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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 1, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-19292
BLUEGREEN(R) CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 03-0300793
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4960 Conference Way North, Suite 100, Boca Raton, Florida 33431
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 912-8000
Securities Registered Pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Common Stock, $.01 par value New York Stock Exchange,
Pacific Stock Exchange
8.25% Convertible Subordinated Debentures
due 2012 New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None.
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in the definitive proxy statement incorporated
by reference into Part III of this Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant: $33,364,477 based upon the closing sale price of the
Company's Common Stock on the New York Stock Exchange on June 28, 2001 ($2.12
per share). For this purpose, "affiliates" include members of the Board of
Directors of the Company, members of executive management and all persons known
to be the beneficial owners of more than 5% of the Company's outstanding Common
Stock. The market value of voting stock held by non-affiliates excludes any
shares issuable upon conversion of any 8.25% Convertible Subordinated Debentures
which are convertible at a current conversion price of $8.24 per share.
Indicate the number of shares outstanding and approximate number of holders
of each of the registrant's classes of Common Stock, as of the latest
practicable date: 24,190,136 shares of Common Stock, $.01 par value outstanding
and approximately 5,900 record holders as of June 28, 2001.
DOCUMENTS INCORPORATED BY REFERENCE
Specifically identified portions of the Company's definitive proxy
statement to be filed for its Annual Meeting of Shareholders to be held on
August 2, 2001 (the "Proxy Statement") are incorporated by reference into Part
III hereof.
BLUEGREEN CORPORATION
INDEX TO ANNUAL REPORT ON FORM 10-K
PAGE
PART I
Item 1. BUSINESS........................................................... 1
Item 2. PROPERTIES......................................................... 18
Item 3. LEGAL PROCEEDINGS.................................................. 18
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................ 19
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS........................................................ 19
Item 6. SELECTED FINANCIAL DATA............................................ 20
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION........................................ 21
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK......... 36
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................ 37
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE........................................... 73
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................. 73
Item 11. EXECUTIVE COMPENSATION............................................. 73
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..... 73
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................... 73
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.... 73
Signatures................................................................... 75
Exhibit Index................................................................ 76
Note: The term "Bluegreen" is registered in the U.S. Patent and Trademark
office by Bluegreen Corporation.
The term "Big Cedar" is registered in the U.S. Patent and Trademark
office by Big Cedar L.L.C.
PART I
Item 1. BUSINESS.
Summary
Bluegreen Corporation (the "Company") is a leading marketer of vacation and
residential lifestyle choices through its resorts and residential land and golf
businesses. The Company's resorts 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 Bluegreen Vacation Club(TM)
product to an annual allotment of "points" in perpetuity (supported by an
underlying deeded fixed timeshare week being held in trust for the buyer).
"Points" may be exchanged by the buyer in various increments for lodging for
varying lengths of time in fully-furnished vacation residences at any of the
Company's participating resorts. A Timeshare Interest also entitles the buyer to
access over 3,500 resorts worldwide through the Company's participation in
timeshare exchange networks. The Company currently develops, markets and sells
Timeshare Interests in 12 resorts located in the United States and the
Caribbean. The Company also markets and sells Timeshare Interests at three
off-site sales locations. Prior to investing in new timeshare projects, the
Company performs market research and testing and, prior to completion of
development, seeks to pre-sell a significant portion of its Timeshare Interests
inventory. 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. The Residential Land and Golf Division's strategy
is to locate its projects near major metropolitan centers outside the perimeter
of intense subdivision development or in popular retirement areas. The Company
has focused the Residential Land and Golf Division's activities in certain core
markets in which the Company has developed substantial marketing expertise and
has a strong track record of success. Prior to acquiring Residential Land and
Golf Division properties, the Company typically utilizes market research,
conducts due diligence and, in the case of new project locations, engages in
pre-marketing techniques to evaluate market response and price acceptance. Once
a parcel of property is acquired, the Company seeks to pre-sell a significant
portion of its planned residential lots on such property prior to extensive
capital investment as a result of the Company's ability to bond its projects to
completion. The Company also generates significant interest income through its
financing of individual purchasers of Timeshare Interests and, to a nominal
extent, land sold by the Residential Land and Golf Division.
For the purposes of this discussion, "estimated remaining life-of-project
sales" assumes sales of the existing, currently under construction or
development, and planned Timeshare Interests or residential lots, as the case
may be, at current retail prices. No assurances can be given that actual sales
will meet expectations.
Market and industry data used throughout this Form 10-K were obtained from
internal company surveys, industry publications, unpublished industry data and
estimates, discussions with industry sources and currently available
information. The sources for this data include, without limitation, the American
Resort Development Association ("ARDA"), a non-profit industry organization.
Industry publications generally state that the information contained therein has
been obtained from sources believed to be reliable, but there can be no
assurance as the accuracy and completeness of such information. The Company has
not independently verified such market data. Similarly, internal Company
surveys, while believed by the Company to be reliable, have not been verified by
any independent sources. Accordingly, no assurance can be given that any such
data are accurate.
The Resorts Division. The Company's Resorts Division was founded in 1994 to
capitalize on the growth of the timeshare industry. According to ARDA and other
industry sources, timeshare industry sales grew at growth rates ranging from 14%
to 17% annually during the period from 1992 through 2000. No assurances can be
given that these industry growth rates will continue. The Company currently
markets and sells Timeshare Interests in twelve resorts located in the Smoky
Mountains of Tennessee; Myrtle Beach and Charleston, South Carolina; Orlando and
Surfside, Florida; Branson and Ridgedale, Missouri; Gordonsville, Virginia;
Wisconsin Dells, Wisconsin and Aruba. In addition, the Company also markets and
sells Timeshare Interests at three off-site sales offices. Through April 1,
2001, the Company has sold approximately 50,952 Timeshare Interests at its
resorts. As of April 1, 2001, the Company had 68,887 completed Timeshare
Interests at its resorts, 1,248 Timeshare Interests under construction or
development and plans to develop approximately 66,607 additional Timeshare
Interests at existing resorts. Based on the foregoing, the Resorts Division's
estimated remaining life-of-project sales were approximately $939 million as of
April 1, 2001, based on retail prices at that date. The Company also manages 20
timeshare resorts (including ten of its own resorts) with an aggregate of
approximately 70,000 members.
1
The Resorts Division uses a variety of techniques to attract prospective
purchasers of Timeshare Interests, including telemarketing mini-vacations,
kiosks in retail and hotel locations, targeted mailings, marketing to current
owners of Timeshare Interests and referrals. To support its marketing and sales
efforts, the Company has developed and continues to enhance its database to
track its timeshare marketing and sales programs. Management believes that, as
the Company's timeshare operations grow, this database will become an
increasingly significant asset, enabling it to take advantage of, among other
things, less costly marketing and referral opportunities.
According to ARDA, the primary reason cited by consumers for purchasing a
Timeshare Interest is the ability to exchange a Timeshare Interest for
accommodations at other resorts through worldwide exchange networks. Each of the
Company's timeshare resorts is affiliated with either Resort Condominium
International, Inc. ("RCI") or Interval International ("II"), the two largest
worldwide timeshare exchange companies. Participation in an exchange network
entitles owners to exchange their annual Timeshare Interests for occupancy at
over 3,500 participating RCI resorts or over 1,900 participating II resorts
worldwide. To further enhance the ability of its Timeshare Interest owners to
customize their vacation experience, the Company has also implemented a
points-based Bluegreen Vacation Club(TM) system which permits its Timeshare
Interest owners to purchase an annual allotment of points which can be redeemed
for occupancy rights at most Company-owned and certain participating managed
resorts. At April 1, 2001, the Company's approximately 38,000 Bluegreen Vacation
Club(TM) members could choose to use their points at 28 resorts in the Bluegreen
system. The Company also has a Vacation Club(TM) Sampler program, which allows
Sampler package purchasers to enjoy substantially the same amenities, activities
and service offered to the Company's regular Vacation Club(TM) members for a
one-year trial period. The Company benefits from the Sampler program by
recapturing some of the costs incurred in initially marketing to prospective
customers through the price of the Sampler package and having the opportunity to
remarket the Company's Timeshare Interests to the Sampler customers when they
use their trial memberships at the Company's resorts.
Prior to acquiring property for resorts, the Resorts Division undertakes a
full property review, including physical and environmental assessments, which is
presented for approval to the Company's Investment Committee, which was
established in 1990 and consists of certain key members of senior management.
During the review process, acquisition specialists analyze market, tourism and
demographic data as well as the quality and diversity of the location's existing
amenities and attractions to determine the potential strength of the timeshare
market in such area and the availability of a variety of recreational
opportunities for prospective Timeshare Interest purchasers.
The Company has historically provided financing to approximately 97% of its
timeshare customers, who are required to make a downpayment of at least 10% of
the Timeshare Interest sales price and who typically finance the balance of the
sales price over a period of seven to ten years. As of April 1, 2001, the
Company had a timeshare receivables portfolio totaling approximately $64.3
million in principal amount, with a weighted-average contractual yield of
approximately 15.7% per annum. During fiscal 2001, the Company maintained a
timeshare receivables warehouse facility and a separate timeshare receivables
purchase facility to accelerate cash flows from the Company's timeshare
receivables. The warehouse and purchase facilities expire in October 2001, and
the Company is currently negotiating replacement facilities. No assurances can
be given that such negotiation will be successful or that the Company will
obtain a new facility on attractive terms if at all. See "Management's
Discussion and Analysis of Results of Operations and Financial Condition"
("MD&A").
The Residential Land and Golf Division. The Residential Land and Golf
Division is focused primarily on land and golf community projects located in
states in which the Company has developed marketing expertise and has a track
record of success, such as Texas, North Carolina and Virginia. The aggregate
carrying amount of Residential Land and Golf Division inventory at April 1, 2001
was $96.6 million. The Residential Land and Golf Division's estimated remaining
life-of-project sales were approximately $402.7 million at April 1, 2001. The
Company believes no other company in the United States of comparable size or
financial resources markets and sells residential land directly to retail
customers.
The Residential Land and Golf Division targets families seeking a quality
lifestyle improvement, which is generally unavailable in traditional suburban
developments. Based on the Company's experience in marketing and selling
residential lots to its target customers, the Company has been able to develop a
marketing and sales program that generates a significant number of on-site sales
presentations to potential prospects through low-cost, high-yield newspaper
advertising. In addition, STARS, the Residential Land and Golf Division's
customer relationship management computer software system, enables the Company
to compile, process and maintain information concerning future sales prospects
within each of its operating regions and track the effectiveness of its
advertising and marketing programs relative to sales generated. Through the
Company's targeted sales and marketing program, the Company believes that it has
been able to achieve an attractive conversion ratio of sales to prospects
receiving on-site sales presentations.
2
The Residential Land and Golf Division acquires and develops land in two
markets: (i) near major metropolitan centers but outside the perimeter of
intense subdivision development; and (ii) popular retirement areas. Prior to
acquiring undeveloped land, the Company researches market depth and forecasts
market absorption. In new market areas, the Company typically supplements its
research with a structured classified advertisement test marketing system that
evaluates market response and price acceptance. The Company's sales and
marketing efforts begin as soon as practicable after the Company enters into an
agreement to acquire a parcel of land. The Company's ability to bond projects to
completion generally allows it to sell a significant portion of its residential
land inventory on a pre-development basis, thereby reducing the amount of
external capital needed to complete improvements. As is the case with the
Resorts Division, all acquisitions of Residential Land and Golf Division
properties are subject to Investment Committee approval.
In fiscal 1997, the Company began construction of its first daily-fee golf
course as part of its long-term plan to participate in the growing daily-fee
golf market. The Company believes that daily-fee golf courses are an attractive
amenity that will increase the marketability of the Company's adjacent
residential lots in certain projects. The Company's first golf course, the
Carolina National Golf Club ("Carolina National"), is located near Southport,
North Carolina, just 30 miles north of Myrtle Beach, South Carolina, one of the
nation's most popular golf destinations, and was designed by Masters Champion
Fred Couples. The Company opened the first 18 holes of Carolina National for
play in July 1998. In fiscal 2000, the Company opened an additional nine holes
at Carolina National along with a new clubhouse, featuring food and beverage
operations and an expanded pro shop. In fiscal 2000, the Company began
construction at Brickshire, a new residential land and golf course community in
New Kent County, Virginia. The Company expects that Brickshire will open its
18-hole golf course, designed by two-time U.S. Open Champion Curtis Strange, in
Spring 2002. In fiscal 2001, the Company began construction of an 18-hole golf
course designed by P.G.A. Champion Davis Love III adjacent to its residential
land project near Chapel Hill, North Carolina, known as The Preserve at Jordan
Lake. The Company intends to expand its golf course community residential land
offerings into markets with attractive demographics for such properties. There
can be no assurances that the Company's strategy for this expansion will be
successful.
The Company's business involves certain risks and uncertainties (This
Annual Report contains certain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1999. See "MD&A").
The Company's executive offices are located at 4960 Conference Way North,
Suite 100, Boca Raton, Florida 33431. The Company's telephone number at such
address is (561) 912-8000.
See also MD&A and Note 17 of Notes to Consolidated Financial Statements for
additional financial information on the Company's business segments.
Industry Overviews
Resorts Division
The Market. The resort component of the leisure industry is serviced
primarily by two separate alternatives for overnight accommodations: commercial
lodging establishments and timeshare resorts. Commercial lodging consists
principally of hotels and motels in which a room is rented on a nightly, weekly
or monthly basis for the duration of the visit or rentals of privately-owned
condominium units or homes. For many vacationers, particularly those with
families, a lengthy stay at a quality commercial lodging establishment can be
expensive, and the space provided to such vacationers by these establishments
relative to the cost is often not economical. In addition, room rates at
commercial lodging establishments are subject to change periodically and
availability is often uncertain. The Company believes that Timeshare Interest
ownership presents an attractive vacation alternative to commercial lodging.
First introduced in Europe in the mid-1960's, Timeshare Interest ownership
has been one of the fastest growing segments of the hospitality industry over
the past two decades. According to ARDA and other industry sources, timeshare
industry sales grew at growth rates ranging from 14% to 17% annually during the
period from 1992 through 2000. Also, the number of timeshare resorts worldwide,
the number of Timeshare Interests owned and the number of timeshare owners grew
by approximately 187%, 550% and 500%, respectively, from 1985 to 1998. No
assurances can be given that such industry growth rates will continue.
The Company believes that, based on ARDA reports and other industry data,
the following factors have contributed to the increased acceptance of the
timeshare concept among the general public and the substantial growth of the
timeshare industry:
3
o Consumer awareness of the value and benefits of Timeshare Interest
ownership, including the cost savings relative to other lodging
alternatives;
o Flexibility of Timeshare Interest ownership due to the growth of
international exchange organizations such as II and RCI and
points-based vacation club systems;
o The quality of the timeshare resorts and their management;
o Consumer confidence resulting from consumer protection regulation of
the timeshare industry and an influx of brand name national lodging
companies to the timeshare industry; and
o Availability of consumer financing for purchasers of Timeshare
Interests.
The timeshare industry traditionally has been highly fragmented and
dominated by a large number of local and regional resort developers and
operators, each with small resort portfolios generally of differing quality. The
Company believes that one of the most significant factors contributing to the
current success of the timeshare industry is the entry into the market of some
of the world's major lodging, hospitality and entertainment companies, such as
Marriott, Disney, Hilton, Hyatt, Four Seasons, Starwood, Carlson and Bass
Hotels. Although timeshare operations currently comprise only a small portion of
these companies' overall operations, the Company believes that their involvement
in the timeshare industry, together with other publicly-traded timeshare
companies, has enhanced the industry's image with the general public.
The Consumer. According to information compiled by ARDA, customers in the
40-49 year age range represented approximately 32% of all Timeshare Interest
owners in the United States in 1998. Historically, the median age of a Timeshare
Interest buyer at the time of purchase was 49. The median annual household
income of Timeshare Interest owners in the United States in 1998 was
approximately $77,000, with approximately 24% of all Timeshare Interest owners
having annual household incomes greater than $100,000. The Company believes
that, despite the industry's growth, Timeshare Interest ownership has achieved
only an approximate 5% market penetration among United States households with
incomes above $50,000 per year.
Timeshare Interest Ownership. The purchase of a Timeshare Interest
typically entitles the buyer to use a fully-furnished vacation residence,
generally for a one-week period each year in perpetuity. Typically, the buyer
acquires an ownership interest in the vacation residence, which is often held as
tenant-in-common with other buyers of interests in the property. Under a
points-based vacation club system, members purchase an annual allotment of
points that can be redeemed for occupancy rights at participating resorts.
Compared to other vacation ownership arrangements, the points-based system
offers members greater flexibility in planning their vacations. The number of
points that are required for a stay at any one resort varies, depending on a
variety of factors, including the resort location, the size of a unit, the
vacation season and the days of the week used. Under this system, members can
select vacations according to their schedules, space needs and available points.
Subject to certain restrictions, members are typically allowed to carry over for
one year any unused points and to "borrow" points from the forthcoming year. In
addition, members are required to pay annual fees for certain maintenance and
management costs associated with the operation of the resorts based on the
number of points to which they are entitled. As of April 1, 2001, all of the
Company's sales offices, with the exception of its La Cabana Beach and Racquet
Club(TM) sales office in Aruba, were selling Timeshare Interests within the
Bluegreen Vacation Club(TM) system.
The owners of Timeshare Interests manage the property through a nonprofit
homeowners' association, which is governed by a board of directors or trustees
consisting of representatives of the developer and owners of Timeshare Interests
at the resort. The board hires a management company to which it delegates many
of the rights and responsibilities of the homeowners' association, including
grounds landscaping, security, housekeeping and operating supplies, garbage
collection, utilities, insurance, laundry and repairs and maintenance. As of
April 1, 2001, the Company's resort property management division managed 20
resorts (including ten of the Company's resorts) and served an owner base of
approximately 70,000.
Each Timeshare Interest owner is required to pay the homeowners'
association a share of all costs of maintaining the property. These charges can
consist of an annual maintenance fee plus applicable real estate taxes and
special assessments, assessed on an as-needed basis. If the Timeshare Interest
owner does not pay such charges, such owner's use rights may be suspended and
the homeowners' association may foreclose on the owner's Timeshare Interest.
Participation in Independent Timeshare Interest Exchange Networks. The
Company believes that its Timeshare Interests are made more attractive by the
Company's affiliation with Timeshare Interest exchange networks operated by RCI
and II, the two largest timeshare exchange companies worldwide. Ten of the
Company's timeshare resorts are affiliated with RCI and have been awarded RCI's
highest designation (Gold Crown), while the La Cabana
4
Beach and Racquet Club(TM) resort in Aruba (the "Aruba Resort") is affiliated
with II. The Company's newest resort on the beach in Surfside, Florida will be
affiliated with RCI when it opens for sales during fiscal 2002 and as a result
has not yet been rated. A Timeshare Interest owner's participation in the RCI or
II exchange network (the fee for which is paid by the Company in the first year
of such owner's participation) allows such owner to exchange his annual
Timeshare Interest for occupancy at over 3,500 participating resorts in the case
of RCI and over 1,900 participating resorts in the case of II, based upon
availability and the payment of a variable exchange fee. A member may exchange
his Timeshare Interest for an occupancy right in another participating resort by
listing his Timeshare Interest as available with the exchange organization and
by requesting occupancy at another participating resort, indicating the
particular resort or geographic area to which the member desires to travel, the
size of the unit desired and the period during which occupancy is desired. The
exchange network assigns ratings to each listed Timeshare Interest, based upon a
number of factors, including the location and size of the unit, the quality of
the resort and the period during which the Timeshare Interest is available, and
attempts to satisfy the exchange request by providing an occupancy right in
another Timeshare Interest with a similar rating. If the exchange network is
unable to meet the member's initial request, it suggests alternative resorts
based on availability. The failure of the Company or any of its resorts to
participate in qualified exchange networks or the failure of such networks to
operate effectively could have a material adverse effect on the Company.
Residential Land and Golf Division
The Residential Land and Golf Division operates within a specialized niche
of the real estate industry which focuses on the sale of residential land to
retail customers who intend to build a home on such land at some point in the
future. The participants in this market are generally individual landowners who
are selling specific parcels of property and small developers who focus
primarily on projects in their region. Although no specific data is available
regarding this market niche, the Company believes that no other company in the
United States of comparable size or financial resources currently markets and
sells residential land directly to retail customers.
Unlike commercial homebuilders who focus on vertical development, the
Residential Land and Golf Division focuses primarily on horizontal development
activities, such as grading, roads and utilities. As a result, the projects
undertaken by the Company are significantly less capital intensive than those
undertaken by the commercial homebuilders, which reduces the Company's risk of
holding a large inventory of property. See "MD&A" for a discussion of these
risks. The Company believes that its market is also the beneficiary of a number
of trends, including the large number of people entering into the 40-55 year age
bracket and the economic and population growth in certain of its primary
markets.
The Residential Land and Golf Division is also focused on the development
of golf courses and related amenities as the center-pieces of certain of the
Company's residential land properties. As of April 1, 2001, the Company was
marketing residential land lots in five projects that include golf courses
developed either by the Company or a third party. The Company intends to acquire
and develop additional golf communities, as management believes that the
demographics and marketability of such properties are consistent with the
Company's overall residential land strategy. Golf communities typically are
larger, multi-phase properties, which require a greater capital commitment than
the Company's single-phase residential land projects. There can be no assurances
that the Company will be able to successfully implement its golf community
strategy.
Company Products
Timeshare Resorts
All of the Company's resorts, with the exception of the Aruba Resort, are
part of the Bluegreen Vacation Club(TM). The Company currently sells consumers
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. In addition to the Company's resorts, Bluegreen Vacation Club(TM)
owners can use their points to stay at 18 additional resorts not owned by the
Company, primarily located in Florida. By selling points in the club, the
Company has the flexibility to deed timeshare interests in its resorts at any of
its sales locations, both on-site (i.e., located on a resort property) and
off-site.
Set forth below is a description of each of the Company's timeshare
resorts. All units at most of the properties have certain standard amenities,
including a full kitchen, at least two televisions, a VCR player and a CD
player. Some units have additional amenities, such as big screen televisions,
fireplaces, Jacuzzi tubs and video game systems. Most properties offer guests a
clubhouse (with an indoor and/or outdoor pool, a game room, exercise facilities
and a lounge) and a hotel-type staff. The Company manages all of its resorts
with the exception of the Aruba Resort.
5
MountainLoft(TM) -- Gatlinburg, Tennessee. The MountainLoft(TM) Resort in
Gatlinburg, Tennessee is located near the Great Smoky Mountains National Park
and is minutes from the family attractions of Pigeon Forge, Tennessee. Units are
located in individual chalets or mid-rise villa buildings. Each unit is fully
furnished with a whirlpool bath and private balconies, and certain units include
gas fireplaces.
Laurel Crest(TM) -- Pigeon Forge, Tennessee. Laurel Crest(TM) is located in
proximity to the Great Smoky Mountains National Park and the Dollywood theme
park. In addition, visitors to Pigeon Forge can enjoy over 200 factory outlet
stores and music shows featuring renowned country music stars as well as partake
in a variety of outdoor activities, such as horseback riding, trout fishing,
boating, golfing and white water rafting.
Shore Crest(TM) Vacation Villas -- Myrtle Beach, South Carolina. Shore
Crest(TM) Vacation Villas is located on the beach in the Windy Hill section of
North Myrtle Beach a mile from the famous Barefoot Landing, with its
restaurants, theaters, shops and outlet stores.
Harbour Lights(TM) -- Myrtle Beach, South Carolina. Harbour Lights(TM)is
located in the Fantasy Harbour Complex in the center of Myrtle Beach. Nearby are
Theater Row, shopping, golf and restaurants. The resort's Activities Center
overlooks the Intracoastal Waterway.
The Falls Village(TM) -- Branson, Missouri. The Falls Village(TM) is
located in the Ozark Mountains. Fishing, boating and swimming are available at
nearby Table Rock Lake and Lake Taneycomo, and area theaters feature shows by
country music stars. Most resort customers come from areas within an eight to
ten hour drive of Branson.
Christmas Mountain Village(TM) -- Wisconsin Dells, Wisconsin. Christmas
Mountain Village(TM) offers a 27-hole golf course and seven ski trails served by
two chair lifts. Other on-site amenities include horseback riding, tennis
courts, a five-acre lake with paddleboats and rowboats and four outdoor swimming
pools. Christmas Mountain Village(TM) attracts customers primarily from the
greater Chicago area and other locations within an eight to ten hour drive of
Wisconsin Dells.
Orlando's Sunshine(TM) -- Orlando, Florida. Orlando's Sunshine(TM) Resort
is located on International Drive, near Wet'n'Wild water park and Universal
Studios. During fiscal 2000, the Company completed construction on Phase II of
the Orlando's Sunshine(TM) Resort, which includes 60 units, an outdoor swimming
pool, hot tub and tennis courts.
La Cabana Beach Resort & Racquet Club(TM) -- Aruba. Bluegreen Properties
N.V. acquired the unsold Timeshare Interest inventory of the Aruba Resort
(approximately 8,000 Timeshare Interests) in December 1997 and additional
Timeshare Interests from time to time thereafter. Established in 1989, the Aruba
Resort is a 449-suite ocean front property, which offers one-, two- and
three-bedroom suites, garden suites and penthouse accommodations. On-site
amenities include tennis, racquetball, squash, a casino, two pools and private
beach cabanas, none of which are owned or managed by the Company.
Shenandoah Crossing(TM) -- Gordonsville, Virginia. Shenandoah Crossing(TM)
features an 18-hole golf course, indoor and outdoor pools, tennis courts,
horseback riding trails and a lake for swimming, fishing and boating.
The Lodge Alley Inn(TM) -- Charleston, South Carolina. Located in
Charleston's historic district, the Lodge Alley Inn(TM) includes one- and
two-bedroom suites, many furnished with an equipped kitchen, living room with
fireplace, dining room, jacuzzi, pine wood floors, and 18th century-style
furniture reproductions. The resort, which features the on-site High Cotton
restaurant, is within walking distance of many of Charleston's historical sites,
open-air markets and art galleries.
The Big Cedar Wilderness Club(TM) -- Ridgedale, Missouri. In 2000,
Bluegreen/Big Cedar Vacations LLC(TM), a joint venture between the Company and
Big Cedar(R) L.L.C., with 51% and 49% ownership respectively, began developing
the Big Cedar Wilderness Club(TM), a 300-unit, wilderness-themed resort adjacent
to the world famous Big Cedar Lodge luxury hotel resort. The Big Cedar Lodge is
owned and operated by Big Cedar L.L.C., an affiliate of Bass Pro Shops, a
privately-held retailer of fishing, marine, hunting, camping and sports gear.
The resort is located on Table Rock Lake, and is near Dogwood Canyon. Guests
staying in the two bedroom cabins or one and two bedroom lodge villas will enjoy
fireplaces, private balconies, full kitchens and internet access. Planned
amenities include indoor and outdoor swimming pools and hot tubs, lazy river,
hiking trails, campfire area, beach and playground. Guests also have access to
certain of the luxury amenities at the Big Cedar Lodge, including the Jack
Nicklaus Signature Top of the Rock Par Three Golf Course, a marina, horseback
riding, tennis and spa.
Surfside, Florida. In June 2001, the Company acquired the unsold Timeshare
Interest inventory (3,033 Timeshare Interests) at an existing vacation ownership
property located in Surfside, Florida, near Miami Beach. This as yet unnamed
resort is located directly on the beach and features one and two bedroom
vacation homes. Sales of this
6
resort are anticipated to commence in September 2001, although there can be no
assurances. The Company intends to renovate the resort's units, common areasand
amenities.Such renovations are anticipated to be completed by February 2002,
although there can be no assurances.
The following table sets forth additional data with respect to each of the
Company's resorts:
Laurel Shore Harbour The Christmas La Cabana
Mountain- Crest(TM) Crest(TM) Lights(TM) Falls Mountain Orlando's Beach &
Loft(TM) Pigeon Myrtle Myrtle Village(TM) Village(TM) Sunshine(TM) Racquet
Gatlinburg, Forge, Beach, Beach, Branson, Wisconsin, Orlando, Club(TM),
Location TN TN SC SC MO Dells, WI FL Aruba
- ----------------------------------------------------------------------------------------------------------------------------
Date sales commenced 7/94 8/95 4/96 6/97 7/97 9/97 12/98 1/98
Number of Timeshare
Interests completed as
of April 1, 2001 (1) 14,248 12,064 12,480 4,992 3,979 3,149 3,120 8,511
Number of Timeshare
Interests under
construction
as of April 1, 2001 (1) -- -- -- -- -- -- -- --
Number of additional
Timeshare Interests
Planned (1)(2) 4,680 8,840 -- 8,736 9,256 12,423 -- --
Average Timeshare
Interests selling price -
Year ended April 1, 2001 $8,641 $9,133 $9,002 $9,272 $9,512 $9,556 $11,244 $8,985
Number of Timeshare
Interests sold through
April 1, 2001 (3) 9,013 7,874 10,530 4,302 3,786 3,476 4,759 4,523
Shenandoah The Big Cedar
Crossing Lodge Wilderness
Farm & Club(TM) Alley Inn(TM) Club(TM)(4)
Gordonsville, Charleston, Ridgedale, Surfside,
Location VA SC MO FL(5)
- ---------------------------------------------------------------------------------------
Date sales commenced 4/98 2/99 11/00 (5)
Number of Timeshare
Interests completed as
of April 1, 2001 (1) 1,144 4,680 520 --
Number of Timeshare
Interests under
construction
as of April 1, 2001 (1) -- -- 1,248 3,033
Number of additional
Timeshare Interests
Planned (1)(2) 9,256 -- 13,416 --
Average Timeshare
Interests selling price -
Year ended April 1, 2001 $9,707 $9,921 $12,947 --
Number of Timeshare
Interests sold through
April 1, 2001 (3) 1,478 1,114 97 --
(1) The number of Timeshare Interests completed, under construction or planned
are intended to be sold in 52 weekly intervals per vacation home for the
Company's Shore Crest(TM), Harbour Lights(TM), Orlando's Sunshine(TM), La
Cabana(TM), Lodge Alley Inn(TM) and Surfside resorts. The amounts for the
remaining resorts include some vacation homes that can be subdivided and
sold as two smaller vacation homes ("lock-out units"), each of which
consists of 104 weekly intervals per vacation home.
(2) There can be no assurances that the Company will have the resources to
complete all such planned Timeshare Interests or that such Timeshare
Interests will be sold at favorable prices.
(3) Includes sales of Timeshare Interests that were sold on a biennial basis
(i.e., sale of one-week periods every other year in perpetuity) as one
Timeshare Interest sold. Therefore, the number of Timeshare Interests sold
may exceed the total number of Timeshare Interests completed, under
construction, and planned.
(4) Bluegreen/Big Cedar LLC(TM), in which the Company owns a 51% interest, is
developing The Big Cedar Wilderness Club(TM).
(5) This resort was acquired by the Company in June 2001. Sales of Timeshare
Interests at this resort are anticipated to commence in September 2001,
although there can be no assurances.
Certain Residential Land and Golf Division Projects
Set forth below is a description of the five largest projects currently
marketed by the Residential Land and Golf Division, which are representative of
the types of projects that the Company has been focusing on since 1993. These
properties represented approximately 80.7% of the Residential Land and Golf
Division's estimated remaining life-of-project sales at April 1, 2001.
Mystic Shores(TM) -- Canyon Lake, Texas. The Company acquired 6,966 acres
located 25 miles north of San Antonio, Texas in October 1999 for $14.9 million.
On May 5, 2000, the Company purchased an additional 435 acres for $2.7 million.
