<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 July 2, 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
--------------------------------------------------------------------------------
(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 August 11, 2000, there were 26,945,436 shares of Common Stock, $.01 par
value per share, issued, 2,731,800 treasury shares and 24,213,636 shares
outstanding.
<PAGE> 2
BLUEGREEN CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION (UNAUDITED)
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS AT
APRIL 2, 2000 AND JULY 2, 2000 .............................................. 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - THREE MONTHS
ENDED JULY 4, 1999 AND JULY 2, 2000 ......................................... 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - THREE MONTHS
ENDED JULY 4, 1999 AND JULY 2, 2000 ......................................... 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ............................. 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION ............................... 14
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK ............................................... 25
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS ................................................................ 25
ITEM 2. CHANGES IN SECURITIES ............................................................ 25
ITEM 3. DEFAULTS UPON SENIOR SECURITIES .................................................. 25
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .............................. 25
ITEM 5. OTHER INFORMATION ................................................................ 26
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ................................................. 26
SIGNATURES................................................................................. 27
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BLUEGREEN CORPORATION
Condensed Consolidated Balance Sheets
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
April 2, July 2,
2000 2000
--------- ---------
(Note) (Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents (including restricted cash of
approximately $21.1 million and $19.4 million at
April 2, 2000 and July 2, 2000, respectively) ................ $ 65,526 $ 34,660
Contracts receivable, net ....................................... 8,403 13,757
Notes receivable, net ........................................... 70,114 87,520
Inventory, net .................................................. 196,509 195,576
Investments in securities ....................................... 15,330 14,935
Property and equipment, net ..................................... 35,409 37,099
Other assets .................................................... 24,221 34,771
--------- ---------
TOTAL ASSETS ................................................. $ 415,512 $ 418,318
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable ................................................ $ 6,876 $ 8,219
Accrued liabilities and other ................................... 28,776 25,605
Deferred income ................................................. 3,973 3,411
Deferred income taxes ........................................... 13,173 14,891
Receivable-backed notes payable ................................. 11,167 8,627
Lines-of-credit and notes payable ............................... 66,364 66,672
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 ............................................ 280,700 277,796
Minority interests .............................................. 768 3,729
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
July 2, 2000, respectively .................................. 269 269
Additional paid-in capital ...................................... 122,533 122,567
Treasury stock, 2,558 and 2,654 common shares at cost at
April 2, 2000 and July 2, 2000, respectively ................ (12,313) (12,610)
Net unrealized gains on investments available-for-sale, net
of income taxes .............................................. 901 901
Retained earnings ............................................... 22,654 25,666
--------- ---------
TOTAL SHAREHOLDERS' EQUITY ................................... 134,044 136,793
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................... $ 415,512 $ 418,318
========= =========
</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
----------------------
JULY 4, JULY 2,
1999 2000
-------- --------
<S> <C> <C>
REVENUES:
Sales ........................................................... $ 62,714 $ 62,207
Other resort and golf operations revenue ........................ 5,381 7,718
Interest income ................................................. 3,792 4,257
Other income .................................................... 59 360
-------- --------
71,946 74,542
COSTS AND EXPENSES:
Cost of sales ................................................... 21,724 21,883
Cost of other resort and golf operations ........................ 4,902 6,594
Selling, general and administrative expenses .................... 34,171 36,927
Interest expense ................................................ 2,955 3,641
Provision for loan losses ....................................... 788 1,035
-------- --------
64,540 70,080
-------- --------
Income before income taxes ......................................... 7,406 4,462
Provision for income taxes ......................................... 2,926 1,718
Minority interest in income (loss) of consolidated subsidiaries .... 56 (268)
-------- --------
NET INCOME ......................................................... $ 4,424 $ 3,012
======== ========
EARNINGS PER COMMON SHARE:
Basic .............................................................. $ 0.19 $ 0.12
======== ========
Diluted ............................................................ $ 0.17 $ 0.12
======== ========
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES:
Basic .............................................................. 23,425 24,359
======== ========
Diluted ............................................................ 29,837 30,198
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
BLUEGREEN CORPORATION
Condensed Consolidated Statements of Cash Flows
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-------- --------
July 4, July 2,
1999 2000
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ............................................................... $ 4,424 $ 3,012
Adjustments to reconcile net income to net
cash flow used by operating activities:
Minority interest in income (loss) of consolidated subsidiaries ........ 56 (268)
Depreciation and amortization .......................................... 940 1,432
Loss on sale of property and equipment ................................. 63 7
Provision for loan losses .............................................. 788 1,035
Provision for deferred income taxes .................................... 2,926 1,718
Interest accretion on investments in securities ........................ (645) (616)
Proceeds from borrowings collateralized by notes
receivable ......................................................... 9,973 --
Payments on borrowings collateralized by notes receivable .............. (853) (2,213)
CHANGE IN OPERATING ASSETS AND LIABILITIES:
Contracts receivable ..................................................... 3,423 (5,354)
Notes receivable ......................................................... (18,565) (20,321)
