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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 March 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-19292
BLUEGREEN CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 03-0300793
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4960 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:
Title of each class Name of each exchange 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: $50,195,971 based upon the closing sale price of the
Company's Common Stock on the New York Stock Exchange on June 24, 2002 ($3.52
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 of each of the registrant's
classes of common stock, as of the latest practicable date: As of June 24, 2002,
there were 24,385,807 shares of the registrant's common stock, $.01 par value,
outstanding.
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 22, 2002 (the "Proxy Statement") are incorporated by reference into Part
III hereof.
BLUEGREEN CORPORATION
INDEX TO ANNUAL REPORT ON FORM 10-K
PART I PAGE
Item 1. BUSINESS.......................................................... 1
Item 2. PROPERTIES........................................................ 21
Item 3. LEGAL PROCEEDINGS................................................. 21
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............... 22
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS......................................................... 22
Item 6. SELECTED FINANCIAL DATA........................................... 24
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION......................................... 24
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........ 41
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................... 43
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE............................................ 80
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................ 80
Item 11. EXECUTIVE COMPENSATION............................................ 80
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.... 80
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................... 80
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K... 80
Signatures.................................................................. 82
Exhibit Index .............................................................. 83
Note: The term "Bluegreen(R)" is registered in the U.S. Patent and Trademark
office by Bluegreen Corporation.
The term "Big Cedar(R)" 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 3,700 resorts worldwide through the Company's participation in
timeshare exchange networks. The Company currently develops, markets and sells
Timeshare Interests in 11 resorts located in the United States and one resort
located in the Caribbean. The Company also markets and sells Timeshare Interests
at two off-site sales locations serving the Indianapolis, Indiana and Detroit,
Michigan markets. 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 (hereinafter referred to as "home sites") 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 (i) near major
metropolitan centers but outside the perimeter of intense subdivision
development or (ii) 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 home sites 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, home sites 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 home sites, 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 2001. 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 (two resorts); Myrtle Beach (two resorts) 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 two off-site sales
offices. Through March 31, 2002, the Company has generated approximately 67,000
Timeshare Interests sales transactions at its resorts. As of March 31, 2002, the
Company had 69,509 completed Timeshare Interests at its resorts, 8,913 Timeshare
Interests under construction or development and plans to develop approximately
78,196 additional Timeshare Interests at existing resorts. Based on the
foregoing, the Resorts Division's estimated remaining life-of-project sales were
approximately $914 million as of March 31, 2002, 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 87,000 members.
1
The Resorts Division uses a variety of techniques to attract prospective
purchasers of Timeshare Interests, including telemarketing mini-vacations,
marketing 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 3,700 participating RCI resorts or over 1,900 participating II resorts
located in over 100 countries worldwide. To further enhance the ability of its
Timeshare Interest owners to customize their vacation experience, the Company
has also implemented the points-based Bluegreen Vacation Club 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 March 31, 2002, the Company's approximately
51,000 Bluegreen Vacation Club members could choose to use their points at 32
resorts in the Bluegreen system. The Company also has implemented the Bluegreen
Vacation Club Sampler program, which allows Sampler package purchasers to enjoy
substantially the same amenities, activities and services offered to the regular
Bluegreen 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 geographic
areas in which the Company currently intends to pursue the acquisition of real
estate or interests in real estate for the Resorts Division are the areas in
which the Resorts Division currently operates (as noted above), the northeastern
and western United States and the Caribbean, although the Company may pursue
acquisitions in other areas. No assurances can be given that the Company will be
able to acquire property in its current target areas or be successful in its
acquisitions strategy.
The Company has historically provided financing to approximately 99% 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 March 31, 2002, the
Company had a timeshare receivables portfolio totaling approximately $50.9
million in principal amount, with a weighted-average contractual yield of
approximately 15.4% per annum. During fiscal 2002, 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 facility expired in April 2002, and the Company is
currently negotiating a new combined warehouse and purchase facility. No
assurances can be given that such negotiation will be successful or that the
Company will obtain a new facility on favorable terms if at all. See "Liquidity
and Capital Resources" for further discussion of the Company's timeshare
receivable facilities and certain risks relating to such facilities.
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 March 31,
2002 was $101.4 million. The Residential Land and Golf Division's estimated
remaining life-of-project sales were approximately $357.6 million at March 31,
2002, based on retail prices at that date. The Company believes no other company
in the United States of comparable size or financial resources markets and sells
residential home sites directly to retail customers.
The Residential Land and Golf Division targets families seeking a quality
lifestyle improvement, which is generally unavailable in traditional, intensely
subdivided suburban developments. Based on the Company's experience in marketing
and selling home sites 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
2
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.
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 increase the marketability of the Company's adjacent home sites in
certain projects. The Company's first golf course, the Carolina National(TM)
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(TM), a new residential land and golf course community in New Kent
County, Virginia. Brickshire opened its 18-hole golf course, designed by
two-time U.S. Open Champion Curtis Strange, in fiscal 2002. In fiscal 2001, the
Company began construction of an 18-hole golf course designed by PGA Champion
Davis Love III adjacent to its residential land project near Chapel Hill, North
Carolina, known as The Preserve at Jordan Lake(TM). The Company expects that the
golf course at The Preserve at Jordan Lake will open for play in August 2002.
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 and this
Annual Report contains certain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1999. Please see Item 7
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" ("MD&A") for further discussion of these risks and uncertainties and
factors that could cause the Company's actual results to differ materially from
those suggested in the forward-looking statements.
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. The Company's web site address is
www.bluegreenonline.com.
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 2001. Also, the number of timeshare resorts worldwide
and the number of timeshare owners grew by approximately 9% and 17%,
respectively, from 2000 to 2001. No assurances can be given that such industry
growth rates will continue.
3
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:
o Consumer awareness of the value and benefits of Timeshare Interest
ownership, including the cost savings relative to certain other
lodging alternatives;
o Flexibility of Timeshare Interest ownership due to the growth of
international exchange organizations such as RCI and II 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 portion of these
companies' overall operations, the Company believes that their involvement in
the timeshare industry has enhanced the industry's image with the general
public.
Since the September 11th terrorist attacks, the leisure and travel
industries, including the timeshare industry, have been adversely impacted by a
reduction in air travel by Americans. The Company believes that it has been
somewhat less affected by this adverse economic impact due to the 11 "drive-to"
resort destinations in its portfolio of 12 timeshare properties. The Company
believes that, in general, Americans still desire to take family vacations and
that the Bluegreen Vacation Club, which consists entirely of "drive-to" resorts,
is positioned to satisfy consumer demand for family vacations in the
post-September 11th environment. There can be no assurances that the Company
will not experience a material adverse economic effect from the current or
future reductions in air and other forms of leisure travel.
The Consumer. According to information compiled by industry sources,
customers in the 40-49 year age range represented approximately 25% of all
Timeshare Interest owners in the United States in 2000. Historically, the median
age of a Timeshare Interest buyer at the time of purchase was 48. The median
annual household income of Timeshare Interest owners in the United States in
2000 was approximately $79,000, with approximately 29% 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 next 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 March 31, 2002, all of the
Company's sales offices, with the exception of its La Cabana Beach and Racquet
Club(TM) ("La Cabana") sales office in Aruba, were only selling Timeshare
Interests within the Bluegreen Vacation Club 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
4
responsibilities of the homeowners' association, including grounds landscaping,
security, housekeeping and operating supplies, garbage collection, utilities,
insurance, laundry and repairs and maintenance. As of March 31, 2002, the
Company managed 20 resorts (including ten of the Company's resorts) and served
an owner base of approximately 87,000.
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. Eleven of the
Company's timeshare resorts are affiliated with RCI and have been awarded RCI's
highest designation (Gold Crown), while La Cabana is affiliated with II. A
Timeshare Interest owner's participation in the RCI or II exchange network
allows such owner to exchange their annual Timeshare Interest for occupancy at
over 3,700 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. RCI and II's participating resorts are located throughout the
world in over 100 countries. A member may exchange their 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. No assurances
can be given that the Company's resorts will continue to qualify for
participation in RCI or II, or that the Company's customers will continue to be
satisfied with these networks. 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 home sites
to retail customers who intend to build a home on such home sites 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, such as
the construction of single and multi-family housing structures, 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. See "MD&A" for a discussion of risks the Company
has as a result of holding real estate inventory. 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 centerpieces of certain of the
Company's residential land properties. As of March 31, 2002, the Company was
marketing home sites in six 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 La Cabana, are part of
the Bluegreen Vacation Club. Buyers of timeshare interests in the Bluegreen
Vacation Club receive an annual allotment of "points" in perpetuity
5
(supported by an underlying deeded fixed timeshare week 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 11 of the Company's resorts (all
except La Cabana), Bluegreen Vacation Club owners can use their points to stay
at 21 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.
Buyers of timeshare interests in La Cabana receive an ownership interest in
La Cabana, which provides them the use of a vacation residence at La Cabana for
a one-week period each year in perpetuity. Ownership of a timeshare interest in
La Cabana is not interchangeable with ownership of a timeshare interest at one
of the Company's other resorts which are part of the Bluegreen Vacation Club, or
vice versa.
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 La Cabana and the Big Cedar Wilderness Club(TM). La Cabana
is managed by Optima Hotel Exploitatiemaatschappij N.V., an unaffiliated third
party which managed the resort prior to the Company's acquisition of La Cabana's
unsold Timeshare Inventory in 1997. The Big Cedar Wilderness Club resort is
managed by Big Cedar(R), L.L.C., the minority owner of the Company's 51%-owned
Bluegreen/Big Cedar Vacations, LLC(TM), the developer of the Big Cedar
Wilderness Club.
Please see page 8 below for additional disclosure about the individual
resorts, including the number of Timeshare Interests completed, under
construction and sold at each of the Company's resorts.
MountainLoft(TM) --Gatlinburg, Tennessee. The MountainLoft 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 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--North Myrtle Beach, South Carolina. Shore
Crest 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 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 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 renowned
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 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 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 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 Resort, which includes 60 units, an outdoor swimming
pool, hot tub and tennis courts.
La Cabana Beach Resort & Racquet Club --Aruba. Bluegreen Properties N.V.
acquired the unsold Timeshare Interest inventory of La Cabana (approximately
8,000 Timeshare Interests) in December 1997 and additional Timeshare Interests
from time to time thereafter. Established in 1989, La Cabana is a 449-suite
ocean front property, which offers
6
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
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 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 --Ridgedale, Missouri. In fiscal 2001,
Bluegreen/Big Cedar Vacations LLC, a joint venture between a wholly-owned
subsidiary of the Company and Big Cedar, L.L.C., with 51% and 49% ownership,
respectively, began developing the Big Cedar Wilderness Club, 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 Big Cedar Wilderness Club 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.
Solara Surfside(TM) --Surfside, Florida. In June 2001, the Company acquired
the unsold Timeshare Interest inventory (approximately 6,001 Timeshare
Interests, as further described in the table below) at an existing vacation
ownership property located in Surfside, Florida, near Miami Beach. Solara
Surfside is located directly on the beach and features one and two bedroom
vacation homes. Sales of Timeshare Interests in this resort commenced in May
2002. The Company is in the process of renovating the resort's units, common
areas and amenities. Such renovations are anticipated to be completed by October
2002, although there can be no assurances.