The project includes an estimated 2,400 home sites, ranging in size from one to
twenty acres. Mystic Shores(TM) is situated on Canyon Lake and is in close
proximity to the Guadeloupe River, which is well known for fishing, rafting and
water sports. The property will also feature a junior Olympic swimming pool,
bathhouse, open-air pavilion, picnic area and boat ramps. Aggregate development
costs through April 1, 2001 were $6.2 million, with projected remaining
expenditures to complete development at the project of $32.6 million. The
Company began selling lots in March 2000, with aggregate sales of $17.9 million
through April 1, 2001. Estimated remaining life-of-project sales were
approximately $106.9 million as of April 1, 2001, based on retail selling prices
as of that date.
Lake Ridge at Joe Pool Lake(TM) -- Cedar Hill, Texas. The Company acquired
1,400 acres located approximately 19 miles outside of Dallas, Texas and 30 miles
outside of Fort Worth, Texas in April 1994 for $6.1 million. In fiscal 2000, the
Company acquired an additional 1,766 acres for $14.9 million. The property is
located at Joe Pool Lake and is atop the highest elevation within 100 miles. The
lake has in excess of 7,500 acres of water for
7
boating, fishing, windsurfing and other water activities. Adjacent amenities
(not owned or managed by the Company) include a 154-acre park with baseball,
football and soccer fields, a fishing pool with a pier, camping areas and an
18-hole golf course. The existing acreage will yield approximately 1,600 lots
based on preliminary phase development, with most lots ranging in size from 1/4
to five acres. The Company began selling lots in April 1994 and aggregate sales
through April 1, 2001 were $86.7 million. Aggregate development costs through
April 1, 2001 were $29.9 million and the Company anticipates that the remaining
capital expenditures to complete development at the project will be $26.1
million. The Company anticipates that unsold lots will be sold-out over the next
five years. Estimated remaining life-of-project sales for this project were
approximately $91.7 million as of April 1, 2001, based on retail selling prices
as of that date.
Brickshire(TM) -- New Kent, Virginia. The Company acquired 1,135 acres
located 20 miles from Williamsburg and Richmond, Virginia, in September 1999 for
$4.4 million. The property will consist of approximately 900 residential
parcels, ranging in size from 1/4 to 2.5 acres, and will feature an 18-hole golf
course designed by U.S. Open champion Curtis Strange. The property will also
offer residents a community club and pool, tennis courts and scenic walking
trails. Aggregate development costs through April 1, 2001 were $9.1 million,
with projected remaining expenditures of $21.6 million. The Company began
selling lots in December 1999, with aggregate sales of $9.3 million through
April 1, 2001. Estimated remaining life-of-project sales were approximately
$57.5 million as of April 1, 2001, based on retail selling prices as of that
date.
The Preserve at Jordan Lake(TM) -- Pittsboro, North Carolina. The Company
acquired approximately 600 acres located in Pittsboro, North Carolina (near
Chapel Hill, North Carolina) for $4.2 million in fiscal 2001. The project will
be the site of a championship daily-fee golf course to be designed by PGA
Champion Davis Love III. This 18-hole golf course is expected to be opened for
play in Spring 2002. The project will also include a swimming pool, a fitness
center, a recreation field and tennis courts. The Company anticipates that the
project will consist of a total of approximately 516 lots, which range in size
from approximately 1/3 acre to one acre. The Company began selling lots in
December 2000, and aggregate sales through April 1, 2001 were $9.8 million.
Aggregate development costs (net of costs capitalized separately in the golf
course) through April 1, 2001 were $2.7 million and the Company anticipates that
the aggregate capital expenditures to complete development at the project will
be $12.3 million. The Company anticipates that the remaining lots will be
sold-out over the next 3 years. Estimated remaining life-of-project sales for
this project were approximately $36.5 million as of April 1, 2001, based on
retail selling prices as of that date.
Mountain Lakes Ranch(TM) -- Bluffdale, Texas. The Company acquired 4,100
acres located approximately 45 miles from Fort Worth, Texas in October 1998 for
$3.1 million. The property features rolling terrain with hilltop views, tree
coverage and ample area to create private lakes. The Company anticipates that
the property will yield approximately 1,390 lots ranging in size from one to
five acres, including both lakefront and waterview parcels. The Company began
selling lots in March 2000, with aggregate sales of $6.0 million through April
1, 2001. Aggregate development costs through April 1, 2001 were $5.4 million and
the Company anticipates that future capital expenditures to complete development
at the project will be $9.6 million. Estimated life-of-project sales for
Mountain Lakes Ranch(TM) were $32.6 million as of April 1, 2001, based on retail
prices at that date, with a projected sell-out period of five years.
Acquisition of Timeshare and Residential Land and Golf Inventory
In order to provide centralized and uniform controls on the type, location
and amount of timeshare and residential land and golf inventory that the Company
acquires, all such inventory acquisitions have required the approval of the
Investment Committee since 1990. The Investment Committee currently consists of
George F. Donovan, President and Chief Executive Officer; John F. Chiste, Senior
Vice President, Treasurer and Chief Financial Officer; Patrick E. Rondeau,
Senior Vice President, Director of Legal Affairs; Daniel C. Koscher, Senior Vice
President--President, Residential Land and Golf Division; David D. Philp, Senior
Vice President and Chief Investment Officer and Mark T. Ryall, Senior Vice
President and Chief Information Officer. The Investment Committee reviews each
proposed inventory acquisition to determine whether the property meets certain
criteria, including estimated cash flows and gross profit margins.
Resorts Division
The Company obtains information with respect to resort acquisition
opportunities through interaction by the Company's management team with resort
operators, lodging companies and financial institutions with which the Company
has established business relationships. Prior to acquiring property for future
resorts, the Resorts Division undertakes a full property review, including an
environmental assessment, which is presented to the Investment Committee for
approval. During the review process, acquisition specialists analyze market,
tourism and demographic data as well as the quality and diversity of the
location's existing amenities and attractions to determine the potential
8
strength of the timeshare market in such area and the availability of a variety
of recreational opportunities for prospective Timeshare Interest purchasers.
Specifically, the Company evaluates the following factors, among others, to
determine the viability of a potential new timeshare resort: (i) anticipated
supply/demand ratio for Timeshare Interests in the relevant market, (ii) the
market's potential growth as a vacation destination, (iii) competitive
accommodation alternatives in the market, (iv) uniqueness of location and demand
for the location by existing Bluegreen Vacation Club(TM) owners and (v) barriers
to entry that would limit competition. The Company anticipates that its
timeshare resorts will generally have a sell-out term of approximately seven
years.
The Company intends to continue to pursue growth by expanding or
supplementing the Company's existing resorts operations through acquisitions in
destinations that will complement such existing operations. Because the
timeshare industry is highly fragmented, the Company believes that significant
opportunities exist to make selected acquisitions at attractive valuations.
Acquisitions the Company may consider include acquiring additional Timeshare
Interest inventory, operating companies, management contracts, Timeshare
Interest mortgage portfolios and properties or other timeshare-related assets
that may be integrated into the Company's operations. In addition, the Company
intends to continue to pursue timeshare resort locations in areas outside the
United States, particularly in the Caribbean, as well as Central and South
America. No assurances can be given that the Company will be successful in its
acquisition strategy.
Residential Land and Golf Division
The Residential Land and Golf Division, through the Company's regional
offices, and subject to Investment Committee review and approval, typically
acquires inventory that (i) is located near a major population center outside
the perimeter of intense subdivision development or in popular retirement areas,
(ii) is suitable for subdivision, (iii) has attractive topographical features,
(iv) for certain projects, could accommodate a golf course and related amenities
and (v) the Company believes will result in an acceptable profit margin and cash
flow to the Company based upon anticipated retail value. Properties are
generally subdivided for resale into parcels typically ranging in size from 1/4
acre to twenty acres. During fiscal 2000, the Company acquired 11,340 acres in
seven separate transactions for a total purchase price of approximately $40.1
million or $3,537 per acre and during fiscal 2001, the Company acquired 4,879
acres in five separate transactions for a total purchase price of $15.2 million,
or $3,114 per acre.
In connection with its review of potential residential land and golf
inventory, the Investment Committee considers such established criteria as the
economic conditions in the area in which the parcel is located, environmental
sensitivity, availability of financing, whether the property is consistent with
the Company's general policies and the anticipated ability of that property to
produce acceptable profit margins and cash flow. As part of its long-term
strategy for the Residential Land and Golf Division, the Company in recent years
has focused on fewer, more capital-intensive projects. The Company intends to
continue to focus the Residential Land and Golf Division on those regions where
the Company believes the market for its products is strongest, such as the
Southeast and Southwest regions of the United States and to replenish its
residential land inventory in such regions as existing projects are sold-out.
The Residential Land and Golf Division has several specialists who assist
regional management in locating inventory for acquisition. The Company has
established contacts with numerous land owners and real estate brokers in many
of its market areas, and because of such contacts and its long history of
acquiring properties, the Company believes that it is generally in a favorable
position to learn of available properties, often before the availability of such
properties is publicly known. In order to ensure such access, the Company
attempts to develop and maintain strong relationships with major property owners
and brokers. Regional offices regularly contact property owners, such as timber
companies, financial institutions and real estate brokers, by a combination of
telephone, mail and personal visits. In addition, prior to acquiring property in
new areas, the Company will conduct test marketing for a prospective project
prior to entering into an acquisition agreement to determine whether sufficient
customer demand exists for the project. To date, the Company's regional offices
generally have been able to locate and acquire adequate quantities of inventory
that meet the criteria established by the Investment Committee to support their
operational activities. In certain cases, however, the Company has experienced
short-term shortages of ready-for-sale inventory due to either difficulties in
acquiring property or delays in the approval and/or development process.
Shortfalls in ready-for-sale inventory may materially adversely affect the
Company's business, operating results and financial position. See "MD&A".
Once a desirable property is identified, the Company completes its initial
due diligence procedures and enters into a purchase agreement with the seller to
acquire the property. It is generally the Company's policy to advance only a
small downpayment of 1%-3% of the purchase price upon signing the purchase
agreement and to limit the liquidated damages associated with such purchase
agreement to the amount of its downpayment and any preliminary development
costs. In most cases, the Company is not required to advance the full purchase
price or enter into a note payable obligation until regulatory approvals for the
subdivision and sale of at least the initial phase of the project have been
obtained. While local approvals are being sought, the Company typically engages
in pre-marketing techniques and, with the consent of the seller and the
knowledge of prospective purchasers, occasionally attempt to pre-sell parcels,
9
subject to closing its purchase of the property. When the necessary regulatory
approvals have been received, the closing on the property occurs and the Company
obtains title to the property. The time between execution of a purchase
agreement and closing on a property has generally been six to 12 months.
Although the Company generally retains the right to cancel purchase agreements
without any loss beyond forfeiture of the downpayment and preliminary
development costs, few purchase agreements have been canceled historically.
By requiring, in most cases, that regulatory approvals be obtained prior to
closing and by making small downpayments upon signing purchase agreements, the
Company is typically able to place a number of properties under contract without
expending significant amounts of cash. This strategy enables the Residential
Land and Golf Division to reduce (i) the time during which it actually owns
specific properties, (ii) the market risk associated with holding such
properties and (iii) the risk of acquiring properties that may not be suitable
for sale. It also provides the Residential Land and Golf Division an additional
source of available properties to meet customer demand. In certain
circumstances, however, the Company has acquired properties and strategically
held such projects until their prime marketing seasons.
Prior to closing on a purchase of residential land, the Company's policy is
to complete its own environmental assessment of the property. The purpose of the
Company's assessment is to evaluate the impact the proposed subdivision will
have on such items as flora and fauna, wetlands, endangered species, open space,
scenic vistas, recreation, transportation and community growth and character. To
obtain this information, the Company's acquisition specialists typically consult
with various groups and agencies including the appropriate county and state
planning agencies, environmental groups, state heritage programs, soil
conservation agencies and forestry groups. If the Company's environmental
assessment indicates that the proposed subdivision meets environmental criteria
and complies with zoning, building, health and other laws, the Company develops
a formal land use plan, which forms a basis for determining an appropriate
acquisition price. The Company attempts, where possible, to accommodate the
existing topographical features of the land, such as streams, hills, wooded
areas, stone walls, farm buildings and roads. Prior to closing on an
acquisition, the Company will typically have the property surveyed by a
professional surveyor and have soil analyses conducted to determine the
suitability of the site for septic systems. At closing, the Company also obtains
title insurance on the property.
Marketing and Sale of Inventory
Resorts Division
The Resorts Division uses a variety of techniques to attract prospective
purchasers of Timeshare Interests, including telemarketing mini-vacations,
kiosks in retail locations, targeted mailings, marketing to current owners of
Timeshare Interests and referrals. The Resorts Division provides hotel
accommodations to prospective purchasers at reduced prices in exchange for their
touring the timeshare resort. To support its marketing and sales efforts, the
Company has developed and continues to enhance its customer relationship
management computer software system to track its timeshare marketing and sales
programs. Management believes that, as the Resort Division's timeshare
operations grow, this database will become an increasingly significant asset,
enabling the Company to focus its marketing and sales efforts to take advantage
of, among other things, less costly marketing and referral opportunities. In
June 2000, the Company entered into an exclusive marketing agreement with Big
Cedar Lodge and Bass Pro Shops of Springfield, Missouri. Under the terms of the
10-year agreement, Bluegreen will market its Vacation Club product to Bass Pro
Shops' estimated 30 million annual retail customers and 34 million catalog
subscribers. Bluegreen now markets its Vacation Club at each of Bass Pro Shops'
national retail locations, using, among other means, interactive kiosks and
other retail promotions. Bluegreen also has an exclusive timeshare marketing
presence on Bass Pro Shops' web site that is linked to the Company web site. The
Company believes that this new marketing agreement will result in more effective
and cost-efficient marketing for the Resorts Division although there can be no
assurances that such effectiveness and efficiency will be achieved.
Timeshare resorts are staffed with sales representatives, sales managers
and an on-site manager who oversees the day-to-day operations, all of whom are
employees of the Company. Sales personnel are generally experienced in resort
sales and undergo ongoing Company-sponsored training. During fiscal 2000, total
advertising expense for the Resorts Division was $37.2 million or 31.8% of the
division's $117.3 million in sales. During fiscal 2001, total advertising
expense for the Resorts Division was $46.0 million or approximately 34% of such
division's $137.4 million in sales. See MD&A for a discussion of the Company's
sales, general and administrative expenses.
The Company requires its sales staff to provide each timeshare customer
with a written disclosure statement regarding the Timeshare Interest to be sold
prior to the time the customer signs a purchase agreement. This disclosure
statement sets forth relevant information regarding timeshare ownership at the
resort and must be signed by every purchaser. The Company believes that this
information statement contains all material and relevant information a customer
requires to make an informed decision as to whether or not to purchase a
Timeshare Interest at one of its resorts.
10
After deciding to purchase a Timeshare Interest, a purchaser enters into a
purchase agreement and is required to pay the Company a deposit of at least 10%
of the purchase price. Purchasers are entitled to cancel purchase agreements
within specified rescission periods after execution in accordance with statutory
requirements. Substantially all timeshare purchasers visit one of the Company's
resorts or one of the Company's off-site sales offices prior to purchasing.
In addition to sales offices located at its resorts, the Company also
operates three off-site sales offices serving the Indianapolis, Indiana;
Cleveland, Ohio; and Detroit, Michigan markets. The Company closed its off-site
sales office serving the Louisville, Kentucky market during fiscal 2001 due to
low operating margins being generated by the site. These off-site sales offices
market and sell Timeshare Interests in the Company's points-based Vacation Club,
and allow the Company to bring its products to markets with favorable
demographics and low competition for prospective buyers. The Cleveland and
Detroit off-sites sell Timeshare Interests using the Company's "Bluegreen Air"
virtual-reality jet airline experience as part of the sales presentation. During
fiscal 2001, the "Bluegreen Air" offices (excluding Louisville, which generated
a $798,000 loss in fiscal 2001) generated $22.3 million and $1.0 million or
16.2% and 10.3% of the Resorts Division's sales and field operating profit,
respectively. The Company intends to evaluate its off-site sales office strategy
during fiscal 2002.
The Company believes that the attractiveness of Timeshare Interest
ownership has been enhanced significantly by the Bluegreen Vacation Club(TM)
program and the availability of exchange networks that allow Timeshare Interest
owners to exchange the occupancy right in their Timeshare Interests in a
particular year, for an occupancy right at another participating network resort
at either the same or a different time. The Aruba Resort is affiliated with the
timeshare exchange network operated by II, while the Company's ten other resorts
currently in sales are affiliated with RCI's timeshare exchange network. If the
Company's resorts cease to qualify for the exchange networks or such networks
cease to operate effectively, the Company's sales of Timeshare Interests and the
performance of its timeshare receivables could be materially adversely affected.
For further information on sales and other financial information (including
segment information) attributable to the Resorts Division, see "MD&A" and the
Company's consolidated financial statements and the related Notes.
Residential Land and Golf Division
In general, as soon as practicable after agreeing to acquire a property and
during the time period that appropriate improvements are being completed, the
Company establishes selling prices for the individual parcels taking into
account such matters as regional economic conditions, quality as a building
site, scenic views, road frontage, golf course views (if applicable) and natural
features such as lakes, mountains, streams, ponds and wooded areas. The Company
also considers recent sales of comparable parcels in the area. Initial decisions
on pricing of parcels in a given area are made by the Company's regional
managers and, in all cases, are subject to approval by the Investment Committee.
Once such selling prices are established the Company commences its marketing
efforts.
The most widely used marketing technique by the Residential Land Division
is advertising in major newspapers in metropolitan areas located within a one to
three hour drive from the property and local newspapers. In addition, the
Company uses its customer relationship management system, which enables the
Company to quickly compile information on the previously identified prospects
most likely to be interested in a particular project. The Residential Land and
Golf Division also conducts direct mail campaigns to market property through the
use of brochures describing available parcels, as well as television and radio
advertising. Through this sales and marketing program, the Company believes that
it has been able to achieve a high conversion ratio of sales to prospects
receiving on-site sales presentations. The Company estimates that the conversion
ratio of sales to prospects receiving on-site sales presentations has
historically been approximately 20%. A sales representative who is knowledgeable
about the property answers each inquiry generated by the Company's marketing
efforts, discusses the property with the prospective purchaser, attempts to
ascertain the purchaser's needs and determines whether the parcel would be
suitable for that person, and arranges an appointment for the purchaser to visit
the property. Substantially all prospective purchasers inspect a property before
purchasing. During fiscal 2000, the Residential Land and Golf Division incurred
$7.1 million in advertising expense, or 7.3% of such division's $97.2 million in
sales. During fiscal 2001, the Residential Land and Golf Division incurred $8.6
million in advertising expense, or approximately 9.6% of such division's $88.9
million in sales.
The success of the Company's marketing efforts depends heavily on the
knowledge and experience of its sales personnel. The Company requires that,
prior to initiating the marketing effort for a property, all sales
representatives walk the property and become knowledgeable about each parcel and
applicable zoning, subdivision and building code requirements. Continued
training programs are conducted, including training with regional office sales
managers, weekly sales meetings and frequent site visits by an executive officer
of the Company. The Company enhances its sales
11
and marketing organization through the Bluegreen Institute, a mandatory training
program, which is designed to instill the Company's marketing and customer
service philosophy in middle and lower-level management. Additionally, the sales
staff is evaluated against performance standards established by the executive
officers of the Company. Substantially all of a sales representative's
compensation is commission-based.
The Company requires its sales staff to provide each prospective purchaser
with a written disclosure statement regarding the property to be sold prior to
the time such purchaser signs a purchase agreement. This information statement,
which is either in the form of a U.S. Department of Housing and Urban
Development ("HUD") lot information statement, where required, or a Company
generated "Vital Information Statement," sets forth relevant information with
respect to, and risks associated with, the property and must be signed by each
purchaser. The Company believes that these information statements contain all
material and relevant information necessary for a prospective purchaser to make
an informed decision as to whether or not to purchase such property, including
the availability and estimated cost of utilities, restrictions regarding
property usage, status of access roads and information regarding rescission
rights.
After deciding to purchase a parcel, a purchaser enters into a purchase
agreement and is required to pay the Company a deposit of at least 10% of the
purchase price. Purchasers are entitled to cancel purchase agreements within
specified periods after execution in accordance with statutory requirements. The
closing of a residential land sale usually occurs two to eight weeks after
payment of the deposit. Upon closing of a residential land sale, the Company
typically delivers a warranty deed and a recent survey of the property to the
purchaser. Title insurance is available at the purchaser's expense.
For further information on sales and other financial information (including
industry segment information) attributable to the Residential Land and Golf
Division, see "MD&A" and the Company's consolidated financial statements and the
related Notes.
Customer Financing
General
During fiscal 1999, 2000 and 2001, the Company financed 40%, 52% and 62%,
respectively, of the aggregate purchase price of its sales of Timeshare
Interests and residential land to customers that closed during these periods and
received cash for the remaining balance of the purchase price. The increase in
the percentage of sales financed by the Company since 1999 is primarily
attributable to an increase in the sales of Timeshare Interests over the same
period. Sales of Timeshare Interests accounted for 46%, 55% and 61% of
consolidated sales during fiscal 1999, 2000 and 2001, respectively.
Approximately 97% of all purchasers of Timeshare Interests finance with the
Company (compared to approximately 2% of residential land purchasers in fiscal
2001). In recent years, the percentage of residential land customers who
utilized the Company's financing has declined materially due to, among other
things, an increased willingness on the part of local banks to extend direct lot
financing to purchasers.
The Company believes that its financing is attractive to purchasers who
find it convenient to handle all facets of the purchase of residential land and
Timeshare Interests through a single source and because the downpayments
required by the Company are similar to those required by banks and mortgage
companies which offer this type of credit.
The Company offers financing of up to 90% of the purchase price of its
Timeshare Interests. The typical financing extended by the Company on a
Timeshare Interest during fiscal 1999, 2000 and 2001, provides for terms of
seven or ten years and a fixed interest rate. Historically, at the closing, the
Company and the purchaser executed a contract for deed agreement. After the
obligation is paid in full, the Company delivers a deed to the purchaser. In
connection with the Company's Timeshare Interest sales within the Bluegreen
Vacation Club(TM) system, the Company delivers the deed on behalf of the
purchasers to the trustee of the Bluegreen Vacation Club(TM) and secures
repayment of the purchaser's obligation by obtaining a mortgage on the
purchaser's Timeshare Interest. The Company does not believe that the transfer
to a note and mortgage system has had or will have a material adverse effect on
its servicing operations or financial results, although no assurances can be
given.
The Company also offers financing of up to 90% of the purchase price of all
parcels sold under the Residential Land and Golf Division to all purchasers who
qualify for such financing. The term of repayment on such financing has
historically ranged from five to 15 years although the Company, by offering
reduced interest rates, has been successful in encouraging customers during
recent years to finance their purchases over shorter terms with increased
downpayments. Management believes such strategy has improved the quality of the
notes receivable generated by its Residential Land and Golf Division in recent
years. An average note receivable underwritten by the Company during
12
fiscal 1999, 2000 and 2001 has a term of ten years. Most notes receivable bear
interest at a fixed interest rate and are secured by a first lien on the land.
The weighted-average interest rate on the Company's notes receivable was
15.0%, 15.1% and 15.2% at March 28, 1999, April 2, 2000 and April 1, 2001,
respectively.
Loan Underwriting
Resorts Division. Consistent with industry practice, Timeshare Interest
financing is not subject to extensive loan underwriting criteria. Customer
financing on sales of Timeshare Interests requires (i) receipt of a minimum
downpayment of 10% of the purchase price and (ii) a contract for deed or note
and mortgage, as applicable, and other closing documents between the Company and
the purchaser. The Company encourages purchasers to make increased downpayments
by offering a lower interest rate. In addition, purchasers who do not elect to
participate in the Company's pre-authorized payment plan are charged interest at
a rate which is one percent greater than the otherwise prevailing rate. As of
April 1, 2001, approximately 70% of the Company's timeshare notes receivable are
serviced through the Company's pre-authorized payment plan. Historically,
timeshare receivables have had a higher default rate than residential land
receivables.
Residential Land and Golf Division. The Company has established loan
underwriting criteria and procedures designed to reduce credit losses on its
residential land loan portfolio. The loan underwriting process undertaken by the
Company's credit department includes reviewing the applicant's credit history,
verifying employment and income as well as calculating certain debt-to-income
ratios. The primary focus of the Company's underwriting review is to determine
the applicant's ability to repay the loan in accordance with its terms. This
assessment is based on a number of factors, including the relationship of the
applicant's required monthly payment to disposable income. The Company also
examines the applicant's credit history through various credit reporting
agencies. In order to verify an applicant's employment status, the Company
generally contacts the applicant's employer. The Company also obtains current
pay stubs, recent tax returns and other tax forms from the applicant, as
applicable.
In order to obtain financing from the Residential Land and Golf Division, a
prospective purchaser must submit a completed and signed credit application,
purchase and sale agreement and pre-authorized checking agreement accompanied by
a voided check, if applicable, to the Company's credit department. All credit
decisions are made at the Company's corporate headquarters. Loan amounts under
$50,000 are approved by designated personnel located in the Company's corporate
headquarters, while loan amounts of $50,000 or more require approval from a
senior executive officer. In addition, rejected applications and any material
exceptions to the underwriting policy are also reviewed by senior management.
Customers are notified of the reasons for credit denial by mail.
The Company encourages customers to increase their downpayment and reduce
the loan term through the structure of its loan programs. Customers receive a
lower rate of interest as their downpayment increases and the loan term
shortens. Additionally, the Company encourages its customers to make timely
payments through a pre-authorized payment arrangement. Customers who do not
choose a pre-authorized payment plan are charged interest at a rate which is one
percent greater than the prevailing rate.
After the credit decision has been made, the credit department categorizes
the file as either approved, pending or declined. Upon receipt of a credit
approval, the regional office schedules the closing with the customer. Closings
are typically conducted at the office of the Company's local attorney or
settlement agent, although in some cases the closing may take place at the sales
site or by mail.
When the original closing documents are received from the closing agent,
the Company verifies that the loan closed under terms approved by the Company's
credit department. A quality control audit is performed to verify that required
documents have been received and that they have been prepared and executed
correctly. If any revisions are required, notification is sent to the regional
office.
A loan file typically includes a copy of the signed security instrument,
the mortgage note, a copy of the deed, Truth-in-Lending disclosure, purchase and
sale agreement, credit application, local counsel opinion, Vital Information
Statement or purchaser's acknowledgment of receipt of HUD lot information
statement, HUD settlement statement and a copy of the assignment of mortgage and
an original note endorsement from the Company's subsidiary originating the sale
and the loan to the Company (if applicable). After the initial closing documents
are received, the recorded mortgage and assignment and original title insurance
policy are obtained in order to complete the loan file.
13
Collection Policies
Resorts Division. The Company's timeshare receivables have been
historically documented by contracts for deed, which allows the Company to
retain title to the Timeshare Interest until the obligation is paid in full,
thereby eliminating the need to foreclose in the event of a default. Collection
efforts and delinquency information concerning the Resorts Division are managed
at the Company's corporate headquarters. Servicing of the division's receivables
is handled by a staff of experienced collectors, assisted by a mortgage
collection computer system. Unless circumstances otherwise dictate, collection
efforts are generally made by mail and telephone. If a contract for deed becomes
delinquent for ten days, telephone contact commences with the customer. If the
customer fails to bring the account current, a late notice is mailed when the
account is 15 days delinquent. After an account is 30 days delinquent, the
Company typically sends a third letter advising the customer that such customer
has 30 days within which to bring the account current. Under the terms of the
contract for deed, the borrower is in default when the account becomes 60 days
delinquent. At this time a default letter is sent advising the customer that he
or she has 30 days to bring the account current or lose his or her contractual
interest in the timeshare unit. When the account becomes 90 days delinquent, the
Company forwards a final letter informing the customer that the contract for
deed has been terminated. At such time, the Timeshare Interest can be resold to
a new purchaser.
In connection with the implementation of its points-based Bluegreen
Vacation Club(TM) system, the Company has converted to a note and mortgage
system. In addition to the 10, 15 and 30 day collection correspondence outlined
above, at 60 days delinquent, a lock-out letter is sent to the Bluegreen
Vacation Club(TM) customer prohibiting such customer from making a reservation
for lodging at a resort property. If the default continues, at 90 days
delinquent, a Notice of Intent to Cancel Membership is mailed. This informs the
customer that unless the default is cured within 30 days, membership in the
Bluegreen Vacation Club(TM) will be terminated. If the default is not cured, a
Termination Letter is sent, typically at 120 days. At such time, the Timeshare
Interest can be resold to a new purchaser.
Residential Land and Golf Division. Collection efforts and delinquency
information concerning the Residential Land and Golf Division are also managed
at the Company's corporate headquarters. Servicing of the division's receivables
is handled by a staff of experienced collectors, assisted by a mortgage
collection computer system. Unless circumstances otherwise dictate, collection
efforts are generally made by mail and telephone. Collection efforts begin when
an account is ten days past due, at which time the Company contacts the customer
by telephone. Attempts are then made to contact the customer via telephone to
determine the reason for the delinquency and to bring the account current. The
determination of how to handle a delinquent loan is based upon many factors,
including the customer's payment history and the reason for the current
inability to make timely payments. If no agreement is made or the customer does
not abide by the agreement, collection efforts continue until the account is
either brought current or legal action is commenced. If not accelerated sooner,
the Company declares the loan in default when the loan becomes 60 days
delinquent. When the loan is 90 days past due, the accrual of interest is
stopped (unless the loan is considered an in-substance foreclosure loan, in
which case all accrued interest is reversed since the Company's means of
recovery is determined through the resale of the underlying collateral and not
through collection on the note) and the Credit/Collection Manager determines the
action to be taken.
Loan Loss Reserves. The reserve for loan losses as a percentage of
outstanding notes receivable was 3.5%, 4.1% and 4.6% at March 28, 1999, April 2,
2000 and April 1, 2001, respectively. The adequacy of the Company's reserve for
loan losses is determined by management and reviewed on a regular basis
considering, among other factors, historical frequency of default, loss
experience, estimated value of the underlying collateral, present and expected
economic conditions as well as the quality of the receivables. (See "MD&A" for
further discussion of the Company's provision for loan losses.)
Sales of Receivables/Pledging of Receivables
Since 1986, the Company has sold or pledged a significant amount of its
receivables, generally retaining the right and obligation to service such
receivables. In the case of residential land and golf receivables, the Company
historically transferred the receivables to a special purpose finance
subsidiary, which in turn enters into a receivables securitization. The
receivables were typically sold by such subsidiary with limited or no recourse.
In the case of receivables pledged to a financial institution, the Company
generally must maintain a debt to eligible collateral rate (based on outstanding
principal balance of the pledged loans) of 90%. The Company is obligated to
pledge additional eligible receivables or make additional principal payments in
order to maintain this collateralization rate. Repurchases and additional
principal payments have not been material to date.
Private placement REMIC financings have provided substantial capital
resources to the Company, although the Company has not completed a REMIC
financing since December 1996, due to the decrease in land sales financed by the
Company. Under the terms of these transactions, the receivables are sold to a
REMIC trust and the Company has no obligation to repurchase the receivables due
to default by the borrowers. The Company does, however, have the
14
obligation to repurchase the receivables in the event that there is any material
defect in the loan documentation and related representations and warranties as
of the time of sale.
Since fiscal 1999, the Company has maintained timeshare receivables
purchase facilities with financial institutions. Under the current purchase
facility in effect at April 1, 2001 (the "Purchase Facility"), a special purpose
finance subsidiary of the Company sold $77.7 million aggregate principal amount
of timeshare receivables in securitization transactions. Receivables were sold
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
Company acts as servicer under the Purchase Facility for a fee, and is required
to make advances to the financial institution to the extent it believes such
advances will be recoverable. Subject to its terms, the Purchase Facility will
allow the Company to sell up to an additional $17.0 million aggregate principal
amount of timeshare receivables through October 16, 2001. The Company is
currently negotiating new timeshare receivables purchase facilities with two
financial institutions. There can be no assurances that the Company's
negotiations will result in the Company obtaining either or both facilities on
acceptable terms to the Company, if at all. In connection with the Purchase
Facility, the Company also entered into a warehouse facility with the same
institution, pursuant to which the Company has the ability to borrow against
receivables through October 16, 2001. The Company is also currently negotiating
a new warehouse facility with that same institution. There can be no assurances
that such negotiations will be successful. See further discussion of the terms
of the Purchase Facility and the warehouse facility under "MD&A" -- Credit
Facilities for Timeshare Receivables and Inventories".