Inventory ................................................................ (2,569) 7,827
Other assets ............................................................. (2,241) (2,024)
Accounts payable, accrued liabilities and other .......................... (5,213) (2,380)
-------- --------
NET CASH USED BY OPERATING ACTIVITIES ....................................... (7,493) (18,145)
-------- --------
INVESTING ACTIVITIES:
Purchases of property and equipment ...................................... (3,940) (2,124)
Sales of property and equipment .......................................... 619 3
Cash received from investments in securities ............................. 582 1,011
Long-term prepayment to Bass Pro, Inc. (see Note 3) ...................... -- (9,000)
Loan to related party .................................................... (251) --
Principal payments received on loans to related party .................... 192 --
-------- --------
NET CASH USED BY INVESTING ACTIVITIES ....................................... (2,798) (10,110)
-------- --------
FINANCING ACTIVITIES:
Proceeds from borrowings under line-of-credit facilities and
other notes payable .................................................... -- 1,500
Payments under line-of-credit facilities and other notes payable ......... (1,526) (3,831)
Payment of debt issuance costs ........................................... (519) (16)
Payments for treasury stock .............................................. (4,252) (298)
Proceeds from exercise of employee and director stock options ............ 77 34
-------- --------
NET CASH USED BY FINANCING ACTIVITIES ....................................... (6,220) (2,611)
-------- --------
Net decrease in cash and cash equivalents ................................... (16,511) (30,866)
Cash and cash equivalents at beginning of period ............................ 55,557 65,526
-------- --------
Cash and cash equivalents at end of period .................................. 39,046 34,660
Restricted cash and cash equivalents at end of period ....................... (17,457) (19,422)
-------- --------
Unrestricted cash and cash equivalents at end of period ..................... $ 21,589 $ 15,238
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
BLUEGREEN CORPORATION
Condensed Consolidated Statements of Cash Flows - - Continued
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------
July 4, July 2,
1999 2000
------------ ------------
<S> <C> <C>
SUPPLEMENTAL SCHEDULE OF NON-CASH OPERATING, INVESTING
AND FINANCING ACTIVITIES
Inventory acquired through financing ................. $ -- $ 2,112
============ ============
Property and equipment acquired through financing .... $ -- $ 519
============ ============
Inventory acquired through foreclosure or
deedback in lieu of foreclosure ..................... $ 1,587 $ 1,552
============ ============
Contribution of land inventory by minority
interest ......................................... $ -- $ 3,230
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE> 7
BLUEGREEN CORPORATION
Notes to Condensed Consolidated Financial Statements
July 2, 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-month period ended July 2, 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 Company's points-based Vacation Club 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 three months ended July 2, 2000, sales generated
by the Company's Resorts Division and Residential Land and Golf Division
comprised approximately 55% and 45%, 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 three-month periods ended
July 4, 1999 and July 2, 2000 consisted of 14 weeks and 13 weeks, respectively.
7
<PAGE> 8
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:
<TABLE>
<CAPTION>
(in thousands, except per share data) Three Months Ended
--------------------
July 4, July 2,
1999 2000
------- -------
<S> <C> <C>
Basic earnings per share - numerator:
Net income .............................................. $ 4,424 $ 3,012
======= =======
Diluted earnings per share - numerator:
Net income - basic ...................................... $ 4,424 $ 3,012
Effect of dilutive securities (net of tax effects) ...... 528 510
------- -------
Net income - diluted .................................... $ 4,952 $ 3,522
======= =======
Denominator:
Denominator for basic earnings per share - weighted-
average shares ...................................... 23,425 24,359
Effect of dilutive securities:
Stock options ........................................... 710 137
Convertible securities .................................. 5,702 5,702
------- -------
Dilutive potential common shares ........................... 6,412 5,839
======= =======
Denominator for diluted earnings per share - adjusted
weighted-average shares and assumed conversions ......... 29,837 30,198
======= =======
Basic earnings per common share ........................... $ 0.19 $ 0.12
======= =======
Diluted earnings per common share ......................... $ 0.17 $ 0.12
======= =======
</TABLE>
STOCK COMPENSATION
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-month period
ended July 2, 2000.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the current
period presentation.
2. JOINT VENTURE
On June 16, 2000, a wholly-owned subsidiary of the Company entered into an
agreement with Big Cedar 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 (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 contribution to the Joint Venture of approximately $3.2 million, of
which $323,000 was funded as of July 2, 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 additional capital contributions under
certain circumstances, in the future.
8
<PAGE> 9
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.
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% 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 Prepayment is non-interest bearing
and is included in other assets on the condensed consolidated balance sheet. As
of July 2, 2000, the unamortized balance of the Prepayment was $9 million.
4. RECEIVABLE-BACKED NOTE PAYABLE
On July 18, 2000, the Company borrowed $20.7 million pursuant to a timeshare
receivables financing facility with a financial institution (the "Loan"). The
Loan is collateralized by $22.2 million of timeshare receivables and is due on
August 28, 2000. The Loan bears interest at LIBOR plus 3%, which is paid on a
weekly basis. The Company is using the Loan as bridge financing until it is able
to sell a majority of these receivables under a new, $90.0 million, timeshare
receivables purchase facility with the same financial institution. The Company
has entered into commitment letters and a term sheet for the new facility with
two financial institutions, and is in the process of negotiating definitive
documentation. Subject to the execution of definitive agreements, the first sale
under this new facility is expected to take place during the Company's second
fiscal Quarter, although no assurances can be given.
5. 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 therefor. 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, Bluegreen Properties N.V., Resort Title Agency, Inc., any
special purpose finance subsidiary, any subsidiary which is formed and continues
to operate for the limited purpose of holding a real estate license and acting
as a broker, and certain other subsidiaries which have individually less then
$50,000 of assets (collectively, "Non-Guarantor Subsidiaries").