7
The following table sets forth additional data with respect to each of the
Company's resorts:
Laurel Shore Harbour The Christmas La Cabana Shenandoah
Mountain- Crest Crest Lights Falls Mountain Beach & Crossing Orlando's
Loft Pigeon Myrtle Myrtle Village Village Racquet Farm & Club Sunshine
Gatlinburg, Forge, Beach, Beach, Branson, Wisconsin, Club , Gordonsville, Orlando,
Location TN TN SC SC MO Dells, WI Aruba VA FL
- -----------------------------------------------------------------------------------------------------------------------------------
Date sales commenced 7/94 8/95 4/96 6/97 7/97 9/97 1/98 4/98 12/98
Number of Timeshare
Interests completed as
of March 31, 2002 (1) 14,248 12,064 12,480 4,992 3,979 2,792 8,511 2,123 3,120
Number of Timeshare
Interests under
Construction as of
March 31, 2002 (1) (2) -- -- -- -- -- 416 -- -- --
Number of additional
Timeshare Interests
Planned (1) (2) 4,680 8,840 -- 8,736 9,256 12,364 -- 10,400 --
Number of Timeshare
Interests in inventory at
March 31, 2002 (3) 890 781 4,004 927 276 696 3,874 402 531
Average sales price
Per transaction (4) (5) $7,979 $7,959 $8,588 $9,423 $10,005 $6,291 $8,001 $9,189 $7,140
Number of Timeshare
Sales transactions (5)
Through March 31, 2002 12,656 9,889 12,402 5,778 4,767 4,162 5,819 1,991 4,968
The Big Cedar
Lodge Wilderness Solara
Alley Inn Club (6) Surfside
Charleston, Ridgedale, Surfside,
Location SC MO FL
- -----------------------------------------------------------------
Date sales commenced 2/99 11/00 5/02
Number of Timeshare
Interests completed as
of March 31, 2002 (1) 4,680 520 --
Number of Timeshare
Interests under
Construction as of
March 31, 2002 (1) (2) -- 2,496 6,001
Number of additional
Timeshare Interests
Planned (1) (2) -- 23,920 --
Number of Timeshare
Interests in inventory at
March 31, 2002 (3) 1,868 1,617 6,001
Average sales price
Per transaction (4) (5) $9,596 $13,196 --
Number of Timeshare
Sales transactions (5)
Through March 31, 2002 3,405 929 --
(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, Harbour Lights, Orlando's Sunshine, La Cabana and
Lodge Alley Inn resorts. The amounts for the remaining resorts include some
vacation homes that can be subdivided and sold either as two smaller
vacation homes ("lock-out units") or, as in the case of the Solara Surfside
resort, as two timeshare interests per week (Monday through Thursday and
Friday through Sunday), each of which consists of 104 timeshare interests
per vacation home.
(2) There can be no assurances that the Company will have the resource, or will
decide, to complete all such planned Timeshare Interests or that such
Timeshare Interests will be sold at favorable prices.
(3) The number of Timeshare Interests in inventory at March 31, 2002 reflects
the number of Timeshare Interests completed or under construction that are
currently available for sale. In addition to full Timeshare Interests, as
defined elsewhere herein, the Company also sells biennial Timeshare
Interests, which entitle the buyer of points in the Bluegreen Vacation Club
with the use of those points every other year. Biennial Timeshare Interests
held in the Company's inventory are counted as 1/2 of a Timeshare Interest
for the purposes of this disclosure.
(4) The average sales price per transaction is for sales during the year ended
March 31, 2002.
(5) The Company reacquires previously-sold Timeshare Interests in its resorts
in various transactions including foreclosures, deedback in lieu of
foreclosure and equity trade-ins of one Timeshare Interest towards the
purchase of a higher priced Timeshare Interest, subject to the Company's
policies and applicable laws and regulations. The Company sells reacquired
Timeshare Interests through its sales outlets at then-current retail
prices. For the purposes of this disclosure, each sale, including the sale
of a reacquired or a biennial Timeshare Interest, is counted as one
timeshare sales transaction. Also, the sales price on a transaction with an
equity trade-in is accounted for net of the equity trade-in allowance
granted the customer.
(6) Bluegreen/Big Cedar LLC, in which the Company owns a 51% interest, is
developing The Big Cedar Wilderness Club.
The Company believes that each of its resorts is adequately covered by
property and casualty insurance, in the case of the Company's completed resorts,
and builder's risk insurance, in the case of resorts that are under
construction. In addition, the Company, or general contractors hired by the
Company, as applicable, purchase performance bonds if required by the local
jurisdictions in which the Company develops its resorts.
Certain Residential Land and Golf Division Projects
Set forth below is a description of the six 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 78.8% of the Residential Land and Golf
Division's estimated remaining life-of-project sales at March 31, 2002.
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 approximately 2,400 home sites, ranging in size from one to
twenty acres. Mystic Shores 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. General improvements
on home sites at Mystic Shores performed by the Company include, in most cases,
water and lot clearing, while some sections of the project also include
underground electric and telephone utilities. Aggregate development costs
through March 31, 2002 were
8
$17.6 million, with projected remaining expenditures to complete development at
the project of $25.6 million. The Company began selling home sites in March
2000, with aggregate sales of $33.1 million through March 31, 2002. Estimated
remaining life-of-project sales were approximately $95.1 million as of March 31,
2002, based on retail selling prices as of that date. As of March 31, 2002, the
Company had sold 474 home sites at this project and had a total of 1,899 home
sites remaining available for sale.
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 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 2,800 home sites, with most home sites ranging in size
from 1/4 to five acres. General improvements on the home sites at Lake Ridge
performed by the Company include, in most cases, water, sewer, electric,
telephone and cable television utilities as well as lot clearing. The Company
began selling home sites in April 1994 and aggregate sales through March 31,
2002 were $98.2 million. Aggregate development costs through March 31, 2002 were
$30.0 million and the Company anticipates that the remaining capital
expenditures to complete development at the project will be $21.0 million.
Estimated remaining life-of-project sales for this project were approximately
$80.2 million as of March 31, 2002, based on retail selling prices as of that
date. As of March 31, 2002, the Company had sold 1,469 home sites at this
project and had a total of 1,342 home sites remaining available for sale.
Brickshire -- 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 1,135 home sites, ranging in
size from 1/4 to 2.5 acres, and features 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. General improvements on
the home sites at Brickshire performed by the Company include, in most cases,
water and sewer utilities. Aggregate development costs through March 31, 2002
were $16.1 million, with projected remaining expenditures of $14.0 million. The
Company began selling home sites in December 1999, with aggregate sales of $19.8
million through March 31, 2002. Estimated remaining life-of-project sales were
approximately $47.5 million as of March 31, 2002, based on retail selling prices
as of that date. As of March 31, 2002, the Company had sold 335 home sites at
this project and had a total of 800 home sites remaining available for sale.
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 1,290 home sites ranging in size from one
to five acres, including both lakefront and waterview parcels. General
improvements on the home sites at Mountain Lakes Ranch performed by the Company
include, in most cases, water, electric and telephone utilities. The Company
began selling home sites in March 2000, with aggregate sales of $15.9 million
through March 31, 2002. Aggregate development costs through March 31, 2002 were
$18.0 million and the Company anticipates that future capital expenditures to
complete development at the project will be $3.8 million. Estimated
life-of-project sales for Mountain Lakes Ranch were $23.3 million as of March
31, 2002, based on retail prices at that date. As of March 31, 2002, the Company
had sold 483 home sites at this project and had a total of 806 home sites
remaining available for sale.
Ridge Lake Shores(TM) -- Magnolia, Texas. In February 2001, the Company
acquired 1,152 acres located approximately 25 minutes drive from Houston, Texas
for $3.2 million. This property is anticipated to include approximately 700 home
sites, ranging in size from one to four acres, and will feature two private
fishing lakes, boat ramps, open-air pavilions, bathhouses, playgrounds and a
beach area. General improvements to the home sites in Ridge Lake Shores
performed by the Company include, in most cases, water and lot clearing, while
some sections of the project have electric, cable, telephone and/or gas
utilities. The Company began selling home sites in May 2001, with aggregate
sales of $5.1 million through March 31, 2002. Aggregate development costs
through March 31, 2002 were $3.7 million and the Company anticipates that future
capital expenditures to complete development at the project will be $7.1
million. Estimated life-of-project sales for Ridge Lake Shores were $20.4
million as of March 31, 2002, based on retail prices at that date. As of March
31, 2002, the Company had sold 154 home sites at this project and had a total of
548 home sites remaining available for sale.
The Preserve at Jordan Lake - 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 which has been designed by
PGA Champion Davis Love III. The project will also include a swimming pool, a
fitness center, a recreation field and tennis courts. The Company anticipates
9
that the project will consist of a total of approximately 516 home sites, which
range in size from approximately 1/3 acre to one acre. The Company began selling
home sites in December 2000, and aggregate sales through March 31, 2002 were
$32.6 million. Aggregate development costs (net of costs capitalized separately
in the golf course) through March 31, 2002 were $12.1 million and the Company
anticipates that the aggregate capital expenditures to complete development at
the project will be $4.4 million. Estimated remaining life-of-project sales for
this project were approximately $15.2 million as of March 31, 2002, based on
retail selling prices as of that date. As of March 31, 2002, the Company had
sold 351 home sites at this project and had a total of 165 home sites remaining
available for sale.
The Company believes that each of its residential land and golf projects is
adequately covered by builder's risk insurance during the construction period
and property and casualty insurance for home sites that are held in the
Company's inventory prior to sale to consumers. Once a home site is sold, the
consumer assumes the risk of loss on such home site. In addition, the applicable
property owners' association bears the risk of loss on any common amenities at
each project.
The Company also purchases performance bonds on each of its projects, to
provide assurance to home site buyers that construction of the project will be
completed. The Company believes that its ability to obtain such performance
bonds assist the Company in its pre-construction sales efforts.
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; Daniel C. Koscher, Senior
Vice President--President, Residential Land and Golf Division; Mark T. Ryall,
Senior Vice President and Chief Information Officer and Randi S. Tompkins, Vice
President, Director of Corporate Legal Affairs. The Investment Committee reviews
each proposed inventory acquisition to determine whether the property meets
certain criteria, including estimated cash flows and anticipated gross profit
margins.
Please see "Liquidity and Capital Resources", below, for discussion of the
Company's methods and available resources for financing acquisition and
development efforts for its timeshare and land projects.
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
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 owners and (v) barriers to
entry that would limit competition.
The Company intends to continue to pursue growth by expanding or
supplementing the Company's existing resorts operations through acquisitions in
destinations that the Company believes will complement such existing operations.
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. The geographic areas in
which the Company currently intends to pursue the acquisition of real estate or
interests in real estate for the Resorts Division are the areas in which the
Resorts Division currently operates (as noted above), the northeastern and
western United States and the Caribbean, although the Company may pursue
acquisitions in other areas. 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 but
outside the perimeter of intense subdivision development or in popular
retirement areas, (ii) is suitable for subdivision,
10
(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 2002, the Company acquired 1,280 acres in one transaction for a total
purchase price of approximately $1.2 million or $938 per acre. 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. 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.
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, sometimes 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 attempts to pre-sell parcels,
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 helps 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. In
certain circumstances, however, the Company has acquired properties and
strategically held such projects until their prime marketing seasons. Please see
"MD&A" and the discussion of risks related to holding real estate inventory.
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
11
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,
placing marketing kiosks in retail locations, acquiring the right to market to
prospective purchasers from third-party vendors, marketing to current owners of
Timeshare Interests and encouraging referrals. The Resorts Division provides
hotel accommodations to prospective purchasers at reduced rates in exchange for
their touring one of the Company's timeshare resorts. 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, Inc. ("Bass Pro") of Springfield,
Missouri. Under the terms of the 10-year agreement, which expires in June 2010,
the Company will market the Bluegreen Vacation Club product to Bass Pro's
estimated 30 million annual retail customers and 34 million catalog subscribers.