Receivables Servicing
Receivables servicing includes collecting payments from borrowers and
remitting such funds to the owners, lenders or investors in such receivables,
accounting for receivables principal and interest, making advances when
required, contacting delinquent borrowers, foreclosing, or terminating a
contract for deed or membership in the Bluegreen Vacation Club(TM) in the event
that defaults are not remedied and performing other administrative duties. The
Company's obligation to provide receivables servicing and its rights to collect
fees are set forth in a servicing agreement. The Company has the obligation and
right to service all of the receivables it originates and retains the obligation
and right with respect to substantially all of the receivables it sells through
REMICs and all of the receivables sold under the Purchase Facility. The Company
typically receives an annual servicing fee ranging from approximately .5% to
2.0% of the principal balance.
Regulation
The timeshare and real estate industries are subject to extensive and
complex regulation. The Company is subject to compliance with various federal,
state and local environmental, zoning and other statutes and regulations
regarding the acquisition, subdivision and sale of real estate and Timeshare
Interests and various aspects of its financing operations. On a federal level,
the Federal Trade Commission has taken an active regulatory role through the
Federal Trade Commission Act, which prohibits unfair or deceptive acts or
competition in interstate commerce. In addition to the laws applicable to the
Company's customer financing and other operations discussed below, the Company
is or may be subject to the Fair Housing Act and various other federal statutes
and regulations. The Company is also subject to various foreign laws with
respect to the Aruba Resort. In addition, there can be no assurance that in the
future, Timeshare Interests will not be deemed to be securities subject to
regulation as such, which could have a material adverse effect on the Company.
The Company believes that it is in compliance in all material respects with
applicable regulations. However, no assurance can be given that the cost of
complying with applicable laws and regulations will not be significant or that
the Company is in fact in compliance with applicable law. Any failure to comply
with applicable laws or regulations could have a material adverse effect on the
Company.
The Company's sales and marketing of residential land are subject to
various consumer protection laws and to the Interstate Land Sales Full
Disclosure Act, which establishes strict guidelines with respect to the
marketing and sale of land in interstate commerce. HUD has enforcement powers
with respect to this statute. In some instances, the Company has been exempt
from HUD registration requirements because of the size or number of the
subdivided parcels and the limited nature of its offerings. The Company, at its
discretion, may formally request an exemption advisory opinion from HUD to
confirm the exempt status of any particular offering. Several such exemption
requests have been submitted to, and approved by, HUD. In those cases where the
Company and its legal counsel determine parcels must be registered to be sold,
the Company files registration materials disclosing financial information
concerning the property, evidence of title and a description of the intended
manner of offering and advertising such property. The Company bears the cost of
such registration, which includes legal and filing fees. Many states also have
statutes and regulations governing the sale of real estate. Consequently, the
Company regularly consults with counsel for assistance in complying with
federal, state and local law. The Company must obtain the approval of numerous
governmental authorities for its acquisition and marketing activities and
changes in local circumstances or applicable laws may necessitate the
application for, or the modification of, existing approvals.
15
The Company's timeshare resorts are subject to various regulatory
requirements including state and local approvals. The laws of most states
require the Company to file with a designated state authority for its approval a
detailed offering statement describing the Company and all material aspects of
the project and sale of Timeshare Interests. Laws in each state where the
Company sells Timeshare Interests generally grant the purchaser of a Timeshare
Interest the right to cancel a contract of purchase at any time within a
specified period following the earlier of the date the contract was signed or
the date the purchaser has received the last of the documents required to be
provided by the Company. Most states have other laws which regulate the
Company's activities, such as real estate licensure; seller's of travel
licensure; anti-fraud laws; telemarketing laws; prize, gift and sweepstakes
laws; and labor laws. In addition, certain state and local laws may impose
liability on property developers with respect to construction defects discovered
or repairs made by future owners of such property. Pursuant to such laws, future
owners may recover from the Company amounts in connection with the repairs made
to the developed property. As required by state laws, the Company provides its
timeshare purchasers with a public disclosure statement that contains, among
other items, detailed information about the surrounding vicinity, the resort and
the purchaser's rights and obligations as a Timeshare Interests owner.
Under various federal, state and local laws, ordinances and regulations,
the owner of real property generally is liable for the costs of removal or
remediation of certain hazardous or toxic substances located on or in, or
emanating from, such property, as well as related costs of investigation and
property damage. Such laws often impose such liability without regard to whether
the owner knew of, or was responsible for, the presence of such hazardous or
toxic substances. The presence of such substances, or the failure to properly
remediate such substances, may adversely affect the owner's ability to sell or
lease a property or to borrow using such real property as collateral. Other
federal and state laws require the removal or encapsulation of
asbestos-containing material when such material is in poor condition or in the
event of construction, demolition, remodeling or renovation. Other statutes may
require the removal of underground storage tanks. Noncompliance with these and
other environmental, health or safety requirements may result in the need to
cease or alter operations at a property.
The Company's customer financing activities are also subject to extensive
regulation, which may include, the Truth-in-Lending Act and Regulation Z, the
Fair Housing Act, the Fair Debt Collection Practices Act, the Equal Credit
Opportunity Act and Regulation B, the Electronic Funds Transfer Act and
Regulation E, the Home Mortgage Disclosure Act and Regulation C, Unfair or
Deceptive Acts or Practices and Regulation AA and the Right to Financial Privacy
Act.
Management is not aware of any pending regulatory contingencies that are
expected to have a material adverse impact on the Company.
Competition
The real estate industry is highly competitive. In each of its markets, the
Company competes against numerous developers and others in the real estate
business. The Resorts Division competes with various high profile and
well-established operators. Many of the world's most recognized lodging,
hospitality and entertainment companies have begun to develop and sell Timeshare
Interests in resort properties. Major companies that now operate or are
developing or planning to develop timeshare resorts include Marriott, Disney,
Hilton, Hyatt, Four Seasons, Starwood, Carlson, Bass Hotels, Fairfield
Communities and Silverleaf Resorts. The Company also competes with numerous
other smaller owners and operators of timeshare resorts. The Residential Land
and Golf Division competes with builders, developers and others for the
acquisition of property and with local, regional and national developers,
housebuilders and others with respect to the sale of residential lots.
Competition may be generally smaller with respect to the Company's residential
lot sales in the more rural markets in which it operates. The Company believes
that it can compete on the basis of its reputation and the price, location and
quality of the products it offers for sale, as well as on the basis of its
experience in land acquisition, development and sale. Although, as noted above,
the Resorts Division competes with various high profile and well-established
operators, the Company believes that it can compete on the basis of its general
reputation and the price, location and quality of its timeshare resorts. The
development and operation of additional timeshare resorts in the Company's
markets could have a material adverse impact on the demand for the Company's
Timeshare Interests and its results of operations. In its customer financing
activities, the Company competes with banks, mortgage companies, other financial
institutions and government agencies offering financing of real estate. In
recent years, the Company has experienced increased competition with respect to
the financing of Residential Land and Golf Division sales as evidenced by the
low percentage of residential land sales internally financed since 1995. The
Company believes that, based on its interest rates and repayment schedules, the
financing packages it offers are convenient for customers and competitive with
those of other institutions which offer such financing.
16
Personnel
As of April 1, 2001, the Company had 2,372 employees. Of the 2,372
employees, 190 were located at the Company's headquarters in Boca Raton,
Florida, and 2,182 in regional field offices throughout the United States, Aruba
and Canada (the field personnel include 222 field employees supporting the
Company's Residential Land and Golf Division and 1,960 field employees
supporting the Company's Resorts Division). Only the Company's employees in
Aruba are represented by a collective bargaining unit, and the Company believes
that relations with its employees generally are excellent.
Executive Officers of the Company
The following table sets forth certain information regarding the executive
officers of the Company as of May 1, 2001.
Name Age Position
---- --- --------
George F. Donovan 62 President and Chief Executive Officer
John F. Chiste 45 Senior Vice President, Chief Financial Officer and Treasurer
Daniel C. Koscher 43 Senior Vice President - President, Land & Golf Division
David D. Philp 39 Senior Vice President and Chief Investment Officer
Patrick E. Rondeau 54 Senior Vice President, Director of Corporate Legal Affairs and Clerk
Mark T. Ryall 41 Senior Vice President and Chief Information Officer
Allan J. Herz 41 Vice President and Director of Mortgage Operations
Susan J. Milanese 42 Vice President and Director of Human Resources
Anthony M. Puleo 33 Vice President and Chief Accounting Officer
George F. Donovan joined the Company as a Director in 1991 and was appointed
President and Chief Operating Officer in October 1993. He became Chief Executive
Officer in December 1993. Mr. Donovan has served as an officer of a number of
other recreational real estate corporations, including Leisure Management
International, of which he was President from 1991 to 1993, and Fairfield
Communities, Inc., of which he was President from April 1979 to December 1985.
Mr. Donovan holds a B.S. in Electrical Engineering and is a Registered Resort
Professional.
John F. Chiste joined the Company in July 1997 as Treasurer and Chief Financial
Officer. In 1998, Mr. Chiste was also named Senior Vice President. From January
1997 to June 1997, Mr. Chiste was the Chief Financial Officer of Compscript,
Inc., an entity that provides institutional pharmacy services to long-term
health care facilities. From December 1992 to January 1997, he served as the
Chief Financial Officer, Secretary and Treasurer of Computer Integration
Corporation, a publicly-held distribution company that provides information
products and services to corporations nationwide. From 1983 through 1992, Mr.
Chiste held various positions with Ernst & Young LLP, most recently serving as a
Senior Manager. Mr. Chiste holds a B.B.A. in Accounting and is a Certified
Public Accountant.
Daniel C. Koscher joined the Company in 1986. During his tenure, he has served
in various financial management positions including Chief Accounting Officer,
Vice President and Director of Planning/Budgeting. In 1997, he became Senior
Vice President, Residential Land and Golf Division. Prior to his employment with
the Company, Mr. Koscher was employed by the William Carter Company, a
manufacturing company located in Needham, Massachusetts. He has also been
employed by Cipher Data Products, Inc., a computer peripheral manufacturer
located in San Diego, California, as well as the State of Nevada as an audit
agent. Mr. Koscher holds an M.B.A. along with a B.B.A. in Accounting and is a
Registered Resort Professional.
David D. Philp joined the Company in August 1999 as Chief Investment Officer. In
2000, Mr. Philp was also named Senior Vice President. From February 1996 to
August 1999, Mr. Philp was a Vice President and Corporate Officer directly
responsible for new property acquisitions with Sunterra Corporation, a publicly
held timeshare resort developer. From September 1995 to January 1996, he served
as a co-owner of E & O Development, an entity involved in the development of new
restaurant concepts in California. From September 1994 to August 1995, Mr. Philp
was a Regional Director of Development with responsibility for property
acquisitions and hotel management contract negotiations for Doubletree Hotels
Corporation, a national hotel chain. Mr. Philp holds a B.S. in Hotel
Administration.
Patrick E. Rondeau joined the Company in 1990 and was elected Vice President and
Director of Corporate Legal Affairs. He became Clerk in 1993 and Senior Vice
President in 1997. For more than five years prior to his employment with the
Company, Mr. Rondeau was a senior partner of Freedman, DeRosa & Rondeau, located
in North Adams, Massachusetts, which firm serves as legal counsel to the Company
on various matters. Mr. Rondeau holds a B.A. in Political Science along with a
J.D.
17
Mark T. Ryall joined the Company in October 2000 as Chief Information Officer.
In November 2000, Mr. Ryall was also named Senior Vice President. From 1997
through 2000, Mr. Ryall was Vice President and Chief Information Officer at AHL
Services, Inc., a publicly held provider of outsourcing solutions based in
Atlanta, Georgia. From 1990 to 1997, Mr. Ryall served as Group Project Manager,
Management Information Systems, at Ryder System, Inc., a publicly held provider
of logistics, supply chain and transportation management solutions worldwide,
based in Miami, Florida. From 1983 through 1990, Mr. Ryall held various
positions with Andersen Consulting, an international technology consulting firm.
Mr. Ryall holds an M.B.A.
Allan J. Herz joined the Company in 1992 and was named Director of Mortgage
Operations in September 1992. Mr. Herz was also elected Vice President in 1993.
From 1982 to 1992, Mr. Herz worked for AmeriFirst Federal Savings Bank based in
Miami, Florida. During his 10 year tenure with the bank, he held various lending
positions, the most recent being Division Vice President in Consumer Lending.
Mr. Herz holds a B.B.A. and an M.B.A.
Susan J. Milanese joined the Company in 1988. During her tenure, she has held
various management positions in the Company including Assistant to the Chief
Financial Officer, Divisional Controller and Director of Accounting. In 1995,
she was elected Vice President and Director of Human Resources. From 1983 to
1988, Ms. Milanese was employed by General Electric Company in various financial
management positions including the corporate audit staff. Ms. Milanese holds a
B.B.A in Accounting.
Anthony M. Puleo joined the Company in October 1997 as Chief Accounting Officer.
In 1998, Mr. Puleo was also elected Vice President. From December 1990 through
October 1997, Mr. Puleo held various positions with Ernst & Young LLP, most
recently serving as a Senior Manager in the Assurance and Advisory Business
Services group. Mr. Puleo holds a B.B.A. in Accounting and is a Certified Public
Accountant.
The Company's By-Laws provide that, except as otherwise provided by law or
the charter and by-laws of the Company, the President, Treasurer and the Clerk
hold office until the first meeting of the Board of Directors following the next
annual meeting of shareholders and until their respective successors are chosen
and qualified and that all other officers hold office for the same period unless
a shorter time is specified in the vote appointing such officer or officers.
Item 2. PROPERTIES.
The Company's principal executive office is located in Boca Raton, Florida
in approximately 74,000 square feet of leased space. On April 1, 2001, the
Company also maintained regional sales offices in the Northeastern,
Mid-Atlantic, Southeastern, Midwestern, Southwestern and Western regions of the
United States as well as the Province of Ontario, Canada and the island of
Aruba. See further description of the Company's resort and land properties under
"Item 1. Business--Company Products".
Item 3. LEGAL PROCEEDINGS.
In the ordinary course of its business, the Company from time to time
becomes subject to claims or proceedings relating to the purchase, subdivision,
sale and/or financing of real estate. Additionally, from time to time, the
Company becomes involved in disputes with existing and former employees. The
Company believes that substantially all of the above are incidental to its
business.
In addition to its other ordinary course litigation, the Company became a
defendant in two proceedings during fiscal 1999. First, an action was filed in
Colorado state court against the Company on December 15, 1998 (the Company has
removed the action to the Federal District Court in Denver). The plaintiff has
asserted that the Company is in breach of its obligations under, and has made
certain misrepresentations in connection with, a contract under which the
Company acted as marketing agent for the sale of undeveloped property owned by
the plaintiff. The plaintiff also alleges fraud, negligence and violation by the
Company of an alleged fiduciary duty owed to plaintiff. Among other things, the
plaintiff alleges that the Company failed to meet certain minimum sales
requirements under the marketing contract and failed to commit sufficient
resources to the sale of the property. The original complaint sought damages in
excess of $18 million and certain other remedies, including punitive damages.
Subsequently, the damages sought were reduced to approximately $15 million by
the court. During fiscal 2001, the court dismissed the plaintiff's claims
related to promissory estoppel, covenant of good faith and fair dealing, breach
of fiduciary duty and negligence. In addition, the court dismissed the claims
alleged by a sister company of the plaintiff. The dismissals discussed above
further reduced the plaintiff's claims for damages to approximately $8 million,
subject to the plaintiff's right of appeal.
Second, an action was filed on July 10, 1998 in the District Court for the
State of Texas in the County of Montgomery against two subsidiaries of the
Company and various other defendants. The Company itself is not
18
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. During fiscal 2001, the court advised the parties in open court that
the Company's motion for summary judgment was granted, thus dismissing all of
the Plaintiff's claims for damages, subject to the Plaintiffs' right of appeal.
The parties are awaiting the court's written decision documenting the summary
judgment.
The Company is continuing to evaluate these actions and their potential
impact, if any, on the Company and accordingly cannot predict the outcomes with
any degree of certainty. However, based upon all of the facts presently under
consideration of management, the Company believes that it has substantial
defenses to the allegations in each of the actions and intends to defend each of
these matters vigorously. The Company does not believe that any likely outcome
of either case will have a material adverse effect on the Company's financial
condition or results of operations.
On August 21, 2000, the Company received a Notice of Field Audit Action
(the "Notice") from the State of Wisconsin Department of Revenue (the "DOR")
alleging that two subsidiaries now owned by the Company failed to collect and
remit sales and use taxes to the State of Wisconsin during the period from
January 1, 1994 through September 30, 1997 totaling $1.9 million. The majority
of the assessment is based on the subsidiaries not charging sales tax to
purchasers of Timeshare Interests at the Company's Christmas Mountain
Village(TM) resort. In addition to the assessment, the Notice indicated that
interest would be charged, but no penalties would be assessed. As of April 1,
2001, aggregate interest was approximately $1.1 million. The Company filed a
Petition for Redetermination (the "Petition") on October 19, 2000, and, if the
Petition is unsuccessful, the Company intends to vigorously appeal the
assessment. The Company acquired the subsidiaries that were the subject of the
Notice in connection with the acquisition of RDI Group, Inc. ("RDI") on
September 30, 1997. Under the RDI purchase agreement, the Company has the right
to set off payments owed by the Company to RDI's former stockholders pursuant to
a $1.0 million outstanding note payable balance and to make a claim against such
stockholders for $500,000 previously paid for any breach of representations and
warranties. The Company has notified the former stockholders that it intends to
exercise these rights to mitigate any settlement with the DOR in this matter. In
addition, the Company believes that, if necessary, amounts paid to the State of
Wisconsin pursuant to the Notice, if any, may be further funded through
collections of sales tax from the consumers who effected the assessed timeshare
sales with RDI without paying sales tax on their purchases. Based on
management's assessment of the Company's position in the Petition, the Company's
right of set off with the former RDI stockholders and other factors discussed
above, management does not believe that the possible sales tax pursuant to the
Notice will have a material adverse impact on the Company's results of
operations or financial position, and therefore no amounts have been accrued
related to this matter.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company's common stock is traded on the New York Stock Exchange
("NYSE") and the Pacific Stock Exchange under the symbol "BXG". The following
table sets forth, for the periods indicated, the high and low closing price of
the common stock as reported on the NYSE:
Price Range Price Range
High Low High Low
--------------------------------------------------------------------------
Fiscal 2000 Fiscal 2001
First Quarter $6.50 $4.88 First Quarter $4.06 $2.75
Second Quarter 6.38 4.56 Second Quarter 3.75 2.63
Third Quarter 5.63 4.38 Third Quarter 3.25 1.56
Fourth Quarter 4.94 3.06 Fourth Quarter 2.60 1.53
19
The Company did not pay any cash or stock dividends during fiscal 2000 or
fiscal 2001. The Company does not anticipate paying any dividends in the
foreseeable future, as it currently anticipates that it will retain any future
earnings for use in its business. Restrictions contained in the Indenture
related to the Company's $110 million 10 1/2% Senior Secured Notes due 2008
issued in April 1998, and certain of the Company's credit facilities may, in
certain instances, limit the payment of cash dividends on its Common Stock.
On August 14, 1998, the Company entered into a Securities Purchase
Agreement (the "Stock Agreement") with Morgan Stanley Real Estate Investors III,
L.P., Morgan Stanley Real Estate Fund III, L.P., MSP Real Estate Fund, L.P., and
Morgan Stanley Real Estate Fund III Special Fund, L.P. (collectively, the
"Funds") pursuant to which the Funds purchased 4.1 million and 1.8 million
shares of the Company's Common Stock for an aggregate of $35 million and $15
million during fiscal 1999 and 2000, respectively. Aggregate legal and other
stock issuance costs totaled approximately $774,000.
Shares of Common Stock sold to the Funds were exempt from registration
under the Securities Act of 1933, by virtue of Section 4(2) and Rule 506 of
Regulation D and issued thereunder.
Item 6. SELECTED FINANCIAL DATA.
The selected consolidated financial data set forth below should be read in
conjunction with the Consolidated Financial Statements, related notes, and other
financial information appearing elsewhere in this Annual Report.
As of or for the Year Ended,
-------------------------------------------------------------
March 30, March 29, March 28, April 2, April 1,
(dollars in thousands, except per share data) 1997 1998 1999 2000 2001
-------- -------- -------- -------- --------
STATEMENT OF OPERATIONS DATA:
Sales $109,722 $172,659 $225,816 $214,488 $226,310
Other resort and golf operations revenues 259 5,728 14,881 21,745 28,213
Interest income 6,255 10,819 14,804 15,652 17,317
Gain (loss) on sale of notes receivable (96) -- 3,692 2,063 3,281
Other income 259 312 522 735 572
-------- -------- -------- -------- --------
Total revenues 116,399 189,518 259,715 254,683 275,693
Income (loss) before income taxes
and minority interest (7,390) 17,003 31,917 10,565 3,002
Net income (loss) (4,360) 10,000 17,040 6,777 2,717
Earnings (loss) per common share:
Basic (0.21) 0.49 0.77 0.29 0.11
Diluted (0.21) 0.46 0.66 0.28 0.11
BALANCE SHEET DATA:
Notes receivable, net $ 35,062 $ 81,293 $ 64,380 $ 70,114 $ 74,796
Inventory, net 86,661 107,198 142,984 197,093 193,634
Total assets 169,627 272,963 347,318 413,983 419,681
Shareholders' equity 59,243 69,993 119,349 134,044 136,790
Book value per common share 2.94 3.45 4.95 5.50 5.65
OTHER DATA:
EBITDA (1) $ 8,291 $ 29,897 $ 48,402 $ 30,986 $ 27,354
Weighted-average interest rate on notes
receivable at period end 13.3% 14.9% 15.0% 15.1% 15.2%
Resorts division statistics:
Total resort division sales $ 27,425 $ 60,751 $103,127 $117,271 $137,411
Number of resorts at period end 4 8 10 10 11
Gross margin on resort sales 71.0% 74.0% 75.7% 76.7% 77.4%
Number of timeshare intervals sold (2) 3,195 6,904 11,764 12,547 14,775
Residential land and golf division statistics:
Total residential land and golf division
sales $ 82,297 $111,908 $122,689 $ 97,217 $ 88,899
Gross margin on sales of land 40.3% 47.6% 54.0% 51.1% 46.3%
Number of land parcels sold (2) 2,203 2,469 2,380 1,846 1,614
20
(1) EBITDA should not be considered in isolation or construed as a substitute
for the Company's net income (loss), income (loss) from operations, cash
flows from operating activities or liquidity in analyzing the Company's
operating performance, financial position or cash flows. EBITDA is not
necessarily comparable to other similarly titled captions of other
companies due to potential inconsistencies in the method of calculation.
The following table reconciles EBITDA to net income (loss) (amounts in
thousands).
For the Year Ended,
---------------------------------------------------------------
March 30, March 29, March 28, April 2, April 1,
1997 1998 1999 2000 2001
------- ------- ------- ------- -------
Net income (loss) $(4,360) $10,000 $17,040 $ 6,777 $ 2,717
Extraordinary loss, net of income taxes -- -- 1,682 -- --
Interest expense 5,459 9,281 12,922 13,841 15,494
Capitalized interest expense included in cost of
sales 956 2,565 1,830 2,407 2,384
Provision (benefit) for income taxes (3,030) 6,803 12,610 4,055 1,156
Provision for non-recurring costs (a) 8,200 -- -- -- --
Depreciation and amortization (b) 1,066 1,248 2,318 3,906 5,603
------- ------- ------- ------- -------
EBITDA $ 8,291 $29,897 $48,402 $30,986 $27,354
======= ======= ======= ======= =======
(a) The provision for non-recurring costs represents the Company's $8.2
million write-down of certain Communities Division and Residential
Land Division properties in the first quarter of fiscal 1997.
(b) Excludes amortization of debt issuance costs, which is included in
interest expense.
(2) Unit sales data includes those sales made during the applicable period
where recognition of revenue is deferred under the percentage-of-completion
method of accounting (see "Contracts Receivable and Revenue Recognition"
under Note 1 of Notes to Consolidated Financial Statements.) Also Includes
sales of Timeshare Interests that were sold on a biennial basis (i.e., sale
of one-week periods every other year in perpetuity) as one Timeshare
Interest sold.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
Certain Definitions and Cautionary Statement Regarding Forward-Looking
Statements
The following discussion of the results of operations and financial
condition of Bluegreen Corporation (the "Company") should be read in
conjunction with the Company's Consolidated Financial Statements and
related Notes and other financial information included elsewhere in this
Annual Report. Unless otherwise indicated in this discussion, references to
"real estate" and to "inventories" collectively encompass the Company's
inventories held for sale by the Resorts Division and Residential Land and
Golf Division. "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 with 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. "EBITDA" refers to net income (loss) before
extraordinary item, interest expense (including interest expense previously
capitalized and then expensed in cost of sales during the periods
presented), income taxes, depreciation and amortization. "Estimated
remaining life-of-project sales" assumes sales of the existing, currently
under construction or development, and planned Timeshare Interests or
residential lots, as the case may be, at current retail prices.
Market and industry data used throughout this Annual Report were
obtained from internal Company surveys, industry publications, unpublished
industry data and estimates, discussions with industry sources and
currently available information. The sources for this data include, without
limitation, the American Resort Development Association ("ARDA"), a
non-profit industry organization. Industry publications generally state
that the information contained therein has been obtained from sources
believed to be reliable, but there can be no assurance as to the accuracy
and completeness of such information. The Company has not independently
verified such market data. Similarly, internal Company surveys, while
believed by the Company to be reliable, have not been verified by any
independent sources. Accordingly, no assurance can be given that any such
data are accurate.
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
21
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, 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 (i) those anticipated or (ii)
levels necessary in order for the Company to be profitable.
l) An increase or decrease in the number of land or resort properties subject
to percentage-of-completion accounting, which requires deferral of profit
recognition on such projects until development is substantially complete.
22
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 Bluegreen Vacation Club(TM) is not
accepted by consumers or imposes limitations on the Company's operations,
or is adversely impacted by legal or other requirements.
q) The risk that any contemplated transactions currently under negotiation
will not close.
r) Risks that the Company's joint ventures will not be as successful as
anticipated and that the Company will be required to make capital
contributions to such ventures in amounts greater than anticipated.
The Company does not undertake and expressly disclaims any duty to update or
revise forward-looking statements, even if the Company's situation may change in
the future.
General
Real estate markets are cyclical in nature and highly sensitive to changes
in national, regional and international economic conditions, including, among
other factors, levels of employment and discretionary disposable income,
consumer confidence, available financing and interest rates. A downturn in the
economy in general or in the market for real estate could have a material
adverse effect on the Company.
The Company recognizes revenue on residential land and Timeshare Interest
sales when a minimum of 10% of the sales price has been received in cash, the
refund or rescission period has expired, collectibility of the receivable
representing the remainder of the sales price is reasonably assured and the
Company has completed substantially all of its obligations with respect to any
development relating to the real estate sold. In cases where all development has
not been completed, the Company recognizes income in accordance with the
percentage-of-completion method of accounting. Under this method of income
recognition, income is recognized as work progresses. Measures of progress are
based on the relationship of costs incurred to date to expected total costs. The
Company has been dedicating greater resources to more capital-intensive
residential land and timeshare projects. As development on more of these larger
projects is begun, and based on the Company's 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 (see "Contracts Receivable and Revenue Recognition" under Note 1
of Notes to Consolidated Financial Statements.)
Costs associated with the acquisition and development of timeshare resorts
and residential land properties, including carrying costs such as interest and
taxes, are capitalized as real estate and development costs and are allocated to
cost of real estate sold as the respective revenue is recognized.
Effective September 30, 1997, a wholly-owned subsidiary of the Company
acquired all of the issued and outstanding common stock of RDI Group, Inc. and
Resort Title Agency, Inc. (collectively "RDI") for a purchase price of $7.5
million consisting of $6.0 million cash and a $1.5 million, 9% promissory note
due October 3, 1999. RDI was privately-held and owned timeshare resorts in
Orlando, Florida and Wisconsin Dells, Wisconsin, as well as a points-based
vacation club. The acquisition was accounted for using the purchase method of
accounting and, accordingly, the results of operations of RDI have been included
in the Company's consolidated financial statements from September 30, 1997.
Approximately $1.8 million of goodwill, which is included in other assets on the
consolidated balance sheet, was recognized in connection with the acquisition of
RDI. The goodwill is being amortized over 25 years.
On December 15, 1997, the Company invested $250,000 of capital in Bluegreen
Properties N.V.(TM) ("BPNV"), an entity organized in Aruba that previously had
no operations, in exchange for a 50% ownership
23
interest. Concurrently, the Company and an affiliate of the other 50% owner of
BPNV (who is not an affiliate of the Company), each loaned BPNV $3 million
pursuant to promissory notes due on December 15, 2000 and bearing interest at
the prime rate plus 1%. BPNV then acquired from a third party approximately
8,000 unsold timeshare intervals at the La Cabana Beach & Racquet Club(TM), a
fully developed timeshare resort in Oranjestad, Aruba, in exchange for $6
million cash and the assumption of approximately $16.6 million of interest-free
debt from a bank in Aruba. The debt was recorded by BPNV at approximately $12.5
million, which reflects a discount based on an imputed interest rate of 12%. The
debt is to be repaid over five years through release-prices as intervals are
sold, subject to minimum monthly principal payments of approximately $278,000.
On August 25, 2000, the Company acquired the 50% minority ownership
interest in BPNV. The minority interest was acquired for $250,000 in cash, which
approximated the book value of the minority interest on the acquisition date.
Subsequent to the acquisition, the Company also repaid the principal of the $3.0
million loan to an affiliate of the former joint venture partner in BPNV and
wrote off approximately $368,000 of forgiven accrued interest. The Company now
owns 100% of BPNV.
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(TM) (the "Joint Venture"). The Joint Venture
is developing, marketing and selling 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. During the year ended April
1, 2001, the Company made an initial cash capital contribution to the Joint
Venture of approximately $3.2 million, in exchange for a 51% ownership interest
in the Joint Venture. 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.
The Company has historically experienced and expects to continue to
experience seasonal fluctuations in its gross revenues and net earnings. This
seasonality may cause significant fluctuations in the quarterly operating
results of the Company, with the majority of the Company's gross revenues and
net earnings historically occurring in the first and second quarters of the
fiscal year. As the Company's timeshare revenues grow as a percentage of total
revenues, the Company believes that the fluctuations in revenues due to
seasonality may be mitigated in part. In addition, other material fluctuations
in operating results may occur due to the timing of development and the
Company's use of the percentage-of-completion method of accounting. Management
expects that the Company will continue to invest in projects that will require
substantial development (with significant capital requirements). There can be no
assurances that historical seasonal trends in quarterly revenues and earnings
will continue or be mitigated by the Company's efforts.
The Company believes that inflation and changing prices have not had a
material impact on its revenues and results of operations during any of the
three years ended April 1, 2001. 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 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. The results of operations from sales of remaining
factory-built manufactured home/lot packages and undeveloped lots, previously
managed under the Company's Communities Division, have been combined with the
results of operations of the Residential Land and Golf Division in the prior
periods, due to immateriality.
Inventory is carried at the lower of cost, including costs of improvements
and amenities, incurred subsequent to acquisition, or fair value, net of costs
to dispose (see Note 1 of Notes to Consolidated Financial Statements).