9
<PAGE> 10
Supplemental financial information for Bluegreen Corporation, its combined
Non-Guarantor Subsidiaries and its combined Subsidiary Guarantors is presented
below:
CONDENSED CONSOLIDATING BALANCE SHEET AT JULY 2, 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 .................... $ 12,338 $ 11,703 $ 10,619 $ -- $ 34,660
Contracts receivable, net .................... -- 163 13,594 -- 13,757
Intercompany receivable ...................... 150,406 -- -- (150,406) --
Notes receivable, net ........................ 193 6,785 80,542 -- 87,520
Inventory, net ............................... -- 16,028 179,548 -- 195,576
Investments in securities .................... -- 14,935 -- -- 14,935
Investments in subsidiaries .................. 7,979 -- 3,230 (11,209) --
Property and equipment, net .................. 8,354 308 28,437 -- 37,099
Other assets ................................. 11,013 5,540 24,125 (5,907) 34,771
--------- --------- --------- --------- ---------
Total assets .............................. $ 190,283 $ 55,462 $ 340,095 $(167,522) $ 418,318
========= ========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable, accrued liabilities and
other ..................................... $ 9,295 $ 15,030 $ 15,817 $ (2,907) $ 37,235
Intercompany payable ......................... -- 11,827 138,579 (150,406) --
Deferred income taxes ........................ 3,759 1,670 9,462 -- 14,891
Lines-of-credit and notes payable ............ 3,437 12,483 62,379 (3,000) 75,299
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 ......................... 166,862 41,010 226,237 (156,313) 277,796
Minority interests ........................... -- -- -- 3,729 3,729
Total shareholders' equity ....................... 23,421 14,452 113,858 (14,938) 136,793
--------- --------- --------- --------- ---------
Total liabilities and shareholders' equity ....... $ 190,283 $ 55,462 $ 340,095 $(167,522) $ 418,318
========= ========= ========= ========= =========
</TABLE>
10
<PAGE> 11
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JULY 4, 1999
------------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Sales ............................................. $ 7,206 $ 3,270 $ 52,238 $ -- $ 62,714
Management fee revenue ............................ 6,340 -- -- (6,340) --
Other resort and golf operations revenue .......... -- 456 4,925 -- 5,381
Interest income ................................... 292 920 2,580 -- 3,792
Other income ...................................... 5 14 40 -- 59
-------- -------- -------- -------- --------
13,843 4,660 59,783 (6,340) 71,946
COST AND EXPENSES
Cost of sales ..................................... 2,413 859 18,452 -- 21,724
Cost of other resort and golf operations .......... -- 283 4,619 -- 4,902
Management fees ................................... -- 465 5,875 (6,340) --
Selling, general and administrative
expenses ...................................... 10,164 2,039 21,968 -- 34,171
Interest expense .................................. 2,360 444 151 -- 2,955
Provision for loan losses ......................... -- (37) 825 -- 788
-------- -------- -------- -------- --------
14,937 4,053 51,890 (6,340) 64,540
-------- -------- -------- -------- --------
Income (loss) before income taxes ................ (1,094) 607 7,893 -- 7,406
Provision (benefit) for income taxes .............. (432) 240 3,118 -- 2,926
Minority interest in income of consolidated
subsidiary .................................... -- -- -- 56 56
-------- -------- -------- -------- --------
Net income ........................................ $ (662) $ 367 $ 4,775 $ (56) $ 4,424
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED JULY 2, 2000
----------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ------------ ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Sales ............................................. $ -- $ 1,439 $ 60,768 $ -- $ 62,207
Management fee revenue ............................ 7,372 -- -- (7,372) --
Other resort and golf operations revenue .......... -- 721 6,997 -- 7,718
Interest income ................................... 464 912 2,881 -- 4,257
Other income ...................................... 154 20 186 -- 360
-------- -------- -------- -------- --------
7,990 3,092 70,832 (7,372) 74,542
COST AND EXPENSES
Cost of sales ..................................... -- 431 21,452 -- 21,883
Cost of other resort and golf operations .......... -- 333 6,261 -- 6,594
Management fees ................................... -- -- 7,372 (7,372) --
Selling, general and administrative
expenses ...................................... 5,754 1,596 29,577 -- 36,927
Interest expense .................................. 2,300 464 877 -- 3,641
Provision for loan losses ......................... -- 122 913 -- 1,035
-------- -------- -------- -------- --------
8,054 2,946 66,452 (7,372) 70,080
-------- -------- -------- -------- --------
Income (loss) before income taxes ................. (64) 146 4,380 -- 4,462
Provision (benefit) for income taxes .............. (25) 85 1,658 -- 1,718
Minority interest in loss of consolidated
subsidiary .................................... -- -- -- (268) (268)
-------- -------- -------- -------- --------
Net income (loss) ................................. $ (39) $ 61 $ 2,722 $ 268 $ 3,012
======== ======== ======== ======== ========
</TABLE>
11
<PAGE> 12
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JULY 4, 1999
----------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS CONSOLIDATED
----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net cash (used) provided by operating activities ........... $(10,601) $ (387) $ 3,495 $ (7,493)
-------- -------- -------- --------
INVESTING ACTIVITIES:
Purchases of property and equipment ..................... (617) (6) (3,317) (3,940)
Sales of property and equipment ......................... -- -- 619 619
Cash received from investments in securities ............ -- 582 -- 582
Loan to related party ................................... -- -- (251) (251)
Principal payments received on loan to related party .... -- -- 192 192
-------- -------- -------- --------
Net cash (used) provided by investing activities ........... (617) 576 (2,757) (2,798)
-------- -------- -------- --------
FINANCING ACTIVITIES:
Payments under line-of-credit facilities
and other notes payable ............................... (31) (797) (698) (1,526)
Payment of debt issuance costs .......................... (63) (41) (415) (519)
Payments for treasury stock ............................. (4,252) -- -- (4,252)
Proceeds from exercise of employee and
director stock options ................................ 77 -- -- 77
-------- -------- -------- --------
Net cash used by financing activities ...................... (4,269) (838) (1,113) (6,220)
-------- -------- -------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS .................. (15,487) (649) (375) (16,511)
Cash and cash equivalents at beginning of period ........... 36,710 8,690 10,157 55,557
-------- -------- -------- --------
Cash and cash equivalents at end of period ................. 21,223 8,041 9,782 39,046
Restricted cash and cash equivalents at end of period ...... (4,993) (8,041) (4,423) (17,457)
-------- -------- -------- --------
