (3.2) (10,526) (8.2)
Selling and marketing expenses .............. (39,952) (58.6) (10,168) (16.9) (50,120) (39.0)
Field general and administrative expenses (1) (5,707) (8.4) (4,522) (7.5) (10,229) (8.0)
--------- ------- --------- ------- --------- -------
Field operating profit ...................... $ 7,557 11.0 $ 18,152 30.2 $ 25,709 20.0
========= ======= ========= ======= ========= =======
SIX MONTHS ENDED OCTOBER 1, 2000
Sales ....................................... $ 77,971 100.0% $ 49,046 100.0% $ 127,017 100.0%
Cost of sales ............................... (17,288) (22.2) (25,491) (52.0) (42,779) (33.7)
--------- ------- --------- ------- --------- -------
Gross profit ................................ 60,683 77.8 23,555 48.0 84,238 66.3
Other resort and golf operations revenue .... 14,563 18.7 1,014 2.1 15,577 12.3
Cost of resort and golf operations .......... (11,718) (15.0) (1,496) (3.1) (13,214) (10.4)
Selling and marketing expenses .............. (49,731) (63.8) (9,939) (20.3) (59,670) (47.0)
Field general and administrative expenses (1) (6,197) (7.9) (4,442) (9.1) (10,639) (8.4)
--------- ------- --------- ------- --------- -------
Field operating profit ...................... $ 7,600 9.8 $ 8,692 17.6 $ 16,292 12.8
========= ======= ========= ======= ========= =======
</TABLE>
(1) GENERAL AND ADMINISTRATIVE EXPENSES ATTRIBUTABLE TO CORPORATE OVERHEAD HAVE
BEEN EXCLUDED FROM THE TABLES. CORPORATE GENERAL AND ADMINISTRATIVE
EXPENSES TOTALED $4.9 MILLION AND $4.9 MILLION FOR THE THREE MONTHS ENDED
OCTOBER 3, 1999 AND OCTOBER 1, 2000, RESPECTIVELY, AND $9.1 MILLION AND
$9.2 MILLION FOR THE SIX MONTHS ENDED OCTOBER 3, 1999 AND OCTOBER 1, 2000,
RESPECTIVELY.
SALES
Consolidated sales decreased 1.3% from $65.7 million for the three-month period
ended October 3, 1999 (the "2000 Quarter") to $64.8 million for the three-month
period ended October 1, 2000 (the "2001 Quarter"). Consolidated sales decreased
1.1% from $128.4 million for the six-month period ended October 3, 1999 (the
"2000 Period") to $127.0 million for the six-month period ended October 1, 2000
(the "2001 Period"). Decreases in Residential Land and Golf
19
<PAGE> 20
Division sales during the 2001 Quarter and 2001 Period were partially offset by
higher Resorts Division sales. The 2000 Period included 27 weeks of operating
results as compared to 26 weeks of operating results in the 2001 Period. The
additional week of operations in the 2000 Period produced total sales of $7.9
million. In addition, a one-time, bulk sale of mineral rights and related land
in Colorado to a developer of oil and gas rights accounted for $5.0 million of
sales in both the 2000 Quarter and 2000 Period. Excluding the additional week of
operations and the sale of mineral rights from the 2000 Quarter and 2000 Period
(as applicable), sales increased 6.9% and 10.0% during the 2001 Quarter and 2001
Period.
As of October 1, 2000, approximately $3.5 million in estimated income on sales
of $7.5 million was deferred under percentage-of-completion accounting. At April
2, 2000, approximately $2.9 million in estimated income on sales of $7.3 million
was deferred. All such amounts are included on the Condensed Consolidated
Balance Sheets under the caption Deferred Income.
RESORTS DIVISION. During the 2000 Quarter and the 2001 Quarter, the Resorts
Division contributed $35.9 million or 54.7% and $43.6 million or 67.3%,
respectively, of the Company's total consolidated sales. During the 2000 Period
and the 2001 Period, the Resorts Division contributed $68.2 million or 53.1% and
$78.0 million or 61.4%, respectively, of the Company's total consolidated sales.
The table set forth below outlines the number of timeshare sales transactions
and the average sales price per sale for the Resorts Division for the periods
indicated, BEFORE giving effect to the percentage-of-completion method of
accounting.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------- -------------------------
October 3, October 1, October 3, October 1,
1999 2000 1999 2000
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Number of timeshare sales transactions 3,873 4,834 7,423 8,503
Average sales price per timeshare sale $9,149 $9,140 $9,044 $9,195
Gross margin 76.7% 78.5% 76.7% 77.8%
</TABLE>
The increase in the number of timeshare sales transactions during the 2001
Quarter and 2001 Period as compared to the comparable prior year periods is
primarily due to the Company's Bluegreen Air(TM) offsite sales offices. The
Bluegreen Air(TM) offsite sales offices (i.e., not located onsite at one of the
Company's resorts) serve the Louisville, Kentucky; Cleveland, Ohio; and Detroit,
Michigan markets and provide prospective buyers with a virtual-reality jet
airline experience to present the Bluegreen Vacation Club(TM) product. The
Company opened the Detroit office during fiscal 2000, generating 346 and 709
timeshare sales transactions during the 2001 Quarter and 2001 Period,
respectively, with no corresponding sales during the comparable prior year
periods. The other Bluegreen Air(TM) sales offices had comparable sales during
the 2001 Quarter and 2001 Period as compared to the 2000 Quarter and 2000
Period, respectively.