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
24
would be less than expected and earnings would be charged in the future when the
retained interests are realized, except for the effect of reduced interest
accretion on the Company's retained interest, which would be recognized each
period the retained interests are held. If actual defaults or other factors
discussed above with respect to loans sold are greater than estimated,
charge-offs would exceed previously estimated amounts and earnings would be
charged in the future when the retained interests are realized. Declines in the
fair value of the retained interests that are determined to be other than
temporary are charged to operations. 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.
Results of Operations
(in thousands) Residential
Resorts Land and Golf Total
--------------------- --------------------- ---------------------
Year Ended March 28, 1999
- -------------------------
Sales $ 103,127 100.0% $ 122,689 100.0% $ 225,816 100.0%
Cost of sales (1) (25,013) (24.3)% (56,482) (46.0)% (81,495) (36.1)%
--------- ------- --------- ------- --------- -------
Gross profit 78,114 75.7% 66,207 54.0% 144,321 63.9%
Other resort and golf operations revenues 13,825 13.4% 1,056 0.9% 14,881 6.6%
Cost of resort and golf operations (14,197) (13.8)% (1,780) (1.5)% (15,977) (7.1)%
Field selling, general and administrative
expenses (2) (65,870) (63.9)% (33,617) (27.4)% (99,487) (44.1)%
--------- ------- --------- ------- --------- -------
Field operating profit $ 11,872 11.5% $ 31,866 26.0% $ 43,738 19.4%
========= ======= ========= ======= ========= =======
Year Ended April 2, 2000
- ------------------------
Sales $ 117,271 100.0% $ 97,217 100.0% $ 214,488 100.0%
Cost of sales (1) (27,374) (23.3)% (47,583) (48.9)% (74,957) (34.9)%
--------- ------- --------- ------- --------- -------
Gross profit 89,897 76.7% 49,634 51.1% 139,531 65.1%
Other resort and golf operations revenues 19,038 16.2% 2,707 2.8% 21,745 10.1%
Cost of resort and golf operations (17,112) (14.6)% (3,836) (4.0)% (20,948) (9.8)%
Field selling, general and administrative
expenses (2) (84,413) (72.0)% (25,918) (26.7)% (110,331) (51.4)%
--------- ------- --------- ------- --------- -------
Field operating profit $ 7,410 6.3% $ 22,587 23.2% $ 29,997 14.0%
========= ======= ========= ======= ========= =======
Year Ended April 1, 2001
- ------------------------
Sales $ 137,411 100.0% $ 88,899 100.0% $ 226,310 100.0%
Cost of sales (1) (31,049) (22.6)% (47,746) (53.7)% (78,795) (34.8)%
--------- ------- --------- ------- --------- -------
Gross profit 106,362 77.4% 41,153 46.3% 147,515 65.2%
Other resort and golf operations revenues 26,326 19.2% 1,887 2.1% 28,213 12.5%
Cost of resort and golf operations (22,068) (16.1)% (2,883) (3.2)% (24,951) (11.1)%
Field selling, general and administrative
expenses (2) (100,896) (73.4)% (27,166) (30.6)% (128,062) (56.6)%
--------- ------- --------- ------- --------- -------
Field operating profit $ 9,724 7.1% $ 12,991 14.6% $ 22,715 10.0%
========= ======= ========= ======= ========= =======
(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 $15.2 million, $18.7 million and $20.5 million for 1999,
2000 and 2001, respectively.
Sales
Consolidated sales were $225.8 million for the year ended March 28, 1999
("fiscal 1999"), $214.5 million for the year ended April 2, 2000 ("fiscal 2000")
and $226.3 million for the year ended April 1, 2001 ("fiscal 2001"),
representing a decrease of 5.0% from fiscal 1999 to fiscal 2000 and an increase
of 5.5% from fiscal 2000 to fiscal 2001.
Resorts Division
During fiscal 1999, fiscal 2000 and fiscal 2001, sales of Timeshare
Interests contributed $103.1 million or 46%, $117.3 million or 55% and $137.4
million or 61%, respectively, of the Company's total consolidated sales.
The following table sets forth certain information for sales of Timeshare
Interests for the periods indicated, before giving effect to the
percentage-of-completion method of accounting.
25
Years Ended,
----------------------------------------
March 28, April 2, April 1,
1999 2000 2001
---- ---- ----
Number of Timeshare Interests sold 11,764 12,547 14,775
Average sales price per Timeshare Interests $8,787 $9,061 $9,368
Gross margin 76% 77% 77%
The increase in the number of Timeshare Interests sold during fiscal 2000
as compared to fiscal 1999 is primarily due to the Company's Bluegreen Air(TM)
offsite sales offices (i.e., not located onsite at one of the Company's
resorts). In fiscal 2000, the Bluegreen Air(TM) offsite sales offices served the
Louisville, Kentucky; Cleveland, Ohio; and Detroit, Michigan markets and
provided 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 385 Timeshare Interest sales during the
start-up phase. Same location sales increased by 1,230 Timeshare Interests sold
at the Louisville and Cleveland sites due to the success of the sales concept
and the maturation of the offices. Overall, the Bluegreen Air(TM) sales offices
generated an additional 1,615 Timeshare Interest sales during fiscal 2000 as
compared to fiscal 1999.
These increases during fiscal 2000 were partially offset by net decreases
at the Company's Aruba and other existing sales locations. The Company's La
Cabana Beach and Racquet Club(TM) sales office in Aruba experienced a decrease
of 665 in the number of Timeshare Interests sold (1,835 and 1,170 Timeshare
Interests sold during fiscal 1999 and 2000, respectively). The resort
experienced a slowdown in operations during fiscal 2000 as a result of
transitioning its sales staff from an employee leasing arrangement to permanent
employee status, which resulted in attrition among the sales force. New sales
personnel have since been hired to replace those who left during the transition.
In addition, a decreased amount of available Timeshare Interests related to
summer weeks contributed to decreased sales during the summer months (as buyers
in Aruba tend to want to buy Timeshare Interests related to the same period that
they are currently there on vacation). The Company is reviewing its pricing of
non-summer weeks and is considering the implementation of the Bluegreen Vacation
Club(TM) at the Aruba sales office in order to eliminate the summer inventory
issue. There can be no guarantees that pricing changes will have a positive
impact on sales or that the Company will be able to successfully implement the
Bluegreen Vacation Club(TM) at La Cabana(TM).
The remaining offsetting decreases at the Company's other existing sales
offices during fiscal 2000 were due to the adverse impact of Hurricanes Dennis
and Floyd on vacation traffic and therefore sales tour flow. Also, inconsistent
methods of selling the Bluegreen Vacation Club(TM) product, customer service
issues and the adverse effects during the transition period of a reorganization
of the Resorts Division's regional management structure in order to better
position the Company for future growth had an adverse impact on sales during
fiscal 2000. These factors caused lower prospect-to-sale conversion rates and
higher cancellation rates during fiscal 2000, and therefore lower sales and
higher marketing costs. The Company has taken steps to make the Bluegreen
Vacation Club(TM) sales process and pricing more uniform throughout the
organization and has implemented a formal customer service initiative.
The increase in the number of timeshare sales transactions during fiscal
2001 as compared to fiscal 2000 is primarily due to the fiscal 2000 opening of
the Company's Bluegreen Air(TM) offsite sales office serving the Detroit,
Michigan market. The Detroit sales office generated 386 and 1,373 timeshare
sales transactions during fiscal 2000 and fiscal 2001, respectively.
In addition, the Company's MountainLoft(TM) resort sales office in
Gatlinburg, Tennessee generated 595 more timeshare sales transactions during
fiscal 2001 as compared to fiscal 2000, due to a 28% increase in prospective
buyers touring the property combined with a 3%-point increase in the sales
office's prospect-to-tour conversion percentage. Also, the Company's Lodge Alley
Inn(TM) sales office in Charleston, South Carolina generated 299 more sales
during fiscal 2001 as compared to fiscal 2000, due to a 43% increase in
prospective buyers touring the property combined with a 3%-point increase in the
sales office's prospect-to-tour conversion percentage. The Falls Village(TM)
resort generated 281 more sales during fiscal 2001 as compared to fiscal 2000,
due to a 9% increase in prospective buyers touring the property combined with a
2%-point increase in the sales office's prospect-to-tour conversion percentage.
These increases are attributed to the implementation of an improved sales
process relative to the Bluegreen Vacation Club(TM) product and more effective
marketing programs.
26
Finally, the opening of the Company's 51%-owned Big Cedar Wilderness
Club(TM) resort adjacent to the Big Cedar Lodge in Ridgedale, Missouri,
contributed to the overall increase in the number of Timeshare Interests sold
during fiscal 2001.
The increase in average sales price during fiscal 2000 as compared to
fiscal 1999 was primarily due to sales of Timeshare Interests in the Company's
Lodge Alley Inn(TM) and Orlando's Sunshine II(TM) resorts, which generated
average sales prices of $12,311 and $11,515, respectively.
The increase in average sales price during fiscal 2001 as compared to
fiscal 2000 was primarily due to an across-the-board price increase per
Bluegreen Vacation Club(TM) point sold and efforts to better manage sales of and
the pricing of biennial Timeshare Interests as compared to full Timeshare
Interests.
Gross profit from other resort services increased 618% during fiscal 2000
as compared to fiscal 1999. The increase was due to increased profits generated
by Resort Title Agency(TM), Inc. ("Title"), the Company's wholly-owned title
company. Title's operating profit increased $1.2 million during fiscal 2000
primarily due to the fact that all Bluegreen Vacation Club(TM) sales are now
processed through Title (in fiscal 1999 not all sales were Bluegreen Vacation
Club(TM) sales - in fiscal 2000, all sales except those in Aruba were Bluegreen
Vacation Club(TM) sales). Also, the Company recognized an additional $600,000 of
operating profit related to management and reservation fee income earned for
services provided to Bluegreen Vacation Club(TM) members.
Gross profit from other resort services increased 121% during fiscal 2001
as compared to fiscal 2000. The primary reason was that the Company's cost of
subsidizing the property owners' associations which maintain our resort
properties, net of any rental income that was derived from renting timeshare
intervals and a pro-rata maintenance fee charged to each new timeshare buyer,
decreased $1.4 million, primarily as a result of the maturation of the Company's
resorts Also, revenues generated by Title increased commensurate with the
increase in Timeshare Interest sales, as Title earns closing cost fees on every
Timeshare Interest sold by the Company. In addition, the increased membership in
the Bluegreen Vacation Club(TM) as a result of new Timeshare Interests sold in
fiscal 2001 caused the Company's profits from managing the club to increase
approximately $400,000.
The increase in field selling, general and administrative expenses as a
percentage of sales during fiscal 2000 as compared to fiscal 1999 was due to the
lower prospect-to-sales conversion rates and the costs of the Aruba sales force
transition, discussed above.
The 1.4%-point increase in field selling, general and administrative
expenses as a percentage of sales during fiscal 2001 as compared to fiscal 2000
was due primarily to increased selling and marketing costs in the Bluegreen
Air(TM) offsite sales offices. The Bluegreen Air(TM) selling and marketing costs
increased from 71% to 77% of the related sales during fiscal 2000 and fiscal
2001, respectively, and are primarily due to higher costs per prospect and lower
prospect-to-sale conversion ratios in these offsite markets. The Company has
made a change in the senior management of these offsite sales offices and is
currently reviewing its overall offsite strategy. On November 11, 2000, the
Company closed the Bluegreen Air(TM) off-site sales office serving the
Louisville, Kentucky market. The Louisville office generated a field operating
loss of $798,000 during fiscal 2001. The Company has adopted a plan which is
intended to improve the efficiencies of its marketing programs within the
Resorts Division, including but not limited to fully implementing its marketing
agreement with Bass Pro (see Note 3 of Notes to Consolidated Financial
Statements), the centralization of most resort marketing operations at the
Company's headquarters, the continued centralization of the Company's
telemarketing operations in South Florida, the implementation of a centralized
resort marketing customer relationship management system, continuing to monitor
and, if necessary, eliminate marginally performing sales operations and
implementing a Company-wide initiative to reduce costs and increase efficiency
in all areas. Many portions of the plan have already been implemented including
the opening of centralized resort telemarketing operations near the Company's
headquarters, the centralization of sales management under a national director
of sales and the Company-wide cost reduction initiative. There can be no
assurances that the Company's efforts in this regard will be successful or that
selling and marketing expenses for the Resorts Division will not continue to
increase as a percentage of sales in the near term.
Residential Land and Golf Division
During fiscal 1999, 2000 and 2001, residential land and golf sales
contributed $122.7 million or 54%, $97.2 million or 45% and $88.9 million or
39%, respectively, of the Company's total consolidated sales.
27
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 excluding sales of bulk parcels.
Years Ended,
------------------------------------
March 28, April 2, April 1,
1999 2000 2001
---- ---- ----
Number of parcels sold 2,380 1,846 1,614
Average sales price per parcel $47,721 $49,741 $57,191
Gross margin 54% 51% 46%
The aggregate number of parcels sold decreased during fiscal 2000 as
compared to fiscal 1999 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 1999 or 2000 or which are approaching sell-out in areas of
the country where the Company has chosen to minimize residential land and golf
operations. These areas include Florida, Tennessee, Wisconsin, Colorado,
Arizona, and New Mexico. This factor resulted in 430 fewer lot sales in fiscal
2000 as compared to fiscal 1999. 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 Dallas, Texas
region generated 134 fewer lot sales in fiscal 2000 due to the sell-out of
certain properties during the beginning of fiscal 2000. On September 14, 1999,
the Dallas region acquired an additional 1,550 acres of land adjacent to the
Company's successful Lake Ridge(TM) residential land project in order to replace
these sales and generate sales growth in the region. Sales commenced at this new
project during fiscal 2001.. The Company's Winding River Plantation(TM) golf
community generated 62 fewer lot sales in fiscal 2000, primarily due to the
impact of Hurricanes Dennis and Floyd on sales tour flow. The above decreases
were partially offset by sales in projects that opened in fiscal 2000 in the
Company's Texas Hill Country region.
Included in the fiscal 2000 results of operations is a bulk sale of land
and mineral rights in Colorado to a developer of oil and gas rights, which
contributed approximately $5.0 million and $4.3 million to Residential Land and
Golf Division sales and field operating profit, respectively.
The aggregate number of parcels sold decreased during fiscal 2001 as
compared to fiscal 2000 due primarily to decreases in available inventories due,
in part, to a strategic decision not to replace certain properties which either
sold out in fiscal 2000 or which are approaching sell-out in areas of the
country where the Company has chosen to exit. These areas include Florida,
Tennessee, Wisconsin, Colorado, Arizona, and New Mexico. This factor resulted in
266 fewer lot sales during fiscal 2001 as compared to fiscal 2000.
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 continued expansion into the
California market. During fiscal 2001, the Company's golf communities and Texas
regions comprised approximately 33% and 56%, respectively, of the Company's
total Residential Land & Golf sales. The Company added Brickshire(TM), a golf
community located in New Kent County, Virginia, to its golf community offerings
during the second half of fiscal 2000. Brickshire(TM) features an 18-hole,
championship golf course designed by Curtis Strange and generated $8.2 million
in sales (before considering the impact of percentage-of-completion accounting)
during fiscal 2001. During November 2000, the Company acquired 597 acres of land
outside of Chapel Hill, North Carolina, upon which the 516 lots that will
comprise The Preserve at Jordan Lake(TM) will be developed. The Preserve will
surround an 18-hole, Davis Love III signature championship golf course. The
Preserve opened for sales during December 2000, and generated $9.8 million in
sales (before considering the impact of percentage-of-completion accounting)
during the four months of fiscal 2001 that it was open.
In December 2000, the Company acquired approximately 2300 acres near San
Diego, California, representing the Company's first acquisition in the
California market. This property was acquired for $4.6 million in cash,
including acquisition costs. The Company expects that this project will commence
sales during fiscal 2002.
The decrease in gross margin during fiscal 2000 as compared to fiscal 1999
was primarily due to the fiscal 1999 sellout of the Company's Ranches of
Sonterra(TM) property in Ruidoso, New Mexico, a project which yielded a 62.4%
margin during fiscal 1999. In addition, certain projects which are approaching
sellout in the Company's
28
Texas and Colorado regions yielded gross margins in the 20% to 30% range in
fiscal 2000 as compared to the 45% to 55% range in fiscal 1999 due to a lower
number of premium lots (e.g., waterfront, views, etc.) being available for sale
during fiscal 2000 and price decreases instituted to promote sellout.
The decrease in gross margin during fiscal 2001 as compared to fiscal 2000
was primarily due to the impact of the sale of mineral rights and related land
in Colorado to a developer of oil and gas rights, which accounted for $5.0
million of sales and $4.6 million in gross profit in fiscal 2000. Excluding this
one-time transaction, Residential Land and Golf Division gross margins would
have been 49% during fiscal 2000. In addition, gross margins were adversely
impacted by unanticipated additional road work, the costs of which are being
directly expensed in cost of sales, in the Company's Crystal Cove(TM) project in
Tennessee.
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 generated revenues and related costs for the first time
during fiscal 1999 and the net loss from these operations increased 55.9%,
during fiscal 2000 as compared to fiscal 1999. The Company opened the first 18
holes of its Carolina National Golf Course(TM) ("Carolina National(TM)") for
play in July 1998. In fiscal 2000, the Company opened another nine holes at
Carolina National(TM) along with a new clubhouse, featuring food and beverage
operations and an expanded pro shop. Startup losses from the new amenities
contributed to the increased loss in fiscal 2000.
The gross loss from golf operations decreased 11.8% during fiscal 2001 as
compared to fiscal 2000, due to decreased start-up losses from the operations at
Carolina National(TM).
Interest Income
Interest income was $14.8 million, $15.7 million and $17.3 million for
fiscal 1999, 2000 and 2001, 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 fiscal 2000 was primarily due to an increase
in the average notes receivable balance due to increased timeshare sales plus
increased interest accretion on securities retained from the sale of timeshare
notes receivable. The increase in interest income during fiscal 2001 was
primarily due to an increase in the average notes receivable balance during
fiscal 2001, as compared to fiscal 2000. The increase was primarily due to the
fact that the Company's new timeshare receivables purchase facility (see
"Liquidity and Capital Resources") was not executed as of the end of the second
quarter of fiscal 2001, and therefore the Company did not sell any receivables
during the first half of fiscal 2001, thus generating more interest income from
higher average notes receivable balances.
Gain on Sale of Notes Receivable and Other Income
In fiscal 1999, 2000 and 2001, the Company recognized $3.7 million, $2.1
million and $3.3 million in gains, respectively, on the sale of timeshare notes
receivable pursuant to timeshare receivables purchase facilities in place during
the respective periods (the current timeshare receivables purchase facility is
more fully described below under "Credit Facilities for Timeshare Receivables
and Inventories"). The amount of gain decreased in 2000 and increased in 2001
commensurate with the amount of receivables sold.
Other income was $522,000, $735,000 and $572,000 during fiscal 1999, 2000
and 2001, respectively, and was less than 1% of total revenues in each fiscal
year.
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 $114.7 million, $129.0 million and $148.6
million for fiscal 1999, 2000 and 2001, respectively. As a percentage of total
revenues, S, G & A Expenses were 44.1% for fiscal 1999, 50.7% for fiscal 2000
and 53.9% for fiscal 2001.
29
The increases in S, G & A Expenses as a percentage of revenues in fiscal
2000 and fiscal 2001 were largely the result of higher S, G & A Expenses for the
Resorts Division (due to reasons previously discussed under "Resorts Division")
as well as higher corporate general and administrative expenses. In fiscal 2000,
growth in the information systems area as well as increased facilities and
depreciation expense to support the future growth of the Company resulted in
higher expenses. In fiscal 2001, increased fees related to the Company's
timeshare receivables purchase facilities, higher depreciation due to increased
investment in technology and other fixed assets and higher legal expenses
related to defending certain litigation described more fully under Item 3 "Legal
Proceedings" all contributed to the increase in corporate overhead.
Interest Expense
Interest expense totaled $12.9 million, $13.8 million and $15.5 million for
fiscal 1999, fiscal 2000 and fiscal 2001, respectively. The 7.0% increase in
interest expense in fiscal 2000 was due to an increase in the average debt
balance outstanding from $175.2 million in fiscal 1999 to $202.7 million in
fiscal 2000. This increase was primarily due to interest incurred on
approximately $53.8 million of acquisition and development borrowings incurred
during the second and third fiscal quarters of fiscal 2000. This increased
interest expense incurred was partially offset by an increased amount of
interest capitalized into the carrying cost of the Company's inventory during
fiscal 2000 commensurate with the increased inventory balances during the
period. The 11.9% increase in fiscal 2001 was due to increased interest expense
from the hypothecation of receivables during the first half of fiscal 2001
pending the first sale of timeshare receivables under the Company's timeshare
receivables purchase facility entered into during September 2000 (see "Liquidity
and Capital Resources"). The majority of this hypothecation interest expense was
offset by increased interest income earned on the timeshare receivables held.
The effective cost of borrowing (when adding back capitalized interest) was
10.0%, 9.8% and 9.5% for fiscal 1999, fiscal 2000 and fiscal 2001, respectively.
Provision for Loan Losses
The allowance for loan losses by division as of April 2, 2000 and April 1,
2001 was (amounts in thousands):
Resorts Residential Land
Division and Golf Division Other Total
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%
======== ======== ======== ========
April 1, 2001
- -------------
Notes receivable $64,245 $9,001 $5,136 $78,382
Less: allowance for loan losses (3,058) (416) (112) (3,586)
-------- -------- -------- --------
Notes receivable, net $61,187 $8,585 $5,024 $74,796
======== ======== ======== ========
Allowance as a % of gross notes receivable 4.8% 4.6% 2.2% 4.6%
======== ======== ======== ========
The Company recorded provisions for loan losses totaling $2.8 million, $5.3
million and $4.9 million during fiscal 1999, fiscal 2000 and fiscal 2001,
respectively. The 93.8% increase in the provision during fiscal 2000 from fiscal
1999 was due in part to the overall 10% increase in the notes receivable
portfolio. The increase in the provision is also due to increased timeshare
sales, and therefore increased timeshare loans (where historical default rates
exceed those for land loans). The 8.4% decrease in the provision during fiscal
2001 as compared to fiscal 2000 was due to increased, non-recourse sales of
notes receivable pursuant to the Company's timeshare receivables purchase
facility during fiscal 2001 as compared to fiscal 2000 (see "Liquidity and
Capital Resources").
Other notes receivable primarily includes a $4.7 million loan to Napa
Partners, LLC ("Napa"), a real estate company in Napa, California (the "Napa
Loan"). Napa used the proceeds to acquire approximately 32 acres of undeveloped
land in Napa, California, which is zoned for mixed use as a timeshare resort,
hotel and commercial property. On January 4, 2001, Napa repaid approximately
$68,000 in principal of the Napa Loan. In May 2001,
30
Napa repaid the remaining outstanding principal balance on the Napa Loan and all
accrued interest. The remaining balance of other notes receivable primarily
consists of secured promissory notes receivable from commercial enterprises upon
their purchase of bulk parcels from the Company's Residential Land and Golf and
Communities Divisions. 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 as a percentage of income before taxes was
39.5%, 38.4% and 38.5% during fiscal 1999, fiscal 2000 and fiscal 2001,
respectively. The decrease in fiscal 2000 was primarily due to state tax savings
generated by a restructuring of subsidiaries in a state where the Company has
significant operations.
Extraordinary Item
The Company recognized a $1.7 million extraordinary loss on early
extinguishment of debt, net of taxes, during fiscal 1999 (see further discussion
under "Liquidity and Capital Resources - Note Offering").
Summary
Based on the factors discussed above, the Company's net income decreased
from $17.0 million in fiscal 1999 to $6.8 million in fiscal 2000 and to $2.7
million in fiscal 2001.
Changes in Financial Condition
Consolidated assets of the Company increased $5.7 million from $414.0
million at April 2, 2000 to $419.7 million at April 1, 2001. This increase was
due to an increase in contracts receivable of $10.6 million due to higher
Residential Land and Golf division sales during the fourth quarter of fiscal
2001 as compared to the fourth quarter of fiscal 2000. Prepaid expenses
increased $8.6 million due to the $9.0 million prepaid marketing fees paid to
Bass Pro, Inc. (see Note 3 of Notes to Consolidated Financial Statements).
Investments in securities increased $4.6 million due to additional residual
interests in timeshare receivables portfolios sold during fiscal 2001. Property
and equipment increased $6.1 million due primarily due to additional development
spending on the Company's golf courses and additional technology purchases.
These increases were partially offset by a $25.5 million decrease in cash and
cash equivalents, more fully described in the Consolidated Statement of Cash
Flows included in the Consolidated Financial Statements contained elsewhere
herein.
Consolidated liabilities increased $879,000 from $279.2 million at April 2,
2000 to $280.1 million at April 1, 2001. The increase was primarily due to a
$2.6 million increase in accounts payable, a $2.4 million increase in deferred
income (due primarily to income deferred on the Company's new project near
Chapel Hill, North Carolina, The Preserve at Jordan Lake(TM)) and a $6.2 million
increase in deferred taxes as a result of the increased impact of installment
sales income from the Company's Resorts Division. These increases were partially
offset by a $2.5 million decrease in receivable-backed debt due to payments made
on timeshare hypothecation lines in connection with the sales of the underlying
notes. In addition, lines-of-credit and notes payable decreased $7.4 million due
to lot/interval release payments made on acquisition and development
lines-of-credit during fiscal 2001.
Total shareholders' equity increased $2.7 million during fiscal 2001,
primarily due to net income during the year. The Company's book value per common
share increased from $5.50 to $5.65 and its debt-to-equity ratio decreased from
1.70:1 to 1.59:1 at April 2, 2000 and April 1, 2001, respectively.
Liquidity and Capital Resources
The Company's capital resources are provided from both internal and
external sources. The Company's primary capital resources from internal
operations are: (i) cash sales, (ii) down payments on 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
31
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.
Note Offering
On April 1, 1998, the Company consummated a Rule 144A private placement
offering (the "Offering") of $110.0 million in aggregate principal amount of
10.5% senior secured notes due April 1, 2008 (the "Notes"). The net proceeds of
the Offering were approximately $106.3 million. In connection with the Offering,
the Company repaid the $22.1 million of short-term borrowings from the two
investment banking firms that were the initial purchasers of the Notes,
approximately $28.9 million of line-of-credit and notes payable balances and
approximately $36.3 million of the Company's receivable-backed notes payable. In
addition, the Company paid aggregate accrued interest on the repaid debt of
approximately $1.0 million and $2.7 million of prepayment penalties. The
remaining net proceeds of the Offering were used to repay other obligations of
the Company and for working capital purposes (see Note 10 of Notes to
Consolidated Financial Statements).
Credit Facilities for Timeshare Receivables and Inventories
The Company maintains various credit facilities with financial institutions
that provide for receivable financing for its timeshare projects.
In September 2000, the Company executed agreements for a new timeshare
receivables purchase facility (the "Purchase Facility") with two financial
institutions, including a commercial paper conduit (the "Senior Purchaser") and
the institution that underwrote the Company's immediately prior timeshare
receivables purchase facility (the "Subordinated Purchaser") (collectively, the
"Purchasers"). The Purchase Facility utilizes an owner's trust structure,
pursuant to which the Company sells receivables to a special purpose finance
subsidiary of the Company (the "Subsidiary") and the Subsidiary sells the
receivables to an owner's trust without recourse except for breaches of
customary representations and warranties at the time of sale. Pursuant to the
agreements that constitute the Purchase Facility (collectively, the "Purchase
Facility Agreements"), the Subsidiary may receive up to $90 million of
cumulative purchase price (as more fully described below) on sales of timeshare
receivables to the owner's trust in transactions through October 16, 2001. The
Purchase Facility includes a provision for a $50 million extension, if so
requested by the Company and at the Purchasers' sole discretion and approval.
The Purchase Facility has detailed requirements with respect to the eligibility
of receivables for purchase. Under the Purchase Facility, a purchase price equal
to 95.00% (subject to adjustment in 0.50% increments down to 87.50% depending on
the difference between the weighted-average interest rate on the notes
receivable sold and the sum of the returns to the Purchasers plus the servicing
fee, as more fully defined below) of the principal balance of the receivables
sold will be paid at closing in cash. For eligible notes generated by Bluegreen
Properties N.V.(TM), the Company's subsidiary in Aruba, the purchase price paid
in cash at closing is equal to 85.00% (subject to adjustment in 0.50% increments
down to 77.00% depending on the difference between the weighted-average interest
rate on the notes receivable sold and the sum of the returns to the Purchasers
plus the servicing fee) of the principal balance of the receivables sold. The
balance of the purchase price will be deferred until such time as the Purchasers
have received a specified return, all servicing, custodial and similar fees and
expenses have been paid and a cash reserve account has been funded. The 95.00%
purchase price shall be funded 71.58% by the Senior Purchaser and 28.42% by the
Subordinated Purchaser. For the Aruba receivables, the 85.00% purchase price
shall be funded 70.00% by the Senior Purchaser and 30.00% by the Subordinated
Purchaser. The Senior Purchaser shall earn a return equal to the rate equivalent
to its borrowing cost (based on then applicable commercial paper rates) plus
0.60%, subject to use of alternate return rates in certain circumstances. The
Subordinated Purchaser shall earn a return equal to one-month LIBOR plus 4.00%,
subject to use of alternate return rates in certain circumstances. The
Subsidiary is required to purchase an interest rate cap agreement in connection
with each sale under the Purchase Facility, in order to reduce interest rate
risk and protect the cash flows to the Purchasers. In addition to other fees, if
the Subsidiary does not sell during the term of the Purchase Facility notes
receivable with a cumulative purchase price of at least $70 million, the Company
will pay to the Purchasers a fee equal to 1.5% of the shortfall in the
cumulative purchase price. The Purchase Facility is renewable for an additional
364-day revolving period thereafter subject to the consent of the Purchasers.
32
The Purchasers' obligation to purchase under the Purchase Facility will
terminate upon the occurrence of specified events. The Company acts as servicer
under the Purchase Facility for a fee, and is required to make advances to the
Purchasers to the extent it believes such advances will be recoverable. The
Purchase Facility Agreement includes various conditions to purchase, covenants,
trigger events and other provisions customary for a transaction of this type.
On October 16, 2000, the Subsidiary sold $31.8 million of timeshare
receivables under the Purchase Facility. Gross proceeds from the sale of these
receivables were approximately $30.1 million, of which $15.8 million was used to
pay down the Warehouse Facility (see below). The Company recognized a $1.3
million gain on the sale of the receivables, recorded a $3.0 million retained
interest and recorded a $236,000 servicing asset.
On December 27, 2000, the Subsidiary sold $30.9 million of timeshare
receivables under the Purchase Facility. Gross proceeds on the sale of these
receivables were approximately $29.2 million, of which $8.3 million was used to
pay down the Warehouse Facility (see below). The Company recognized a $1.4
million gain on the sale of the receivables, recorded a $3.1 million retained
interest and recorded a $244,000 servicing asset.
On March 13, 2001, the Subsidiary sold $15.1 million of timeshare
receivables under the Purchase Facility. Gross proceeds on the sale of these
receivables were approximately $14.0 million, of which $981,000 was used to pay
down the Warehouse Facility (see below). The Company recognized a $582,000 gain
on the sale of the receivables, recorded a $1.8 million retained interest and
recorded an $113,000 servicing asset.
The Company has approximately $17.0 million of aggregate principal balance
of timeshare notes receivable available for future sales under the Purchase
Facility. The Company anticipates that it will be necessary to enter into a new
facility during fiscal 2002. The Company is currently negotiating new timeshare
receivables purchase facilities with two financial institutions. There can be no
assurances that the Company's negotiations will result in the Company obtaining
either or both facilities on acceptable terms to the Company, if at all.