Unrestricted cash and cash equivalents at end of period .... $ 16,230 $ -- $ 5,359 $ 21,589
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED JULY 2, 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 ........................................... $(31,702) $ (1,415) $ 14,972 $ -- $(18,145)
-------- -------- -------- -------- --------
INVESTING ACTIVITIES:
Investment in joint venture .......................... -- -- (323) 323 --
Purchases of property and equipment .................. (247) (29) (1,848) -- (2,124)
Sales of property and equipment ...................... -- -- 3 -- 3
Cash received from investments in
securities ......................................... -- 1,011 -- -- 1,011
Long-term prepayment to Bass Pro, Inc. ............... -- -- (9,000) -- (9,000)
-------- -------- -------- -------- --------
Net cash (used) provided by investing
activities ........................................... (247) 982 (11,168) 323 (10,110)
-------- -------- -------- -------- --------
FINANCING ACTIVITIES:
Proceeds from borrowings under
line-of-credit facilities and other notes payable .. 1,500 -- -- -- 1,500
Payments under line-of-credit facilities
and other notes payable ............................ (42) (631) (3,158) -- (3,831)
Payment of debt issuance costs ....................... -- (14) (2) -- (16)
Payments for treasury stock .......................... (298) -- -- -- (298)
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 ......................................... 1,194 (322) (3,160) (323) (2,611)
-------- -------- -------- -------- --------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS ...................................... (30,755) (755) 644 -- (30,866)
Cash and cash equivalents at beginning of
period ........................................... 43,093 12,458 9,975 -- 65,526
-------- -------- -------- -------- --------
Cash and cash equivalents at end of period ............. 12,338 11,703 10,619 -- 34,660
Restricted cash and cash equivalents at end
of period .......................................... (791) (11,703) (6,928) -- (19,422)
-------- -------- -------- -------- --------
Unrestricted cash and cash equivalents at
end of period ...................................... $ 11,547 $ -- $ 3,691 $ -- $ 15,238
======== ======== ======== ======== ========
</TABLE>
12
<PAGE> 13
6. 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, 1999. 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, 1999 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 September 17, 1999, the Company received a Notice of Proposed Audit Report
(the "Notice") from the State of Wisconsin Department of Revenue (the "DOR")
alleging that, subject to possible changes made in a final Notice of Field Audit
Action, two subsidiaries now owned by the Company failed to pay sales and use
taxes to the State of Wisconsin during the period from January 1, 1994 through
September 30, 1997. The majority of the proposed assessment is based on the
subsidiaries not charging sales tax to purchasers of Timeshare Interests at the
Company's Christmas Mountain Village resort. In addition to the proposed
assessment, the Notice indicated that interest would be charged, but no
penalties would be assessed. These subsidiaries were acquired by the Company in
connection with the acquisition of 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 million outstanding note
payable balance and to make a claim against such stockholders for certain
amounts 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. If a Notice of
Field Audit Action is issued by the DOR in this matter, the Company intends to
vigorously appeal any assessment of sales tax on Timeshare Interest sales.
7. 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.
13
<PAGE> 14
Required disclosures for the Company's business segments are as follows (in
thousands):
<TABLE>
<CAPTION>
RESIDENTIAL LAND
RESORTS AND GOLF TOTALS
-------- ---------------- --------
<S> <C> <C> <C>
AS OF AND FOR THE THREE MONTHS ENDED JULY 4, 1999
Sales $ 32,279 $ 30,435 $ 62,714
Other resort and golf operations revenue 4,662 719 5,381
Depreciation expense 250 191 441
Field operating profit 3,493 8,089 11,582
Inventory, net 100,248 46,536 146,784
AS OF AND FOR THE THREE MONTHS ENDED JULY 2, 2000
Sales $ 34,351 $ 27,856 $ 62,207
Other resort and golf operations revenue 7,047 671 7,718
Depreciation expense 408 211 619
Field operating profit 2,829 6,015 8,844
Inventory, net 109,990 85,586 195,576
</TABLE>
Field operating profit for reportable segments reconciled to consolidated income
before income taxes (in thousands) is as follows:
<TABLE>
<CAPTION>
Three Months Ended
-----------------------
JULY 4, JULY 2,
1999 2000
-------- --------
<S> <C> <C>
Field operating profit for reportable segments $ 11,582 $ 8,844
Interest income 3,792 4,257
Other income 59 360
Corporate general and administrative expenses (4,284) (4,323)
Interest expense (2,955) (3,641)
Provision for loan losses (788) (1,035)
-------- --------
Consolidated income before income taxes $ 7,406 $ 4,462
======== ========
</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 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,
14
<PAGE> 15
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.
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 to update or revise forward-looking statements,
even if the Company's situation may change in the future.
15
<PAGE> 16
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 ability and 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 months ended
July 4, 1999 or July 2, 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 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
16
<PAGE> 17
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 JULY 4, 1999
Sales $ 32,279 100.0 % $ 30,435 100.0 % $ 62,714 100.0 %
Cost of sales (1) (7,546) (23.4)% (14,178) (46.6)% (21,724) (34.6)%
-------- -------- -------- -------- -------- --------
Gross profit 24,733 76.6 % 16,257 53.4 % 40,990 65.4 %
Other resort and golf operations revenue 4,662 14.4 % 719 2.4 % 5,381 8.6 %
Cost of other resort and golf operations (3,993) (12.4)% (909) (3.0)% (4,902) (7.8)%
Field selling, general and administrative
expenses(2) (21,909) (67.9)% (7,978) (26.2)% (29,887) (47.7)%
-------- -------- -------- -------- -------- --------
Field operating profit $ 3,493 10.8 % $ 8,089 26.6 % $ 11,582 18.5 %
======== ======== ======== ======== ======== ========
THREE MONTHS ENDED JULY 2, 2000
Sales $ 34,351 100.0 % $ 27,856 100.0 % $ 62,207 100.0 %
Cost of sales (1) (7,907) (23.0)% (13,976) (50.2)% (21,883) (35.2)%
-------- -------- -------- -------- -------- --------
Gross profit 26,444 77.0 % 13,880 49.8 % 40,324 64.8 %
Other resort and golf operations revenue 7,047 20.5 % 671 2.4 % 7,718 12.4 %
Cost of resort and golf operations (5,798) (16.9)% (796) (2.9)% (6,594) (10.6)%
Field selling, general and administrative
expenses(2) (24,864) (72.4)% (7,740) (27.8)% (32,604) (52.4)%
-------- -------- -------- -------- -------- --------
Field operating profit $ 2,829 8.2 % $ 6,015 21.6 % $ 8,844 14.2 %
======== ======== ======== ======== ======== ========
</TABLE>
(1) COST OF SALES REPRESENTS THE COST OF INVENTORY INCLUDING THE COST OF
IMPROVEMENTS, AMENITIES AND IN CERTAIN CASES PREVIOUSLY CAPITALIZED
INTEREST AND REAL ESTATE TAXES.