The Company now markets discounted three-day, two-night mini-vacation packages
at most of Bass Pro's national retail locations. Each mini-vacation package
requires the buyer to participate in a sales presentation at either a Bluegreen
Vacation Club sales office or the Big Cedar Wilderness Club sales office.
Bluegreen also has an exclusive timeshare marketing presence on Bass Pro's web
site, which is linked to the Company's web site. The Company believes that this
arrangement 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. Pursuant to the marketing agreement with Bass
Pro, the Company has the right to market its Timeshare Interests at each of Bass
Pro's national retail locations (currently fourteen stores), in Bass Pro's
catalogs and on its web site. The Company also has access to Bass Pro's customer
mailing lists. In exchange for these services, the Company agreed to pay Bass
Pro a commission of either 3.5% or 7.0%, depending on certain circumstances, on
each sale of a Timeshare Interest, net of cancellations and defaults, that is
made 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 Big Cedar Wilderness Club sales
office, as this sales office is part of a joint venture between an affiliate of
Bass Pro, Big Cedar L.L.C., and the Company (the "Joint Venture").
On June 16, 2000, the Company prepaid $9 million to Bass Pro (the
"Prepayment") in connection with the aforementioned marketing agreement. 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 marketing agreement expires on the earlier of: (i) June 16, 2010 or
(ii) such time as ninety percent (90%) of the Joint Venture's proposed Timeshare
Interests have been sold and conveyed.
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 2002, total
advertising expense for the Resorts Division was $42.6 million or 29.6% of the
division's $144.2 million in sales. During fiscal 2001, total advertising
expense for the Resorts Division was $46.0 million or approximately 32.7% of the
division's $141.0 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
12
customer requires to make an informed decision as to whether or not to purchase
a Timeshare Interest at one of its resorts.
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 two off-site sales offices serving the Indianapolis, Indiana and
Detroit, Michigan markets. The Company closed its off-site sales offices serving
the Cleveland, Ohio and Louisville, Kentucky markets during fiscal 2002 and
2001, respectively, due to low operating margins being generated by the sites.
These off-site sales offices market and sell Timeshare Interests in the
Bluegreen Vacation Club, and allow the Company to bring its products to markets
with favorable demographics and low competition for prospective buyers. During
fiscal 2002, the Indianapolis and Detroit sales offices generated an aggregate
$16.7 million and $2.9 million in sales and field operating profit,
respectively. The Company continues to evaluate its ongoing utilization of
off-site sales operations and may elect to open new locations and/or close
existing locations in the future.
The Company believes that the attractiveness of Timeshare Interest
ownership has been enhanced significantly by the Bluegreen Vacation Club 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. La Cabana is affiliated with the timeshare
exchange network operated by II, while the Company's eleven other resorts 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
who the Company believes are 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 2002,
the Residential Land and Golf Division incurred $8.0 million in advertising
expense, or 8.3% of such division's $96.4 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
13
sales meetings and frequent site visits by an executive officer of the Company.
The Company enhances its sales 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, please see "MD&A" and the Company's consolidated financial statements
and the related Notes.
Customer Financing
General
During fiscal 2002, fiscal 2001 and fiscal 2000, the Company financed 62%,
62% and 52%, 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 fiscal 2000 is
primarily attributable to an increase in the sales of Timeshare Interests over
the same period. Sales of Timeshare Interests accounted for 60%, 61% and 55% of
consolidated sales during fiscal 2002, fiscal 2001 and fiscal 2000,
respectively. Approximately 99% of all purchasers of Timeshare Interests finance
with the Company (compared to approximately 2% of residential land purchasers in
fiscal 2002). 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 2002, fiscal 2001 and fiscal 2000, provided for
terms of seven or ten years and a fixed interest rate. In connection with the
Company's Timeshare Interest sales within the Bluegreen Vacation Club system,
the Company delivers the deed on behalf of the purchasers to the trustee of the
Bluegreen Vacation Club and secures repayment of the purchaser's obligation by
obtaining a mortgage on the purchaser's Timeshare Interest. Prior to the Company
converting its sales operations to sell the Bluegreen Vacation Club, the Company
and the purchaser of a fixed-week Timeshare Interest executed a contract for
deed agreement. After the contract for deed obligation is paid in full, the
Company delivers a deed to the purchaser. 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. An average note receivable underwritten by the Company during
fiscal 2002, fiscal 2001 and fiscal 2000 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.
14
The weighted-average interest rate on the Company's notes receivable by
division was as follows:
As of
---------------------------------------
Division March 31, 2002 April 1, 2001
-------- -------------- -------------
Resorts 15.4% 15.7%
Residential Land & Golf 11.1% 12.1%
Consolidated 14.7% 15.2%
Please see `Sale of Receivables/Pledging of Receivables', below, for
information regarding the Company's receivable financing activities.
Loan Underwriting
Resorts Division. Consistent with industry practice, the Company's
Timeshare Interest financing is not subject to extensive loan underwriting
criteria. Currently, customer financing on sales of Timeshare Interests requires
(i) receipt of a minimum downpayment of 10% of the purchase price, (ii) a note
and mortgage and (iii) 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. During
fiscal 2002, 68% of the Company's timeshare notes receivable generated were
being serviced through the Company's pre-authorized payment plan.
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 one or more 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
15
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.
Collection Policies
Resorts Division. Prior to fiscal 1999, the Company's timeshare receivables
were 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 its points-based Bluegreen Vacation Club system, in
fiscal 1999 the Company converted to a note and mortgage arrangement. 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
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 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 reached 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 typically 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 approximately 7% and 5% at March 31, 2002 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.) During the years ended March 31, 2002,
April 1, 2001 and April 2, 2000, the annual default rates on resorts and
residential land receivables owned or serviced by the Company were as follows:
Year Ended
-------------------------------------------
March 31, April 1, April 2,
Division 2002 2001 2000
-------- ---- ---- ----
Resorts 8.1% 7.1% 7.4%
Residential Land 2.0% 2.6% 2.4%
16
Sales of Receivables/Pledging of Receivables
During the years ended March 31, 2002, April 1, 2001 and April 2, 2000, all
of the Company's notes receivable sold and the majority of the Company's notes
receivable pledged consisted of notes receivable generated by the Resorts
Division.
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, once a sufficient pool of receivables was generated, and the
subsidiary in turn entered 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.
Although private placement REMIC financings of land receivables provided
substantial capital resources to the Company during the early to mid-1990's, 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 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 (the "Purchase Facility") and through June 24, 2002, a special purpose
finance subsidiary of the Company had sold $83.2 million aggregate principal
amount of timeshare receivables in securitization transactions to Credit Suisse
First Boston ("CSFB") and $26.0 million to ING Capital, LLC ("ING"), an
affiliate of ING Bank NV. ING acquired the Purchase Facility from CSFB in April
2002. Receivables are sold under the Purchase Facility without recourse to the
Company or its special purpose finance subsidiary except for breaches of
representations and warranties made at the time of sale. The Company acts as
servicer under the Purchase Facility for a fee. Subject to its terms, the
Purchase Facility will allow the Company to sell up to an additional $41.2
million aggregate principal amount of timeshare receivables, on a revolving
basis, through April 2003. See "Liquidity and Capital Resources" for further
discussion of the Purchase Facility. The Company is currently negotiating a new
timeshare receivables purchase facility with another financial institution.
There can be no assurances that the Company's negotiations will result in the
Company obtaining the new facility on acceptable terms to the Company, if at
all. The Company's liquidity and financial condition could be materially
adversely affected if it were not able to sell a material portion of the
receivables it generates under its current or one or more future facilities. In
obtaining such facilities, the Company is subject to factors impacting the
securitization markets generally and to factors affecting the sale of timeshare
receivables in particular, including the performance of the Company's
receivables.
For a further discussion of the terms of the Purchase Facility and the
Company's existing receivables warehouse and hypothecation facilities please see
"Liquidity and Capital Resources" under Item 7, below.
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 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 for a given pool of receivables 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 any of the Company's timeshare receivable purchase facilities to date,
although in certain circumstances the purchasers may elect to appoint a new
servicer. The Company typically receives an annual servicing fee ranging from
approximately .5% to 2.0% of the principal balance of the loans serviced. During
the years ended March 31, 2002, April 1, 2001 and April 2, 2000, the Company
recognized aggregate servicing fee income of $2.7 million, $1.9 million and $1.1
million, respectively.
17
Regulation
The timeshare and real estate industries are subject to extensive and
complex regulation. The Company is subject to compliance with various federal,
state, local and foreign environmental, zoning, consumer protection 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 La Cabana. 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, including those
discussed below in this section. Any failure to comply with current or future
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.
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.
18
During the years ended March 31, 2002 and April 1, 2001, approximately 17%
and 22%, respectively, of the Company's timeshare sales were generated by
marketing to prospective purchasers obtained through internal and affiliated
telemarketing efforts. In addition, approximately 21% and 15% of the Company's
timeshare sales during the years ended March 31, 2002 and April 1, 2001,
respectively, were generated by marketing to prospective purchasers obtained
from third-party timeshare prospect vendors, many of whom use telemarketing
operations to generate these prospects. In recent years, state regulators have
increased legislation and enforcement regarding telemarketing operations
including requiring the adherence to state "do not call" lists. In addition, it
is anticipated that the Federal Trade Commission will implement national "do not
call" legislation in the near future. The Company believes that its exposure to
adverse impacts from this heightened telemarketing legislation and enforcement
has been and will continue to be mitigated in some instances by the use of
"permission marketing" techniques, whereby prospective purchasers have directly
or indirectly granted the Company permission to contact them in the future, and
through its exclusive marketing agreement with Bass Pro. The Company has
implemented procedures which it believes will help ensure that individuals who
have formally requested to their state regulators that they be placed on a "do
not call" list are not contacted through one of its inhouse or third-party
contracted telemarketing operations, although there can be no assurances that
such procedures are 100% effective in ensuring regulatory compliance. Through
March 31, 2002, the Company has not been subject to any material fines or
penalties as a result of its telemarketing operations. There can be no
assurances that the Company will be able to efficiently or effectively market to
prospective purchasers through telemarketing operations in the future or that
the Company will be able to develop alternative sources of prospective
purchasers of its timeshare products at acceptable costs.
Other than as described above, 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 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 and Cendant Corporation. The
Company also competes with numerous other smaller owners and operators of
timeshare resorts. In addition to competing for sales leads and prospects, the
Company competes with other timeshare developers for sales personnel. The
Company believes that each of its timeshare resorts face the same general
competitive conditions. 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.
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 each of its residential land and golf projects faces the
same general competitive conditions. 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.
The Company's golf courses face competition for business from other
operators of daily fee and, to a lesser extent, private golf courses within the
local markets that the Company operates. Competition in these markets affects
the rates that the Company charges per round of golf, the level of maintenance
on the golf courses and the types of additional amenities available to golfers,
such as food and beverage operations. The Company does not believe that such
competitive factors have a material adverse impact on its results of operations
or financial position.
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.
19
Personnel
As of March 31, 2002, the Company had 2,266 employees. Of the 2,266
employees, 284 were located at the Company's headquarters in Boca Raton,
Florida, and 1,982 in regional field offices throughout the United States, Aruba
and Canada (the field personnel include 278 field employees supporting the
Company's Residential Land and Golf Division and 1,704 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 June 1, 2002.