The Company has a timeshare receivables warehouse loan facility, which
expires on October 16, 2001, with the Subordinated Purchaser (the "Warehouse
Facility"). Loans under the Warehouse Facility bear interest at LIBOR plus 3%.
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. (TM), for which the borrowing base
is 85%. The Warehouse Facility includes affirmative, negative and financial
covenants and events of default. During the year ended April 1, 2001, the
Company borrowed an aggregate $31.3 million in various increments from
time-to-time under the Warehouse Facility, of which the Company repaid an
aggregate $31.5 million by using cash generated from principal and interest
payments on the underlying loans and proceeds from the sale of the underlying
receivables. The remaining balance of the Warehouse Facility, as well as any
such future borrowings, will be repaid as principal and interest payments are
collected on the timeshare notes receivable which collateralize the loan or as
the loans are sold through the Purchase Facility, but in no event later than
October 16, 2001. The maximum principal amount that may be outstanding
prospectively under the Warehouse Facility is $15.0 million. As of April 1,
2001, the outstanding balance on the Warehouse Facility was $1.4 million. The
Company is currently negotiating an increased facility with an extended
expiration date with the Subordinated Purchaser. There can be no assurances that
such a facility will be obtained with the Subordinated Purchaser or another
lender at terms acceptable to the Company.
In addition, the Subordinated Purchaser has provided the Company with a
$28.0 million acquisition and development facility for its timeshare inventories
(the "A&D Facility"). The draw down period on the A&D Facility has expired and
outstanding borrowings under the A&D Facility mature no later than January 2006.
Principal will be repaid through agreed-upon release prices as Timeshare
Interests are sold at the financed resort, subject to minimum required
amortization. The indebtedness under the facility bears interest at LIBOR plus
3%. On September 14, 1999, the Company borrowed approximately $14.0 million
under the A&D facility. The outstanding principal must be repaid by November 1,
2005, through agreed-upon release prices as Timeshare Interests in the Company's
Lodge Alley Inn(TM) resort in Charleston, South Carolina are sold, subject to
minimum required amortization. On December 20, 1999, the Company borrowed
approximately $13.9 million under the acquisition and development facility. The
principal must be repaid by January 1, 2006, through agreed-upon release prices
as Timeshare Interests in the Company's Shore Crest II(TM) resort are sold,
subject to minimum required amortization. The outstanding balance under the A&D
Facility at April 1, 2001 was $17.8 million. The Company is currently
negotiating an extension and increase of the A&D Facility. There can be no
assurances that the Company's negotiations will be successful.
33
Credit Facilities for Residential Land and Golf Receivables and Inventories
The Company has a $30.0 million revolving credit facility with a financial
institution for the pledge of Residential Land and Golf Division receivables,
with up to $10 million of the total facility available for Land and Golf
Division inventory borrowings. The interest rate charged on outstanding
borrowings ranges from prime plus 0.5% to 1.0%, with 8.0% being the minimum
interest rate for inventory borrowings. At April 1, 2001, the outstanding
principal balance under this facility was approximately $6.0 million, all of
which related to receivables borrowings. All principal and interest payments
received on pledged receivables are applied to principal and interest due under
the facility. The ability to borrow under the facility expires on December 31,
2003. Any outstanding indebtedness is due on December 31, 2005.
The Company has a $35.0 million revolving credit facility, which expires in
March 2002, with a financial institution. The Company uses this facility to
finance the acquisition and development of residential land projects and,
potentially, to finance land receivables. The facility is secured by the real
property (and personal property related thereto) with respect to which
borrowings are made, with the lender required to advance up to a specified
percentage of the value of the mortgaged property and eligible pledged
receivables, provided that the maximum outstanding amount secured by pledged
receivables may not exceed $20.0 million. The interest charged on outstanding
borrowings is prime plus 1.25%. On September 14, 1999, in connection with the
acquisition of 1,550 acres adjacent to the Company's Lake Ridge at Joe Pool
Lake(TM) residential land project in Dallas, Texas ("Lake Ridge II"), the
Company borrowed approximately $12.0 million under the revolving credit
facility. Principal payments are effected through agreed-upon release prices as
lots in Lake Ridge II and in another recently purchased section of Lake Ridge
are sold. The principal must be repaid by September 14, 2004. On October 6,
1999, in connection with the acquisition of 6,966 acres for the Company's Mystic
Shores(TM) residential land project in Canyon Lake, Texas, the Company borrowed
$11.9 million under the revolving credit facility. On May 5, 2000, the Company
borrowed an additional $2.1 million under this facility in order to purchase an
additional 435 acres for the Mystic Shores(TM) project. Principal payments are
effected through agreed-upon release prices as lots in Mystic Shores(TM) are
sold. The principal under the $11.9 million and $2.1 million loans for Mystic
Shores(TM) must be repaid by October 6, 2004 and May 5, 2004, respectively. The
aggregate outstanding balance on the Revolving Credit Facility was $22.1 million
at April 1, 2001.
On September 24, 1999, the Company obtained two lines-of-credit with a bank
for the purpose of acquiring and developing a new residential land and golf
course community in New Kent County, Virginia, known as Brickshire(TM). The
lines-of-credit have an aggregate borrowing capacity of approximately $15.8
million. On September 27, 1999, the Company borrowed approximately $2.0 million
under one of the lines-of-credit in connection with the acquisition of the
Brickshire(TM) property. During December 2000, the Company borrowed an
additional $2.0 million under the lines-of-credit. The outstanding balances
under the lines-of-credit bear interest at prime plus 0.5% and interest is due
monthly. Principal payments are effected through agreed-upon release prices as
lots in Brickshire(TM) are sold, subject to minimum required quarterly
amortization commencing on April 30, 2002. All borrowings under the
lines-of-credit must be repaid by January 31, 2004. The loan is secured by the
Company's residential land lot inventory in Brickshire(TM). As of April 1, 2001,
the outstanding principal balance on the lines-of-credit was $675,000.
Concurrent with obtaining the Brickshire(TM) lines-of-credit discussed
above; the Company also obtained from the same bank a $4.2 million
line-of-credit for the purpose of developing a golf course on the Brickshire(TM)
property (the "Golf Course Loan"). In December 2000, the Company borrowed $2.6
million under the Golf Course Loan. The outstanding balances under the Golf
Course Loan will bear interest at prime plus 0.5% and interest is due monthly.
Principal payments will be payable in equal monthly installments of $35,000
commencing September 1, 2001. The principal must be repaid by October 1, 2005.
The loan is secured by the Brickshire(TM) golf course property. As of April 1,
2001, $2.6 million was 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
34
through seller, bank or financial institution loans. Terms for repayment under
these loans typically call for interest to be paid monthly and principal to be
repaid through lot releases. The release price is usually defined as a
pre-determined percentage of the gross selling price (typically 25% to 50%) of
the parcels in the subdivision. In addition, the agreements generally call for
minimum cumulative annual amortization. When the Company provides financing for
its customers (and therefore the release price is not available in cash at
closing to repay the lender), it is required to pay the creditor with cash
derived from other operating activities, principally from cash sales or the
pledge of receivables originated from earlier property sales.
Other Credit Facility
The Company has a $10 million, unsecured line-of-credit with a bank.
Borrowings under the line bear interest at LIBOR plus 2% and are due on December
31, 2001. At April 1, 2001, there were no amounts outstanding under the
line-of-credit.
Summary
The Company intends to continue to pursue a growth-oriented strategy,
particularly with respect to its Resorts Division. In connection with this
strategy, the Company may from time to time acquire, among other things,
additional resort properties and completed Timeshare Interests; land upon which
additional resorts may be built; management contracts; loan portfolios of
Timeshare Interest mortgages; portfolios which include properties or assets
which may be integrated into the Company's operations; interests in joint
ventures; and operating companies providing or possessing management, sales,
marketing, development, administration and/or other expertise with respect to
the Company's operations in the timeshare industry. In addition, the Company
intends to continue to focus the Residential Land and Golf Division on larger,
more capital intensive projects particularly in those regions where the Company
believes the market for its products is strongest, such as new golf communities
in the Southeast and other areas and continued growth in the Company's
successful regions in Texas.
The Company estimates that the total cash required to complete preparation
for the sale of its residential land and golf and timeshare property inventory
as of April 1, 2001 is approximately $272.6 million (based on current costs)
with such amount expected to be incurred over a five- to seven-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 or
generate the cash from operations necessary to complete the foregoing plans or
that actual costs will not exceed those estimated.
The Company believes that its existing cash, anticipated cash generated
from operations, anticipated future permitted borrowings under existing or
proposed credit facilities and anticipated future sales of notes receivable
under the timeshare receivables purchase facility (or any replacement facility)
will be sufficient to meet the Company's anticipated working capital, capital
expenditure and debt service requirements for the foreseeable future. Based on
outstanding borrowings at April 1, 2001, and the existing credit facilities
described above, the Company has approximately $79.8 million of available credit
at its disposal, subject to customary conditions, compliance with covenants and
eligible collateral. The Company will be required to renew or replace credit
facilities that will expire in fiscal 2002. The Company will, in the future,
also require additional credit facilities or issuances of other corporate debt
or equity securities in connection with acquisitions or otherwise. Any debt
incurred or issued by the Company may be secured or unsecured, bear fixed or
variable rate interest and may be subject to such terms as the lender may
require and management deems prudent. There can be no assurances that the credit
facilities which have expired or which are scheduled to expire in the near term
will be renewed or replaced or that sufficient funds will be available from
operations or under existing, proposed or future revolving credit or other
borrowing arrangements or receivables purchase facilities to meet the Company's
cash needs, including, without limitation, its debt service obligations.
The Company's credit facilities, indentures and other outstanding debt
instruments include customary conditions to funding, eligibility requirements
for collateral, certain financial and other affirmative and negative covenants,
including, among others, limits on the incurrence of indebtedness, limits on the
repurchase of securities, payment of dividends, investments in joint ventures
and other restricted payments, the incurrence of liens, transactions with
affiliates, covenants concerning net worth, fixed charge coverage requirements,
debt-to-equity ratios and events of default. No assurances can be given that
such covenants will not limit the Company's ability to raise funds, satisfy or
refinance its obligations or otherwise adversely affect the Company's
operations. In addition, the Company's future
35
operating performance and ability to meet its financial obligations will be
subject to future economic conditions and to financial, business and other
factors, many of which will be beyond the Company's control.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Foreign Currency Risk
The Company's total revenues and net assets denominated in a currency other
than U.S. dollars during fiscal 2001 were less than 1% of consolidated revenues
and consolidated assets, respectively. Sales generated and long-term debt
incurred to date by BPNV are transacted in U.S. dollars. The effects of changes
in foreign currency exchange rates have not historically been significant to the
Company's operations or net assets.
Interest Rate Risk
The Company sold $54.8 million, $48.3 million and $77.7 million of
fixed-rate timeshare notes receivable during fiscal 1999, 2000 and 2001,
respectively, under the Purchase Facility (see "Credit Facilities for Timeshare
Receivables and Inventories"). The gain on sale recognized by the Company is
based upon variable interest rates at the time of sale including the prevailing
weighted-average term treasury rate and prevailing commercial paper rates
(depending on the purchase facility in effect) and many other factors including,
but not limited to the weighted-average coupon rate and remaining contractual
life of the loans sold, and assumptions regarding the constant prepayment rate,
loss severity and annual default rates. The Company also retains residual
interests in pools of fixed and variable rate land notes receivable sold in
private placement REMIC transactions. The Company believes that it has used
conservative assumptions in valuing the residual interests retained in the
timeshare and land notes sold through the Purchase Facility and REMIC
transactions, respectively, and that such assumptions should mitigate the impact
of a hypothetical one-percentage point interest rate change on these valuations.
There can be no assurances that the assumptions will prove to be conservative.
As of April 1, 2001, the Company had fixed interest rate debt of
approximately $159.3 million and floating interest rate debt of approximately
$58.7 million. In addition, the Company's notes receivable from timeshare and
residential land and golf customers were comprised of $70.8 million of fixed
rate loans and $3.9 million of notes bearing floating interest rates. The
floating interest rates are based either upon the prevailing prime or
three-month LIBOR interest rates. For floating rate financial instruments,
interest rate changes do not generally affect the market value of debt but do
impact future earnings and cash flows, assuming other factors are held constant.
Conversely, for fixed rate financial instruments, interest rate changes do
affect the market value of debt but do not impact earnings or cash flows.
A hypothetical one-percentage point change in the prevailing prime or LIBOR
rates, as applicable, would decrease after-tax earnings of the Company by
approximately $198,000 per year, based on the impact of increased interest
income on variable rate residential land and golf notes receivable and cash and
cash equivalents offset by the increased interest expense on variable rate debt.
A similar change in the interest rate would decrease the total fair value of the
Company's fixed rate debt, excluding the Debentures and the Notes, by
approximately $113,000. The fact that the Debentures are publicly traded and
convertible into the Company's common stock makes it impractical to estimate the
effect of the hypothetical change in interest rates on the fair value of the
Debentures. In addition, the fact that the Notes (see "Note Offering") are
publicly traded in the over-the-counter market makes it impractical to estimate
the effect of the hypothetical change in interest rates on the fair value of the
Notes. Due to the non-interest related factors involved in determining the fair
value of these publicly traded securities, their fair values have historically
demonstrated increased, decreased or at times contrary relationships to changes
in interest rates as compared to other types of fixed-rate debt securities.
These analyses do not consider the effects of the reduced level of overall
economic activity that could exist in such an environment. Further, in the event
of such a change, management may likely take actions to mitigate its exposure to
the change. However, due to the uncertainty of the specific actions that would
be taken and their possible effects, the sensitivity analysis assumes no changes
in the Company's financial structure.
36
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
BLUEGREEN CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
April 2, April 1,
2000 2001
--------- ---------
ASSETS
Cash and cash equivalents (including restricted cash of approximately
$21.1 million and $22.4 million at April 2, 2000 and April 1, 2001, respectively) ....... $ 65,526 $ 40,016
Contracts receivable, net ................................................................. 7,919 18,507
Notes receivable, net ..................................................................... 70,114 74,796
Prepaid expenses .......................................................................... 5,003 13,595
Inventory, net ............................................................................ 197,093 193,634
Investments in securities ................................................................. 15,330 19,898
Property and equipment, net ............................................................... 35,409 41,462
Other assets .............................................................................. 17,589 17,773
--------- ---------
Total assets .................................................................... $ 413,983 $ 419,681
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable .......................................................................... $ 3,654 $ 6,245
Accrued liabilities and other ............................................................. 31,514 31,171
Deferred income ........................................................................... 2,928 5,314
Deferred income taxes ..................................................................... 13,173 19,329
Receivable-backed notes payable ........................................................... 11,167 8,702
Lines-of-credit and notes payable ......................................................... 66,364 58,918
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 ...................................................................... 279,171 280,050
Minority interest ......................................................................... 768 2,841
Commitments and contingencies
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 26,946 shares issued at April 2, 2000 and April 1, 2001, respectively ............... 269 269
Additional paid-in capital ................................................................ 122,533 122,564
Treasury stock, 2,558 and 2,756 common shares at April 2, 2000 and
April 1, 2001, respectively, at cost .................................................... (12,313) (12,885)
Net unrealized gains on investments available-for-sale, net of income taxes
901 1,471
Retained earnings ......................................................................... 22,654 25,371
--------- ---------
Total shareholders' equity ........................................................... 134,044 136,790
--------- ---------
Total liabilities and shareholders' equity ...................................... $ 413,983 $ 419,681
========= =========
See accompanying notes to consolidated financial statements.
37
BLUEGREEN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Year Ended
---------------------------------------------
March 28, April 2, April 1,
1999 2000 2001
---------------------------------------------
Revenues:
Sales ............................................................. $ 225,816 $ 214,488 $ 226,310
Other resort and golf operations .................................. 14,881 21,745 28,213
Interest income ................................................... 14,804 15,652 17,317
Gain on sales of notes receivable ................................. 3,692 2,063 3,281
Other income ...................................................... 522 735 572
--------- --------- ---------
259,715 254,683 275,693
Cost and expenses:
Cost of sales ..................................................... 81,495 74,957 78,795
Cost of other resort and golf operations .......................... 15,977 20,948 24,951
Selling, general and administrative expenses ...................... 114,650 129,034 148,564
Interest expense .................................................. 12,922 13,841 15,494
Provision for loan losses ......................................... 2,754 5,338 4,887
--------- --------- ---------
227,798 244,118 272,691
--------- --------- ---------
Income before provision for income taxes and minority interest ..... 31,917 10,565 3,002
Provision for income taxes .......................................... 12,610 4,055 1,156
Minority interest in (loss) income of consolidated subsidiary ....... 585 (267) (871)
--------- --------- ---------
Income before extraordinary item .................................... 18,722 6,777 2,717
Extraordinary loss on early extinguishment of debt,
net of income taxes .............................................. (1,682) -- --
--------- --------- ---------
Net income .......................................................... $ 17,040 $ 6,777 $ 2,717
========= ========= =========
Earnings per common share:
Basic:
Income before extraordinary item .............................. $ .85 $ .29 $ .11
Extraordinary loss on early extinguishment of debt,
net of income taxes ........................................ (.08) -- --
--------- --------- ---------
Net income .................................................... $ .77 $ .29 $ .11
========= ========= =========
Diluted:
Income before extraordinary item .............................. $ .72 $ .28 $ .11
Extraordinary loss on early extinguishment of debt,
net of income taxes ........................................ (.06) -- --
--------- --------- ---------
Net income .................................................... $ .66 $ .28 $ .11
========= ========= =========
Weighted-average number of common and common
equivalent shares:
Basic ............................................................. 22,167 23,323 24,242
========= ========= =========
Diluted ........................................................... 28,909 25,375 24,316
========= ========= =========
See accompanying notes to consolidated financial statements.
38
BLUEGREEN CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
Net
Unrealized
Gains on
Investments
Common Additional Treasury Available-for-
Shares Common Paid-in Stock at Sale Net of,
Issued Stock Capital Cost Income Taxes
------ ----- ------- ---- ------------
Balance at March 30, 1998 ........................ 20,761 $ 208 $ 71,932 $ (1,389) $ 405
Net income ....................................... -- -- -- -- --
Net unrealized gains on investments
available-for-sale, net of income
taxes ......................................... -- -- -- -- 155
Comprehensive income .............................
Sale of common stock, net of
issuance costs ................................. 4,118 41 34,212 -- --
Conversion of subordinated
debentures ..................................... 45 1 367 -- --
Shares issued to employees and
directors upon exercise of stock
options ........................................ 139 1 396 -- --
Income tax benefit from stock
options exercised .............................. -- -- 299 -- --
Shares repurchased for treasury stock ............ -- -- -- (3,156) --
-------- -------- -------- -------- --------
Balance at March 28, 1999 ........................ 25,063 251 107,206 (4,545) 560
Net income ....................................... -- -- -- -- --
Net unrealized gains on investments
available-for-sale, net of income taxes ........ -- -- -- -- 341
Comprehensive income .............................
Sale of common stock, net of issuance costs ...... 1,765 17 14,956 -- --
Shares issued to employees and directors upon
exercise of stock options ...................... 107 1 260 -- --
Income tax benefit from stock options exercised .. -- -- 111 -- --
Shares repurchased for treasury stock ............ -- -- -- (7,768) --
-------- -------- -------- -------- --------
Balance at April 2, 2000 ......................... 26,935 269 122,533 (12,313) 901
Net income ....................................... -- -- -- -- --
Net unrealized gains on investments
available-for-sale, net of income taxes ........ -- -- -- -- 570
Comprehensive income .............................
Shares issued to employees and directors upon
exercise of stock options ...................... 11 -- 28 -- --
Income tax benefit from stock options exercised .. -- -- 3 -- --
Shares repurchased for treasury stock ............ -- -- -- (572) --
-------- -------- -------- -------- --------
Balance at April 1, 2001 ......................... 26,946 $ 269 $122,564 $(12,885) $ 1,471
======== ======== ======== ======== ========
Retained
Earnings
(Accumulated
Deficit) Total
-------- -----
Balance at March 30, 1998 ........................ $ (1,163) $ 69,993
Net income ....................................... 17,040 17,040
Net unrealized gains on investments
available-for-sale, net of income
taxes ......................................... -- 155
--------
Comprehensive income ............................. 17,195
Sale of common stock, net of
issuance costs ................................. -- 34,253
Conversion of subordinated
debentures ..................................... -- 368
Shares issued to employees and
directors upon exercise of stock
options ........................................ -- 397
Income tax benefit from stock
options exercised .............................. -- 299
Shares repurchased for treasury stock ............ -- (3,156)
-------- --------
Balance at March 28, 1999 ........................ 15,877 119,349
Net income ....................................... 6,777 6,777
Net unrealized gains on investments
available-for-sale, net of income taxes ........ -- 341
--------
Comprehensive income ............................. 7,118
Sale of common stock, net of issuance costs ...... -- 14,973
Shares issued to employees and directors upon
exercise of stock options ...................... -- 261
Income tax benefit from stock options exercised .. -- 111
Shares repurchased for treasury stock ............ -- (7,768)
-------- --------
Balance at April 2, 2000 ......................... 22,654 134,044
Net income ....................................... 2,717 2,717
Net unrealized gains on investments
available-for-sale, net of income taxes ........ -- 570
--------
Comprehensive income ............................. 3,287
Shares issued to employees and directors upon
exercise of stock options ...................... -- 28
Income tax benefit from stock options exercised .. -- 3
Shares repurchased for treasury stock ............ -- (572)
-------- --------
Balance at April 1, 2001 ......................... $ 25,371 $136,790
======== ========
See accompanying notes to consolidated financial statements.
39
BLUEGREEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended
-------------------------------------------
March 28, April 2, April 1,
1999 2000 2001
-------------------------------------------
Operating activities:
Net income ...................................................................... $ 17,040 $ 6,777 $ 2,717
Adjustments to reconcile net income to net cash provided (used)
by operating activities:
Extraordinary loss on early extinguishment of debt, net
of income taxes ........................................................... 1,682 -- --
Minority interest in income (loss) of consolidated subsidiary ............... 585 (267) (871)
Depreciation ................................................................ 1,897 3,206 4,263
Amortization ................................................................ 1,023 1,556 2,463
Amortization of discount on note payable .................................... 1,353 1,039 708
Gain on sale of notes receivable ............................................ (3,692) (2,063) (3,281)
(Gain) loss on sale of property and equipment ............................... (199) 347 45
Loss on exchange of REMIC certificates ...................................... -- 179 --
Provision for loan losses ................................................... 2,754 5,338 4,887
Provision (benefit) for deferred income taxes ............................... 5,841 (360) 5,801
Interest accretion on investments in securities ............................. (2,205) (2,274) (2,627)
Proceeds from sale of notes receivable ...................................... 53,261 46,969 73,244
Proceeds from borrowings collateralized by notes receivable ................. 4,137 13,771 34,634
Payments on borrowings collateralized by notes receivable ................... (3,568) (11,530) (35,964)
Changes in operating assets and liabilities:
Contracts receivable ...................................................... (4,683) 11,763 (10,588)
Notes receivable .......................................................... (50,613) (62,882) (89,786)
Prepaid expenses .......................................................... (1,547) (1,349) 408
Inventory ................................................................. (26,808) (22,035) 21,500
Other assets .............................................................. (3,013) (2,935) (1,096)
Accounts payable, accrued liabilities and other ........................... 6,235 2,492 4,615
--------- --------- ---------
Net cash provided (used) by operating activities ................................ (520) (12,258) 11,072
--------- --------- ---------
Investing activities:
Long-term prepayment to Bass Pro, Inc. (see Note 3) ........................... -- -- (9,000)
Investment in note receivable ................................................. -- -- (4,711)
Principal payments received on investment in note receivable .................. -- -- 68
Purchase of related party notes receivable .................................... (2,850) -- --
Loan to related party ......................................................... (1,318) (256) --
Principal payments received on loan to related party .......................... -- 459 --
Cash received from investments in securities .................................. 1,478 6,201 6,890
Business and minority interest acquisitions, net of cash acquired ............. -- (675) (250)
Purchases of property and equipment ........................................... (11,018) (10,846) (9,549)
Proceeds from sales of property and equipment ................................. 939 1,516 79
--------- --------- ---------
Net cash used by investing activities ........................................... (12,769) (3,601) (16,473)
--------- --------- ---------
Financing activities:
Payments under short-term borrowings from underwriters ........................ (22,149) -- --
Proceeds from borrowings under line-of-credit facilities and
notes payable ............................................................... -- 27,885 11,121
Payments under line-of-credit facilities and notes payable .................... (75,751) (7,516) (29,135)
Proceeds from issuance of 10.5% senior secured notes payable .................. 110,000 -- --
Payment of debt issuance costs ................................................ (5,813) (2,007) (1,551)
Proceeds from issuance of common stock ........................................ 34,253 14,973 --
Proceeds from exercise of employee and director stock options ................. 397 261 28
Payments for treasury stock ................................................... (3,156) (7,768) (572)
--------- --------- ---------
Net cash provided (used) by financing activities 37,781 25,828 (20,109)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents ............................ 24,492 9,969 (25,510)
Cash and cash equivalents at beginning of year .................................. 31,065 55,557 65,526
--------- --------- ---------
Cash and cash equivalents at end of year ........................................ 55,557 65,526 40,016
Restricted cash and cash equivalents at end of year ............................. (15,806) (21,129) (22,363)
--------- --------- ---------
Unrestricted cash and cash equivalents at end of year ........................... $ 39,751 $ 44,397 $ 17,653
========= ========= =========
40
BLUEGREEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
(in thousands)
Year Ended
----------------------------------------
March 28, April 2, April 1,
1999 2000 2001
----------------------------------------
Supplemental schedule of non-cash operating, investing
and financing activities
Inventory acquired through financing ................................... $ 2,485 $ 25,867 $ 8,952
======== ======== ========
Inventory acquired through foreclosure or deedback in lieu of
foreclosure .......................................................... $ 6,137 $ 6,982 $ 5,859
======== ======== ========
Contribution of timeshare inventory (raw land) by minority interest .... $ -- $ -- $ 3,230
======== ======== ========
Foreclosure of notes receivable, inventory and fixed assets
following default on notes receivable from related party .............. $ -- $ 3,965 $ --
======== ======== ========
Exchange of REMIC certificates for notes receivable and inventory
in connection with termination of REMIC ............................... $ -- $ 4,353 $ --
======== ======== ========
Property and equipment acquired through financing ...................... $ 446 $ 713 $ 891
======== ======== ========
Investment in securities retained in connection with REMIC
transactions and sale of timeshare notes receivable .................. $ 5,181 $ 3,436 $ 7,903
======== ======== ========
Sale of inventory in exchange for an investment in securities .......... $ -- $ 2,500 $ --
======== ======== ========
Net change in unrealized gains on investments .......................... $ 257 $ 259 $ 928
======== ======== ========
Conversion of 8.25% convertible subordinated debentures
into common stock .................................................... $ 368 $ -- $ --
======== ======== ========
Supplemental schedule of operating cash flow information
Interest paid, net of amounts capitalized ............................ $ 6,366 $ 12,578 $ 15,597
======== ======== ========
Income taxes paid .................................................... $ 8,188 $ 3,858 $ 316
======== ======== ========
See accompanying notes to consolidated financial statements.
41
BLUEGREEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies
Organization
Bluegreen Corporation (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")
strategically 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(TM) product to an annual allotment of "points" in perpetuity
(supported by an underlying deeded fixed timeshare week being held in trust for
the buyer). "Points" may be exchanged by the buyer in various increments for
lodging for varying lengths of time in fully-furnished vacation residences at
the Company's participating resorts. The Company currently develops, markets and
sells Timeshare Interests in eleven resorts located in the United States and
Aruba. The Company also markets and sells Timeshare Interests in its resorts at
three 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 year ended
April 1, 2001, sales generated by the Company's Resorts Division and Residential
Land and Golf Division comprised approximately 61% and 39%, respectively, of the
Company's total sales. The Company's other resort and golf operations revenues
are generated from resort property management services, resort title services,
resort amenity operations, hotel operations and daily-fee golf course
operations. The Company also generates significant interest income by providing
financing to individual purchasers of Timeshare Interests and, to a nominal
extent, land sold by the Residential Land and Golf Division.
Principles of Consolidation
The consolidated financial statements include the accounts of Bluegreen
Corporation, all of its wholly-owned subsidiaries and entities in which the
Company holds a controlling financial interest. All significant intercompany
balances and transactions are eliminated.
Use of Estimates
The preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the 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 years 1999, 2000 and 2001
were 52, 53 and 52 weeks long, respectively.
Cash and Cash Equivalents
The Company invests cash in excess of immediate operating requirements in
short-term time deposits and money market instruments generally with original
maturities of three months or less. The Company maintains cash and cash
equivalents with various financial institutions. These financial institutions
are located throughout the United States, Canada and Aruba. Company policy is
designed to limit exposure to any one institution. However, a significant
portion of the Company's unrestricted cash is maintained with a single bank and,
accordingly, the Company is subject to credit risk. Periodic evaluations of the
relative credit standing of financial institutions maintaining Company deposits
are performed to evaluate and mitigate, if necessary, credit risk.
42
Restricted cash consists of funds collected as servicer of notes receivable
owned by other parties and customer deposits held in escrow accounts.
Contracts Receivable and Revenue Recognition
In accordance with the requirements of Statement of Financial Accounting
Standards ("SFAS") No. 66 "Accounting for Sales of Real Estate", the Company
recognizes revenue on retail land sales and sales of Timeshare Interests when a
minimum of 10% of the sales price has been received in cash, the legal recission
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 related to
the real estate sold. In cases where all development has not been completed, the
Company recognizes revenue in accordance with the percentage-of-completion
method of accounting.
Sales which do not meet the criteria for revenue recognition described
above are deferred using the deposit method. Under the deposit method, cash
received from customers is classified as a refundable deposit in the liability
section of the consolidated balance sheets and profit recognition is deferred
until the requirements of SFAS No. 66 are met.
Contracts receivable is net of an allowance for cancellations of
residential land sale contracts amounting to approximately $255,000 and $434,000
at April 2, 2000 and April 1, 2001, respectively.
Other resort and golf operations revenues are recognized as earned.
Notes Receivable and Receivable Sales
Notes receivable are carried at amortized cost. Interest income is
suspended on all notes receivable when principal or interest payments are more
than three months contractually past due and not resumed until such loans are
less than three months past due.
When the Company sells notes receivables either pursuant to its timeshare
receivables purchase facilities (more fully described in Note 4) or, in the case
of land mortgages receivable, Real Estate Mortgage Investment Conduits
("REMICs"), it retains subordinated tranches, rights to excess interest spread,
servicing rights and in some cases a cash reserve account, all of which are
retained interests in the sold notes receivable. Gain or loss on sale of the
receivables depends in part on the previous carrying amount of the financial
assets involved in the transfer, allocated between the assets sold and the
retained interests based on their relative fair value at the date of transfer.
The Company estimates fair value based on the present value of future expected
cash flows estimated using management's best estimates of the key assumptions -
prepayment rates, loss severity rates, default rates and discount rates
commensurate with the risks involved.
Investments in Securities
The Company's investments in securities consist of retained interests in
notes receivable sold to others through either private-placement REMIC
transactions or timeshare purchase facility transactions (see Note 4). These
investments are considered available-for-sale securities and, accordingly, are
carried at fair value in accordance with SFAS No. 115 "Accounting for Certain
Investments in Debt and Equity Securities". Accordingly, unrealized holding
gains or losses on available-for-sale investments are included in shareholders'
equity, net of income taxes. Declines in fair value that are determined to be
other than temporary are charged to operations.
Fair value of these securities is periodically measured based on the
present value of future expected cash flows estimated using management's best
estimates of the key assumptions - prepayment rates, loss severity rates,
default rates and discount rates commensurate with the risks involved.
Interest on the Company's securities is accreted using the effective yield
method.