(2) GENERAL AND ADMINISTRATIVE EXPENSES ATTRIBUTABLE TO CORPORATE OVERHEAD HAVE
BEEN EXCLUDED FROM THE TABLES. CORPORATE GENERAL AND ADMINISTRATIVE
EXPENSES TOTALED $4.3 MILLION AND $4.3 MILLION FOR THE THREE MONTHS ENDED
JULY 4, 1999 AND JULY 2, 2000, RESPECTIVELY.
SALES
Consolidated sales decreased 0.8% from $62.7 million for the three-month period
ended July 4, 1999 (the "2000 Quarter") to $62.2 million for the three-month
period ended July 2, 2000 (the "2001 Quarter"). Decreases in Residential Land
and Golf Division sales during the 2001 Quarter were partially offset by higher
Resorts Division sales. The 2000 Quarter included 14 weeks of operating results
as compared to 13 weeks of operating results in the 2001 Quarter. The additional
week of operations in the 2000 Quarter produced total operating revenues of $6.5
million.
As of July 2, 2000, approximately $2.4 million in estimated income on sales of
$5.2 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, sales of
Timeshare Interests contributed $32.3 million or 51.4% and $34.4 million or
55.2%, respectively, of the Company's total consolidated sales.
The table set forth below outlines the number of Timeshare Interests sold and
the average sales price per Timeshare Interest for the Resorts Division for the
periods indicated, BEFORE giving effect to the percentage-of-completion method
of accounting.
17
<PAGE> 18
THREE MONTHS ENDED
---------------------
JULY 4, JULY 2,
1999 2000
------ --------
Timeshare Interests sold 3,550 3,669
Average sales price per Timeshare Interest $8,929 $9,268
Gross margin 76.6% 77.0%
The increase in the number of Timeshare Interests sold during the 2001 Quarter
as compared to the 2000 Quarter is primarily due to the Company's "Bluegreen
Air" offsite sales offices. The "Bluegreen Air" 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 Company's Vacation
Club product. The Company opened the Detroit office during fiscal 2000,
generating 363 Timeshare Interest sales during the 2001 Quarter, with no
corresponding sales during the 2000 Quarter. The other "Bluegreen Air" sales
offices had comparable sales during the 2000 Quarter and 2001 Quarter.
These increases during fiscal 2001 were partially offset by decreased sales at
the Company's Aruba sales location. The Company's La Cabana Beach and Racquet
Club in Aruba ("La Cabana") experienced a decrease of 228 in the number of
Timeshare Interests sold (395 and 167 Timeshare Interests sold during the 2000
Quarter and 2001 Quarter, respectively). A decreased amount of available
Timeshare Interests related to summer weeks contributed to decreased sales
during June (as buyers in Aruba tend to want to by Timeshare Interests related
to the same period that they are currently there on vacation). The Company is
currently in negotiations to enter into a joint venture with a third-party
which, if successful, would result in the availability of additional summer
inventory at La Cabana. There can be no assurances that the Company will elect
to proceed with the negotiations or, if it does, that the Company's negotiations
will be successful. If additional summer inventory is not obtained, the Company
expects that future sales at La Cabana during the summer months will also be
below prior levels.
The Resorts Division's gross margin increased from 76.6% during the 2000 Quarter
to 77.0% during the 2001 Quarter primarily due to the increased average sales
prices noted above and the approximately 80% gross margin generated by sales of
the Company's Orlando's Sunshine Resort II ("OSR II") inventory.
Other resort service revenues and costs increased 51.2% and 45.2%, respectively,
during the 2001 Quarter as compared to the 2000 Quarter. The increase is
primarily due to an increase of $1.6 million in the amount of initial
maintenance fees that are charged to new owners at the time of purchase to cover
a portion of the Company's costs to maintain the applicable resort property
during the period that the Timeshare Interest is held in inventory. The Company
retains these fees. 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 included in the $1.6 million
are rentals of Timeshare Interests held in inventory, specifically at the
Company's Shore Crest II and OSR II resorts, construction of which was completed
in fiscal 2000. The remaining increase was primarily due to increased revenues
and costs generated by Resort Title Agency, Inc., the Company's wholly owned
title company.
Field selling, general and administrative ("FSG&A") expenses increased as a
percentage of sales for the Resorts Division during the 2001 Quarter from the
2000 Quarter to 72.4% from 67.9%, respectively. The increases are due in part to
FSG&A expenses approximating 100% of sales at La Cabana due to costs incurred to
sell Timeshare Interests on behalf of the third-party which the Company may
enter a joint venture with and as discussed above. The Company did not receive
any revenues but did incur the selling and marketing costs related to these
sales during the 2001 Quarter.
In addition, as indicated above, the Company opened its fourth off-site sales
office serving the Detroit market in November 1999. The Detroit office generated
an additional $2.7 million of FSG&A expenses on sales of $3.8 million, due
primarily to achieving a low conversion rate of prospects to sales directly
resulting in significantly higher marketing costs as a percentage of sales.
RESIDENTIAL LAND AND GOLF DIVISION. During the 2000 Quarter and the 2001
Quarter, residential land and golf sales contributed $30.4 million or 48.5% and
$27.9 million or 44.8%, respectively, of the Company's total consolidated sales.
18
<PAGE> 19
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.
Three Months Ended
---------------------
July 4, July 2,
1999 2000
------- -------
Number of parcels sold 534 424
Average sales price per parcel $51,391 $52,735
Gross margin 53.4% 49.8%
The aggregate number of parcels sold decreased during the 2001 Quarter as
compared to the 2000 Quarter primarily due 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
84 fewer lot sales in the 2001 Quarter as compared to the 2000 Quarter. 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. In addition, the Company's Winding River Plantation golf community
generated 34 fewer lot sales in the 2001 Quarter. Higher lot sales in the 2000
Quarter resulted from sales events in connection with the grand opening of the
third nine holes at Carolina National Golf Course ("Carolina National").