Name Age Position
George F. Donovan 63 President and Chief Executive Officer
John F. Chiste 46 Senior Vice President, Chief Financial Officer and Treasurer
Daniel C. Koscher 44 Senior Vice President - President, Land & Golf Division
John M. Maloney, Jr. 40 Senior Vice President - President, Resorts Division
Mark T. Ryall 42 Senior Vice President and Chief Information Officer
Allan J. Herz 42 Vice President and Director of Mortgage Operations
Susan J. Milanese 43 Vice President and Director of Human Resources
Anthony M. Puleo 34 Vice President and Chief Accounting Officer
Randi S. Tompkins 41 Vice President, Director of Corporate Legal Affairs and Clerk
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 and
Vice President and Director of Planning/Budgeting. In 1997, he became Senior
Vice President - 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.
John M. Maloney, Jr. joined the Company in May 2001 as Senior Vice President,
Resorts Division, Operations and Business Development. In May 2002, Mr. Maloney
was named Senior Vice President of the Company and President of the Resorts
Division. From 1997 to 2000 Mr. Maloney served in various positions with
ClubCorp, most recently as the Senior Vice President of Sales and Marketing for
the Owners Club by ClubCorp. From 1994 to 1997, Mr. Maloney held various
positions with Hilton Grand Vacations Company, most recently as the Director of
Sales Marketing for the South Florida area. Mr. Maloney holds a bachelors degree
in Economics.
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
now known as Accenture. Mr. Ryall holds a B.S.B.A. in Financial Management and
an M.B.A.
20
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.
Randi S. Tompkins joined the Company in 1998 as Assistant Director of Legal
Affairs and was elected Vice President and Director of Corporate Legal Affairs
and Clerk in 2002. From March 1995 to October 1998, Ms. Tompkins was a sole
practitioner attorney, specializing in commercial transactions and commercial
and residential real estate matters. Concurrent with her law practice, Ms.
Tompkins owned and operated a real estate title insurance company. From 1989 to
1994, Ms. Tompkins was an attorney with the law firm of Michael S. Weiner and
Associates. Ms. Tompkins holds a B.A. in American Studies along with a J.D.
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 March 31, 2002, 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. For a further description of the Company's resort and land properties
please see "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 an action that 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.
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
21
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.
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 corporations 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
resort. In addition to the assessment, the Notice indicated that interest would
be charged, but no penalties would be assessed. As of March 31, 2002, aggregate
interest was approximately $1.5 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.(TM) ("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 to them 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 2002 Fiscal 2001
First Quarter $2.29 $1.60 First Quarter $4.06 $2.75
Second Quarter 2.20 1.71 Second Quarter 3.75 2.63
Third Quarter 2.20 1.75 Third Quarter 3.25 1.56
Fourth Quarter 4.99 2.00 Fourth Quarter 2.60 1.53
There were approximately 1,320 record holders of the Company's common
stock as of June 24, 2002. The number of record holders does not reflect the
number of persons or entities holding their stock in "street" name through
brokerage firms or other entities.
The Company did not pay any cash or stock dividends during fiscal 2002 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 do, and the terms of certain of the Company's credit
facilities may, in certain instances, limit the payment of cash dividends on its
common stock and restrict the Company's ability to repurchase shares.
22
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. The net proceeds of the
sale were used for general corporate purposes, including the acquisition of
inventory. Shares of the Company's 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. Pursuant to the Stock
Agreement, the Funds made investment representations which are customary for
private placement transactions with institutional investors and agreed not to
sell or transfer the securities absent registration under the Securities Act or
an opinion of counsel acceptable to the Company that such registration was not
required.
On April 10, 2002, Levitt Companies, LLC ("Levitt"), a subsidiary of
BankAtlantic Bancorp, Inc. (NYSE: BBX), acquired an aggregate of approximately 8
million shares of the Company's outstanding common stock from the Funds and
Grace Brothers, Ltd. in private transactions. As a result of these purchases,
combined with prior holdings in the Company, Levitt now owns approximately 40%
of the Company's outstanding common stock.
From time to time, the Company's Board of Directors has adopted and
publicly announced a share repurchase program. Repurchases under such programs
are subject to the price of the Company's stock, prevailing market conditions,
the Company's financial condition and available resources, other investment
alternatives and other factors. The Company did not repurchase any shares during
fiscal year 2002. During fiscal years 2001 and 2000, the Company repurchased
198,000 and 1.6 million shares, respectively, under share repurchase programs at
aggregate costs of $572,000 and $7.8 million, respectively. As of March 31, 2002
there were 694,500 shares remaining for purchase under the Company's current
repurchase program, although the Company has no present intention of acquiring
these remaining shares in the foreseeable future.
23
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 31, April 1, April 2, March 28, March 29,
(dollars in thousands, except per share data) 2002 2001 2000 1999 1998
---- ---- ---- ---- ----
INCOME STATEMENT DATA:
Sales $240,628 $229,874 $214,488 $225,816 $172,659
Other resort and golf operations revenues 25,470 24,649 21,745 14,881 5,728
Interest income 15,447 17,317 15,652 14,804 10,819
Gain on sales of notes receivable 6,280 3,281 2,063 3,692 --
Other income -- -- 192 168 312
-------- -------- -------- -------- --------
Total revenues 287,825 275,121 254,140 259,361 189,518
Income before income taxes
and minority interest 19,482 3,002 10,565 31,917 17,003
Net income 11,732 2,717 6,777 17,040 10,000
Earnings per common share:
Basic 0.48 0.11 0.29 0.77 0.49
Diluted 0.46 0.11 0.28 0.66 0.46
BALANCE SHEET DATA:
Notes receivable, net $ 55,648 $ 74,796 $ 70,114 $ 64,380 $ 81,293
Inventory, net 187,688 193,634 197,093 142,984 107,198
Total assets 435,161 419,681 413,983 347,318 272,963
Shareholders' equity 149,656 136,790 134,044 119,349 69,993
Book value per common share 6.16 5.65 5.50 4.95 3.45
OTHER DATA:
Weighted-average interest rate on notes
receivable at period end 14.7% 15.2% 15.1% 15.0% 14.9%
Resorts division statistics:
Total resort division sales $144,226 $140,975 $117,271 $103,127 $ 60,751
Number of resorts at period end 12 11 10 10 8
Gross margin on resort sales 76.7% 78.0% 76.7% 75.7% 74.0%
Number of timeshare sale transactions (1) 16,414 16,240 13,518 11,764 6,904
Residential land and golf division statistics:
Total residential land and golf division
sales $ 96,402 $ 88,899 $ 97,217 $122,689 $111,908
Gross margin on sales of land 45.1% 46.3% 51.1% 54.0% 47.6%
Number of home sites sold (1) 1,640 1,614 1,846 2,380 2,469
(1) 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.)
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
Certain Definitions, Cautionary Statement Regarding Forward-Looking
Statements and Risk Factors
The following discussion of the results of operations and financial
condition of 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 (and throughout this Annual Report),
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
24
by the buyer in various increments for lodging for varying lengths of time
in fully-furnished vacation residences at the Company's participating
resorts. "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 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
Section 21E of the Securities Exchange Act of 1934, as amended. The Company may
also make written or oral forward-looking statements in its annual report to
stockholders, in press releases and in other written materials, and in oral
statements made by its officers, directors and employees. 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 or by other statements that do not relate to
historical facts. All statements, trend analyses and other information relative
to the market for the Company's products, the Company's expected future sales,
financial position, operating results and liquidity and capital resources and
its business strategy, financial plan and expected capital requirements 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.
Factors that could adversely affect the Company's future results can also be
considered general "risk factors" with respect to the Company's business,
whether or not they relate to a forward-looking statement. The Company wishes to
caution readers that the following important factors, among other risk factors,
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
adversely 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 or the interpretation of 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. Also the risks
that changes in or the failure of the Company to comply with laws and
regulations governing the marketing (including telemarketing) of the
Company's inventories and services will adversely impact the Company's
ability to make sales in any of its current or future markets at its
current relative marketing cost.
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, financing 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.
25
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, natural disasters 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, which may limit the
effective interest rates that the Company may charge on its notes
receivable.
g) A decreased willingness on the part of banks to extend direct customer
homesite financing, which could result in the Company receiving less cash
in connection with the sales of real estate and/or lower sales.
h) The fact that the Company requires external sources of liquidity to support
its operations, acquire, carry, develop and sell real estate and satisfy
its debt and other obligations, and the Company may not be able to locate
external sources of liquidity on favorable terms or at all.
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 or fund securitization transactions
or to consummate fundings under facilities.
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, which could, among other
things, reduce the Company's interest income, increase loan losses and make
it more difficult and expensive for the Company to sell and/or pledge
receivables.
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 achieve anticipated profit and
operating margins or 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.
Such increases or decreases could cause material fluctuations in
period-to-period results of operations.
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, pay
dividends or repurchase debt or equity. Any such failure could materially,
adversely impact the Company's liquidity position and its operations.
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 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 or conditions to funding under existing or future facilities
will not be satisfied.
r) Risks relating to any joint venture that the Company is a party to,
including risks tat a dispute may arise with a joint venture partner, 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.
s) Risks that any currently proposed or future changes in accounting
principles will have an adverse impact on the Company.
26
t) Risks that a short-term or long-term decrease in the amount of vacation
travel (whether as a result of economic, political or other factors),
including but not limited to air travel, by American consumers will have an
adverse impact on the Company's timeshare sales.
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. While a downturn in
the economy in general or in the market for real estate could have a material
adverse effect on the Company, and there are no assurances that a continuation
or decline in existing conditions will not have a material adverse effect, the
Company believes that current general economic conditions have not materially
impacted the Company's financial position or results of operations as of and for
the year ended March 31, 2002.
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, to the extent possible, and based on the Company's strategy
to pre-sell projects when minimal development has been completed, the amount of
income deferred under the percentage-of-completion method of accounting may
increase significantly.
Costs associated with the acquisition and development of timeshare resorts
and residential land properties, including carrying costs such as interest and
taxes, are capitalized as inventory and are allocated to cost of real estate
sold as the respective revenues are recognized.
The Company has historically experienced and expects to continue to
experience seasonal fluctuations in its gross revenues and net earnings. This
seasonality may cause significant fluctuations in the quarterly operating
results of the Company, with the majority of the Company's gross revenues and
net earnings historically occurring in the first and second quarters of the
fiscal year. As the Company's timeshare revenues grow as a percentage of total
revenues, the Company believes that the fluctuations in revenues due to
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 March 31, 2002, other than to the extent that the Company
continually challenges and has historically increased the sales prices of its
timeshare interests annually. Based on prior history, the Company does not
expect that inflation will have a material impact on the Company's revenues or
results of operations in the foreseeable future, although there is no assurance
that the Company will be able to continue to increase prices. 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 believes that the terrorist attacks on September 11, 2001 in
the United States and subsequent events that have decreased the amount of
vacation air travel by Americans have not, to date, had a material adverse
impact on the Company's sales in its domestic sales offices. With the exception
of La Cabana, guests at the Company's Bluegreen Vacation Club destination
resorts more typically drive, rather than fly, to these resorts due to the
accessibility of the resorts. While there was an adverse impact on sales at La
Cabana during certain months in the post-September
27
11th period, based on current conditions the Company does not believe that there
will be a long-term adverse impact on its sales in Aruba from decreased air
travel, partially due to the fact that a significant portion of Aruba's tourist
traffic comes from South America. There can be no assurances, however, that a
long-term decrease in air travel or increase in anxiety regarding actual or
possible future terrorist attacks or other world events would not have a
material adverse impact on the Company's results of operations in some future
period.