43
Inventory
Inventory consists of completed Timeshare Interests, Timeshare Interests
under construction, land held for future timeshare development and residential
land acquired or developed for sale. Inventory is carried at the lower of cost,
including costs of improvements and amenities incurred subsequent to
acquisition, capitalized interest, real estate taxes and other costs incurred
during construction, or estimated fair value, less costs to dispose. Residential
land parcels and Timeshare Interests reacquired through foreclosure or deedback
in lieu of foreclosure are recorded at the lower of fair value, net of costs to
dispose, or the original historical cost of the inventory. The Company
periodically evaluates the recovery of the carrying amount of individual resort
and residential land properties under the guidelines of SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets for Long-Lived Assets to be
Disposed Of."
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed on the
straight-line method based on the estimated useful lives of the related assets
or, in the case of leasehold improvements, over the term of the related lease,
if shorter/. Depreciation expense includes the amortization of assets recorded
under capital leases.
Goodwill
Goodwill is amortized over periods ranging from 2 to 25 years using the
straight-line method. The Company periodically evaluates the recovery of the
carrying amount of goodwill by determining if any impairment indicators are
present. These indicators include duplication of resources resulting from
acquisitions, income derived from businesses acquired, the estimated
undiscounted cash flows of the entity over the remaining amortization period and
other factors.
As of April 2, 2000 and April 1, 2001, goodwill and related accumulated
amortization, included in other assets on the consolidated balance sheets, is as
follows (in thousands):
April 2, 2000 April 1, 2001
------------- -------------
Goodwill $ 3,286 $ 3,286
Accumulated amortization (264) (601)
------- -------
Goodwill, net $ 3,022 $ 2,685
======= =======
Treasury Stock
The Company accounts for repurchases of its common stock using the cost
method with common stock in treasury classified in the consolidated balance
sheets as a reduction of shareholders' equity.
Advertising Expense
The Company expenses advertising costs as incurred. Advertising expense was
$37.1 million, $44.3 million and $54.6 million for the years ended March 28,
1999, April 2, 2000 and April 1, 2001, respectively, and is included in selling,
general and administrative expenses in the consolidated statements of income.
Stock-Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation", encourages, but
does not require companies to record compensation cost for employee stock
options at fair value. The Company has elected to continue to account for stock
options using the intrinsic value method pursuant to Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees", and related
Interpretations. Accordingly, compensation cost for stock options is measured as
the excess, if any, of the quoted market price of the Company's stock at the
date of the grant over the exercise price of the option.
Earnings Per Common Share
Basic earnings per common share is computed by dividing net income by the
weighted-average number of common shares outstanding during the period. Diluted
earnings per common share is computed in the same manner
44
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 weighted-average common shares outstanding as if the Company's
8.00% convertible subordinated notes payable (after-tax impact of $295,000 on
net income and 1.5 million shares) and 8.25% convertible subordinated debentures
(after-tax impact of $1.7 million on net income and 4.2 million shares) were
converted into Common stock at the beginning of the earliest period presented
below.
The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share data):
Year Ended
---------------------------------------------
March 28, April 2, April 1,
1999 2000 2001
---------------------------------------------
Basic earnings per share - numerators:
Income before extraordinary item ............................. $ 18,722 $ 6,777 $ 2,717
Extraordinary loss on early extinguishment of
debt, net of income taxes ................................... (1,682) -- --
---------------------------------------------
Net income ................................................... $ 17,040 $ 6,777 $ 2,717
=============================================
Diluted earnings per share - numerators:
Income before extraordinary item - basic ..................... $ 18,722 $ 6,777 $ 2,717
Effect of dilutive securities (net of income tax effects) .... 2,009 297 --
---------------------------------------------
Income before extraordinary item - diluted ................... 20,731 7,074 2,717
Extraordinary loss on early extinguishment of
debt, net of income taxes ................................. (1,682) -- --
---------------------------------------------
Net income - diluted ......................................... $ 19,049 $ 7,074 $ 2,717
=============================================
Denominator:
Denominator for basic earnings per share-weighted-
average shares ............................................ 22,167 23,323 24,242
Effect of dilutive securities:
Stock options ............................................. 1,032 522 74
Convertible securities .................................... 5,710 1,530 --
---------------------------------------------
Dilutive potential common shares ............................. 6,742 2,052 74
---------------------------------------------
Denominator for diluted earnings per share-adjusted
weighted-average shares and assumed conversions ........... 28,909 25,375 24,316
=============================================
Basic earnings per common share:
Income before extraordinary item .............................. $ .85 $ .29 $ .11
Extraordinary loss on early extinguishment
of debt, net of income taxes ............................... (.08) -- --
---------------------------------------------
Net income .................................................... $ .77 $ .29 $ .11
=============================================
Diluted earnings per common share:
Income before extraordinary item ............................. $ .72 $ .28 $ .11
Extraordinary loss on early extinguishment
of debt, net of income taxes ............................. (.06) -- --
---------------------------------------------
Net income ................................................... $ .66 $ .28 $ .11
=============================================
Comprehensive Income
As of March 30, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income". SFAS No. 130 establishes new rules for the reporting and
display of comprehensive income and its components; however, the adoption of
this Statement had no impact on the Company's net income or shareholders'
equity. SFAS No. 130 requires unrealized gains or losses on the Company's
available-for-sale securities to be included in other comprehensive income.
Comprehensive income is shown as a subtotal within the consolidated statements
of shareholders' equity in each year presented.
45
Recent Accounting Pronouncements
In 1997, the Accounting Standards Executive Committee ("AcSEC") of the
American Institute of Certified Public Accountants ("AICPA") began a project to
address the accounting for timeshare transactions. The proposed guidance is
currently in the drafting stage of the promulgation process and no formal
exposure draft has been issued to date; therefore, the Company is unable to
assess the possible impact of this proposed guidance. The Company anticipates
that an exposure draft of the proposed guidance will be issued during its fiscal
2003.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 is effective for
the Company's fiscal year 2002 (beginning April 2, 2001). The Company has
determined that adoption of SFAS No. 133 would have had no impact on the
Company's results of operations and financial position if adopted during the
year ended April 1, 2001.
In December 1999, the Securities and Exchange Commission's ("SEC's") staff
issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in
Financial Statements". The SAB explains how the SEC staff believes existing
rules on revenue recognition should be applied or analogized to for transactions
not addressed by existing rules. The Company was required to adopt the SAB
starting in its fourth fiscal quarter starting on January 1, 2001. The adoption
of SAB No. 101 did not have a significant impact on the Company's results of
operations and financial position.
In March 2000, the 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 or financial position.
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No.
140 changes certain provisions of SFAS No. 125. SFAS No. 140 is effective for
transfers of financial assets occurring after March 31, 2001. The Company is
currently evaluating the impact of SFAS No. 140 on its results of operations and
financial position from future potential transfers.
Reclassifications
Certain reclassifications of prior period amounts have been made to conform
to the current year presentation.
2. Joint Ventures
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(TM) (the "Joint Venture"). The Joint Venture
is developing, marketing and selling 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. During the year ended April
1, 2001, the Company made an initial cash capital contribution to the Joint
Venture of approximately $3.2 million, in exchange for a 51% ownership interest
in the Joint Venture. 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.
As of April 1, 2001, the Company had advanced the Joint Venture $1.3
million due on demand and bearing interest at prime plus 1%. Subsequent to April
1, 2001, the Company loaned an additional $700,000 to the Joint Venture on
identical terms. Big Cedar has committed to a combination of additional capital
contributions and loan guarantees of up to $490,000, but has made no additional
fundings to date.
In addition to its 51% ownership interest, the Company also receives 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.
46
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 consolidated financial statements. The
Joint Venture has been designated as an unrestricted subsidiary for purposes of
the Indenture governing the Notes referred to in Note 10 and the Joint Venture
has not guaranteed such Notes.
On December 15, 1997, the Company invested $250,000 of capital in Bluegreen
Properties N.V.(TM) ("BPNV"), an entity organized in Aruba that previously had
no operations, in exchange for a 50% ownership interest. Concurrently, the
Company and an affiliate of the other 50% owner of BPNV (who is not an affiliate
of the Company), each loaned BPNV $3 million pursuant to promissory notes due on
December 15, 2000 and bearing interest at the prime rate plus 1%. BPNV then
acquired from a third party approximately 8,000 unsold timeshare intervals at
the La Cabana Beach & Racquet Club(TM), a fully developed timeshare resort in
Oranjestad, Aruba, in exchange for $6 million cash and the assumption of
approximately $16.6 million of interest-free debt from a bank in Aruba. The debt
was recorded by BPNV at approximately $12.5 million, which reflects a discount
based on an imputed interest rate of 12%. The debt is to be repaid over five
years through release-prices as intervals are sold, subject to minimum monthly
principal payments of approximately $278,000.
On August 25, 2000, the Company acquired the 50% minority ownership
interest in BPNV. The minority interest was acquired for $250,000 in cash, which
approximated the book value of the minority interest on the acquisition date.
Subsequent to the acquisition, the Company also repaid the $3.0 million loan to
an affiliate of the former joint venture partner in BPNV and wrote off
approximately $368,000 of forgiven accrued interest. The Company now owns 100%
of BPNV.
3. Marketing Agreement
On June 16, 2000, the Company entered into an exclusive, 10-year marketing
agreement with Bass Pro, Inc. ("Bass Pro"), a privately-held retailer of
fishing, marine, hunting, camping and sports gear. Bass Pro is an affiliate of
Big Cedar (see Note 2). Pursuant to the agreement, the Company has 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 also has access to Bass Pro's customer lists. In exchange for
these services, the Company agreed to pay Bass Pro a commission ranging from
3.5% to 7.0% on each sale of a Timeshare Interest, net of cancellations and
defaults, that is made to a customer as a result of one of the Bass Pro
marketing channels described above (the "Commission"). The amount of the
Commission is dependent on the level of additional marketing efforts required by
the Company to convert the prospect into a sale and a defined time frame for
such marketing efforts. There is no Commission paid to Bass Pro on sales made by
the Joint Venture.
On June 16, 2000, the Company prepaid $9 million to Bass Pro (the
"Prepayment"). The Prepayment is amortized from future Commissions earned by
Bass Pro and future member distributions otherwise payable to Big Cedar from the
earnings of the Joint Venture as a member thereof. No additional Commissions or
member distributions will be paid in cash to Bass Pro or Big Cedar,
respectively, until the Prepayment has been fully utilized. The Company will
periodically evaluate the Prepayment for any indications of impairment. The
Prepayment is included in prepaid expenses on the April 1, 2001 consolidated
balance sheet. As of April 1, 2001, the unamortized balance of the Prepayment
was approximately $9 million, as the marketing programs resulting from the
marketing agreement were in the development stage during the year ended April 1,
2001.
47
4. Notes Receivable and Servicing Assets
The weighted-average interest rate on notes receivable from customers was
15.1% and 15.2% at April 2, 2000 and April 1, 2001, respectively. The table
below sets forth additional information relating to the Company's notes
receivable (in thousands).
April 2, 2000 April 1, 2001
------------- -------------
Notes receivable secured by Timeshare Interests .... $ 61,520 $ 64,245
Notes receivable secured by land ................... 10,883 9,001
Other notes receivable ............................. 735 5,136
-------- --------
Notes receivable, gross ............................ 73,138 78,382
Reserve for loan losses ............................ (3,024) (3,586)
-------- --------
Notes receivable, net .............................. $ 70,114 $ 74,796
======== ========
All of the Company's timeshare loans bear interest at fixed rates. The
average interest rate charged on loans secured by Timeshare Interests was 15.7%
at April 1, 2001. Approximately 42.6% of the Company's notes receivable secured
by land bear interest at variable rates, while approximately 57.4% bear interest
at fixed rates. The average interest rate charged on loans secured by land was
12.1% at April 1, 2001.
The Company's timeshare receivables are generally secured by property
located in Tennessee, Missouri, Wisconsin, Florida, Virginia and South Carolina.
No concentrations of credit risk exist for the Company's notes receivable
secured by land.
The table below sets forth activity in the reserve for loan losses (in
thousands).
Reserve for loan losses, March 29, 1999 ... $ 2,318
Provision for loan losses ................. 5,338
Charge-offs ............................... (4,632)
-------
Reserve for loan losses, April 2, 2000 3,024
Provision for loan losses ................. 4,887
Charge-offs ............................... (4,325)
-------
Reserve for loan losses, April 1, 2001 .... $ 3,586
=======
Installments due on notes receivable held by the Company during each of the
five fiscal years subsequent to fiscal 2001, and thereafter, are set forth below
(in thousands).
2002.............. $17,670
2003.............. 6,652
2004.............. 6,844
2005.............. 6,749
2006.............. 7,155
Thereafter........ 33,312
-------
Total $78,382
=======
On June 26, 1998, the Company executed a timeshare receivables purchase
facility (the "First Purchase Facility") with a financial institution. Under the
First Purchase Facility, a special purpose finance subsidiary of the Company
sold $103.1 million aggregate principal amount of timeshare receivables to the
financial institution in securitization transactions, which fully utilized the
First Purchase Facility. The First Purchase Facility had detailed requirements
with respect to the eligibility of receivables for purchase. Under the First
Purchase Facility, a purchase price equal to approximately 97% (subject to
adjustment in certain circumstances) of the principal balance of the receivables
sold was paid at closing in cash, with a portion deferred until such time as the
purchaser has received a return equal to the weighted-average term treasury rate
plus 1.4% and all servicing, custodial and similar fees and expenses have been
paid and a cash reserve account has been funded. The Company's special purpose
finance subsidiary is required to maintain a specified overcollateralization
level and a cash reserve account. Receivables were sold 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 Company acts as
servicer under the First Purchase Facility for a fee, and is
48
required to make advances to the financial institution to the extent it believes
such advances will be recoverable. The First Purchase Facility includes various
provisions customary for a transaction of this type.
During fiscal 1999 and 2000, the Company sold approximately $54.8 million
and $48.3 million, respectively, in aggregate principal amount of timeshare
receivables under the Purchase Facility for a purchase price equal to 97% of the
principal balance and recognized an aggregate gain of $3.7 million and $2.1
million, respectively. As a result of the sales, the Company recorded an $8.6
million available-for-sale investment in the residual cash flow of the
receivable pools (i.e. the deferred payments) included in investments in
securities in the consolidated balance sheet as of April 1, 2001.
In October 2000, the Company executed agreements for a new timeshare
receivables purchase facility (the "Second Purchase Facility") with two
financial institutions, including a commercial paper conduit (the "Senior
Purchaser") and the institution that underwrote the First Purchase Facility (the
"Subordinated Purchaser") (collectively, the "Purchasers"). The Second Purchase
Facility utilizes an owner's trust structure, pursuant to which the Company
sells receivables to a special purpose finance subsidiary of the Company (the
"Subsidiary") and the Subsidiary sells the receivables to an owner's trust
without recourse except for breaches of customary representations and warranties
at the time of sale. Pursuant to the agreements that constitute the Second
Purchase Facility (collectively, the "Second Purchase Facility Agreements"), the
Subsidiary may receive up to $90 million of cumulative purchase price (as more
fully described below) on sales of timeshare receivables to the owner's trust in
transactions through October 16, 2001. The Second Purchase Facility has detailed
requirements with respect to the eligibility of receivables for purchase. Under
the Second Purchase Facility, a purchase price equal to 95.00% (subject to
adjustment in 0.50% increments down to 87.50% depending on the difference
between the weighted-average interest rate on the notes receivable sold and the
sum of the returns to the Purchasers plus the servicing fee, as more fully
defined below) of the principal balance of the receivables sold will be paid at
closing in cash. For eligible notes generated by Bluegreen Properties N.V.(TM),
the Company's subsidiary in Aruba, the purchase price paid in cash at closing is
equal to 85.00% (subject to adjustment in 0.50% increments down to 77.00%
depending on the difference between the weighted-average interest rate on the
notes receivable sold and the sum of the returns to the Purchasers plus the
servicing fee) of the principal balance of the receivables sold. The balance of
the purchase price will be deferred until such time as the Purchasers have
received a specified return, all servicing, custodial and similar fees and
expenses have been paid and a cash reserve account has been funded. The 95.00%
purchase price shall be funded 71.58% by the Senior Purchaser and 28.42% by the
Subordinated Purchaser. For the Aruba receivables, the 85.00% purchase price
shall be funded 70.00% by the Senior Purchaser and 30.00% by the Subordinated
Purchaser. The Senior Purchaser shall earn a return equal to the rate equivalent
to its borrowing cost (based on then applicable commercial paper rates) plus
0.60%, subject to use of alternate return rates in certain circumstances. The
Subordinated Purchaser shall earn a return equal to one-month LIBOR plus 4.00%,
subject to use of alternate return rates in certain circumstances. In addition
to other fees, if the Subsidiary does not sell during the term of the Second
Purchase Facility notes receivable with a cumulative purchase price of at least
$70 million, the Company will pay to the Purchasers a fee equal to 1.5% of the
shortfall in the cumulative purchase price.
The Purchasers' obligation to purchase under the Second Purchase Facility
will terminate upon the occurrence of specified events. The Company acts as
servicer under the Second Purchase Facility for a fee equal to 1.5% of the
principal amount of the receivables serviced, and is required to make advances
to the Purchasers to the extent it believes such advances will be recoverable.
The Second Purchase Facility Agreement includes various conditions to purchase,
covenants, trigger events and other provisions customary for a transaction of
this type.
On October 16, 2000, the Subsidiary sold $31.8 million of timeshare
receivables under the Second Purchase Facility. Gross proceeds from the sale of
these receivables were approximately $30.1 million, of which $15.8 million was
used to pay down the Warehouse Facility (see Note 8). The Company recognized a
$1.3 million gain on the sale of the receivables, recorded a $3.0 million
retained interest and recorded a $236,000 servicing asset. The weighted-average
life of the portfolio sold was 9.3 years.
On December 27, 2000, the Subsidiary sold $30.9 million of timeshare
receivables under the Second Purchase Facility. Gross proceeds on the sale of
these receivables were approximately $29.2 million, of which $8.3 million was
used to pay down the Warehouse Facility (see Note 8). The Company recognized a
$1.4 million gain on the sale of the receivables, recorded a $3.1 million
retained interest and recorded a $244,000 servicing asset. The weighted-average
life of the portfolio sold was 9.3 years.
49
On March 13, 2001, the Subsidiary sold $15.1 million of timeshare
receivables under the Second Purchase Facility. Gross proceeds on the sale of
these receivables were approximately $14.0 million, of which $981,000 was used
to pay down the Warehouse Facility (see Note 8). The Company recognized a
$582,000 gain on the sale of the receivables, recorded a $1.8 million retained
interest and recorded an $113,000 servicing asset. The weighted-average life of
the portfolio sold was 9.5 years.
The following assumptions were used to measure the initial fair value of
the retained interests for all of the above sales under the Second Purchase
Facility: Prepayment rates ranging from 17% to 14% per annum as the portfolios
mature; loss severity rate of 45%; default rates ranging from 6% to 1% per annum
as the portfolios mature; and a discount rate of 14%.
On December 15, 2000, the Company loaned $4.7 million to Napa Partners, LLC
("Napa"), a real estate company in Napa, California (the "Napa Loan"). Napa used
the proceeds to acquire approximately 32 acres of undeveloped land in Napa,
California, which is zoned for mixed use as a timeshare resort, hotel and
commercial property. On January 4, 2001, Napa repaid approximately $68,000 in
principal of the Napa Loan. In May 2001, Napa repaid the remaining outstanding
principal balance on the Napa Loan and all accrued interest.
On October 7, 1998, Leisure Capital Corporation ("LCC"), a wholly-owned
subsidiary of the Company, acquired from a bank delinquent notes receivable
issued by AmClub, Inc. ("AmClub"), with an aggregate outstanding principal
balance of $5.3 million (the "AmClub Notes"). LCC acquired the AmClub Notes for
a purchase price of approximately $2.9 million. During fiscal 1999, the Company
had also advanced $1.3 million to AmClub, primarily for timeshare resort
improvements (the "AmClub Loan"). On December 14, 1998, LCC notified AmClub that
the AmClub Notes and AmClub Loan were in default and due immediately. On
September 1, 1999, the Company completed a foreclosure of the underlying
collateral securing the AmClub Notes and the AmClub Loan. As a result of the
foreclosure, the Company obtained a golf course, residential land, land for
future resort development (all of which properties are located at the Shenandoah
Crossing Farm & Club in Gordonsville, Virginia) and a portfolio of timeshare
notes receivable with an aggregate net carrying value of approximately $4.0
million. The aggregate outstanding principal and interest on the AmClub Notes
and AmClub Loan were allocated to the foreclosed assets based on relative fair
market value. On December 17, 1999, the Company sold the golf course and related
buildings for approximately $1.3 million and recorded a field operating profit
(as defined in Note 17) of approximately $510,000. AmClub was owned by the
former stockholders of RDI, an entity which was acquired by the Company on
September 30, 1997.
5. Inventory
The Company's net inventory holdings as of April 2, 2000 and April 1, 2001,
summarized by division, are set forth below (in thousands).
April 2, 2000 April 1, 2001
------------- -------------
Resorts ........................ $109,534 $ 97,012
Residential Land and Golf ...... 87,559 96,622
-------- --------
$197,093 $193,634
======== ========
Resorts Division inventory as of April 2, 2000, consisted of land inventory
of $7.2 million, $13.3 million of construction-in-progress and $89.0 million of
completed units. Resorts Division inventory as of April 1, 2001 consisted of
land inventory of $10.3 million, $17.2 million of construction-in-progress, and
$69.4 million of completed units.
Interest capitalized during fiscal 1999, fiscal 2000 and fiscal 2001
totaled approximately $5.3 million, $6.9 million and $7.5 million, respectively.
Interest expense in the consolidated statements of income is net of capitalized
interest.
50
6. Investments in Securities and Servicing Assets
Investments in Securities
The Company's investments in securities, which are classified as
available-for-sale, and associated unrealized gains and losses are set forth
below (in thousands).
Gross Gross
Unrealized Unrealized
Cost Gain Loss Fair Value
---- ---- ---- ----------
April 2, 2000
- -------------
1995 REMIC debt securities ..................... $ 2,395 $ 842 $ -- $ 3,237
1996 REMIC debt securities ..................... 2,130 23 -- 2,153
First Purchase Facility Timeshare debt
securities (see Note 4) 9,309 631 -- 9,940
-------- -------- -------- --------
Total $ 13,834 $ 1,496 $ -- $ 15,330
======== ======== ======== ========
Gross Gross
Unrealized Unrealized
Cost Gain Loss Fair Value
---- ---- ---- ----------
April 1, 2001
- -------------
1995 REMIC debt securities ..................... $ 2,236 $ 1,060 $ -- $ 3,296
1996 REMIC debt securities ..................... 1,594 -- 6 1,588
First Purchase Facility Timeshare debt
securities (see Note 4) 5,427 494 -- 5,921
Second Purchase Facility Timeshare debt
securities (see Note 4) 8,217 876 -- 9,093
======== ======== ======== ========
Total $ 17,474 $ 2,430 $ 6 $ 19,898
======== ======== ======== ========
Contractual maturities are set forth below (in thousands).
Cost Fair Value
---- ----------
After one year but within five.............. $ 4,624 $ 5,600
After five years but within ten............. 12,850 14,298
------- -------
Total $17,474 $19,898
======= =======
The following assumptions were used to measure the fair value of the above
retained interests: Prepayment rates ranging from 23% to 14% per annum as the
portfolios mature; loss severity rates of 25% to 60%; default rates ranging from
8% to 0.75% per annum as the portfolios mature; and discount rates of 14% to
15%.
The table below summarizes certain cash flows received from and (paid to)
special purpose finance subsidiaries of the Company during fiscal 2001 (in
thousands):
Proceeds from new sales of receivables $73,244
Proceeds from collection of previously sold receivables (41,292)
Servicing fees received 1,853
Purchases of foreclosed assets (1,224)
Proceeds from resales of foreclosed assets (2,962)
Remarketing fees received 974
Servicing advances (4,260)
Repayments of servicing assets 3,961
Cash received on investment in securities 6,890
51
Quantitative information about the portfolios of notes receivable
previously sold without recourse in which the Company holds the above retained
interests as investments in securities is as follows (in thousands):
For the year ended
As of April 1, 2001 April 1, 2001
-----------------------------------------------------------
Total Principal Amount
Principal of Loans More Than Credit Losses, Net
Amount of Loans 60 Days Past Due of Recoveries
--------------- ---------------- -------------
1995 REMIC - land mortgages $ 8,016 $ 472 $ 265
1996 REMIC - land mortgages 4,277 36 58
First Purchase Facility Timeshare receivables 62,049 2,150 268
Second Purchase Facility Timeshare receivables 73,315 1,959 9
The net unrealized gain on available-for-sale securities, presented as a
separate component of shareholders' equity, is net of income taxes of
approximately $953,000.
During fiscal 2000, the Company exchanged its residual investment in the
1994 REMIC debt securities for the underlying mortgages. The 1994 REMIC
investment was exchanged in connection with the termination of the REMIC, as all
of the senior 1994 REMIC security holders had received all of the required cash
flows pursuant to the terms of their REMIC certificates. Although the Company
had previously recorded an unrealized loss of $304,000 on this
available-for-sale security, the Company only realized a $179,000 loss on the
exchange, based on the net realizable value of the mortgages received and the
amortized cost of the investment.
Servicing Assets
The changes in the Company's servicing assets, included in other assets in
the consolidated balance sheet, for the year ended April 1, 2001 were as follows
(in thousands):
Balance at April 2, 2000............ $ --
Additions........................... 593
Less: amortization.................. (31)
----
Balance at April 1, 2001............ $562
====
The estimated fair value of the servicing assets approximated their
carrying amounts as of April 1, 2001. Fair value is estimated by discounting
estimated future cash flows from the servicing assets using discount rates and
the other assumptions used to measure the fair value of the Company's retained
interests for portfolios of notes receivable sold. For purposes of measuring
impairment, the Company stratifies the pools of assets underlying the servicing
assets by the portfolios of timeshare notes receivable previously sold. A
valuation allowance is recorded where the fair value is below the carrying
amount of specific strata, even though the overall fair value of the servicing
assets exceeds amortized cost. As of April 1, 2001, no such valuation allowance
was necessary.
7. Property and Equipment
The table below sets forth the property and equipment held by the Company
(in thousands).
Useful April 2, April 1,
Life 2000 2001
---- ---- ----
Office equipment, furniture and fixtures............. 3-14 years $16,274 $19,486
Golf course land, land improvements, buildings
and equipment...................................... 10-30 years 14,661 18,940
Land, buildings and building improvements............ 10-30 years 6,989 8,386
Leasehold improvements............................... 3-14 years 4,267 5,143
Aircraft............................................. 3-5 years 1,021 1,070
Vehicles and equipment............................... 3-5 years 837 703
------- -------
44,049 53,728
Accumulated depreciation and amortization of
leasehold improvements............................ (8,640) (12,266)
------- -------
Total $35,409 $41,462
======= =======
52
8. Receivable-Backed Notes Payable
The Company has a timeshare receivables warehouse loan facility, which
expires on October 16, 2001, with the Subordinated Purchaser (the "Warehouse
Facility"). Loans under the Warehouse Facility bear interest at LIBOR plus 3%.
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. (TM), for which the borrowing base
is 85%. The Warehouse Facility includes affirmative, negative and financial
covenants and events of default. During the year ended April 1, 2001, the
Company borrowed an aggregate $31.3 million in various increments from
time-to-time under the Warehouse Facility, of which the Company repaid an
aggregate $31.5 million by using cash generated from principal and interest
payments on the underlying loans and proceeds from the sale of the underlying
receivables. The remaining balance of the Warehouse Facility, as well as any
such future borrowings, will be repaid as principal and interest payments are
collected on the timeshare notes receivable which collateralize the loan or as
the loans are sold through the Purchase Facility, but in no event later than
October 16, 2001. The maximum principal amount that may be outstanding at any
one time prospectively under the Warehouse Facility is $15.0 million. As of
April 1, 2001, the outstanding balance on the Warehouse Facility was $1.4
million.
The Company has a $30.0 million revolving credit facility with a financial
institution for the pledge of Residential Land and Golf Division receivables,
with up to $10 million of the total facility available for Land and Golf
Division inventory borrowings. The interest rate charged on outstanding
borrowings ranges from prime plus 0.5% to 1.0%, with 8.0% being the minimum
interest rate for inventory borrowings. At April 1, 2001, the outstanding
principal balance under this facility was approximately $6.0 million, all of
which related to receivables borrowings. All principal and interest payments
received on pledged receivables are applied to principal and interest due under
the facility. The ability to borrow under the facility expires on December 31,
2003. Any outstanding indebtedness is due on December 31, 2005.
The remaining $1.3 million of receivable-backed notes payable balances are
related to notes receivable sold by RDI with recourse, prior to the acquisition
of RDI by the Company, and debt related to receivables hypothecated by AmClub
prior to the foreclosure described in Note 4. At April 1, 2001, $11.4 million in
notes receivable secured the $8.7 million in receivable-backed notes payable.
9. Lines-of-Credit and Notes Payable
The Company has outstanding borrowings with various financial institutions
and other lenders, which have been used to finance the acquisition and
development of inventory and to fund operations. Financial data related to the
Company's borrowing facilities is set forth below.
April 2, April 1,
2000 2001
---- ----
(in thousands)
Lines-of-credit secured by inventory with a carrying value of
$68.2 million at April 1, 2001. Interest rates range from 9.29%
to 10.50% at April 2, 2000 and from 7.75% to 9.25% at April 1, 2001
Maturities range from January 2004 to January 2006 .............................. $52,031 $40,631
Notes and mortgage notes secured by certain inventory, property and
equipment and investments with an aggregate carrying value of
$28.7 million at April 1, 2001. Interest rates ranging from 8.75%
to 12.00% at April 2, 2000 and from 6.25% to 12.00% at April 1, 2001
Maturities range from December 2002 to March 2012 ............................... 13,067 16,897
Unsecured notes payable to former stockholders of RDI. Interest rate
of 9.00%. Matured in October 1999. (see Note 14) ................................ 1,000 1,000
Lease obligations with a imputed interest rates ranging from 2.89% to
10.50%. Maturities range from December 2001 to April 2002 ....................... 266 390
------- -------
Total $66,364 $58,918
======= =======
53
The table below sets forth the contractual minimum principal payments
required on the Company's lines-of-credit and notes payable for each of the five
fiscal years subsequent to fiscal 2001. Such minimum contractual payments may
differ from actual payments due to the effect of principal payments required on
a lot or timeshare interval release basis for certain of the above obligations
(in thousands).
2002.................................... $10,365
2003.................................... 9,267
2004.................................... 20,168
2005.................................... 16,002
2006.................................... 3,309
Thereafter.............................. 465
-------
Total................................. 59,576
Less: unamortized discount based on
an imputed interest rate of 12%.... (658)
-------
$58,918
=======
The following is a discussion of the Company's significant credit
facilities and material new borrowings in fiscal 2001:
On September 25, 2000, the Company borrowed $5 million under its $10
million, unsecured line-of-credit with a bank. The borrowing bore interest at
LIBOR plus 1.75% and was due on December 31, 2000. The proceeds were used for
operations. The $5 million debt was repaid during December 2000.
On December 31, 2000, the Company extended this unsecured line-of-credit
through December 31, 2001 at an interest rate of LIBOR plus 2.00%.
In addition, the Subordinated Purchaser has provided the Company with a
$28.0 million acquisition and development facility for its timeshare inventories
(the "A&D Facility"). The draw down period on the A&D Facility has expired and
outstanding borrowings under the A&D Facility mature no later than January 2006.