Gross margins decreased in the 2001 Quarter as compared to the 2000 Quarter.
Certain phases of projects which are approaching sellout in the Company's Texas
and North Carolina regions yielded gross margins in the 60% to 65% range in the
2000 Quarter as compared to the 55% to 60% range in the 2001 Quarter due to a
lower number of premium lots (e.g., waterfront, views, etc.) being available for
sale during the 2001 Quarter and price decreases instituted to promote sellout.
In addition, gross margins were adversely impacted in the 2001 Quarter by the
impact of percentage of completion accounting. The gross margin recognized on
sales previously deferred under percentage of completion accounting decreased
from 80.9% in the 2000 Quarter to 36.0% in the 2001 Quarter, based on the mix of
projects which were subject to sales deferred 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.
Golf operations revenues and related costs decreased 6.7% and 12.4%
respectively, during the 2001 Quarter as compared to the 2000 Quarter. In the
2000 Quarter, the Company opened another nine holes at Carolina National 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 in the 2000 Quarter.
INTEREST INCOME
Interest income was $3.8 million and $4.3 million for the 2000 Quarter and 2001
Quarter, 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, as compared to the 2000
Quarter.
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 $34.2 million and $36.9 million for the 2000
Quarter and 2001 Quarter, respectively. As a percentage of total revenues, S, G
& A Expenses were 47.5% and 49.5% for the 2000 Quarter and 2001 Quarter,
respectively.
19
<PAGE> 20
The increase in S, G & A Expenses as a percentage of revenues in the 2001
Quarter was the result of the growth of the Resorts Division (from 51% to 55% of
consolidated sales during the 2000 Quarter and 2001 Quarter, respectively),
where S, G & A Expenses are typically higher than for the Residential Land and
Golf Division. See also discussions of increases in S, G & A expenses for the
Company's Resorts Division, above.
INTEREST EXPENSE
Interest expense totaled $3.0 million and $3.6 million for the 2000 Quarter and
2001 Quarter, respectively. The 23.2% increase in interest expense for the 2000
Quarter 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.
PROVISION FOR LOAN LOSSES
The Company recorded a provision for loan losses totaling $788,000 and $1.0
million during the 2000 Quarter and 2001 Quarter, respectively. The increase in
the provision was due to an increase in the notes receivable portfolio during
the 2001 Quarter as compared to the 2000 Quarter. The increase in the portfolio
is due to an increased amount of timeshare loans (where historical default rates
exceed those for land loans).
The allowance for loan losses by division as of April 2, 2000 and July 2, 2000
was (amounts in thousands):
<TABLE>
<CAPTION>
RESIDENTIAL
RESORTS LAND AND
DIVISION GOLF 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%
======== ======== ======== ========
JULY 2, 2000
Notes receivable $ 79,618 $ 10,453 $ 686 $ 90,757
Less: allowance for loan losses (2,702) (454) (81) (3,237)
-------- -------- -------- --------
Notes receivable, net $ 76,916 $ 9,999 $ 605 $ 87,520
======== ======== ======== ========
Allowance as a % of gross notes receivable 3.4% 4.3% 11.8% 3.6%
======== ======== ======== ========
</TABLE>
The allowance for loan losses as a percentage of the gross notes receivable
balance decreased at July 2, 2000, for the Resorts Division, as the Company did
not provide allowance for approximately $19 million of notes receivable which
are expected to be sold during the three months ending October 1, 2000 through a
new, non-recourse timeshare receivable purchase facility currently being
negotiated (see "Liquidity and Capital Resources"). There can be no assurances
that such receivables will be sold when expected.
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 39.5% to 38.5% during the 2001 Quarter. 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
$4.4 million to $3.0 million in the 2000 Quarter and 2001 Quarter, respectively.
20
<PAGE> 21
CHANGES IN FINANCIAL CONDITION
Consolidated assets of the Company increased $2.8 million from April 2, 2000 to
July 2, 2000. This increase is primarily due to a net $17.4 million increase in
notes receivable, primarily due to new notes generated by $34.4 million of
timeshare sales during quarter, net of principal payments received. In addition,
other assets increased $10.5 million, primarily due to the $9 million prepaid
marketing fees paid to Bass Pro, Inc. (see Note 3 of Notes to Condensed
Consolidated Financial Statements). Also, contracts receivable increased $5.4
million due to increased sales during the month of June 2000 as compared to the
month of March 2000. These increases were partially offset by a $30.9 million
decrease in cash and cash equivalents more fully described on the Condensed
Consolidated Statement of Cash Flows.
Consolidated liabilities decreased $2.9 million from April 2, 2000 to July 2,
2000. The decrease is primarily due to an aggregate $2.5 million in payments
made on the Company's receivable backed notes payable.
Minority interest increased $2.9 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 more fully described in Note 2 of Notes to
Condensed Consolidated Financial Statements. This amount is net of minority
interest's share of net losses in the Company's consolidated joint venture in
Aruba.
Total shareholders' equity increased $2.7 million during the 2001 Quarter,
primarily due to net income of $3.0 million. This increase was partially offset
by the Company's repurchase of $300,000 of common stock (96,000 shares) to be
held in treasury. The Company's book value per common share increased from $5.50
to $5.63 at April 2, 2000 and July 2, 2000, respectively. The debt-to-equity
ratio decreased from 1.70:1 to 1.65:1 at April 2, 2000 and July 2, 2000,
respectively, primarily due to the debt paydowns and net income 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 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
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 and is currently negotiating various credit facilities
with financial institutions that provide for receivable financing for its
timeshare projects.