The Company's real estate operations are managed under two divisions. The
Resorts Division manages the Company's timeshare operations and the Residential
Land and Golf Division acquires large tracts of real estate, which are
subdivided, improved (in some cases to include a golf course on the property)
and sold, typically on a retail basis as home sites.
Inventory is carried at the lower of cost, including costs of improvements
and amenities incurred subsequent to acquisition, or fair value, net of costs to
dispose.
A portion of the Company's revenues historically has been and, although no
assurances can be given, is expected to continue to be comprised of gains on
sales of loans. The gains are recorded on the Company's Consolidated Income
Statement and the related retained interests in the portfolios are recorded on
its Consolidated Balance Sheet at the time of sale. The amount of gains and the
fair value of the retained interests recorded are based in part on management's
estimates of future prepayment, default and loss severity rates and other
considerations in light of then-current conditions. If actual prepayments with
respect to loans occur more quickly than was projected at the time such loans
were sold, as can occur when interest rates decline, interest would be less than
expected and may cause a decline in the fair value of the retained interests and
a charge to earnings currently. 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 may cause a decline in the fair value of
the retained interests and a charge to earnings currently. There can be no
assurances that the carrying value of the Company's retained interests in notes
receivable sold will be fully realized or that future loan sales will be
consummated or, if consummated, result in gains. Declines in the fair value of
the retained interests that are determined to be other than temporary are
charged to operations.
Critical Accounting Policies and Estimates
The Company's discussion and analysis of its results of operations and
financial condition are based upon its consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements requires
management to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of
commitments and contingencies. On an ongoing basis, management evaluates its
estimates, including those that relate to the recognition of revenue, including
recognition under the percentage-of-completion method of accounting; the
Company's reserve for loan losses; the valuation of retained interests in notes
receivable sold and the related gains on sales of notes receivable; the recovery
of the carrying value of real estate inventories, intangible assets and other
assets; and the estimate of contingent liabilities related to litigation and
other claims and assessments. Management bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions and conditions. If actual results
significantly differ from management's estimates, the Company's results of
operations and financial condition could be materially adversely impacted.
The Company believes the following critical accounting policies affect its
more significant judgments and estimates used in the preparation of its
consolidated financial statements:
o 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 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
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. Should the
Company's estimates regarding the collectibility of its receivables
change adversely or the Company's estimates of the total anticipated
cost of its timeshare and residential land and golf projects increase,
the Company's results of operations could be adversely impacted.
28
o The Company considers many factors when establishing and evaluating
the adequacy of its reserve for loan losses. These factors include
recent and historical default rates, current delinquency rates,
contractual payment terms, loss severity rates along with present and
expected economic conditions. The Company examines these factors and
adjusts its reserve for loan losses on at least a quarterly basis.
Should the Company's estimates of these and other pertinent factors
change, the Company's results of operations, financial condition and
liquidity position could be adversely affected.
o When the Company sells notes receivables either pursuant to its
timeshare receivables purchase facilities or, in the case of land
mortgages receivable, private-placement 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 allocation of the previous
carrying amount of the financial assets involved in the transfer
between the assets sold and the retained interests based on their
relative fair value at the date of transfer. The Company initially and
periodically estimates fair value based on the present value of future
expected cash flows using management's best estimates of the key
assumptions - prepayment rates, loss severity rates, default rates and
discount rates commensurate with the risks involved. Should the
Company's estimates of these key assumptions change, the Company's
results of operations and financial condition could be adversely
impacted.
o 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." Factors
that the Company considers in making this evaluation include the
estimated remaining life-of-project sales for each project based on
current retail prices and the estimated costs to complete each
project. Should the Company's estimates of these factors change, the
Company's results of operations and financial condition could be
adversely impacted.
o The Company periodically evaluates the recovery of the carrying amount
of goodwill and other long-lived assets 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, the recoverability of
the long-lived assets over their estimated lives and other factors.
Should the Company's estimates of these factors change and indicators
of impairment prove to be present, the Company may be required to
write down its goodwill or other long-lived assets in some future
period, which may have a material adverse impact on the results of
operations and financial condition.
In June 2001, the FASB issued SFAS No. 142, "Accounting for Goodwill
and Other Intangible Assets", effective for the Company's fiscal year
2003. Under the new rules, goodwill and intangible assets deemed to
have indefinite lives will no longer be amortized but will be subject
to annual impairment tests in accordance with SFAS No. 142. Other
intangible assets will continue to be amortized over their useful
lives. The Company will apply the new rules on accounting for goodwill
and other intangible assets beginning in the first quarter of fiscal
2003 (beginning April 1, 2002). The adoption of SFAS No. 142 is not
expected to have a material impact on the Company's results of
operations or financial condition.
29
Results of Operations
(in thousands) Residential
Resorts Land and Golf Total
----------------------- ----------------------- -----------------------
Year Ended March 31, 2002
Sales $ 144,226 100% $ 96,402 100% $ 240,628 100%
Cost of sales (1) (33,588) (23) (52,937) (55) (86,525) (36)
--------- --------- ---------
Gross profit 110,638 77 43,465 45 154,103 64
Other resort and golf operations
revenues 23,149 16 2,321 2 25,470 11
Cost of resort and golf operations (20,506) (14) (3,038) (3) (23,544) (10)
Field selling, general and
administrative expenses (2) (93,552) (65) (27,333) (28) (120,885) (50)
--------- --------- ---------
Field operating profit $ 19,729 14% $ 15,415 16% $ 35,144 15%
========= ========= =========
Year Ended April 1, 2001
Sales $ 140,975 100% $ 88,899 100 $ 229,874 100%
Cost of sales (1) (31,049) (22) (47,746) (54) (78,795) (34)
--------- --------- ---------
Gross profit 109,926 78 41,153 46 151,079 66
Other resort and golf operations
revenues 22,762 16 1,887 2 24,649 11
Cost of resort and golf operations (22,068) (16) (2,883) (3) (24,951) (11)
Field selling, general and
administrative expenses (2) (100,896) (72) (27,166) (31) (128,062) (56)
--------- --------- ---------
Field operating profit $ 9,724 7% $ 12,991 15% $ 22,715 10%
========= ========= =========
Year Ended April 2, 2000
Sales $ 117,271 100% $ 97,217 100% $ 214,488 100%
Cost of sales (1) (27,374) (23) (47,583) (49) (74,957) (35)
--------- --------- ---------
Gross profit 89,897 77 49,634 51 139,531 65
Other resort and golf operations
revenues 19,038 16 2,707 3 21,745 10
Cost of resort and golf operations (17,112) (15) (3,836) (4) (20,948) (10)
Field selling, general and
administrative expenses (2) (84,413) (72) (25,918) (27) (110,331) (51)
--------- --------- ---------
Field operating profit $ 7,410 6% $ 22,587 23% $ 29,997 14%
========= ========= =========
(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 $19.4 million, $19.5 million and $18.2 million for fiscal
2002, fiscal 2001 and fiscal 2000, respectively.
Sales and Field Operations
Consolidated sales were $240.6 million for the year ended March 31, 2002
("fiscal 2002"), $229.9 million for the year ended April 1, 2001 ("fiscal 2001")
and $214.5 million for the year ended April 2, 2000 ("fiscal 2000"),
representing an increase of 5% from fiscal 2001 to fiscal 2002 and an increase
of 7% from fiscal 2000 to fiscal 2001.
Resorts Division
During fiscal 2002, fiscal 2001 and fiscal 2000, sales of Timeshare
Interests contributed $144.2 million or 60%, $141.0 million or 61% and $117.3
million or 55%, 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.
Years Ended,
-------------------------------------------
March 31, April 1, April 2,
2002 2001 2000
---- ---- ----
Number of timeshare sale transactions 16,414 16,240 13,518
Average sales price per transaction $8,989 $8,743 $8,410
Gross margin 77% 78% 77%
The $3.2 million increase in Resorts Division sales during fiscal 2002 as
compared to fiscal 2001 is primarily due to the $9.7 million increase in sales
at the Company's 51%-owned Big Cedar Wilderness Club, as this resort had just
commenced sales in fiscal 2001 and was in the start-up phase. This increase was
partially offset by
30
the closure of the offsite sales office serving the Cleveland, Ohio market in
May 2001, due to low profitability. The Cleveland sales office generated $1.2
million in sales prior to its closure in fiscal 2002, as compared to $8.4
million in fiscal 2001.
The increase in timeshare sales during fiscal 2001 as compared to fiscal
2000 is primarily due to the fiscal 2000 opening of the Company's offsite sales
office serving the Detroit, Michigan market. The Detroit sales office generated
timeshare sales of $13.9 million and $3.7 million during fiscal 2001 and fiscal
2000, respectively. In addition, the Company's MountainLoft resort sales office
in Gatlinburg, Tennessee generated $4.0 million more timeshare sales 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 sales office in Charleston, South Carolina generated $2.2 million 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 resort
in Branson, Missouri, generated $1.5 million 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. The Company believes these increases are
attributed to the implementation of an improved sales process relative to the
Bluegreen Vacation Club product and more effective marketing programs.
Finally, the opening of the Company's 51%-owned Big Cedar Wilderness Club
resort adjacent to the Big Cedar Lodge in Ridgedale, Missouri, contributed $1.3
million to the overall increase in timeshare sales during fiscal 2001.
Gross profit from other resort services increased $1.9 million or 681% to
$2.6 million from $694,000 during fiscal 2002 as compared to fiscal 2001,
respectively. The increase was primarily due to $2.6 million in increased
profits related to management and other fee income earned for services provided
to Bluegreen Vacation Club members, due to an increase in members from 38,000 to
51,000 members at April 1, 2001 and March 31, 2002, respectively. As the
Bluegreen Vacation Club member base increases, the Company anticipates increased
gross profits from the related management fees, although there can be no
assurances that the member base will increase or that such increased management
fees will be realized. This increase was partially offset by additional costs
incurred in connection with the expansion of the Resorts Division's customer
service area.
Gross profit from other resort services decreased $1.2 million to $694,000
from $1.9 million during fiscal 2001 as compared to fiscal 2000, respectively.
The Company added a resort customer service department in fiscal 2001, at a cost
of over $600,000. In addition, profits from the Company's resort rental
brokerage services decreased approximately $400,000.
The reduction in field selling, general and administrative expenses as a
percentage of timeshare sales to 65% from 72% during fiscal 2002 as compared to
fiscal 2001, respectively, was primarily due to the Company's focused efforts on
increasing tour flow from our inhouse, referral and owner marketing programs as
well as a new compensation plan which tied the Company's regional sales and
marketing directors' compensation to profitability. In addition, the
centralization of certain marketing functions contributed to the decrease in
costs. Another factor in the decrease of field selling, general and
administrative expenses was a new, standardized commissions plan implemented in
fiscal 2002 as well as the centralization of commission processing and
monitoring at the Company's corporate headquarters, which resulted in a decrease
in administrative personnel. Field selling, general and administrative expenses
as a percentage of sales is an important indicator of the performance of the
Resorts Division and the Company as a whole. No assurances can be given that
this positive trend will continue or that field selling, general and
administrative expenses will not increase as a percentage of sales in future
periods.
Residential Land and Golf Division
During fiscal 2002, fiscal 2001 and fiscal 2000, residential land and golf
sales contributed $96.4 million or 40%, $88.9 million or 39% and $97.2 million
or 45%, respectively, of the Company's total consolidated sales.
The table set forth below outlines the number of home sites sold and the
average sales price per home site 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.