In addition, the on-site sales offices that comprise the Company's
Midwest/Tennessee region generated 445 and 414 more timeshare sales transactions
during the 2001 Quarter and 2001 Period, respectively, as compared to the 2000
Quarter and 2000 Period, respectively. The remaining increase during the 2001
Quarter is primarily attributed to 124 more sales at the Lodge Alley Inn(TM)
sales office in Charleston, South Carolina as compared to the 2000 Quarter.
These increases are attributed to changes in senior management in the
Midwest/Tennessee region and at Lodge Alley Inn(TM) and an improved sales
process relative to the Bluegreen Vacation Club(TM) product.
The Resorts Division's gross margin increased from 76.7% to 78.5% during the
2000 Quarter and 2001 Quarter, respectively, and from 76.7% to 77.8% during the
2000 Period and 2001 Period. The increase is primarily due to an increase in the
sales prices of the Bluegreen Vacation Club(TM) product coupled with the sale of
lower cost Timeshare Interests.
The gross profit on other resort service operations increased 501.9% and 204.0%
during the 2001 Quarter and 2001 Period, respectively, as compared to the
comparable prior year periods. The increases are primarily due to an increased
excess of initial maintenance fees that are charged to new owners at the time of
purchase over the Company's costs to maintain the applicable resort property
during the period that the Timeshare Interest is held in inventory. This margin
increased from net losses of approximately $400,000 and $550,000 during the 2000
Quarter and 2000 Period, respectively, to net profits of $156,000 and $647,000
during the 2001 Quarter and 2001 Period, respectively. During fiscal 2001, the
Company began charging new buyers one full year's maintenance fee as opposed to
a pro rata maintenance fee based on the time of year that the sale was made.
Also, net profits generated
20
<PAGE> 21
by Resort Title Agency, Inc., the Company's wholly owned title company,
increased from $460,000 and $632,000 during the 2000 Quarter and 2000 Period,
respectively, to net profits of $798,000 and $1.2 million during the 2001
Quarter and 2001 Period, respectively. The remaining increase in the 2001
Quarter is attributed to $420,000 additional net profit from managing the
Bluegreen Vacation Club(TM) in exchange for management fees from the related
property owners' association.
Selling and marketing expenses for the Resorts Division increased as a
percentage of sales for the Resorts Division from 58.1% to 63.7% during the 2000
Quarter and 2001 Quarter, respectively, and from 58.6% to 63.8% during the 2000
Period and 2001 Period, respectively. The increases are due primarily to
increased selling and marketing costs in the Bluegreen Air(TM) offsite sales
offices. The Bluegreen Air(TM) selling and marketing costs increased from 61.4%
to 73.3% of the related sales during the 2000 Period and 2001 Period,
respectively, and are primarily due to higher costs per prospect and lower
prospect-to-sale conversion ratios in these offsite markets. The Company has
made a change in the senior management of these offsite sales offices and is
currently reviewing its overall offsite strategy. On November 11, 2000, the
Company closed the Bluegreen Air(TM) off-site sales office serving the
Louisville, Kentucky market. The Louisville office generated field operating
losses of $298,000 and $545,000 during the 2001 Quarter and 2001 Period,
respectively, and field operating profits of $135,000 and $140,000 during the
2000 Quarter and 2000 Period, respectively. The Company is focusing on improving
the efficiencies of its marketing programs within the Resorts Division,
including but not limited to fully implementing its marketing agreement with
Bass Pro (see Note 3 of Notes to Condensed Consolidated Financial Statements)
and continuing to monitor and, if necessary, eliminate marginally performing
sales operations. There can be no assurances that the Company's efforts in this
regard will be successful or that selling and marketing expenses for the Resorts
Division will not continue to increase as a percentage of sales in the near
term.
Field general and administrative expenses for the Resorts Division decreased as
a percentage of sales from 8.0% to 7.5% during the 2000 Quarter and 2001
Quarter, respectively, and from 8.4% to 7.9% during the 2000 Period and 2001
Period, respectively, primarily due to the increase in sales and the fixed
nature of a significant portion of these costs.
RESIDENTIAL LAND AND GOLF DIVISION. During the 2000 Quarter and the 2001
Quarter, residential land and golf sales contributed $29.7 million or 45.3% and
$21.2 million or 32.7%, respectively, of the Company's total consolidated sales.
During the 2000 Period and the 2001 Period, residential land and golf sales
contributed $60.2 million or 46.9% and $49.0 million or 38.6%, respectively, of
the Company's total consolidated sales.