On August 1, 2000, the Company executed commitment letters and a term sheet for
a timeshare receivables purchase facility (the "Purchase Facility") with two
financial institutions, including a commercial paper conduit (the "Senior
Purchaser") and the institution who underwrote the Company's immediately prior
timeshare receivables purchase facility (the "Subordinated Purchaser")
(collectively, the "Purchasers"). Pursuant to the term sheet, under the Purchase
Facility, a 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 Purchasers in securitization transactions.
The Purchase Facility will include a $50 million extension, if the full $90
million capacity is utilized, at the Company's option, subject to the
Purchasers' consent. The Purchase Facility will have detailed requirements with
respect to the eligibility of receivables for purchase. Under the Purchase
Facility, a purchase price equal to 95% (subject to adjustment in 0.5%
increments down to 87.5% depending on the difference between the
weighted-average interest rate on the notes receivable sold and 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. A
portion of the purchase price will be deferred until such time as the
21
<PAGE> 22
Purchasers have received their portion of principal payments (to be defined in
the Purchase Facility agreement), a return on their advances (as more fully
described below), all servicing, custodial and similar fees and expenses have
been paid and a cash reserve account has been funded. The 95% purchase price
shall be funded 80% by the Senior Purchaser and 15% by the Subordinated
Purchaser. The Senior Purchaser shall earn a return equal to the rate equivalent
of their borrowing cost (based on then applicable commercial paper rates) plus
0.7%. In the event that there is a disruption in the commercial paper market (to
be defined in the Purchase Facility agreement), the Senior Purchaser shall earn
a return equal to the one-month LIBOR plus 1.5% or, in the event of a disruption
in the LIBOR market (to be defined in the Purchase Facility agreement), a return
equal to the greater of the Prime lending rate and the Federal Funds Rate plus
1.0%. The Subordinated Purchaser shall earn a return equal to the one-month
LIBOR plus 4.12%. The Company will arrange for an interest rate hedge with
another financial institution at a 1.0% strike to preserve the excess spread for
credit enhancement purposes. In addition to other fees, if the Company does not
sell to the Purchasers during the term of the Purchase Facility notes receivable
with a cumulative purchase price of at least $70 million, the Company will pay a
minimum usage fee equal to 1.5% of the shortfall in the cumulative purchase
price. The Purchase Facility will have an initial revolving term of 364 days
from the date the final agreement is executed, renewable for an additional
364-day revolving period thereafter subject to the consent of the Purchasers.
Definitive agreements for the Purchase Facility are being negotiated. No
assurances can be given that the Purchase Facility will be entered into or that
the final terms of the facility will be as discussed herein.
Receivables will be sold under the Purchase Facility without recourse to the
Company or its special purpose finance subsidiary except for breaches of
representations and warranties made at the time of sale. The Purchasers'
obligation to purchase under the Purchase Facility will terminate upon the
occurrence of specified events. The Company will act 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 will include various conditions to purchase, covenants, events of
default and other provisions customary for a transaction of this type.
The Company has a $35 million timeshare receivables warehouse loan facility,
which expires on August 28, 2000, with the Subordinated Purchaser. Loans under
the warehouse facility bear interest at LIBOR plus 3.00%. The warehouse facility
has detailed requirements with respect to the eligibility of receivables for
inclusion and other conditions to funding. The borrowing base under the
warehouse facility is 95% of the outstanding principal balance of eligible notes
arising from the sale of Timeshare Interests except for eligible notes generated
by Bluegreen Properties N.V., the Company's 50%-owned joint venture in Aruba,
for which the borrowing base is 85%. The warehouse facility includes
affirmative, negative and financial covenants and events of default. On June 30,
1999, the Company borrowed $8.9 million under the warehouse facility, which 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 a
purchase facility, but in no event later than August 28, 2000. As of July 2,
2000, the outstanding balance on this facility was $1.4 million. On July 18,
2000, the Company borrowed $20.7 million under the warehouse facility, which is
also scheduled to mature on August 28, 2000. It is anticipated that a portion of
this loan will be repaid by selling some of the underlying receivables through
the Purchase Facility, although there can be no assurances. The Company is
currently negotiating an extension of the maturity date on these borrowings.
There can be no assurances that such negotiations will be successful.
In addition, the Subordinated Purchaser has provided the Company with a $28.0
million acquisition and development facility for its timeshare inventories. The
facility includes a two-year draw down period, which expires in October 2000,
and matures in 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 acquisition and
development facility. The principal must be repaid by November 1, 2005, through
agreed-upon release prices as Timeshare Interests in the Company's Lodge Alley
Inn 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 resort are sold, subject to minimum
required amortization. The outstanding balance under the acquisition and
development facility at July 2, 2000 was $25.2 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.
22
<PAGE> 23
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.
Under the terms of this facility, the Company is entitled to advances secured by
eligible Residential Land and Golf Division receivables up to 90% of the
outstanding principal balance. In addition, up to $8.0 million of the facility
can be used for land acquisition and development purposes. The interest rate
charged on outstanding borrowings ranges from prime plus 0.5% to 1.5%. At July
2, 2000, the outstanding principal balances under the receivables and
development portions of this facility were approximately $4.8 million and
$309,000, 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 expires in September 2000. Any outstanding
indebtedness is due in September 2002. The Company is currently negotiating an
extension of the facility 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 residential land project in Dallas,
Texas ("Lake Ridge II"), the Company borrowed approximately $12.0 million under
the revolving credit facility. Principal payments will be 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 residential land project in Canyon
Lake, Texas, the Company borrowed $11.9 million under the revolving credit
facility. Principal payments will be effected through agreed-upon release prices
as lots in Mystic Shores are sold. The principal must be repaid by October 6,
2004. The outstanding balance on this facility was $22.6 million at July 2,
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. 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
property. The outstanding balances under the lines-of-credit bear interest at
prime plus 0.5% and interest is due monthly. Principal payments will be effected
through agreed-upon release prices as lots in Brickshire are sold, subject to
minimum required quarterly amortization commencing on April 30, 2002. The
principal must be repaid by January 31, 2004. The loan is secured by the
Company's residential land lot inventory in Brickshire. As of July 2, 2000, the
outstanding balance on this loan was $1.2 million.