Principal will be repaid through agreed-upon release prices as Timeshare
Interests are sold at the financed resort, subject to minimum required
amortization. The indebtedness under the facility bears interest at LIBOR plus
3%. On September 14, 1999, the Company borrowed approximately $14.0 million
under the A&D facility. The outstanding principal must be repaid by November 1,
2005, through agreed-upon release prices as Timeshare Interests in the Company's
Lodge Alley Inn(TM) resort in Charleston, South Carolina are sold, subject to
minimum required amortization. On December 20, 1999, the Company borrowed
approximately $13.9 million under the acquisition and development facility. The
principal must be repaid by January 1, 2006, through agreed-upon release prices
as Timeshare Interests in the Company's Shore Crest II(TM) resort are sold,
subject to minimum required amortization. The outstanding balance under the A&D
Facility at April 1, 2001 was $17.8 million.
The Company has also obtained from a financial institution a $35.0 million
revolving credit facility (the "Revolving Credit Facility"), which expires in
March 2002. 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% and interest is due
monthly. 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(TM)"), the Company borrowed approximately $12.0 million
under the Revolving Credit Facility. Principal payments are effected through
agreed-upon release prices as lots in Lake Ridge II(TM) and in another recently
purchased section of Lake Ridge(TM) ("Section 15") are sold. The principal must
be repaid by September 14, 2004. The loan is secured by the Company's
residential land lot inventory in Lake Ridge II(TM) and in Section 15. On
October 6, 1999, in connection with the acquisition of 6,966 acres for the
Company's Mystic Shores(TM) land project in Canyon Lake, Texas, the Company
borrowed $11.9 million under the Revolving Credit Facility. On May 5, 2000, the
Company borrowed an additional $2.1 million under this facility in order to
purchase an additional 435 acres for the Mystic Shores(TM) project. Principal
payments are effected through agreed-upon release prices as lots in Mystic
Shores(TM) are sold. The principal under the $11.9 million and $2.1 million
loans for Mystic Shores(TM) must be repaid by October 6, 2004 and May 5, 2004,
respectively. The aggregate outstanding balance on the Revolving Credit Facility
was $22.1 million at April 1, 2001.
54
On September 24, 1999, the Company obtained two lines-of-credit with a bank
for the purpose of acquiring and developing a new residential land and golf
course community in New Kent County, Virginia, known as Brickshire(TM). The
lines-of-credit have an aggregate borrowing capacity of approximately $15.8
million. On September 27, 1999, the Company borrowed approximately $2.0 million
under one of the lines-of-credit in connection with the acquisition of the
Brickshire(TM) property. During December 2000, the Company borrowed an
additional $2.0 million under the lines-of-credit. The outstanding balances
under the lines-of-credit bear interest at prime plus 0.5% and interest is due
monthly. Principal payments are effected through agreed-upon release prices as
lots in Brickshire(TM) are sold, subject to minimum required quarterly
amortization commencing on April 30, 2002. All borrowings under the
lines-of-credit must be repaid by January 31, 2004. The loan is secured by the
Company's residential land lot inventory in Brickshire(TM). As of April 1, 2001,
the outstanding principal balance on the lines-of-credit was $675,000.
Concurrent with obtaining the Brickshire(TM) lines-of-credit discussed
above; the Company also obtained from the same bank a $4.2 million
line-of-credit for the purpose of developing a golf course on the Brickshire(TM)
property (the "Golf Course Loan"). In December 2000, the Company borrowed $2.6
million under the Golf Course Loan. The outstanding balances under the Golf
Course Loan will bear interest at prime plus 0.5% and interest is due monthly.
Principal payments will be payable in equal monthly installments of $35,000
commencing September 1, 2001. The principal must be repaid by October 1, 2005.
The loan is secured by the Brickshire(TM) golf course property. As of April 1,
2001, $2.6 million was outstanding under the Golf Course Loan.
10. Note Offering
On April 1, 1998, the Company consummated a private placement offering (the
"Offering") of $110 million in aggregate principal amount of 10.50% senior
secured notes due April 1, 2008 (the "Notes"). Interest on the Notes is payable
semiannually on April 1 and October 1 of each year. The Notes are redeemable at
the option of the Company, in whole or in part, in cash, on or after April 1,
2003, together with accrued and unpaid interest, if any, to the date of
redemption at the following redemption prices: 2003 - 105.25%; 2004 - 103.50%;
2005 - 101.75% and 2006 and thereafter - 100.00%. The Notes are senior
obligations of the Company and rank pari passu in right of payment with all
existing and future senior indebtedness of the Company and rank senior in right
of payment to all existing and future subordinated obligations of the Company.
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 existing and future subsidiaries (the "Subsidiary Guarantors"),
with the exception of Bluegreen/Big Cedar Vacations LLC(TM), 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 than $50,000 of assets
(collectively, "Non-Guarantor Subsidiaries"). The Note guarantees are senior
obligations of each Subsidiary Guarantor and rank pari passu in right of payment
with all existing and future senior indebtedness of each such Subsidiary
Guarantor and senior in right of payment to all existing and future subordinated
indebtedness of each such Subsidiary Guarantor. The Note guarantees of certain
Subsidiary Guarantors are secured by a first (subject to customary exceptions)
mortgage or similar instrument (each, a "Mortgage") on certain residential land
and golf properties of such Subsidiary Guarantors (the "Pledged Properties").
Absent the occurrence and the continuance of an event of default, the Notes
trustee is required to release its lien on the Pledged Properties as property is
sold and the Trustee does not have a lien on the proceeds of any such sale. As
of April 1, 2001, the Pledged Properties had an aggregate carrying value of
approximately $15.5 million. The Notes' indenture includes certain negative
covenants including restrictions on the incurrence of debt and liens and on
payments of cash dividends.
The net proceeds of the Offering were approximately $106.3 million. In
connection with the Offering, the Company repaid a $22.1 million bridge loan
from the initial purchasers of the Notes, approximately $28.9 million of the
line-of-credit and notes payable balances and approximately $36.3 million of the
Company's receivable-backed notes payable outstanding at March 29, 1998. In
addition, the Company paid aggregate accrued interest on the repaid debt of
approximately $1.0 million and $2.7 million of prepayment penalties. The
remaining net proceeds of the Offering were used to repay other obligations of
the Company and for working capital purposes. In connection with the Offering,
the Company wrote-off approximately $692,000 of debt issuance costs related to
the
55
extinguished debt and recognized a $1.7 million extraordinary loss on early
extinguishment of debt, which is net of taxes of $1.1 million.
Supplemental Guarantor Information
Supplemental financial information for Bluegreen Corporation, its combined
Non-Guarantor Subsidiaries and its combined Subsidiary Guarantors is presented
below:
CONDENSED CONSOLIDATING BALANCE SHEETS AT APRIL 2, 2000 AND APRIL 1, 2001
(IN THOUSANDS) APRIL 2, 2000
--------------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
ASSETS
Cash and cash equivalents ................. $ 43,093 $ 12,458 $ 9,975 $ -- $ 65,526
Contracts receivable, net ................. 221 150 7,548 -- 7,919
Intercompany receivable ................... 100,441 -- -- (100,441) --
Notes receivable, net ..................... 244 7,238 62,632 -- 70,114
Inventory, net ............................ 21,346 13,083 162,664 -- 197,093
Investments in securities ................. -- 15,330 -- -- 15,330
Investments in subsidiaries ............... 7,980 -- -- (7,980) --
Property and equipment, net ............... 9,019 298 26,092 -- 35,409
Other assets .............................. 10,706 1,145 13,741 (3,000) 22,592
--------- --------- --------- --------- ---------
Total assets ........................... $ 193,050 $ 49,702 $ 282,652 $(111,421) $ 413,983
========= ========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable, accrued liabilities
and other ............................. $ 13,193 $ 13,683 $ 11,220 $ -- $ 38,096
Intercompany payable ...................... -- 13,389 87,052 (100,441) --
Deferred income taxes ..................... 3,784 1,585 7,804 -- 13,173
Lines-of-credit and notes payable ......... 1,979 13,114 65,438 (3,000) 77,531
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 ...................... 169,327 41,771 171,514 (103,441) 279,171
Minority interest ........................... -- -- -- 768 768
Total shareholders' equity .................. 23,723 7,931 111,138 (8,748) 134,044
--------- --------- --------- --------- ---------
Total liabilities and shareholders'
equity ............................ $ 193,050 $ 49,702 $ 282,652 $(111,421) $ 413,983
========= ========= ========= ========= =========
56
APRIL 1, 2001
-------------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
ASSETS
Cash and cash equivalents ........................ $ 13,290 $ 17,125 $ 9,601 $ -- $ 40,016
Contracts receivable, net ........................ -- 353 18,154 -- 18,507
Intercompany receivable .......................... 121,111 3,540 -- (124,651) --
Notes receivable, net ............................ 4,929 3,957 65,910 -- 74,796
Inventory, net ................................... -- 17,011 176,623 -- 193,634
Investments in securities ........................ -- 19,898 -- -- 19,898
Investments in subsidiaries ...................... 7,730 -- 3,230 (10,960) --
Property and equipment, net ...................... 8,910 860 31,692 -- 41,462
Other assets ..................................... 12,814 1,682 16,872 -- 31,368
--------- --------- --------- --------- ---------
Total assets .................................. $ 168,784 $ 64,426 $ 322,082 $(135,611) $ 419,681
========= ========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable, accrued liabilities
and other .................................... $ 15,188 $ 18,036 $ 9,506 $ -- $ 42,730
Intercompany payable ............................. -- -- 124,651 (124,651) --
Deferred income taxes ............................ (16,932) 17,732 18,529 -- 19,329
Lines-of-credit and notes payable ................ 3,568 9,170 54,882 -- 67,620
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 ............................. 152,195 44,938 207,568 (124,651) 280,050
Minority interest .................................. -- -- -- 2,841 2,841
Total shareholders' equity ......................... 16,589 19,488 114,514 (13,801) 136,790
--------- --------- --------- --------- ---------
Total liabilities and shareholders' equity ..... $ 168,784 $ 64,426 $ 322,082 $(135,611) $ 419,681
========= ========= ========= ========= =========
57
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(IN THOUSANDS)
YEAR ENDED MARCH 28, 1999
---------------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
REVENUES
Sales ........................................... $ 32,699 $ 15,668 $ 177,449 $ -- $ 225,816
Other resort and golf operations ................ -- 1,305 13,576 -- 14,881
Management fees ................................. 21,878 -- -- (21,878) --
Interest income ................................. 1,981 2,954 9,869 -- 14,804
Gain on sales of notes receivable ............... -- 3,692 -- -- 3,692
Other income (expense) .......................... 532 105 (115) -- 522
--------- --------- --------- --------- ---------
57,090 23,724 200,779 (21,878) 259,715
COSTS AND EXPENSES
Cost of sales ................................... 10,079 4,094 67,322 -- 81,495
Cost of other resort and golf operations ........ -- 1,073 14,904 -- 15,977
Management fees ................................. -- 1,993 19,885 (21,878) --
Selling, general and administrative
expenses ..................................... 35,344 7,920 71,386 -- 114,650
Interest expense ................................ 10,549 1,906 467 -- 12,922
Provision for loan losses ....................... -- 344 2,410 -- 2,754
--------- --------- --------- --------- ---------
55,972 17,330 176,374 (21,878) 227,798
--------- --------- --------- --------- ---------
Income before income taxes and minority
interest ..................................... 1,118 6,394 24,405 -- 31,917
Provision for income taxes ...................... 441 2,526 9,643 -- 12,610
Minority interest in income of
consolidated subsidiary ...................... -- -- -- 585 585
--------- --------- --------- --------- ---------
Income before extraordinary item ................ 677 3,868 14,762 (585) 18,722
Extraordinary loss on early
extinguishment of debt, net of taxes ........... -- -- (1,682) -- (1,682)
--------- --------- --------- --------- ---------
Net income ........................................ $ 677 $ 3,868 $ 13,080 $ (585) $ 17,040
========= ========= ========= ========= =========
YEAR ENDED APRIL 2, 2000
---------------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
REVENUES
Sales ........................................... $ 25,775 $ 10,575 $ 178,138 $ -- $ 214,488
Other resort and golf operations ................ -- 2,747 18,998 -- 21,745
Management fees ................................. 22,066 -- -- (22,066) --
Interest income ................................. 1,231 3,431 10,990 -- 15,652
Gain on sales of notes receivable ............... -- 2,063 -- -- 2,063
Other income .................................... 454 81 200 -- 735
--------- --------- --------- --------- ---------
49,526 18,897 208,326 (22,066) 254,683
COSTS AND EXPENSES
Cost of sales ................................... 7,284 2,787 64,886 -- 74,957
Cost of other resort and golf operations ........ -- 1,228 19,720 -- 20,948
Management fees ................................. -- 1,675 20,391 (22,066) --
Selling, general and administrative
expenses ..................................... 42,542 7,219 79,273 -- 129,034
Interest expense ................................ 8,843 2,053 2,945 -- 13,841
Provision for loan losses ....................... -- 413 4,925 -- 5,338
--------- --------- --------- --------- ---------
58,669 15,375 192,140 (22,066) 244,118
--------- --------- --------- --------- ---------
Income (loss) before income taxes and
minority interest ............................ (9,143) 3,522 16,186 -- 10,565
Provision (benefit) for income taxes ............ (3,631) 1,374 6,312 -- 4,055
Minority interest in loss of
consolidated subsidiary ...................... -- -- -- (267) (267)
--------- --------- --------- --------- ---------
Net income (loss) ............................... $ (5,512) $ 2,148 $ 9,874 $ 267 $ 6,777
========= ========= ========= ========= =========
58
YEAR ENDED APRIL 1, 2001
---------------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
REVENUES
Sales ........................................... $ 58 $ 11,107 $ 215,145 $ -- $ 226,310
Other resort and golf operations ................ -- 3,508 24,705 -- 28,213
Management fees ................................. 25,163 -- -- (25,163) --
Interest income ................................. 1,378 4,155 11,784 -- 17,317
Gain on sales of notes receivable ............... -- 3,281 -- -- 3,281
Other income .................................... (44) 87 529 -- 572
--------- --------- --------- --------- ---------
26,555 22,138 252,163 (25,163) 275,693
COSTS AND EXPENSES
Cost of sales ................................... -- 3,270 75,525 -- 78,795
Cost of other resort and golf operations ........ -- 1,577 23,374 -- 24,951
Management fees ................................. -- -- 25,163 (25,163) --
Selling, general and administrative
expenses ..................................... 27,085 8,110 113,369 -- 148,564
Interest expense ................................ 10,189 941 4,364 -- 15,494
Provision for loan losses ....................... -- 69 4,818 -- 4,887
--------- --------- --------- --------- ---------
37,274 13,967 246,613 (25,163) 272,691
--------- --------- --------- --------- ---------
Income (loss) before income taxes and
minority interest ............................ (10,719) 8,171 5,550 -- 3,002
Provision (benefit) for income taxes ............ (4,127) 3,644 1,639 -- 1,156
Minority interest in loss of
consolidated subsidiary ...................... -- -- -- (871) (871)
--------- --------- --------- --------- ---------
Net income (loss) ............................... $ (6,592) $ 4,527 $ 3,911 $ 871 $ 2,717
========= ========= ========= ========= =========
59
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED MARCH 28, 1999
---------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
Operating activities:
Net cash (used) provided by operating activities .......... $ (83,348) $ 9,624 $ 73,204 $ -- $ (520)
--------- --------- --------- --------- ---------
Investing activities:
Purchase of related party notes receivable ................. -- -- (2,850) -- (2,850)
Loan to related party ...................................... -- -- (1,318) -- (1,318)
Cash received from investments in securities ............... -- 1,478 -- -- 1,478
Purchases of property and equipment ........................ (4,330) (54) (6,634) -- (11,018)
Proceeds from sales of property and equipment .............. 836 62 41 -- 939
--------- --------- --------- --------- ---------
Net cash (used) provided by investing activities ............. (3,494) 1,486 (10,761) -- (12,769)
--------- --------- --------- --------- ---------
Financing activities:
Payments under short-term borrowings from
underwriters ............................................ (22,149) -- -- -- (22,149)
Payments under line-of-credit facilities
and notes payable ....................................... (6,992) (6,751) (62,008) -- (75,751)
Proceeds from issuance of 10.5% senior secured
notes payable ........................................... 110,000 -- -- -- 110,000
Payment of debt issuance costs ............................. (4,901) (855) (57) -- (5,813)
Proceeds from issuance of common stock ..................... 34,253 -- -- -- 34,253
Proceeds from exercise of employee and
director stock options .................................. 397 -- -- -- 397
Payments for treasury stock ................................ (3,156) -- -- -- (3,156)
--------- --------- --------- --------- ---------
Net cash provided (used) by financing activities ............. 107,452 (7,606) (62,065) -- 37,781
--------- --------- --------- --------- ---------
Net increase in cash and cash equivalents .................... 20,610 3,504 378 -- 24,492
Cash and cash equivalents at beginning of year ............... 16,100 5,186 9,779 -- 31,065
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of year ..................... 36,710 8,690 10,157 -- 55,557
Restricted cash and cash equivalents at end of year .......... (1,597) (8,595) (5,614) -- (15,806)
--------- --------- --------- --------- ---------
Unrestricted cash and cash equivalents at end of year ........ $ 35,113 $ 95 $ 4,543 $ -- $ 39,751
========= ========= ========= ========= =========
60
YEAR ENDED APRIL 2, 2000
---------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
Operating activities:
Net cash (used) provided by operating activities ............. $ 2,807 $ 1,528 $ (16,593) $ -- $ (12,258)
--------- --------- --------- --------- ---------
Investing activities:
Loan to related party ..................................... -- -- (256) -- (256)
Payments received on loan to related party ................ -- -- 459 -- 459
Cash received from investments in securities .............. -- 6,201 -- -- 6,201
Business acquisition, net of cash acquired ................ -- -- (675) -- (675)
Purchases of property and equipment ....................... (2,722) (162) (7,962) -- (10,846)
Proceeds from sales of property and equipment ............. -- -- 1,516 -- 1,516
--------- --------- --------- --------- ---------
Net cash (used) provided by investing activities ............. (2,722) 6,039 (6,918) -- (3,601)
--------- --------- --------- --------- ---------
Financing activities:
Proceeds from borrowings under line-of-credit
facilities and notes payable ........................... -- -- 27,885 -- 27,885
Payments under line-of-credit facilities and
notes payable .......................................... (126) (3,596) (3,794) -- (7,516)
Payment of debt issuance costs ............................ (1,042) (203) (762) -- (2,007)
Proceeds from issuance of common stock .................... 14,973 -- -- -- 14,973
Proceeds from exercise of employee and director
stock options .......................................... 261 -- -- -- 261
Payments for treasury stock ............................... (7,768) -- -- -- (7,768)
--------- --------- --------- --------- ---------
Net cash provided (used) by financing activities ............. 6,298 (3,799) 23,329 -- 25,828
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents ......... 6,383 3,768 (182) -- 9,969
Cash and cash equivalents at beginning of year ............... 36,710 8,690 10,157 -- 55,557
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of year ..................... 43,093 12,458 9,975 -- 65,526
Restricted cash and cash equivalents at end of year .......... (1,437) (12,458) (7,234) -- (21,129)
--------- --------- --------- --------- ---------
Unrestricted cash and cash equivalents at end of year ........ $ 41,656 $ -- $ 2,741 $ -- $ 44,397
========= ========= ========= ========= =========
61
YEAR ENDED APRIL 1, 2001
---------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
Operating activities:
Net cash (used) provided by operating activities ............. $ (24,250) $ 2,312 $ 33,010 $ -- $ 11,072
--------- --------- --------- --------- ---------
Investing activities:
Long term prepayment to Bass Pro, Inc. .................... -- -- (9,000) -- (9,000)
Investment in note receivable .............................. (4,711) -- -- -- (4,711)
Principal payments received on investment in note
receivable ............................................. 68 -- -- -- 68
Cash received from investments in securities .............. -- 6,890 -- -- 6,890
Acquisition of minority interest .......................... -- -- (250) -- (250)
Investment in joint venture ............................... -- -- (3,230) 3,230 --
Purchases of property and equipment ....................... (1,539) (739) (7,271) -- (9,549)
Proceeds from sales of property and equipment ............. -- -- 79 -- 79
--------- --------- --------- --------- ---------
Net cash (used) provided by investing activities ............. (6,182) 6,151 (19,672) 3,230 (16,473)
--------- --------- --------- --------- ---------
Financing activities:
Proceeds from borrowings under line-of-credit
facilities and notes payable ........................... 6,500 645 3,976 -- 11,121
Payments under line-of-credit facilities and
notes payable .......................................... (5,282) (6,303) (17,550) -- (29,135)
Payment of debt issuance costs ............................ (45) (1,368) (138) -- (1,551)
Proceeds from capitalization of joint venture ............. 3,230 -- (3,230) --
Proceeds from exercise of employee and director
stock options .......................................... 28 -- -- -- 28
Payments for treasury stock ............................... (572) -- -- -- (572)
--------- --------- --------- --------- ---------
Net cash provided (used) by financing activities ............. 629 (3,796) (13,712) (3,230) (20,109)
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents ......... (29,803) 4,667 (374) -- (25,510)
Cash and cash equivalents at beginning of year ............... 43,093 12,458 9,975 -- 65,526
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of year ..................... 13,290 17,125 9,601 -- 40,016
Restricted cash and cash equivalents at end of year .......... -- (15,961) (6,402) -- (22,363)
--------- --------- --------- --------- ---------
Unrestricted cash and cash equivalents at end of year ........ $ 13,290 $ 1,164 $ 3,199 $ -- $ 17,653
========= ========= ========= ========= =========
11. Convertible Subordinated Notes Payable and Debentures
Notes Payable
The Company financed the cash portion of the purchase price of RDI by
issuing two 8% convertible subordinated promissory notes in the aggregate
principal amount of $6 million (the "8% Notes) to a member of the Board of
Directors of the Company (the "Board") and an affiliate of a Board member. The
8% Notes, which were executed on September 11, 1997, are due on September 11,
2002, and are convertible into shares of the Company's common stock at a
conversion price of $3.92 per share, subject to adjustment under certain
circumstances.
Debentures
The Company has $34.4 million of its 8.25% Convertible Subordinated
Debentures (the "Debentures") outstanding at both April 2, 2000 and April 1,
2001. The Debentures are convertible at any time prior to maturity (2012),
unless previously redeemed, into common stock of the Company at a current
conversion price of $8.24 per share, subject to adjustment under certain
conditions. The Debentures are redeemable at any time, at the Company's option,
in whole or in part at 100% of the face amount. The Company is obligated to
redeem annually 10% of the principal amount of the Debentures originally issued,
commencing May 15, 2003, net of previous redemptions of approximately $5.6
million. Such redemptions are calculated to retire 90% of the principal amount
of the Debentures
62
prior to maturity. The Debentures are unsecured and subordinated to all senior
indebtedness of the Company. Interest is payable semi-annually on May 15 and
November 15.
Under financial covenants of the Indenture pursuant to which the Debentures
were issued, the Company is required to maintain net worth of not less than
$29.0 million. Should net worth fall below $29.0 million for two consecutive
quarters, the Company is required to make an offer to purchase 20% of the
outstanding Debentures at par, plus accrued interest.
During fiscal 1999, holders of $368,000 in aggregate principal amount of
the Debentures elected to convert said Debentures into an aggregate 44,658
shares of the Company's common stock.
12. Fair Value of Financial Instruments
The following methods and assumptions were used by the Company in
estimating the fair values of its financial instruments:
Cash and cash equivalents: The amounts reported in the consolidated balance
sheets for cash and cash equivalents approximate fair value.
Contracts receivable: The amounts reported in the consolidated balance
sheets for contracts receivable approximate fair value. Contracts receivable are
non-interest bearing and generally convert into cash or an interest-bearing
mortgage note receivable within thirty days.
Notes receivable: The amounts reported in the consolidated balance sheets
for notes receivable approximate fair value based on discounted future cash
flows using current rates at which similar loans with similar maturities would
be made to borrowers with similar credit risk.
Investments in securities: Investments in securities, which represent
retained interests in REMIC and timeshare receivable pools sold, are carried at
fair value based on discounted cash flow analyses.
Lines-of-credit, notes payable and receivable-backed notes payable: The
amounts reported in the balance sheets approximate their fair value for
indebtedness that provides for variable interest rates. The fair value of the
Company's fixed-rate indebtedness was estimated using discounted cash flow
analyses, based on the Company's current incremental borrowing rates for similar
types of borrowing arrangements.
10.50% senior secured notes payable: The fair value of the Company's 10.50%
senior secured notes is based on the quoted market price in the over-the-counter
bond market.
8.00% convertible subordinated notes payable to related parties: The fair
value of the Company's $6 million notes was estimated using a discounted cash
flow analysis, based on the Company's current incremental borrowing rates for
similar types of borrowing arrangements.
8.25% convertible subordinated debentures: The fair value of the Company's
8.25% convertible subordinated debentures is based on the quoted market price as
reported on the New York Stock Exchange.
63
April 2, 2000 April 1, 2001
---------------------------------------------------------------
(in thousands) Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
------ ---------- ------ ----------
Cash and cash equivalents ................................. $ 65,526 $ 65,526 $ 40,016 $ 40,016
Contracts receivable, net ................................. 7,919 7,919 18,507 18,507
Notes receivable, net ..................................... 70,114 70,114 74,796 74,796
Investments in securities ................................. 15,330 15,330 19,898 19,898
Lines-of-credit, notes payable, and receivable-
backed notes payable .................................... 77,531 77,531 67,620 67,620
10.50% senior secured notes payable ....................... 110,000 71,500 110,000 59,400
8.00% convertible subordinated notes payable to
related parties ......................................... 6,000 5,889 6,000 6,000
8.25% convertible subordinated debentures ................. 34,371 23,286 34,371 22,341
13. Common Stock and Stock Option Plans
On August 14, 1998, the Company entered into a Securities Purchase
Agreement (the "Stock Agreement") by and among the Company, Morgan Stanley Real
Estate Investors III, L.P., Morgan Stanley Real Estate Fund III, L.P.,
("MSREF"), MSP Real Estate Fund, L.P., and MSREF III Special Fund, L.P.,
(collectively, the "Funds") pursuant to which the Funds purchased 4.1 million
and 1.8 million shares of the Company's common stock for an aggregate of $35
million and $15 million during fiscal 1999 and 2000, respectively. Legal and
other stock issuance costs totaled approximately $774,000.
Treasury Stock
During fiscal 1999 and fiscal 2000, the Board authorized a program to
repurchase up to an additional 2 million and 1 million shares of common stock,
respectively. During fiscal 1999, the Company repurchased approximately 518,000
common shares at an aggregate cost of $3.2 million. During fiscal 2000, the
Company repurchased approximately 1.6 million common shares at an aggregate cost
of $7.8 million. During fiscal 2001, the Company repurchased approximately
198,000 common shares at an aggregate cost of $572,000.
Stock Option Plans
Under the Company's employee stock option plans, options vest ratably over
a five-year period and expire ten years from the date of grant. All options were
granted at exercise prices that either equaled or exceeded fair market value at
the respective dates of grant.
The stock option plan covering the Company's non-employee Directors
provides for the grant to the Company's non-employee directors (the "Outside
Directors") of non-qualified stock options that vest ratably over a three-year
period and expire ten years from the date of grant.
64
A summary of stock option activity related to the Company's Employee and
Outside Directors Plans is presented below (in thousands, except per share
data).
Number Number
of Shares Outstanding Exercise Price of Shares
Reserved Options Per Share Exercisable
Employee Stock Option Plans
Balance at March 30, 1998................. 1,740 1,725 $1.25-$4.88 541
Additional options authorized......... 2,000 -- --
Granted............................... -- 1,234 $8.50-$9.50
Forfeited............................. (3) (11) $2.29-$3.13
Exercised............................. (36) (36) $2.29-$2.60
----- -----
Balance at March 28, 1999................. 3,701 2,912 $1.25-$9.50 821
Granted............................... -- 115 $4.88-$8.50
Forfeited............................. (2) (144) $3.13-$8.50
Exercised............................. (54) (54) $2.29-$4.51
----- -----
Balance at April 2, 2000.................. 3,645 2,829 $1.25-$9.50 1,288
Granted............................... -- 60 $2.26-$3.00
Forfeited............................. (5) (185) $3.13-$8.50
Exercised............................. (11) (11) $3.13
----- -----
Balance at April 1, 2001.................. 3,629 2,693 $1.25-$9.50 1,637
===== =====
Outside Directors Plans
Balance at March 30, 1998............ 558 558 $0.83-$4.78 408
Additional options authorized .... 500 -- --
Granted........................... -- 90 $9.31
Exercised......................... (103) (103) $1.77-$4.78
----- -----
Balance at March 28, 1999............ 955 545 $0.83-$9.31 381
Granted........................... -- 120 $5.94
Exercised......................... (52) (52) $0.83-$2.81
----- -----
Balance at April 2, 2000............. 903 613 $1.46-$9.31 408
Granted........................... -- 105 $2.88
----- -----
Balance at April 1, 2001............. 903 718 $1.46-$9.31 503
===== =====
The weighted-average fair values of options granted during the
year ended April 1, 2001 were: Exercise price equal to fair
value at grant date: employees $1.24, directors - $1.50
The weighted-average exercise prices and weighted-average remaining
contractual lives of the Company's outstanding stock options at April 1, 2001
(grouped by range of exercise prices) were:
Weighted-Average Weighted-
Remaining Weighted- Average
Number Number of Contractual Life Average Exercise Price
of Options Vested Options (in years) Exercise Price (vested only)
---------- -------------- ---------- -------------- -------------
(In 000's)
----------
Employees:
$1.25-$1.46 102 102 1 $1.35 $1.35
$2.26-$3.13 645 434 6 $2.96 $3.00
$3.58-$4.88 888 681 6 $4.33 $4.20
$8.50-$9.50 1,058 420 8 $9.22 $9.23
----- -----
2,693 1,637
===== =====
65
Weighted-Average Weighted-
Remaining Weighted- Average
Number Number of Contractual Life Average Exercise Price
of Options Vested Options (in years) Exercise Price (vested only)
---------- -------------- ---------- -------------- -------------
(In 000's)
----------
Directors:
$1.46-$1.77 72 72 2 $1.62 $1.62
$2.81-$3.80 436 331 6 $3.19 $3.29
$5.94 120 40 9 $5.94 $5.94
$9.31 90 60 8 $9.31 $9.31
--- ---
718 503
=== ===
Pro forma information regarding net income and earnings per share as if the
Company had accounted for its employee stock options under the fair value method
of SFAS No. 123 is presented below. The fair value for these options was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted-average assumptions for fiscal 1999, 2000 and 2001,
respectively: risk free investment rates of 5.0%, 5.7% and 5.5% dividend yields
of 0%, 0% and 0%, a volatility factor of the expected market price of the
Company's common stock of .428, .448 and .532 and a weighted average life of the
options of 5.0 years, 5.3 years and 5.0 years, respectively.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The effects of
applying SFAS No. 123 for the purpose of providing pro forma disclosures are not
likely to be representative of the effects on reported pro forma net income for
future years, due to the impact of the staggered vesting periods of the
Company's stock option grants. The Company's pro forma information is as follows
(in thousands, except per share data).
Year Ended
----------------------------------
March 28, April 2, April 1,
1999 2000 2001
---- ---- ----
Pro forma net income ....................... $16,419 $ 5,934 $ 1,873
======= ======= =======
Pro forma earnings per share:
Basic .................................... $ .74 $ .25 $ .08
Diluted .................................. .64 .25 .08
Common Stock Reserved For Future Issuance
As of April 1, 2001, Common stock reserved for future issuance was
comprised of shares issuable (in thousands):
Upon conversion of 8.25% debentures................ 4,171
Upon conversion of 8.00% notes payable............. 1,530
Upon exercise of employee stock options............ 3,629
Upon exercise of outside director stock options.... 903
------
10,233
======
14. Commitments and Contingencies
At April 1, 2001, the estimated cost to complete development work in
subdivisions or resorts from which lots or Timeshare Interests have been sold
totaled $41.9 million. Development is estimated to be completed within the next
two fiscal years as follows: 2002--$34.4 million, 2003--$7.5 million.