The table set forth below outlines the number of parcels sold and the average
sales price per parcel for the Residential Land and Golf Division for the
periods indicated, BEFORE giving effect to the percentage-of -completion method
of accounting and bulk sales.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------- -------------------------
October 3, October 1, October 3, October 1,
1999 2000 1999 2000
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Number of parcels sold 471 404 1,005 828
Average sales price per parcel $49,890 $55,087 $50,687 $53,883
Gross margin 57.2% 45.7% 55.3% 48.0%
</TABLE>
The aggregate number of parcels sold decreased during the 2001 Quarter and 2001
Period as compared to the 2000 Quarter and 2000 period due primarily to
decreases in available inventories due, in part, to a strategic decision not to
replace certain properties which either sold out in fiscal 2000 or which are
approaching sell-out in areas of the country where the Company has chosen to
exit. These areas include Florida, Tennessee, Wisconsin, Colorado, Arizona, and
New Mexico. This factor resulted in 110 fewer lot sales in the 2001 Quarter as
compared to the 2000 Quarter and 204 fewer lot sales in the 2001 Period as
compared to the 2000 Period. In addition, the additional week of sales during
the 2000 Period included 62 sales.
The Company intends to primarily focus its Residential Land & Golf Division
resources on developing new golf communities, continuing to support its
successful regions in Texas and exploring possible expansion into the California
market. During the 2001 Period, the Company's golf communities and Texas regions
comprised approximately 24.7% and 62.6%, respectively, of the Company's total
Residential Land & Golf sales. The Company's golf communities generated 64 more
and 57 more lot sales during the 2001 Quarter and 2001 Period, respectively, as
compared to the comparable prior year periods due to the addition of
Brickshire(TM), a golf
21
<PAGE> 22
community located in New Kent County, Virginia, during the second half of fiscal
2000. During November 2000, the Company acquired 597 acres of land outside of
Chapel Hill, North Carolina, upon which the 516 lots that will comprise The
Preserve at Jordan Lake(TM) will be developed. The Preserve will surround an
18-hole, Davis Love III signature championship golf course and the Company
expects that the project will open for sales in the latter part of fiscal 2001,
although there can be no assurances.
Average sales price per parcel increased during both the 2001 Quarter and 2001
Period as compared to the comparable prior year periods, primarily due to an
increased average sales price in the Texas regions. The Mystic Shores(TM)
project in Canyon Lake, Texas, which began sales in the latter part of fiscal
2000, has an average sales price per parcel sold during the 2001 Period of
approximately $60,500. In addition, higher average sales prices at the Lake
Ridge at Joe Pool Lake(TM) project in Dallas, Texas contributed to the overall
increase in average sales price per parcel for the division.
Gross margins decreased in both the 2001 Quarter and 2001 Period as compared to
the comparable periods in the prior year primarily due to the impact of the bulk
sale of mineral rights and related land in Colorado to a developer of oil and
gas rights, which accounted for $5.0 million of sales and $4.6 million in gross
profit in both the 2000 Quarter and 2000 Period. Excluding this one-time
transaction, Residential Land and Golf Division gross margins would have been
50.1% and 51.9% during the 2000 Quarter and 2000 Period, respectively. In
addition, gross margins were adversely impacted in the 2001 Quarter and 2001
Period by the impact of percentage of completion accounting. The gross margin on
sales deferred under percentage of completion accounting was 61.3% and 59.6%
during the 2001 Quarter and 2001 Period, respectively, based on the mix of
projects which were subject to sales deferral in each period.
The Company's Investment Committee approves all property acquisitions. In order
to be approved for purchase by the Investment Committee, all residential land
and golf (as well as resort) 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.
Selling and marketing expenses for the Residential Land & Golf Division
increased as a percentage of sales from 15.3% to 21.3% during the 2000 Quarter
and 2001 Quarter, respectively, and from 16.9% to 20.3% during the 2000 Period
and 2001 Period, respectively. This increase is primarily due to the impact on
the prior year amounts of the bulk sale of mineral rights and related land in
Colorado to a developer of oil and gas rights, which only generated a 1.5%
selling and marketing expense on $5 million in sales. Excluding this one-time
transaction, the selling and marketing percentage would have been 18.1% and
18.3% during the 2000 Quarter and 2000 Period, respectively.
Field general and administrative expenses for the Residential Land & Golf
Division increased as a percentage of sales from 7.2% to 10.0% during the 2000
Quarter and 2001 Quarter, respectively, and from 7.5% to 9.1% during the 2000
Period and 2001 Period, respectively. This increase is primarily due to the
fixed nature of a significant portion of these costs.
Gross profit from golf operations decreased 53.4% from a loss of $232,000 to a
loss of $356,000 during the 2000 Quarter and 2001 Quarter, respectively. Gross
profit from golf operations decreased 14.5% from a loss of $421,000 to a loss of
$482,000 during the 2000 Period and 2001 Period, respectively. In the 2000
Period, the Company opened an additional nine holes at its Carolina National(TM)
golf course along with a new clubhouse, featuring food and beverage operations
and an expanded pro shop. The initial grand opening and promotional incentives
resulted in higher revenues and profits in the 2000 Quarter and 2000 Period.