31
Years Ended,
-----------------------------------------
March 31, April 1, April 2,
2002 2001 2000
---- ---- ----
Number of home sites sold 1,640 1,614 1,846
Average sales price per home site $58,287 $57,191 $49,741
Gross margin 45% 46% 51%
Residential Land and Golf Division sales increased $7.5 million in fiscal
2002 as compared to fiscal 2001 due primarily to $17.5 million of increased
sales at The Preserve at Jordan Lake, a golf course community located near
Raleigh-Durham, North Carolina. The Preserve at Jordan Lake had just commenced
sales and development during fiscal 2001, and therefore had a significant
portion of its sales during this start-up year deferred under
percentage-of-completion accounting. This increase was partially offset by an
$8.5 million decrease in sales in the Company's Arizona region due to the two
main projects in this region being substantially sold out in fiscal 2001. The
Company still intends to consider acquiring additional residential land projects
in the Arizona market, although no assurances can be given that the Company will
acquire additional inventory in that area. The remaining offsetting decrease was
due to a $1.4 million sale of a bulk tract of land in fiscal 2001 by the
Company, with no such corresponding sale in fiscal 2002.
Residential Land and Golf Division sales 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 and New Mexico. This factor resulted in 266 fewer lot sales
during fiscal 2001 as compared to fiscal 2000. Also, included in the fiscal 2000
results of operations is a one-time, 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 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 2002, the Company's golf communities and Texas
regions comprised approximately 42% and 55%, respectively, of the Company's
total Residential Land and Golf sales.
In December 2000, the Company acquired approximately 2,300 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. Sales at the project are currently delayed while
the Company obtains necessary entitlements on the land. The Company currently
expects that this project will commence sales during fiscal 2003, although there
can be no assurances.
The decrease in gross margin during fiscal 2002 as compared to fiscal 2001
was primarily due to $4.1 million in impairment charges taken on the Company's
Crystal Cove(TM) project in Tennessee. Additional development expenditures
required for road and utility work at the project exceeded the Company's
original estimates. The Company believes that this charge is adequate to reduce
the carrying value of this project its fair value less estimated selling costs;
however there can be no assurances that further charges will not be required.
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 roadwork, the costs of which are being
directly expensed to cost of sales, at the Crystal Cove project.
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.
32
The gross loss from golf operations decreased $279,000 or 28% during fiscal
2002 as compared to fiscal 2001 and $133,000 or 12% during fiscal 2001 as
compared to fiscal 2000, due to decreased losses from the operations at Carolina
National, as the operation continues to mature.
Interest Income
Interest income was $15.4 million, $17.3 million and $15.7 million for
fiscal 2002, fiscal 2001 and fiscal 2000, respectively. The Company's interest
income is earned from its notes receivable, retained interests in notes
receivable sold (including REMIC transactions) and cash and cash equivalents.
The decrease in interest income during fiscal 2002 was due to due to lower
average cash balances on hand, lower interest rates on cash balances and
Residential Land and Golf Division mortgages held and lower timeshare notes
receivables held due to increased sales of timeshare notes receivable during
fiscal 2002 as compared to fiscal 2001.
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
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
In fiscal 2002, fiscal 2001 and fiscal 2000, the Company recognized $6.3
million, $3.3 million and $2.1 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 increased in fiscal
2002 and fiscal 2001 commensurate with the increase in the principal amount of
notes receivable sold ($100.9 million, $77.8 million and $48.3 million in fiscal
2002, fiscal 2001 and fiscal 2000, respectively). Another factor that increased
the gain on sale of theses receivables during fiscal 2002 as compared to fiscal
2001 was the decrease in commercial paper rates during the respective periods.
The return earned by the parties who purchased these fixed rate (approximately
15%) receivables is based on variable commercial paper rates, so as interest
rates decrease the available interest spread increases which in turn increases
the value of the Company's retained interest in the receivable pools sold and
hence increases the Company's gain on sale.
Corporate General and Administrative Expenses
For a discussion of field selling, general and administrative expenses,
please see "Sales and Field Operations", above.
The Company's corporate general and administrative ("G&A") expenses consist
primarily of expenses incurred to administer the various support functions at
the Company's corporate headquarters, including accounting, human resources,
information technology, mergers and acquisitions, mortgage servicing, treasury,
legal, etc. Corporate G&A totaled $19.4 million, $19.5 million and $18.2 million
during fiscal 2002, fiscal 2001 and fiscal 2000, respectively. The increase in
fiscal 2001 was primarily due to increased depreciation expense on fixed assets
and increased outside legal fees in the normal course of business.
Interest Expense
Interest expense totaled $13.0 million, $15.5 million and $13.8 million for
fiscal 2002, fiscal 2001 and fiscal 2000, respectively. The 16.0% decrease in
fiscal 2002 was due to lower outstanding balances on the Company's acquisition
and development loans borrowed in prior years and lower interest rates on
variable-rate facilities. The 11.9% increase in fiscal 2001 as compared to
fiscal 2000 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.
33
The effective cost of borrowing (when adding back capitalized interest) was
9.1%, 9.5% and 9.8% for fiscal 2002, fiscal 2001 and fiscal 2000, respectively.
Provision for Loan Losses
The allowance for loan losses by division as of March 31, 2002 and April 1,
2001 was (amounts in thousands):
Resorts Residential Land
Division and Golf Division Other Total
March 31, 2002
Notes receivable $ 50,892 $ 7,079 $ 1,884 $ 59,855
Less: allowance for loan losses (3,782) (313) (112) (4,207)
-------- -------- -------- --------
Notes receivable, net $ 47,110 $ 6,766 $ 1,772 $ 55,648
======== ======== ======== ========
Allowance as a % of gross notes receivable 7% 4% 6% 7%
======== ======== ======== ========
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 5% 5% 2% 5%
======== ======== ======== ========
The Company recorded provisions for loan losses totaling $4.9 million, $4.9
million and $5.3 million during fiscal 2002, fiscal 2001 and fiscal 2000,
respectively. 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 at March 31, 2002, primarily consists of a loan to
the property owners' association that is responsible for the maintenance of La
Cabana, Casa Grande Cooperative Association I (see Note 4 of Notes to
Consolidated Financial Statements).
Other notes receivable at April 1, 2001, 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, Napa repaid
the remaining outstanding principal balance on the Napa Loan and all accrued
interest.
Summary
Based on the factors discussed above, the Company's net income increased to
$11.7 million in fiscal 2002 from $2.7 million in fiscal 2001 and decreased to
$2.7 million in fiscal 2001 from $6.8 million in fiscal 2000.
Changes in Financial Condition
Cash Flows From Operating Activities
Cash flows from operating activities increased $29.6 million to net cash
inflows of $31.7 million from $2.1 million in fiscal 2002 and fiscal 2001,
respectively. The increase was primarily due to a $9.0 million increase in net
income. The increase in operating cash flows was also due to a $12.7 million
increase in net cash provided from the sale of timeshare notes receivable. The
Company sold $100.9 million and $77.8 million of timeshare notes receivable at
advance rates of 85% and 95% under various timeshare receivable purchase
facilities in fiscal 2002 and fiscal 2001, respectively. See "Liquidity and
Capital Resources" for further discussion of the Company's note receivable
purchase facilities. Also, fiscal 2001 cash flows were impacted by a $9 million
prepayment of commissions and joint venture distributions to Bass Pro, Inc. (see
Note 3 of Notes to Consolidated Financial Statements), which is anticipated to
be a one-time event.
34
Cash flows from operating activities increased $14.3 million to net cash
inflows of $2.1 million from net cash outflows of $12.3 million in fiscal 2001
and fiscal 2000, respectively. The increase was primarily due to a $26.3 million
increase in net cash provided from the sale of timeshare notes receivable. The
Company sold $77.8 million and $48.3 million of timeshare notes receivable under
various timeshare receivable purchase facilities in fiscal 2001 and fiscal 2000,
respectively. See "Liquidity and Capital Resources" for further discussion of
these facilities. This increase was partially offset by a $9 million prepayment
of commissions and joint venture distributions to Bass Pro, Inc. (see Note 3 of
Notes to Consolidated Financial Statements), which is anticipated to be a
one-time event, and a $4.1 million decrease in net income.
The Company reports cash flows from borrowings collateralized by notes
receivable and sales of notes receivable as operating activities in the
consolidated statements of cash flows. The majority of the Company's sales for
the Resorts Division result in the origination of notes receivable from its
customers. Management believes that accelerating the conversion of such notes
receivable into cash, either through the pledge or sale of the Company's notes
receivable, on a regular basis is an integral function of the Company's
operations, and has therefore classified such activities as operating
activities.
Cash Flows From Investing Activities
Cash flows from investing activities increased $5.4 million to net cash
outflows of $2.1 million from $7.5 million in fiscal 2002 and fiscal 2001,
respectively. The increase was primarily due to a $4.7 million loan made to Napa
Partners, LLC during fiscal 2001 that was collected by the Company in fiscal
2002 (see Note 4 of Notes to Consolidated Financial Statements). This increase
was partially offset by a $3.4 million increase in purchases of property and
equipment.
Cash flows from investing activities decreased $3.9 million to net cash
outflows of $7.5 million from $3.6 million in fiscal 2001 and fiscal 2000,
respectively. The decrease is primarily due to a $4.7 million loan made to Napa
Partners, LLC during fiscal 2001, as discussed above.
Cash Flows from Financing Activities
Cash flows from financing activities decreased $760,000 to net cash
outflows of $20.9 million from $20.1 million in fiscal 2002 and fiscal 2001,
respectively. The decrease is due to payments in excess of borrowings under
acquisition and development line-of-credit facilities and notes payable of $19.5
million as compared to $18.0 million in fiscal 2002 and fiscal 2001,
respectively. This decrease was partially offset by the fact that the Company
did not purchase any treasury stock in fiscal 2002 as compared to treasury stock
purchases of $572,000 in fiscal 2001.
Cash flows from financing activities decreased $45.9 million to net cash
outflows of $20.1 million from net cash inflows of $25.8 million in fiscal 2001
and fiscal 2000, respectively. The decrease is due to payments in excess of
borrowings under acquisition and development line-of-credit facilities and notes
payable of $18.0 million in fiscal 2001 as compared to borrowings in excess of
payments under these facilities of $20.4 million in fiscal 2000. Also, in fiscal
2000 the Company realized cash proceeds of approximately $15.0 million from the
sale of common stock to affiliates of Morgan Stanley Dean Witter and Company
(see Note 13 of Notes to Consolidated Financial Statements), with no such
corresponding sale in fiscal 2001. These decreases were partially offset by a
$7.2 million decrease in the amount of cash used to buy treasury stock.
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 home site and timeshare
sales which are financed, (iii) proceeds from the sale of, or borrowings
collateralized by, notes receivable, (iv) principal and interest payments on the
purchase money mortgage loans and contracts for deed arising from sales of
Timeshare Interests and residential land home sites (collectively "Receivables")
and (v) net cash generated from other resort services and golf operations.
Historically, external sources of liquidity have included non-recourse sales of
Receivables, borrowings under secured and unsecured lines-of-credit, seller and
bank financing of inventory acquisitions and the issuance of debt securities.
The Company's capital resources are used to support the Company's operations,
including (i) acquiring and developing inventory, (ii) providing financing for
customer purchases, (iii) meeting operating expenses and (iv) satisfying the
Company's debt, and other obligations. The Company anticipates
35
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 the Offering, the Company
initially sold the Notes to NatWest Capital Markets Limited and McDonald &
Company Securities, Inc. (the "Initial Purchasers") in a private transaction
exempt from the registration requirements of the Securities Act of 1933 by
virtue of the exemption from registration contained in Section 4(2) thereof, and
the Initial Purchasers resold the Notes in compliance with the exemption from
registration contained in Rule 144A under the Securities Act. In the Purchase
Agreement executed with the Initial Purchasers, the Initial Purchasers made
investment representations which are customary for private placement
transactions with institutional investors and agreed to comply with Rule 144A in
connection with any resales. The Company subsequently exchanged the privately
placed Notes for registered Notes. In connection with the Offering, the Company
repaid $22.1 million of short-term borrowings from the Initial Purchasers,
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's ability to sell and/or borrow against its notes receivable
from timeshare buyers is a critical factor in the Company's continued liquidity.