Concurrent with obtaining the Brickshire 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 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 golf course property. As of July 2, 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
23
<PAGE> 24
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
On November 3, 1999, the Company increased the borrowing capacity on its
unsecured line-of-credit with a bank from $5 million to $10 million. 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. Through July 2,
2000, the Company had not borrowed any amounts under the line.
SUMMARY
The Company intends to continue to pursue a growth-oriented strategy,
particularly with respect to its Resorts Division. In connection with this
strategy, the Company may from time to time acquire, among other things,
additional resort properties and completed Timeshare Interests; land upon which
additional resorts may be built; management contracts; loan portfolios of
Timeshare Interest mortgages; portfolios which include properties or assets
which may be integrated into the Company's operations; and operating companies
providing or possessing management, sales, marketing, development,
administration and/or other expertise with respect to the Company's operations
in the timeshare industry. In addition, the Company intends to continue to focus
the Residential Land 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 the Southeast, Southwest, Midwest and Western
regions of the United States and to replenish its residential land and golf
inventory in such regions as existing projects are sold-out.
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
July 2, 2000 is approximately $206.2 million (based on current costs) expected
to be incurred over a five-year period. The Company plans to fund these
expenditures primarily with available capacity on existing or proposed credit
facilities and cash generated from operations. There can be no assurances that
the Company will be able to obtain the financing necessary to complete the
foregoing plans.
The Company 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 July 2, 2000 and the existing credit facilities
described above, the Company has approximately $92.4 million of available credit
at its disposal, subject to customary conditions, compliance with covenants and
eligible collateral. The Company will be required to obtain a new timeshare
receivables purchase facility (see discussion of the term sheet for the new
facility, above under "Credit Facilities for Timeshare Receivables and
Inventories") and to renew or replace credit facilities scheduled to 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 proposed timeshare purchase
facility will close, credit facilities 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
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.
24
<PAGE> 25
IMPACT OF YEAR 2000
The Company believes it has resolved the potential impact of the year 2000
("Y2K") issue on its processing of date sensitive information in its information
technology and operation and control systems. The Company, to date, has not
experienced any negative effects due to the Y2K problem, either internally or
with its customers or vendors. If the Company encounters Y2K problems during the
year 2000, and if customers or vendors cannot rectify Y2K issues, the Company
could incur additional costs, which may be substantial, to develop alternative
methods of managing its business and replacing non-compliant equipment, and may
experience delays in obtaining goods or services from and making payment to
vendors, and making sales and/or providing service to customers. The Company has
no contingency plans for critical functions in the event of non-compliance by
its customers and vendors.
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
At the Annual Meeting of Shareholders held on August 2, 2000, the
shareholders voted on the matters listed below and in the proxy
materials dated July 13, 2000. The results of voting were as follows:
<TABLE>
<CAPTION>
Shares Voted
------------------------------------------------------
For Against Abstain Total
---------- -------- ------- ----------
<S> <C> <C> <C> <C>
Elect each of the following persons as directors of the Company for a
three year term:
Frederick M. Myers 17,794,830 202,632 -- 17,997,462
J. Larry Rutherford 16,319,749 1,677,713 -- 17,997,462
Ratify the appointment of Ernst & Young LLP as independent auditors of
the Company for the fiscal year ending
April 1, 2001 17,970,845 17,421 9,196 17,997,462
</TABLE>
25
<PAGE> 26
The Company has a classified Board of Directors.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.138 - Amended and Restated Loan and Security Agreement dated as of
June 30, 1999, among the Registrant, Bluegreen Vacations
Unlimited, Inc. and Heller Financial, Inc.
10.139 - Amended and Restated Loan and Security Agreement dated as of
June 29, 2000, among the Registrant, Bluegreen Vacations
Unlimited, Inc. and Heller Financial, Inc.
10.200 - Marketing and Promotions Agreement dated as of June 16, 2000,
by and between Big Cedar L.L.C., Bass Pro, Inc., Bluegreen
Vacations Unlimited, Inc. and Bluegreen/Big Cedar Vacations,
LLC.
10.201 - Advertising Advance Loan dated as of June 16, 2000 by and
between Big Cedar L.L.C., as Maker, and Bluegreen Vacations
Unlimited, Inc., as Holder.
10.202 - Website Hyperlink License Agreement dated as of June 16, 2000
by and between Bluegreen Vacations Unlimited, Inc. (as User),
Bass Pro, Inc. and Bass Pro Outdoors Online, L.L.C.
(as Owners).
10.203 - Website Hyperlink License Agreement dated as of June 16, 2000
by and between Bluegreen Vacations Unlimited, Inc. (as Owner)
Bass Pro, Inc. and Bass Pro Outdoors Online, L.L.C. (as
Users).
10.204 - Contribution Agreement dated as of June 16, 2000 by and
between Bluegreen Vacations Unlimited, Inc. and Big Cedar
L.L.C.
10.205 - Operating Agreement of Bluegreen/Big Cedar Vacations, LLC
dated as of June 16, 2000 by and among Bluegreen Vacations
Unlimited, Inc. and Big Cedar L.L.C.
10.206 - Administrative Services Agreement dated as of June 16, 2000 by
and among Bluegreen/Big Cedar Vacations, LLC and Bluegreen
Vacations Unlimited, Inc.
10.207 - Servicing Agreement dated as of June 16, 2000 by and among the
Registrant, Bluegreen/Big Cedar Vacations, LLC and Big Cedar
L.L.C.
27.1 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
None.
26
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BLUEGREEN CORPORATION
(Registrant)
Date: August 15, 2000 By: /s/ George F. Donovan
-----------------------------------
George F. Donovan
President and
Chief Executive Officer
Date: August 15, 2000 By: /s/ John F. Chiste
-----------------------------------
John F. Chiste
Senior Vice President,
Treasurer and Chief Financial Officer
(Principal Financial Officer)
Date: August 15, 2000 By: /s/ Anthony M. Puleo
-----------------------------------
Anthony M. Puleo
Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
27