INTEREST INCOME
Interest income was $4.1 million and $5.3 million for the 2000 Quarter and 2001
Quarter, respectively, and was $7.9 million and $9.6 million for the 2000 Period
and 2001 Period, respectively. The Company's interest income is earned from its
notes receivable, securities retained pursuant to sales of notes receivable
(including REMIC transactions) and cash and cash equivalents. The increase in
interest income during the 2001 Quarter was primarily due to an increase in the
average notes receivable balance during the 2001 Quarter and 2001 Period, as
compared to the comparable prior year periods. The Company's new timeshare
receivables purchase facility (see "Liquidity and Capital Resources") was not
executed as of the end of the 2001 Period, and therefore the Company did not
sell any receivables during the first half of fiscal 2001, thus generating more
interest income from higher average notes receivable balances.
22
<PAGE> 23
GAIN ON SALE OF NOTES RECEIVABLES
The Company recognized an $884,000 gain on sale of timeshare notes receivables
during the 2000 Quarter and 2000 Period, with no corresponding transactions
occurring during the 2001 Quarter and 2001 Period. The gain on sale accounted
for $0.02 per diluted share in both the 2000 Quarter and 2000 Period. The
Company did not sell any timeshare receivables during the 2001 Period, but did
sell $31.8 million of timeshare receivables on October 16, 2000 through the
Company's new, non-recourse timeshare receivable purchase facility (see
"Liquidity and Capital Resources"). The Company anticipates recording a gain on
the sale of these receivables in the third quarter of fiscal 2001, although
there can be no assurances.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("S, G & A EXPENSES")
The Company's S, G & A Expenses consist primarily of marketing costs,
advertising expenses, sales commissions and field and corporate administrative
overhead. S, G & A Expenses totaled $35.3 million and $42.6 million for the 2000
Quarter and 2001 Quarter, respectively, and $69.5 million and $79.5 million for
the 2000 Period and 2001 Period, respectively. As a percentage of total
revenues, S, G & A Expenses were 46.2% and 54.6% for the 2000 Quarter and 2001
Quarter, respectively, and 46.8% and 52.1% for the 2000 Period and 2001 Period,
respectively.
The increase in S, G & A Expenses as a percentage of revenues in the 2001
Quarter and 2001 Period was the result of the growth of the Resorts Division
(from 54.7% to 67.3% of consolidated sales during the 2000 Quarter and 2001
Quarter, respectively, and from 53.1% to 61.4% of consolidated sales during the
2000 Period and 2001 Period, respectively), where S, G & A Expenses are
typically higher than for the Residential Land and Golf Division. Resorts
Division S, G & A Expenses were 71.2% and 71.7% of Resorts Division sales during
the 2001 Quarter and 2001 Period, respectively, while Residential Land and Golf
Division S, G & A Expenses were 31.3% and 29.3% of Residential Land and Golf
Division sales during the 2001 Quarter and 2001 Period, respectively. See also
discussions of increases in S, G & A Expenses for the Company's Resorts
Division, above.
INTEREST EXPENSE
Interest expense totaled $3.7 million and $3.6 million for the 2000 Quarter and
2001 Quarter, respectively, and $6.6 million and $7.3 million during the 2000
Period and 2001 Period, respectively. The 9.6% increase in interest expense for
the 2001 Period was primarily due to interest incurred on approximately $28.0
million of acquisition and development borrowings incurred at the end of the
second quarter of fiscal 2000, partially offset by increased capitalized
interest on the related projects under development.
PROVISION FOR LOAN LOSSES
The Company recorded a provision for loan losses totaling $1.5 million and $1.5
million during the 2000 Quarter and 2001 Quarter, respectively, and $2.3 million
and $2.5 million during the 2000 Period and 2001 Period, respectively.
The allowance for loan losses by division as of April 2, 2000 and October 1,
2000 was (amounts in thousands):
<TABLE>
<CAPTION>
Residential
Resorts Land and Golf
Division Division Other Total
--------- ------------- --------- ---------
<S> <C> <C> <C> <C>
APRIL 2, 2000
Notes receivable $ 61,520 $ 10,883 $ 735 $ 73,138
Less: allowance for loan losses (2,515) (458) (51) (3,024)
--------- --------- --------- ---------
Notes receivable, net $ 59,005 $ 10,425 $ 684 $ 70,114
========= ========= ========= =========
Allowance as a % of gross notes receivable 4.1% 4.2% 6.9% 4.1%
========= ========= ========= =========
OCTOBER 1, 2000
Notes receivable $ 111,055 $ 9,772 $ 658 $ 121,485
Less: allowance for loan losses (3,673) (438) (112) (4,223)
--------- --------- --------- ---------
Notes receivable, net $ 107,382 $ 9,334 $ 546 $ 117,262
========= ========= ========= =========
Allowance as a % of gross notes receivable 3.3% 4.5% 17.0% 3.5%
========= ========= ========= =========
</TABLE>
23
<PAGE> 24
The allowance for loan losses as a percentage of the gross notes receivable
balance decreased at October 1, 2000, for the Resorts Division, as the Company
did not provide an allowance for the $31.8 million of notes receivable which
were sold on October 16, 2000 through the Company's new, non-recourse timeshare
receivable purchase facility with a financial institution (see "Liquidity and
Capital Resources"), as there is no risk of future losses on these receivables.