The timeshare business involves making sales of a product pursuant to which a
financed buyer is only required to pay 10% of the purchase in cash up front, yet
selling, marketing and administrative expenses are primarily cash expenses and
which, in the Company's case for the 2002 Period, approximated 65% of sales.
Accordingly, having facilities for the sale and hypothecation of these timeshare
receivables is critical to meet the Company's short and long-term cash needs.
In June 2001, the Company executed agreements for the Purchase Facility
with CSFB acting as the initial purchaser. In April 2002, ING acquired and
assumed CSFB's rights, obligations and commitments as initial purchaser in the
Purchase Facility by purchasing the outstanding principal balance under the
facility of $64.9 million from CSFB. In connection with its assumption of the
Purchase Facility, ING expanded and extended the Purchase Facility's size and
term. 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
owners' trust without recourse to the Company or the Subsidiary 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 $125.0 million
of cumulative purchase price (as more fully described below) on sales of
timeshare receivables to the owner's trust on a revolving basis, as the
principal balance of receivables sold amortizes, in transactions through April
16, 2003 (subject to certain conditions as more fully described in the Purchase
Facility Agreements). The Purchase Facility has detailed requirements with
respect to the eligibility of receivables for purchase and fundings under the
Purchase Facility are subject to certain conditions precedent. Under the
Purchase Facility, a variable purchase price expected to approximate 85.00% of
the principal balance of the receivables sold, subject to certain terms and
conditions, is paid at closing in cash. The balance of the purchase price will
be deferred until such time as ING has received a specified return and all
servicing, custodial, agent and similar fees and expenses have been paid. ING
shall earn a return equal to the London Interbank Offered Rate ("LIBOR") plus
1.00%, subject to use of alternate return rates in certain circumstances. In
addition, ING will receive a 0.25% facility fee during the term of the facility.
The Purchase Facility also provides for the sale of land notes receivable, under
modified terms.
The Company acts as servicer under the Purchase Facility for a fee. The
Purchase Facility Agreements include various conditions to purchase, covenants,
trigger events and other provisions customary for a transaction of this type.
ING's obligation to purchase under the Purchase Facility may terminate upon the
occurrence of specified events. These specified events, some of which are
subject to materiality qualifiers and cure periods, include, without limitation,
(1) a breach by the Company of the representations or warranties in the Purchase
Facility Agreements, (2) a failure by the Company to perform its covenants in
the Purchase Facility Agreements, including, without limitation,
36
a failure to pay principal or interest due to ING, (3) the commencement of a
bankruptcy proceeding or the like with respect to the Company, (4) a material
adverse change to the Company since December 31, 2001, (5) the amount received
by the Subsidiary under the Purchase Facility exceeding the purchase price for
the receivables after making adjustments for ineligible receivables and
distributions owing to ING, (6) significant delinquencies or defaults on the
receivables sold, (7) a payment default by the Company under any other borrowing
arrangement of $5 million or more (a "Significant Arrangement"), or an event of
default under any indenture, facility or agreement that results in a default
under any Significant Arrangement, (8) a default or breach under any other
agreement beyond the applicable grace period if such default or breach (a)
involves the failure to make a payment in excess of 5% of the Company's tangible
net worth or (b) causes, or permits the holder of indebtedness to cause, an
amount in excess of 5% of the Company's tangible net worth to become due, (9)
the Company's tangible net worth not equaling at least $110 million plus 50% of
net income and 100% of the proceeds from new equity financing following the
first closing under the Purchase Facility, (10) the ratio of the Company's debt
to tangible net worth exceeding 6 to 1, or (11) the failure of the Company to
perform its servicing obligations.
Through June 24, 2002, the Company sold $109.2 million of aggregate
principal balance of notes receivable under the Purchase Facility for a
cumulative purchase price of $92.8 million. As of June 24, 2002, the remaining
amount of purchase price that can be obtained through the Purchase Facility upon
the sale of additional notes receivable is approximately $41.2 million, based on
the remaining facility limit as adjusted for cash already received by CSFB and
ING on receivables previously sold (the $125.0 million facility limit is on a
revolving basis). ING may attempt to securitize and sell the receivable
portfolio that it purchased from CSFB along with additional receivables
purchased from the Company prior to such securitization and sale. Should ING
successfully consummate such a securitization and sale prior to April 16, 2003,
the Subsidiary would again be able to sell additional notes receivable to ING,
at 85.0% of the principal balance, with an aggregate purchase price of $125.0
million, based on the revolving facility limit of the Purchase Facility and
subject to the eligibility requirements and certain conditions precedent. There
can be no assurances that ING will be able to successfully consummate any such
securitization and sale prior to April 16, 2003, or at any time in the future,
or that the Company would have additional eligible notes receivable to sell to
ING (through the Subsidiary).
The Company seeks new timeshare receivable purchase facilities to replace
expiring facilities. The Company is currently discussing terms for a potential
new timeshare receivable purchase facility with a financial institution. Factors
which could adversely impact the Company's ability to obtain new or additional
timeshare receivable purchase facilities include, but are not limited to, a
downturn in general economic conditions; negative trends in the commercial paper
or LIBOR markets; increases in interest rates; a decrease in the number of
financial institutions willing to engage in such facilities in the timeshare
area; and a deterioration in the Company's performance generally and the
performance of the Company's timeshare notes receivable, specifically increased
delinquency, default and loss severity rates. There can be no assurances that
the Company will obtain a new purchase facility to replace the Purchase Facility
when it is completed or expires. As indicated above, the Company's inability to
sell timeshare receivables under a current or future facility could have a
material adverse impact on the Company's liquidity and operations.
The Company had a timeshare receivables warehouse loan facility (the
"Warehouse Facility"), which expired on April 16, 2002, with Heller Financial,
Inc., a financial institution that was subsequently acquired by General Electric
Capital Real Estate ("GE"). Loans under the Warehouse Facility bear interest at
LIBOR plus 3.5%. The Warehouse Facility had detailed requirements with respect
to the eligibility of receivables for inclusion and other conditions to funding.
The borrowing base under the Warehouse Facility was 90% 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 was 80%. The Warehouse Facility includes affirmative,
negative and financial covenants and events of default. During fiscal 2002, the
Company borrowed an aggregate $22.2 million under the Warehouse Facility, of
which the Company repaid an aggregate $13.7 million by using cash generated from
principal and interest payments on the underlying loans and proceeds from the
sale of the underlying receivables under a previous timeshare receivables
purchase facility with the same financial institution. The remaining balance of
the Warehouse Facility was due in April 16, 2002, however GE has represented to
the Company that the remaining balance is not considered to be in default
pending GE's approval of a new combined warehouse and purchase facility. The
remaining balance on the Warehouse Facility continues to be repaid as principal
and interest payments are collected on the timeshare notes receivable. As of
March 31, 2002, there was $9.8 million outstanding under the Warehouse Facility.
There can be no assurances that GE will approve the increase and extension of
the Warehouse Facility or that GE will not declare the Warehouse Facility to be
in default and due and payable immediately. The Company believes that in the
event that GE requires the Warehouse Facility to be repaid, the revolving credit
facility with Foothill Capital
37
Corporation ("Foothill"), discussed below, or the Purchase Facility could be
utilized to satisfy this obligation in the normal course of business.
In addition, GE has provided the Company with a $28.0 million acquisition
and development facility for its timeshare inventories (the "A&D Facility"). The
borrowing period on the A&D Facility has expired and outstanding borrowings
under the A&D Facility mature no later than July 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 of this loan must be repaid by November 1, 2005, through
agreed-upon release prices as Timeshare Interests in the Company's Lodge Alley
Inn resort in Charleston, South Carolina are sold, subject to minimum required
amortization. On December 20, 1999, the Company borrowed approximately $13.9
million under the acquisition and development facility. The principal of this
loan must be repaid by January 1, 2006, through agreed-upon release prices as
Timeshare Interests in the Company's Shore Crest II resort are sold, subject to
minimum required amortization. The outstanding balance under the A&D Facility at
March 31, 2002 was $10.1 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.
The Company is currently in the process of closing a $35.0 million
receivables warehouse facility and a $15.0 million acquisition and development
facility for the Resorts Division with a financial institution. There can be no
assurances that these facilities will close as anticipated.
Under an existing, $30 million revolving credit facility with Foothill for
the pledge of Residential Land and Golf Division receivables, the Company can
use up to $10 million of the facility for the pledge of timeshare receivables.
See the next paragraph for further details on this facility.
Credit Facilities for Residential Land and Golf Receivables and Inventories
The Company has a $30.0 million revolving credit facility with Foothill for
the pledge of Residential Land and Golf Division receivables, with up to $10
million of the total facility available for Residential Land and Golf Division
inventory borrowings and up to $10 million of the total facility available for
the pledge of timeshare receivables. The interest rate charged on outstanding
borrowings ranges from prime plus 0.5% to 1.0%, with 7.0% being the minimum
interest rate. At March 31, 2002, the outstanding principal balance under this
facility was approximately $4.1 million, all of which related to Residential
Land and Golf Division 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 expired in
March 2002, with Finova Capital Corporation. The Company used this facility to
finance the acquisition and development of residential land projects. The
facility is secured by the real property (and personal property related thereto)
with respect to which borrowings are made. 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
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 home sites
in Lake Ridge II and in another recently purchased section of Lake Ridge are
sold. The principal of this loan must be repaid by September 14, 2004. On
October 6, 1999, in connection with the acquisition of 6,966 acres for the
Company's Mystic Shores residential land project in Canyon Lake, Texas, the
Company borrowed $11.9 million under the revolving credit facility. 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 project.
Principal payments on these loans are effected through agreed-upon release
prices as home sites in Mystic Shores are sold. The principal under the $11.9
million and $2.1 million loans for Mystic Shores must be repaid by October 6,
2004 and May 5, 2004, respectively. The aggregate outstanding balance on the
revolving credit facility was $17.1 million at March 31, 2002.
On September 24, 1999, the Company obtained a $4.2 million line-of-credit
with Branch Banking and Trust Company for the purpose of developing a golf
course on the Brickshire property (the "Golf Course Loan"). Through December
2001, the Company borrowed an aggregate $4.0 million under the Golf Course Loan.
The outstanding balances under the Golf Course Loan bears interest at prime plus
0.5% and interest is due monthly. Principal payments are payable in equal
monthly installments of $35,000. The principal must be repaid by October 1,
2005. The loan is
38
secured by the Brickshire golf course property. As of March 31, 2002, $3.7
million was outstanding under the Golf Course Loan.
On August 2, 2001, the Company obtained a revolving line-of-credit with
IndyMac Bank F.S.B. ("IndyMac") for the purpose of developing the Company's golf
course community in Raleigh, North Carolina known as The Preserve at Jordan
Lake. The line-of-credit has an aggregate borrowing capacity of approximately
$6.7 million outstanding at any one time. Through March 2002, the Company
borrowed an aggregate $7.9 million under the line-of-credit, on a revolving
basis. The outstanding balances under the line-of-credit bear interest at prime
plus 1.0% and interest is due monthly. Principal payments are effected through
agreed-upon release prices as home sites in The Preserve at Jordan Lake are
sold. As of March 31, 2002, there was $737,000 outstanding on the
line-of-credit. In June 2002, the Company terminated the line-of-credit with
IndyMac as the line was paid in full and as sales at the Preserve at Jordan Lake
were causing release price payments to IndyMac to exceed borrowings at certain
times.