The Company leases certain office space and equipment under various
noncancelable operating leases. Certain of these leases contain stated
escalation clauses while others contain renewal options.
66
Rent expense for the years ended March 28, 1999, April 2, 2000 and April 1,
2001, totaled approximately $3.1 million, $3.5 million and $4.2 million,
respectively. Lease commitments under these noncancelable operating leases for
each of the five fiscal years subsequent to fiscal 2001, and thereafter are as
follows (in thousands):
2002...................................... $2,961
2003...................................... 2,337
2004...................................... 1,805
2005...................................... 1,274
2006...................................... 136
Thereafter................................ --
------
Total future minimum lease payments $8,513
======
In the ordinary course of its business, the Company from time to time
becomes subject to claims or proceedings relating to the purchase, subdivision,
sale and/or financing of real estate. Additionally, from time to time, the
Company becomes involved in disputes with existing and former employees. The
Company believes that substantially all of the claims and proceedings are
incidental to its business.
In addition to its other ordinary course litigation, the Company became a
defendant in two proceedings during fiscal 1999. First, an action was filed
against the Company on December 15, 1998. The plaintiff has asserted that the
Company is in breach of its obligations under, and has made certain
misrepresentations in connection with, a contract under which the Company acted
as marketing agent for the sale of undeveloped property owned by the plaintiff.
The plaintiff also alleges fraud, negligence and violation by the Company of an
alleged fiduciary duty owed to plaintiff. Among other things, the plaintiff
alleges that the Company failed to meet certain minimum sales requirements under
the marketing contract and failed to commit sufficient resources to the sale of
the property. The original complaint sought damages in excess of $18 million and
certain other remedies, including punitive damages. Subsequently, based on the
testimony of the plaintiff's expert witnesses, the sought damages were reduced
to approximately $15 million. During fiscal 2001, the court dismissed the
plaintiff's claims related to promissory estoppel, covenant of good faith and
fair dealing, breach of fiduciary duty and negligence. In addition, the court
dismissed the claims alleged by a sister company of the plaintiff. The
dismissals discussed above further reduced the plaintiff's claims for damages to
approximately $8 million, subject to the plaintiff's right of appeal. The
Company is continuing to evaluate this action and its potential impact, if any,
on the Company and accordingly cannot predict the outcome with any degree of
certainty. However, based upon all of the facts presently under consideration of
management, the Company believes that it has substantial defenses to the
allegations in this action and intends to defend this matter vigorously. The
Company does not believe that any likely outcome of this case will have a
material adverse effect on the Company's financial condition or results of
operations.
Second, an action was filed on July 10, 1998 against two subsidiaries of
the Company and various other defendants. The Company itself is not named as a
defendant. The Company's subsidiaries acquired certain real property (the
"Property"). The Property was acquired subject to certain alleged oil and gas
leasehold interests and rights (the "Interests") held by the plaintiffs in the
action (the "Plaintiffs"). The Company's subsidiaries developed the Property and
have resold 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. During fiscal 2001, the court advised the parties in open court that
the Company's motion for summary judgment was granted, thus dismissing all of
the Plaintiff's claims for damages, subject to the Plaintiffs' right of appeal.
The parties are awaiting the court's written decision documenting the summary
judgment.
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.
67
On August 21, 2000, the Company received a Notice of Field Audit Action
(the "Notice") from the State of Wisconsin Department of Revenue (the "DOR")
alleging that two subsidiaries now owned by the Company failed to collect and
remit sales and use taxes to the State of Wisconsin during the period from
January 1, 1994 through September 30, 1997 totaling $1.9 million. The majority
of the assessment is based on the subsidiaries not charging sales tax to
purchasers of Timeshare Interests at the Company's Christmas Mountain
Village(TM) resort. In addition to the assessment, the Notice indicated that
interest would be charged, but no penalties would be assessed. As of April 1,
2001, aggregate interest was approximately $1.1 million. The Company filed a
Petition for Redetermination (the "Petition") on October 19, 2000, and, if the
Petition is unsuccessful, the Company intends to vigorously appeal the
assessment. The Company acquired the subsidiaries that were the subject of the
Notice in connection with the acquisition of RDI Group, Inc. ("RDI") on
September 30, 1997. Under the RDI purchase agreement, the Company has the right
to set off payments owed by the Company to RDI's former stockholders pursuant to
a $1.0 million outstanding note payable balance and to make a claim against such
stockholders for $500,000 previously paid for any breach of representations and
warranties. The Company has notified the former stockholders that it intends to
exercise these rights to mitigate any settlement with the DOR in this matter. In
addition, the Company believes that, if necessary, amounts paid to the State of
Wisconsin pursuant to the Notice, if any, may be further funded through
collections of sales tax from the consumers who effected the assessed timeshare
sales with RDI without paying sales tax on their purchases. Based on
management's assessment of the Company's position in the Petition, the Company's
right of set off with the former RDI stockholders and other factors discussed
above, management does not believe that the possible sales tax pursuant to the
Notice will have a material adverse impact on the Company's results of
operations or financial position, and therefore no amounts have been accrued
related to this matter.
15. Income Taxes
The provision for income taxes consists of the following (in thousands):
Year Ended
--------------------------------------------------
March 28, 1999 April 2, 2000 April 1, 2001
-------------- ------------- -------------
Federal:
Current ................. $ 4,973 $ 3,719 $(4,645)
Deferred ................ 4,994 (303) 5,481
------- ------- -------
9,967 3,416 836
State and other:
Current ................. 1,796 696 --
Deferred ................ 847 (57) 320
------- ------- -------
2,643 639 320
------- ------- -------
Total ...................... $12,610 $ 4,055 $ 1,156
======= ======= =======
The reasons for the difference between the provision for income taxes and
the amount that results from applying the federal statutory tax rate in fiscal
1999, 2000 and 2001 to income before provision for income taxes and minority
interest are as follows (in thousands):
Year Ended
-----------------------------------------------------
March 28, 1999 April 2, 2000 April 1, 2001
-------------- ------------- -------------
Income tax expense at statutory rate ........................ $11,171 $ 3,698 $ 1,051
Effect of state taxes, net of federal tax benefit ........... 1,439 357 105
------- ------- -------
$12,610 $ 4,055 $ 1,156
======= ======= =======
At April 2, 2000 and April 1, 2001, deferred income taxes consist of the
following components (in thousands):
April 2, April 1,
2000 2001
---- ----
Deferred federal and state tax liabilities (assets):
Installment sales treatment of notes ............................ $ 13,097 $ 32,565
Deferred federal and state loss carryforwards/AMT credits ....... (643) (16,078)
Tax over book depreciation ...................................... 655 1,384
Book over tax carrying value of investments in securities ....... -- 1,305
Other ........................................................... 64 153
-------- --------
Deferred income taxes ............................................. $ 13,173 $ 19,329
======== ========
68
The Company has available net operating loss carryforwards of $23.5
million, which expire in 2021, and alternative minimum tax credit carryforwards
of $6.7 million, that never expire.
16. Employee Retirement Savings Plan
The Company's Employee Retirement Plan is a code section 401(k) Retirement
Savings Plan (the "Plan"). All employees at least 21 years of age with one year
of employment with the Company are eligible to participate in the Plan. Employer
contributions to the Plan are at the sole discretion of the Company and were not
material to the operations of the Company for fiscal 1999. The Company made no
employer contributions for fiscal 2000 and 2001.
17. Business Segments
The Company has two reportable business segments. The Resorts Division
acquires, develops and markets Timeshare Interests at the Company's resorts and
the Residential Land and Golf Division acquires large tracts of real estate that
are subdivided, improved (in some cases to include a golf course and related
amenities on the property) and sold, typically on a retail basis. The results of
operations from sales of factory-built manufactured home/lot packages and
undeveloped lots previously managed under the Communities Division have been
combined with the results of operations of the Company's Residential Land and
Golf Division in the prior periods, due to immateriality. The Company's
reportable segments are business units that offer different products. The
reportable segments are each managed separately because they sell distinct
products with different development, marketing and selling methods.
The Company evaluates performance and allocates resources based on field
operating profit. Field operating profit is operating profit prior to the
allocation of corporate overhead, interest income, gain on sale of receivables,
other income, provision for loan losses, interest expense, income taxes and
minority interest. Inventory is the only asset that the Company evaluates on a
segment basis - all other assets are only evaluated on a consolidated basis. The
accounting policies of the reportable segments are the same as those described
in the summary of significant accounting policies.
Required disclosures for the Company's business segments are as follows (in
thousands):
Residential Land
As of and for the year ended March 28, 1999 Resorts and Golf Totals
------- -------- ------
Sales ............................................... $103,127 $122,689 $225,816
Other resort and golf operations revenues ........... 13,825 1,056 14,881
Depreciation expense ................................ 684 334 1,018
Field operating profit .............................. 11,872 31,866 43,738
Inventory ........................................... 91,552 51,432 142,984
As of and for the year ended April 2, 2000
Sales ............................................... $117,271 $ 97,217 $214,488
Other resort and golf operations revenues ........... 19,038 2,707 21,745
Depreciation expense ................................ 1,303 831 2,134
Field operating profit .............................. 7,410 22,587 29,997
Inventory ........................................... 109,534 87,559 197,093
As of and for the year ended April 1, 2001
Sales ............................................... $137,411 $ 88,899 $226,310
Other resort and golf operations revenues ........... 26,326 1,887 28,213
Depreciation expense ................................ 1,986 873 2,859
Field operating profit .............................. 9,724 12,991 22,715
Inventory ........................................... 97,012 96,622 193,634
69
Reconciliations to Consolidated Amounts
Field operating profit for reportable segments reconciled to consolidated
income before provision for income taxes and minority interest (in thousands):
Year Ended
-------------------------------------------
March 28, April 2, April 1,
1999 2000 2001
-------------------------------------------
Field operating profit for reportable segments ........... $ 43,738 $ 29,997 $ 22,715
Interest income .......................................... 14,804 15,652 17,317
Gain on sales of notes receivable ........................ 3,692 2,063 3,281
Other income ............................................. 522 735 572
Corporate general and administrative expenses ............ (15,163) (18,703) (20,502)
Interest expense ......................................... (12,922) (13,841) (15,494)
Provision for loan losses ................................ (2,754) (5,338) (4,887)
--------- --------- ---------
Consolidated income before provision for income
taxes and minority interest ........................... $ 31,917 $ 10,565 $ 3,002
========= ========= =========
Depreciation expense for reportable segments reconciled to consolidated
depreciation expense (in thousands):
Year Ended
-------------------------------------------
March 28, April 2, April 1,
1999 2000 2001
-------------------------------------------
Depreciation expense for reportable segments ............. $ 1,018 $ 2,134 $ 2,859
Depreciation expense for corporate fixed assets .......... 879 1,072 1,404
--------- --------- ---------
Consolidated depreciation expense ........................ $ 1,897 $ 3,206 $ 4,263
========= ========= =========
Assets for reportable segments reconciled to consolidated assets (in
thousands):
Year Ended
-------------------------------------------
March 28, April 2, April 1,
1999 2000 2001
-------------------------------------------
Inventory for reportable segments ........................ $ 142,984 $ 197,093 $ 193,634
Assets not allocated to reportable segments .............. 204,334 216,890 226,047
--------- --------- ---------
Total assets ............................................. $ 347,318 $ 413,983 $ 419,681
========= ========= =========
Geographic Information
Sales by geographic area are as follows (in thousands):
Year Ended
-------------------------------------------
March 28, April 2, April 1,
1999 2000 2001
-------------------------------------------
United States ............................................ $ 210,139 $ 203,899 $ 216,321
Aruba .................................................... 15,668 10,575 9,964
Canada ................................................... 9 14 25
--------- --------- ---------
Consolidated totals ...................................... $ 225,816 $ 214,488 $ 226,310
========= ========= =========
Inventory by geographic area is as follows (in thousands):
April 2, April 1,
2000 2001
--------------------------
United States $ 183,978 $ 181,676
Aruba 13,083 11,951
Canada 32 7
--------- ---------
Consolidated totals $ 197,093 $ 193,634
========= =========
70
18. Quarterly Financial Information (Unaudited)
Summarized quarterly financial information for the years ended April 2,
2000 and April 1, 2001 is presented below (in thousands, except for per share
information).
Three Months Ended
-----------------------------------------------------
July 4, October 3, January 2, April 2,
1999 1999 2000 2000
---- ---- ---- ----
Sales ...................................... $ 62,714 $ 65,653 $ 45,246 $ 40,875
Gross profit ............................... 40,990 44,555 27,948 26,038
Net income (loss) .......................... 4,424 5,862 (785) (2,724)
Earnings (loss) per common share:
Basic ................................... 0.19 0.25 (0.03) (0.11)
Diluted ................................. 0.17 0.22 (0.03) (0.11)
Three Months Ended
-----------------------------------------------------
July 2, October 1, December 31, April 1,
2000 2000 2000 2001
---- ---- ---- ----
Sales ...................................... $ 62,207 $ 64,810 $ 44,803 $ 54,490
Gross profit ............................... 40,324 43,915 28,753 34,523
Net income (loss) .......................... 3,012 2,001 (1,361) (935)
Earnings (loss) per common share:
Basic ................................... 0.12 0.08 (0.06) (0.04)
Diluted ................................. 0.12 0.08 (0.06) (0.04)
71
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
Bluegreen Corporation
We have audited the accompanying consolidated balance sheets of Bluegreen
Corporation as of April 2, 2000 and April 1, 2001, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended April 1, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Bluegreen
Corporation at April 2, 2000 and April 1, 2001, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended April 1, 2001, in conformity with accounting principles generally accepted
in the United States.
ERNST & YOUNG LLP
West Palm Beach, Florida
June 8, 2001
72
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
For information with respect to the Company's Directors, see the
information provided under the headings "Proposal 1 - Election of Nominees for
Director" and "Certain Relationships and Other Transactions" in the Proxy
Statement, which sections are incorporated herein by reference. Information
concerning the executive officers of the Company appears in Item 1 of Part 1 of
this Annual Report on Form 10-K.
Section 16 Compliance
The information provided under the heading "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Proxy Statement is incorporated herein by
reference.
Item 11. EXECUTIVE COMPENSATION.
The information provided under the headings "Proposal 1- Election of
Nominees for Director," "Board of Directors and its Committees," "Compensation
Committee Report on Executive Compensation", "Compensation of Chief Executive
Officer", "Executive Compensation" and "Certain Relationships and Other
Transactions" in the Company's Proxy Statement is incorporated herein by
reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information provided under the heading "Proposal 1 - Election of
Nominees for Director" in the Proxy Statement is incorporated herein by
reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information provided under the headings "Proposal 1 - Election of
Nominees for Director," "Executive Compensation" and "Certain Relationships and
Other Transactions" in the Proxy Statement is incorporated herein by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) and (a)(2) List of Financial Statements and Schedules.
1. The following Consolidated Financial Statements and Notes thereto of the
Company and its subsidiaries and the report of independent certified public
accountants relating thereto, are included in Item 8.
Consolidated Balance Sheets as of April 2, 2000 and April 1, 2001
Consolidated Statements of Income for each of the three years in the period
ended April 1, 2001
Consolidated Statements of Shareholders' Equity for each of the three years
in the period ended April 1, 2001
Consolidated Statements of Cash Flows for each of the three years in the
period ended April 1, 2001
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
73
2. All financial statement schedules are omitted because they are not
applicable, are not present in amounts sufficient to require submission of
the schedules or the required information is presented in the Consolidated
Financial Statements or related notes.
(a)(3) List of Exhibits.
The exhibits which are filed with this Annual Report on Form 10-K or which
are incorporated herein by reference are set forth in the Exhibit Index which
appears at pages 77 through 81 hereof and are incorporated herein by reference.
(b) Reports on Form 8-K.
None.
(c) Exhibits.
See (a)(3) above.
(d) Financial Statement Schedules.
All financial statement schedules are omitted because they are not
applicable, are not present in amounts sufficient to require submission of the
schedules or the required information is presented in the Consolidated Financial
Statements or related notes.
74
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: June 26, 2001 By: /S/ GEORGE F. DONOVAN
-------------------------------------------
George F. Donovan,
President and Chief Executive Officer
Date: June 26, 2001 By: /S/ JOHN F. CHISTE
-------------------------------------------
John F. Chiste,
Senior Vice President, Treasurer and Chief
Financial Officer
(Principal Financial Officer)
Date: June 26, 2001 By: /S/ ANTHONY M. PULEO
-------------------------------------------
Anthony M. Puleo,
Vice President and Chief Accounting Officer
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on the 26th day of June, 2001.
Signature Title
--------- -----
/S/ GEORGE F. DONOVAN President, Chief Executive Officer and
- ------------------------------- Director
George F. Donovan
/S/ JOHN F. CHISTE Senior Vice President, Treasurer and Chief
- ------------------------------- Financial Officer
John F. Chiste (Principal Financial Officer)
/S/ ANTHONY M. PULEO Vice President and Chief Accounting Officer
- ------------------------------- (Principal Accounting Officer)
Anthony M. Puleo
/S/ JOHN P. BUZA Director
- -------------------------------
John P. Buza
/S/ RALPH A. FOOTE Director
- -------------------------------
Ralph A. Foote
/S/ MICHAEL J. FRANCO Director
- -------------------------------
Michael J. Franco
/S/ RICHARD M. KELLEHER Director
- -------------------------------
Richard M. Kelleher
/S/ JOHN LAGUARDIA Director
- -------------------------------
John Laguardia
/S/ J. LARRY RUTHERFORD Director
- -------------------------------
J. Larry Rutherford
/S/ BRADFORD T. WHITMORE Director
- -------------------------------
Bradford T. Whitmore
/S/ JOSEPH M. ZUBER Director
- -------------------------------
Joseph M. Zuber
75
EXHIBIT INDEX
Number Description
- ------ -----------
3.1 - Restated Articles of Organization, as amended (incorporated by
reference to exhibit of same designation to Annual Report on Form
10-K for the year ended March 31, 1996).
3.2 - Restated and amended By-laws of the Registrant (incorporated by
reference to exhibit 3.3 to Current Report on Form 8-K dated
August 14, 1998).
4.4 - Specimen of Common Stock Certificate (incorporated by reference
to exhibit of same designation to Annual Report on Form 10-K for
the year ended April 2, 2000).
4.6 - Form of Indenture dated as of May 15, 1987 relating to the
Company's 8.25% Convertible Subordinated Debentures Due 2012,
including Form of Debenture (incorporated by reference to exhibit
of same designation to Registration Statement on Form S-1, File
No. 33-13753).
4.7 - Indenture dated as of April 1, 1998 by and among the Registrant,
certain subsidiaries of the Registrant, and SunTrust Bank,
Central Florida, National Association, as trustee, for the 10
1/2% Senior Secured Notes due 2008. (incorporated by reference to
exhibit of same designation to Registration Statement on Form
S-4, File No. 333-50717).
4.8 - First Supplemental Indenture dated as of March 15, 1999 by and
among the Registrant, certain subsidiaries of the Registrant, and
SunTrust Bank, Central Florida, National Association, as trustee,
for the 10 1/2% Senior Secured Notes due 2008 (incorporated by
reference to exhibit of same designation to Annual Report on Form
10-K for the fiscal year ended March 28, 1999).
10.24 - Form of Agreement dated June 27, 1989 between the Registrant and
Peoples Heritage Savings Bank relating to sale of mortgage notes
receivable (incorporated by reference to exhibit of same
designation to Annual Report on Form 10-K for the fiscal year
ended April 2, 1989).
10.77 - Registrant's Amended 1988 Outside Directors Stock Option Plan
(incorporated by reference to exhibit of same designation to
Annual Report on Form 10-K for the fiscal year ended March 29,
1992).
10.78 - Registrant's 1988 Amended Outside Director's Stock Option Plan
(incorporated by reference to exhibit to Registration Statement
on Form S-8, File No. 33-61687).
10.79 - Registrant's 1998 Non-Employee Director Stock Option Plan
(incorporated by reference to exhibit 10.131 to Annual report on
Form 10-K for the year ended March 29, 1998).
10.80 - Registrant's 1995 Stock Incentive Plan, as amended (incorporated
by reference to exhibit 10.79 to Annual Report on Form 10-K for
the fiscal year ended March 29, 1998).
10.81 - Registrant's Retirement Savings Plan (incorporated by reference
to Registration Statement on Form S-8, File No. 33-48075).
10.85 - Loan and Security Agreement by and between the Registrant and
Foothill Capital Corporation dated as of October 29, 1993
(incorporated by reference to exhibit of same designation to
Annual Report on Form 10-K for the fiscal year ended March 27,
1994).
10.93 - Stock Purchase Agreement dated as of November 22, 1994 by and
among Harry S. Patten and the Purchasers named therein
(incorporated by reference to exhibit of same designation to
Current Report on Form 8-K dated November 22, 1994).
76
10.98 - Pooling and Servicing Agreement dated as of June 15, 1995, among
Patten Receivables Finance Corporation X, the Registrant, Patten
Corporation REMIC Trust, Series 1995-1 and First Trust National
Association, as Trustee (incorporated by reference to exhibit to
Current Report on Form 8-K dated July 12, 1995).
10.99 - Pooling and Servicing Agreement dated as of April 15, 1996, among
Bluegreen Receivables Finance Corporation I, the Registrant,
Bluegreen Corporation REMIC Trust, Series 1996-1 and First Trust
National Association, as Trustee (incorporated by reference to
exhibit to Current Report on Form 8-K dated May 15, 1996).
10.100 - Pooling and Servicing Agreement dated as of November 15, 1996,
among Bluegreen Receivables Finance Corporation II, the
Registrant, Bluegreen Corporation REMIC Trust, Series 1996-2 and
First Trust National Association, as Trustee (incorporated by
reference to exhibit to Current Report on Form 8-K dated December
11, 1996).
10.102 - Amended and Restated Sale and Contribution Agreement dated as of
October 1, 1999 by and among Bluegreen Corporation Receivables
Finance Corporation III and BRFC III Deed Corporation
(incorporated by reference to exhibit 10.103 to Quarterly Report
on Form 10-Q dated January 2, 2000).
10.104 - Amended and Restated Asset Purchase Agreement dated as of October
1, 1999 by and among Bluegreen Corporation, Bluegreen Receivables
Finance Corporation III, BRFC III Deed Corporation, Heller
Financial Inc., Vacation Trust, Inc. and U.S. Bank National
Association, as cash administrator, including Definitions Annex
(incorporated by reference to exhibit of same designation to
Quarterly Report on Form 10-Q dated January 2, 2000).
10.105 - Sale and Contribution Agreement dated as of September 1, 2000,
among the Registrant and Bluegreen Receivables Finance
Corporation IV (incorporated by reference to exhibit of same
designation to Quarterly Report on Form 10-Q dated October 1,
2000).
10.106 - Sale and Servicing Agreement dated as of September 1, 2000, among
the Registrant, BXG Receivables Owner Trust 2000, Bluegreen
Receivables Finance Corporation IV, Concord Servicing
Corporation, Vacation Trust, Inc., U.S. Bank Trust National
Association, Heller Financial, Inc. and Barclays Bank PLC
(incorporated by reference to exhibit of same designation to
Quarterly Report on Form 10-Q dated October 1, 2000).
10.107 - Indenture dated as of September 1, 2000, between BXG Receivables
Owner Trust 2000 and U.S. Bank Trust National Association
(incorporated by reference to exhibit of same designation to
Quarterly Report on Form 10-Q dated October 1, 2000).
10.108 - BXG Receivables Owner Trust 2000 Definitions Annex dated as of
September 1, 2000 (incorporated by reference to exhibit of same
designation to Quarterly Report on Form 10-Q dated October 1,
2000).
10.109 - Class A Note dated as of October 16, 2000, among BXG Receivables
Owner Trust 2000, U.S. Bank Trust National Association and
Barclays Bank PLC (incorporated by reference to exhibit of same
designation to Quarterly Report on Form 10-Q dated October 1,
2000).
10.110 - Class B Note dated as of October 16, 2000, among BXG Receivables
Owner Trust 2000, U.S. Bank Trust National Association and Heller
Financial, Inc. (incorporated by reference to exhibit of same
designation to Quarterly Report on Form 10-Q dated October 1,
2000).
10.123 - Exchange and Registration Rights Agreement dated April 1, 1998,
by and among the Registrant and the persons named therein,
relating to the 10 1/2% Senior Secured Notes due 2008
(incorporated by reference to exhibit of same designation to
Registration Statement on Form S-4, File No. 333-50717).
77
10.124 - Employment Agreement between George F. Donovan and the Company
dated March, 1998 (incorporated by reference to exhibit of same
designation to Registration Statement on Form S-4, File No.
333-50717).
10.125 - Employment Agreement between John F. Chiste and the Company dated
March, 1998 (incorporated by reference to exhibit of same
designation to Registration Statement on Form S-4, File No.
333-50717).
10.126 - Employment Agreement between Daniel C. Koscher and the Company
dated March, 1998 (incorporated by reference to exhibit 10.127 to
Registration Statement on Form S-4, File No. 333-50717).
10.127 - Employment Agreement between Patrick E. Rondeau and the Company
dated March, 1998 (incorporated by reference to exhibit 10.128 to
Registration Statement on Form S-4, File No. 333-50717).
10.128 - Employment Agreement between David D. Philp and the Company dated
August 30, 1999 (incorporated by reference to exhibit 10.129 to
Quarterly Report on Form 10-Q dated October 3, 1999).
10.129 - Amended and Restated Credit Facility Agreement entered into as of
April 16, 1998 between Finova Capital Corporation and the
Registrant (incorporated by reference to exhibit of same
designation to Registration Statement on Form S-4, File No.
333-50717).
10.130 - Second Amended and Restated Credit Facility Agreement entered
into as of September 14, 1999, between Finova Capital Corporation
and the Registrant (incorporated by reference to exhibit of same
designation to Quarterly Report on Form 10-Q dated October 3,
1999).
10.131 - Amended and Restated Loan and Security Agreement dated as of
September 23, 1997 between Foothill Capital Corporation and the
Registrant (incorporated by reference to exhibit 10.130 to
Registration Statement on Form S-4, File No. 333-50717).
10.132 - Amendment Number One to Loan and Security Agreement dated
December 1, 2000, by and between the Registrant and Foothill
Capital Corporation (incorporated by reference to exhibit 10.140
to Quarterly Report on Form 10-Q dated December 31, 2000).
10.133 - Loan and Security Agreement dated October 20, 1998, by the
Registrant and Bluegreen Resorts, Inc. as Borrowers and Heller
Financial, Inc. as Lender (incorporated by reference to exhibit
of same designation to Quarterly Report on Form 10-Q dated
December 27, 1998).
10.134 - Amended and Restated Loan and Security Agreement dated as of June
30, 1999, among the Registrant, Bluegreen Vacations Unlimited,
Inc. and Heller Financial, Inc. (incorporated by reference to
exhibit 10.138 to Quarterly Report on Form 10-Q dated July 2,
2000).
10.135 - Amended and Restated Loan and Security Agreement dated as of June
29, 2000, among the Registrant, Bluegreen Vacations Unlimited,
Inc. and Heller Financial, Inc. (incorporated by reference to
exhibit 10.139 to Quarterly Report on Form 10-Q dated July 2,
2000).
10.136 - Third Amendment to Amended and Restated Loan and Security
Agreement dated as of October 16, 2000, among the Registrant,
Bluegreen Vacations Unlimited, Inc.(TM)and Heller Financial, Inc.
(incorporated by reference to exhibit 10.140 to Quarterly Report
on Form 10-Q dated October 1, 2000).
78
10.137 - Master Bluegreen Resort Loan Facility dated October 20, 1998, by
and between the Registrant and Heller Financial, Inc.
(incorporated by reference to exhibit 10.134 to Quarterly Report
on Form 10-Q dated December 27, 1998).
10.138 - Acquisition Cost Reimbursement Loan Agreement dated as of
September 14, 1999, by and between Bluegreen Vacations Unlimited,
Inc. and Heller Financial, Inc. (incorporated by reference to
exhibit 10.135 to Quarterly Report on Form 10-Q dated October 3,
1999).
10.139 - Acquisition and Construction Cost Reimbursement Loan Agreement
dated as of December 1, 1999, by and between Bluegreen Vacations
Unlimited, Inc. and Heller Financial, Inc. (incorporated by
reference to exhibit 10.136 to Quarterly Report on Form 10-Q
dated January 2, 2000).
10.140 - Letter dated December 1, 1999, amending the Master Bluegreen
Resort Facility, dated as of October 20, 1998, between Bluegreen
Corporation and Heller Financial, Inc. (incorporated by reference
to exhibit 10.137 to Quarterly Report on Form 10-Q dated January
2, 2000).
10.141 - Loan Agreement dated as of September 24, 1999, between Bluegreen
Properties of Virginia, Inc. and Branch Banking and Trust Company
(incorporated by reference to exhibit 10.140 to Quarterly Report
on Form 10-Q dated October 3, 1999).
10.145 - Purchase Agreement dated as of August 14, 1998 by and among
Bluegreen Corporation, Morgan Stanley Real Estate Investors III,
L.P., Morgan Stanley Real Estate Fund III, L.P., MSP Real Estate
Fund, L.P. and MSREF III Special Fund, L.P. (incorporated by
reference to exhibit 10.131 to Current Report on Form 8-K dated
August 14, 1998).
10.146 - Registration Rights Agreement, dated as of August 14, 1998, among
Morgan Stanley Real Estate Investors III, L.P., Morgan Stanley
Real Estate Fund III, L.P., MSP Real Estate Fund, L.P and MSREF
III Special Fund, L.P. and Bluegreen Corporation (incorporated by
reference to exhibit 10.132 to Current Report on Form 8-K dated
August 14, 1998).
10.147 - Voting and Cooperation Agreement, dated as of August 14, 1998,
among Morgan Stanley Real Estate Investors III, L.P., Morgan
Stanley Real Estate Fund III, L.P., MSP Real Estate Fund, L.P.,
MSREF III Special Fund, L.P. and certain shareholders of
Bluegreen Corporation (incorporated by reference to exhibit
10.133 to Current Report on Form 8-K dated August 14, 1998).
10.153 - Modification No. 3 to the Loan Agreement and Renewal Promissory
Note dated December 31, 2000 by and among the Registrant, certain
subsidiaries of the Registrant and First Union National Bank, for
the $10 million, unsecured revolving line-of-credit due December
31, 2001 (incorporated by reference to exhibit of same
designation to Quarterly Report on Form 10-Q dated December 31,
2000).
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.
(incorporated by reference to exhibit of same designation to
Quarterly Report on Form 10-Q dated July 2, 2000).
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 (incorporated by reference to exhibit of same
designation to Quarterly Report on Form 10-Q dated July 2, 2000).
79
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)
(incorporated by reference to exhibit of same designation to
Quarterly Report on Form 10-Q dated July 2, 2000).
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)
(incorporated by reference to exhibit of same designation to
Quarterly Report on Form 10-Q dated July 2, 2000).
10.204 - Contribution Agreement dated as of June 16, 2000 by and between
Bluegreen Vacations Unlimited, Inc. and Big Cedar L.L.C.
(incorporated by reference to exhibit of same designation to
Quarterly Report on Form 10-Q dated July 2, 2000).
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. (incorporated by reference to exhibit
of same designation to Quarterly Report on Form 10-Q dated July
2, 2000).
10.206 - Administrative Services Agreement dated as of June 16, 2000 by
and among Bluegreen/Big Cedar Vacations, LLC and Bluegreen
Vacations Unlimited, Inc. (incorporated by reference to exhibit
of same designation to Quarterly Report on Form 10-Q dated July
2, 2000).
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. (incorporated by reference to exhibit of same designation
to Quarterly Report on Form 10-Q dated July 2, 2000).
21.1 - List of Subsidiaries.
23.1 - Consent of Ernst & Young LLP.
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