Excluding these receivables from the gross notes receivable balance yields an
allowance of 4.6% for the Resort Division and 4.7% consolidated at October 1,
2000.
Other notes receivable primarily include secured promissory notes receivable
from commercial enterprises upon their purchase of bulk parcels from the
Company's Residential Land and Golf Division. The Company monitors the
collectibility of these notes based on various factors, including the value of
the underlying collateral.
PROVISION FOR INCOME TAXES
The provision for income taxes decreased as a percentage of income before taxes
from 39.0% to 38.5% during the 2000 Period as compared to the 2001 Period. The
decrease was primarily due to state tax savings generated by a restructuring of
the Company's subsidiaries in a state where the Company has significant
operations.
SUMMARY
Based on the factors discussed above, the Company's net income decreased from
$5.9 million to $2.0 million in the 2000 Quarter and 2001 Quarter, respectively,
and from $10.3 million to $5.0 million in the 2000 Period and 2001 Period,
respectively.
CHANGES IN FINANCIAL CONDITION
Consolidated assets of the Company increased $26.0 million from April 2, 2000 to
October 1, 2000. This increase is primarily due to a net $47.1 million increase
in notes receivable, primarily due to new notes generated by $78.0 million of
timeshare sales during the 2001 Period, net of downpayments and principal
payments received. In addition, other assets increased $9.3 million, primarily
due to the $9.0 million prepaid marketing fees paid to Bass Pro, Inc. (see Note
3 of Notes to Condensed Consolidated Financial Statements). These increases were
partially offset by a $30.4 million decrease in cash and cash equivalents more
fully described on the Condensed Consolidated Statement of Cash Flows.
Consolidated liabilities increased $19.1 million from April 2, 2000 to October
1, 2000. The increase is primarily due to a net increase of $15.2 million in
Company's receivable-backed notes payable. On July 18, 2000, the Company
borrowed an additional $20.7 million pursuant to a timeshare receivables
financing facility with a financial institution. In addition, the Company's
accrued liabilities increased $3.5 million due primarily to approximately $3.0
million of accruals during the 2001 Period for funding to be paid to subsidize
the operations of the timeshare properties owners associations ("POAs") at
certain of the Company's resorts in lieu of the Company paying maintenance fees
on its unsold Timeshare Interest inventory to the POAs. These increases were
partially offset by paydowns on the Company's receivable-backed notes payable
and other debt.
Minority interest increased $2.4 million due to the $3.2 million capital
contribution made by Big Cedar L.L.C. ("Big Cedar") to the Company's 51%-owned
joint venture with Big Cedar. This amount is net of minority interest's share of
net losses in the Company's consolidated joint venture in Aruba and the
acquisition of the Aruba minority interest. Both of these transactions are more
fully described in Note 2 of Notes to Condensed Consolidated Financial
Statements.
Total shareholders' equity increased $4.5 million during the 2001 Period,
primarily due to net income of $5.0 million. This increase was partially offset
by the Company's repurchase of $527,000 of common stock (177,000 shares) to be
held in treasury. The Company's book value per common share increased from $5.50
to $5.72 at April 2, 2000 and October 1, 2000, respectively. The debt-to-equity
ratio increased from 1.70:1 to 1.73:1 at April 2, 2000 and October 1, 2000,
respectively, primarily due to the additional receivable-backed borrowings
discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital resources are provided from both internal and external
sources. The Company's primary capital resources from internal operations are:
(i) cash sales, (ii) down payments on lot and timeshare sales which
24
<PAGE> 25
are financed, (iii) net cash generated from other resort services and golf
operations, (iv) principal and interest payments on the purchase money mortgage
loans and contracts for deed arising from sales of Timeshare Interests and
residential land lots (collectively "Receivables") and (v) proceeds from the
sale of, or borrowings collateralized by, notes receivable. Historically,
external sources of liquidity have included borrowings under secured and
unsecured lines-of-credit, seller and bank financing of inventory acquisitions
and the issuance of debt securities. The Company's capital resources are used to
support the Company's operations, including (i) acquiring and developing
inventory, (ii) providing financing for customer purchases, (iii) meeting
operating expenses and (iv) satisfying the Company's debt, and other
obligations. The Company anticipates that it will continue to require external
sources of liquidity to support its operations, satisfy its debt and other
obligations and to provide funds for future strategic acquisitions, primarily
for the Resorts Division.
CREDIT FACILITIES FOR TIMESHARE RECEIVABLES AND INVENTORIES
The Company maintains various credit facilities with financial institutions that
provide for receivable financing for its timeshare projects.
In October 2000, the Company executed agreements for a new timeshare receivables
purchase facility (the "Purchase Facility") with two financial institutions,
including a commercial paper conduit (the "Senior Purchaser") and the
institution that underwrote the Company's immediately prior timeshare
receivables purchase facility (the "Subordinated Purchaser") (collectively, the
"Purchasers"). The Purchase Facility utilizes an owner's trust structure,
pursuant to which the Company sells receivables to a special purpose finance
subsidiary of the Company and subsidiary sells the receivables to an owner's
trust without recourse except for breaches of customary representations and
warranties at the time of sale. Pursuant to the agreements that constitute the
Purchase Facility (collectively, the "Purchase Facility Agreements"), the
special purpose finance subsidiary of the Company may receive up to $90 million
of cumulative purchase price (as more fully described below) on sales of
timeshare receivables to the owner's trust in transactions through October 16,
2001. The Purchase Facility includes a provision for a $50 million extension, if
so requested by the Company and at the Purchasers' sole discretion and approval.
The Purchase Facility has detailed requirements with respect to the eligibility
of receivables for purchase. Under the Purchase Facility, a purchase price equal
to 95.00% (subject to adjustment in 0.50% increments down to 87.50% depending on
the difference between the weighted-average interest rate on the notes
receivable sold and the sum of the returns to the Purchasers plus the servicing
fee, as more fully defined below) of the principal balance of the receivables
sold will be paid at closing in cash. For eligible notes generated by Bluegreen
Properties N.V.(TM), the Company's subsidiary in Aruba, the purchase price paid
in cash at closing is equal to 85.00% (subject to adjustment in 0.50% increments
down to 77.00% depending on the difference between the weighted-average interest
rate on the notes receivable sold and the sum of the returns to the Purchasers
plus the servicing fee) of the principal balance of the receivables sold. The
balance of the purchase price will be deferred until such time as the Purchasers
have received a specified return, all servicing, custodial and similar fees and
expenses have been paid and a cash reserve account has been funded. The 95.00%
purchase price shall be funded 71.58% by the Senior Purchaser and 28.42% by the
Subordinated Purchaser. For the Aruba receivables, the 85.00% purchase price
shall be funded 70.00% by the Senior Purchaser and 30.00% by the Subordinated
Purchaser. The Senior Purchaser shall earn a return equal to the rate equivalent
to its borrowing cost (based on then applicable commercial paper rates) plus
0.60%, subject to use of alternate return rates in certain circumstances. The
Subordinated Purchaser shall earn a return equal to one-month LIBOR plus 4.00%,
subject to use of alternate return rates in certain circumstances. In addition
to other fees, if the special purpose finance subsidiary of the Company does not
sell during the term of the Purchase Facility notes receivable with a cumulative
purchase price of at least $70 million, the Company will pay to the Purchasers a
fee equal to 1.5% of the shortfall in the cumulative purchase price. The
Purchase Facility is renewable for an additional 364-day revolving period
thereafter subject to the consent of the Purchasers.
The Purchasers' obligation to purchase under the Purchase Facility will
terminate upon the occurrence of specified events. The Company acts as servicer
under the Purchase Facility for a fee, and is required to make advances to the
Purchasers to the extent it believes such advances will be recoverable. The
Purchase Facility Agreement includes various conditions to purchase, covenants,
trigger events and other provisions customary for a transaction of this type.
On October 16, 2000, the special purpose finance subsidiary of the Company sold
$31.8 million of timeshare receivables under the Purchase Facility. Gross
proceeds from the sale of these receivables were approximately $30.1 million, of
which $15.8 million was used to pay down existing debt under the warehouse loan
facility discussed below. The special purpose finance subsidiary of the Company
has entered into an interest rate cap agreement with the Senior
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Purchaser to limit interest rate risk should LIBOR increase above 7.62% for this
first sale under the Purchase Facility.
The Company has a timeshare receivables warehouse loan facility, which expires
on October 16, 2001, with the Subordinated Purchaser (the "Warehouse Facility").
Loans under the Warehouse Facility bear interest at LIBOR plus 3.0%. 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 95.0% of the outstanding principal balance of
eligible notes arising from the sale of Timeshare Interests except for eligible
notes generated by Bluegreen Properties N.V. (TM), for which the borrowing base
is 85.0%. The Warehouse Facility includes affirmative, negative and financial
covenants and events of default. On July 18, 2000, the Company borrowed $20.7
million under the Warehouse Facility, which at the time had a $35.0 million
borrowing capacity. On October 16, 2000, the Company repaid $15.8 million of
this balance as $16.8 million of the loans that collateralize Warehouse Facility
were sold under the Purchase Facility. The remaining balance of the Warehouse
Facility, as well as any such future borrowings, will be repaid as principal and
interest payments are collected on the timeshare notes receivable which
collateralize the loan or as the loans are sold through the Purchase Facility,
but in no event later than October 16, 2001. The maximum principal amount that
may be outstanding prospectively under the Warehouse Facility is $15.0 million.
In addition, the Subordinated Purchaser has provided the Company with a $28.0
million acquisition and development facility for its timeshare inventories (the
"A&D Facility"). The draw down period on the A&D Facility has expired and
outstanding borrowings under the A&D Facility mature no later than January 2006.
Principal will be repaid through agreed-upon release prices as Timeshare
Interests are sold at the financed resort, subject to minimum required
amortization. The indebtedness under the facility bears interest at the
three-month LIBOR plus 3%. With respect to any inventory financed under the
facility, the Company will be required to have provided equity equal to at least
15% of the approved project costs. On September 14, 1999, the Company borrowed
approximately $14.0 million under the A&D facility. The outstanding principal
must be repaid by November 1, 2005, through agreed-upon release prices as
Timeshare Interests in the Company's Lodge Alley Inn(TM) resort in Charleston,
South Carolina are sold, subject to minimum required amortization. On December
20, 1999, the Company borrowed approximately $13.9 million under the acquisition
and development facility. The principal must be repaid by January 1, 2006,
through agreed-upon release prices as Timeshare Interests in the Company's Shore
Crest II(TM) resort are sold, subject to minimum required amortization. The
outstanding balance under the acquisition and development facility at October 1,
2000 was $22.5 million. The Company is currently negotiating an extension and
increase of the facility. There can be no assurances that the Company's
negotiations will be successful.
CREDIT FACILITIES FOR RESIDENTIAL LAND AND GOLF RECEIVABLES AND INVENTORIES
The Company has a $20.0 million revolving credit facility with a financial
institution for the pledge of Residential Land and Golf Division Receivables.
The interest rate charged on outstanding borrowings ranges from prime plus 0.5%
to 1.5%. At October 1, 2000, the outstanding principal balances under the
receivables and development portions of this facility were approximately $3.9
million and $98,000, 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 has expired. Any outstanding
indebtedness is due in September 2002. The Company is currently negotiating an
increase in the facility amount and an extension of the facility draw down
expiration date. There can be no assurances that such negotiations will be
successful.
The Company has a $35.0 million revolving credit facility, which expires in
March 2002, with a financial institution. The Company uses this facility to
finance the acquisition and development of residential land projects and,
potentially to finance land receivables. The facility is secured by the real
property (and personal property related thereto) with respect to which
borrowings are made, with the lender to advance up to a specified percentage of
the value of the mortgaged property and eligible pledged receivables, provided
that the maximum outstanding amount secured by pledged receivables may not
exceed $20.0 million. The interest charged on outstanding borrowings is prime
plus 1.25%. On September 14, 1999, in connection with the acquisition of 1,550
acres adjacent to the Company's Lake Ridge at Joe Pool Lake(TM) residential land
project in Dallas, Texas ("Lake Ridge II"), the Company borrowed approximately
$12.0 million under the revolving credit facility. Principal payments are
effected through agreed-upon release prices as lots in Lake Ridge II and in
another recently purchased section of Lake Ridge are sold. The principal must be
repaid by September 14, 2004. On October 6, 1999, in connection with the
acquisition of 6,966 acres for the Company's Mystic Shores(TM) residential land
project in Canyon Lake, Texas, the Company borrowed $11.9 million under the
revolving credit facility. On May 5, 2000, the Company borrowed an additional
$2.1 million under this facility in order to purchase an additional 435 acres
for the Mystic Shores(TM) project. Principal payments are effected
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through agreed-upon release prices as lots in Mystic Shores(TM) are sold. The
principal under the $11.9 million and $2.1 million loans for Mystic Shores(TM)
must BE repaid by October 6, 2004 and May 5, 2004, respectively. The aggregate
outstanding balance on the revolving credit facility was $24.1 million at
October 1, 2000.
On September 24, 1999, the Company obtained two lines-of-credit with a bank for
the purpose of acquiring and developing a new residential land and golf course
community in New Kent County, Virginia, known as Brickshire(TM). The
lines-of-credit have an aggregate borrowing capacity of approximately $15.8
million. On September 27, 1999, the Company borrowed approximately $2.0 million
under one of the lines-of-credit in connection with the acquisition of the
Brickshire(TM) property. The outstanding balances under the lines-of-credit bear
interest at prime plus 0.5% and interest is due monthly. Principal payments are
effected through agreed-upon release prices as lots in Brickshire(TM) are sold,
subject to minimum required quarterly amortization commencing on April 30, 2002.
All borrowings under the lines-of-credit must be repaid by January 31, 2004. The
loan is secured by the Company's residential land lot inventory in
Brickshire(TM). As of October 1, 2000, the Company had repaid all outstanding
borrowings under this loan.
Concurrent with obtaining the Brickshire(TM) lines-of-credit discussed above;
the Company also obtained from the same bank a $4.2 million line-of-credit for
the purpose of developing a golf course on the Brickshire(TM) property (the
"Golf Course Loan"). The outstanding balances under the Golf Course Loan will
bear interest at prime plus 0.5% and interest is due monthly. Principal payments
will be payable in equal monthly installments of $35,000 commencing September 1,
2001. The principal must be repaid by October 1, 2005. The loan is secured by
the Brickshire(TM) golf course property. As of October 1, 2000, no amounts were
outstanding under the Golf Course Loan.
Over the past three years, the Company has received approximately 90% to 99% of
its land sales proceeds in cash. Accordingly, in recent years the Company has
reduced the borrowing capacity under credit agreements secured by land
receivables. The Company attributes the significant volume of cash sales to an
increased willingness on the part of certain local banks to extend more direct
customer 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 and golf properties through
seller, bank or financial institution loans. Terms for repayment under these
loans typically call for interest to be paid monthly and principal to be repaid
through 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.
OTHER CREDIT FACILITY
The Company has a $10 million unsecured line-of-credit with a bank. Amounts
borrowed under the line will bear interest at LIBOR plus 1.75%. Interest is due
monthly and all principal amounts are due on December 31, 2000. As of October 1,
2000, the Company had borrowed $5 million 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 and Golf Division on larger more capital intensive projects
particularly in those regions where the Company believes the market for its
products is strongest, such as new golf communities in the Southeast and other
areas and continued growth in the Company's successful regions in Texas.
The Company estimates that the total cash required to complete preparation for
the sale of its residential land and golf and timeshare property inventory as of
October 1, 2000 is approximately $254.1 million (based on current costs) with
such amount expected to be incurred over a five-year period. The Company plans
to fund these expenditures primarily
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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 or that
actual costs will not exceed those estimated.
The Company believes that its existing cash, anticipated cash generated from
operations, anticipated future permitted borrowings under existing or proposed
credit facilities and anticipated future sales of notes receivable under the
proposed timeshare receivables purchase facility (or any replacement facility)
will be sufficient to meet the Company's anticipated working capital, capital
expenditure and debt service requirements for the foreseeable future. Based on
outstanding borrowings at October 1, 2000 and the existing credit facilities
described above, the Company has approximately $46.2 million of available credit
at its disposal, subject to customary conditions, compliance with covenants and
eligible collateral. The Company will be required to renew or replace credit
facilities that have or will expire in fiscal 2001. The Company will, in the
future, also require additional credit facilities or issuances of other
corporate debt or equity securities in connection with acquisitions or
otherwise. Any debt incurred or issued by the Company may be secured or
unsecured, bear fixed or variable rate interest and may be subject to such terms
as the lender may require and management deems prudent. There can be no
assurances that the credit facilities which have expired or which are scheduled
to expire in the near term will be renewed or replaced or that sufficient funds
will be available from operations or under existing, proposed or future
revolving credit or other borrowing arrangements or receivables purchase
facilities to meet the Company's cash needs, including, without limitation, its
debt service obligations.
The Company's credit facilities, indentures and other outstanding debt
instruments 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, limits on the
repurchase of securities, payment of dividends and other restricted payments,
the incurrence of liens, transactions with affiliates, covenants concerning net
worth, fixed charge coverage requirements, debt-to-equity ratios and events of
default. 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. In addition, the Company's future operating
performance and ability to meet its financial obligations will be subject to
future economic conditions and to financial, business and other factors, many of
which will be beyond the Company's control.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For a complete description of the Company's foreign currency and interest rate
related market risks, see the discussion in the Company's Annual Report on Form
10-K for the year ended April 2, 2000. There has not been a material change in
the Company's exposure to foreign currency and interest rate risks since April
2, 2000.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the ordinary course of its business, the Company from time to time becomes
subject to claims or proceedings relating to the purchase, subdivision, sale
and/or financing of real estate. Additionally, from time to time, the Company
becomes involved in disputes with existing and former employees. The Company
believes that substantially all of the above are incidental to its business.
Certain other litigation involving the Company is described in the Company's
Annual Report on Form 10-K for the year ended April 2, 2000. Subsequent to the
filing of such Form 10-K, no material developments have occurred with respect to
such litigation.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders was held on August 2, 2000, and the
results of that voting were set forth in the Company's Quarterly Report
on Form 10-Q for the period ended July 2, 2000.
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ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.105 - Sale and Contribution Agreement dated as of September 1,
2000, among the Registrant and Bluegreen Receivables Finance
Corporation IV.
10.106 - Sale and Servicing Agreement dated as of September 1, 2000,
among the Registrant, BXG Receivables Owner Trust 2000,
Bluegreen Receivables Finance Corporation IV, Concord
Servicing Corporation, Vacation Trust, Inc., U.S. Bank Trust
National Association, Heller Financial, Inc. and Barclays
Bank PLC.
10.107 - Indenture dated as of September 1, 2000, between BXG
Receivables Owner Trust 2000 and U.S. Bank Trust National
Association.
10.108 - BXG Receivables Owner Trust 2000 Definitions Annex dated as
of September 1, 2000.
10.109 - Class A Note dated as of October 16, 2000, among BXG
Receivables Owner Trust 2000, U.S. Bank Trust National
Association and Barclays Bank PLC.
10.110 - Class B Note dated as of October 16, 2000, among BXG
Receivables Owner Trust 2000, U.S. Bank Trust National
Association and Heller Financial, Inc.
10.140 - Third Amendment to Amended and Restated Loan and Security
Agreement dated as of October 16, 2000, among the Registrant,
Bluegreen Vacations Unlimited, Inc.(TM)and Heller Financial,
Inc.
27.1 Financial Data Schedule. (For SEC use only)
(b) Reports on Form 8-K
None.
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 15, 2000 By: /s/ George F. Donovan
------------------------------------
George F. Donovan
President and
Chief Executive Officer
Date: November 15, 2000 By: /s/ John F. Chiste
------------------------------------
John F. Chiste
Senior Vice President,
Treasurer and Chief Financial Officer
(Principal Financial Officer)
Date: November 15, 2000 By: /s/ Anthony M. Puleo
------------------------------------
Anthony M. Puleo
Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
29