The Company is currently in the process of closing a $50.0 million
acquisition and development facility for the Residential Land and Golf Division
with a financial institution. There can be no assurances that this facility will
close as anticipated.
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 home site financing. No assurances can be given that local banks will
continue to provide such customer financing.
Historically, the Company has funded development for road and utility
construction, amenities, surveys and engineering fees from internal operations
and has financed the acquisition of residential land and golf properties through
seller, bank or financial institution loans. Terms for repayment under these
loans typically call for interest to be paid monthly and principal to be repaid
through home site releases. The release price is usually defined as a
pre-determined percentage of the gross selling price (typically 25% to 50%) of
the home sites 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 $12.5 million unsecured line-of-credit with First Union
National Bank. Amounts borrowed under the line bear interest at LIBOR plus 2%.
Interest is due monthly and all principal amounts are due on December 31, 2002.
The Company is only allowed to borrow under the line-of-credit in amounts less
than the remaining availability under its current, active timeshare receivables
purchase facility plus availability under certain receivable warehouse
facilities, less any outstanding letters of credit. The line-of-credit agreement
contains certain covenants and conditions typical of arrangements of this type.
As of March 31, 2002, there was no amount outstanding under the line, nor have
there been any borrowings under the line through June 24, 2002. This
line-of-credit is an important source of short-term liquidity for the Company,
as it allows the Company to fund through its timeshare receivables purchase
facility less frequently than it otherwise would.
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.
39
The Company's material commitments for capital resources as of March 31,
2002, included the required payments due on it's receivable-backed debt, lines
of credit and other notes and debentures payable, commitments to complete its
timeshare and residential land projects based on its sales contracts with
customers and commitments under noncancelable operating leases.
The following table summarizes the contractual minimum principal payments
required on all of the Company's outstanding debt (including its
receivable-backed debt, lines-of-credit and other notes and debentures payable)
and its noncancelable operating leases as of March 31, 2002 by period due (in
thousands):
Payments Due By Period
------------------------------------------------
Contractual Less than 1 - 3 4 - 5 After 5
Obligations Total 1 year Years Years Years
----------- ----- ------ ----- ----- -----
Receivable-backed notes
payable $ 14,628 $ 9,816 $ -- $ 4,105 $ 707
Lines-of-credit and notes
payable (1) 40,534 9,028 28,033 2,840 633
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 -- 2,371 8,000 24,000
Noncancelable operating leases 6,908 2,973 3,641 260 34
-------- ------- ------- ------- --------
Total contractual obligations $212,441 $27,817 $34,045 $15,205 $135,374
======== ======= ======= ======= ========
(1) Includes unamortized discount on notes payable of approximately $272,000.
The Company intends to use cash flow from operations, including cash
received from the sale of timeshare notes receivable, and cash received from new
borrowings under existing or future debt facilities in order to satisfy the
above principal payments. While the Company believes that it will be able to
meet all required debt payments when due, there can be no assurances.
The Company estimates that the total cash required to complete resort
buildings in which sales have occurred and resort amenities and other common
costs in projects in which sales have occurred as of March 31, 2002 is
approximately $5.7 million. The Company estimates that the total cash required
to complete its residential land projects in which sales have occurred as of
March 31, 2002 is approximately $40.9 million. These amounts assume that the
Company is not obligated to develop any building, project or amenity in which a
commitment has not been made through a sales contract to a customer. The Company
plans to fund these expenditures over the next five years 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. The
Company will be required to renew or replace credit facilities that will expire
or were terminated by the Company in fiscal 2003 and fiscal 2004. 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
40
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 or receivables purchase facilities
which have expired, which are scheduled to expire or which have been terminated
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, receivables purchase
facilities and other outstanding debt instruments include customary conditions
to funding, eligibility requirements for collateral, cross-default and other
acceleration provisions, 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 or
termination. 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 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.
The Company's ability to service or to refinance its indebtedness or to
obtain additional financing (including its ability to consummate future notes
receivable securitizations) depends, among other things, on its future
performance, which is subject to a number of factors, including the Company's
business, results of operations, leverage, financial condition and business
prospects, the performance of its receivables, prevailing interest rates,
general economic conditions and perceptions about the residential land and
timeshare industries, some of which are beyond the Company's control. If the
Company's cash flow and capital resources are insufficient to fund its debt
service obligations and support its operation, the Company, among other
consequences, may be forced to reduce or delay planned capital expenditures,
reduce its financing of sales, sell assets, obtain additional equity capital or
refinance or restructure its debt.. The Company cannot assure you that we will
be able to obtain sufficient external sources of liquidity on attractive terms,
or at all. In addition, many of our obligations under our debt arrangements
contain cross-default or cross-acceleration provisions. As a result, if we
default under one debt arrangement, other lenders might be able to declare
amounts due under their arrangements, which would have a material adverse effect
on our business.
The Company's level of debt and debt service requirements have several
important effects on its operations, including the following: (i) the Company
has significant cash requirements to service debt, reducing funds available for
operations and future business opportunities and increasing the company's
vulnerability to adverse economic and industry conditions; (ii) the Company's
leveraged position increases its vulnerability to competitive pressures; (iii)
the financial covenants and other restrictions contained in the indentures, the
credit agreements and other agreements relating to the Company's indebtedness
will require the Company to meet certain financial tests and will restrict its
ability to, among other things, borrow additional funds, dispose of assets, make
investments or pay cash dividends on, or repurchase, preferred or common stock;
and (iv) funds available for working capital, capital expenditures, acquisitions
and general corporate purposes may be limited. Certain of the Company's
competitors operate on a less leveraged basis and have greater operating and
financial flexibility than the Company.
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 2002 were less than 1% of consolidated revenues
and consolidated assets, respectively. Sales generated and long-term debt
incurred to date by Bluegreen Properties, N.V., the Company's subsidiary in
Aruba, 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 $100.9 million, $77.8 million and $48.3 million of
fixed-rate timeshare notes receivable during fiscal 2002, fiscal 2001 and fiscal
2000, respectively, under the Purchase Facility and previous timeshare
receivable purchase facilities (see "Credit Facilities for Timeshare Receivables
and Inventories" and Note 4 of Notes
41
to Consolidated Financial Statements). 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, commercial paper rates or LIBOR
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 March 31, 2002, the Company had fixed interest rate debt of
approximately $154.9 million and floating interest rate debt of approximately
$50.3 million. In addition, the Company's notes receivable from timeshare and
residential land and golf customers were comprised of $55.2 million of fixed
rate loans and $2.8 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 increase in the prevailing prime or
LIBOR rates, as applicable, would decrease after-tax earnings of the Company by
approximately $122,000 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 a nominal
amount. 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.
42
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
BLUEGREEN CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
March 31, April 1,
2002 2001
---- ----
ASSETS
Cash and cash equivalents (including restricted cash of approximately
$27.7 million and $22.4 million at March 31, 2002 and April 1, 2001, respectively) $ 48,715 $ 40,016
Contracts receivable, net .......................................................... 21,818 18,507
Notes receivable, net .............................................................. 55,648 74,796
Prepaid expenses ................................................................... 11,634 12,593
Inventory, net ..................................................................... 187,688 193,634
Retained interests in notes receivable sold ........................................ 38,560 19,898
Property and equipment, net ........................................................ 49,338 41,462
Other assets ....................................................................... 21,760 18,775
--------- ---------
Total assets ................................................................. $ 435,161 $ 419,681
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable ................................................................... $ 4,700 $ 6,245
Accrued liabilities and other ...................................................... 39,112 31,171
Deferred income .................................................................... 5,043 5,314
Deferred income taxes .............................................................. 28,299 19,329
Receivable-backed notes payable .................................................... 14,628 8,702
Lines-of-credit and notes payable .................................................. 40,262 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 ............................................................... 282,415 280,050
Minority interest .................................................................. 3,090 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; 27,059
and 26,946 shares issued at March 31, 2002 and April 1, 2001, respectively ....... 271 269
Additional paid-in capital ......................................................... 122,734 122,564
Treasury stock, 2,756 common shares at both March 31, 2002 and
April 1, 2001, at cost ........................................................... (12,885) (12,885)
Net unrealized gains on retained interests in notes receivable sold,
net of income taxes .............................................................. 2,433 1,471
Retained earnings .................................................................. 37,103 25,371
--------- ---------
Total shareholders' equity .................................................... 149,656 136,790
--------- ---------
Total liabilities and shareholders' equity ............................... $ 435,161 $ 419,681
========= =========
See accompanying notes to consolidated financial statements.
43
BLUEGREEN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Year Ended
-----------------------------------
March 31, April 1, April 2,
2002 2001 2000
-----------------------------------
Revenues:
Sales ...................................................... $ 240,628 $ 229,874 $ 214,488
Other resort and golf operations ........................... 25,470 24,649 21,745
Interest income ............................................ 15,447 17,317 15,652
Gain on sales of notes receivable .......................... 6,280 3,281 2,063
Other income ............................................... -- -- 192
--------- --------- ---------
287,825 275,121 254,140
Cost and expenses:
Cost of sales .............................................. 86,525 78,795 74,957
Cost of other resort and golf operations ................... 23,599 24,951 20,948
Selling, general and administrative expenses ............... 140,189 147,592 128,491
Interest expense ........................................... 13,017 15,494 13,841
Provision for loan losses .................................. 4,851 4,887 5,338
Other expense .............................................. 162 400 --
--------- --------- ---------
268,343 272,119 243,575
--------- --------- ---------
Income before provision for income taxes and minority interest 19,482 3,002 10,565
Provision for income taxes ................................... 7,501 1,156 4,055
Minority interest in income (loss) of consolidated subsidiary 249 (871) (267)
--------- --------- ---------
Net income ................................................... $ 11,732 $ 2,717 $ 6,777
========= ========= =========
Earnings per common share:
Basic ...................................................... $ .48 $ .11 $ .29
========= ========= =========
Diluted .................................................... $ .46 $ .11 $ .28
========= ========= =========
Weighted-average number of common and common
equivalent shares:
Basic ...................................................... 24,256 24,242 23,323
========= ========= =========
Diluted .................................................... 29,993 24,316 25,375
========= ========= =========
See accompanying notes to consolidated financial statements.
44
BLUEGREEN CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
Net
Unrealized
Gains on
Retained
Interests in
Notes
Common Additional Treasury Receivable
Shares Common Paid-in Stock at Sold, Net of Retained
Issued Stock Capital Cost Income Taxes Earnings Total
------ ----- ------- ---- ------------ -------- -----
Balance at March 29, 1999 ................. 25,063 $ 251 $ 107,206 $ (4,545) $ 560 $ 15,877 $ 119,349
Net income ................................ -- -- -- -- -- 6,777 6,777
Net unrealized gains on retained
interests in notes receivable sold, net
of income taxes .......................... -- -- -- -- 341 -- 341
---------
Comprehensive income ...................... 7,118
Sale of common stock, net of issuance
costs .................................... 1,765 17 14,956 -- -- -- 14,973
Shares issued to employees and
directors upon exercise of stock
options .................................. 107 1 260 -- -- -- 261
Income tax benefit from stock options
exercised ................................ -- -- 111 -- -- -- 111
Shares repurchased for treasury stock ..... -- -- -- (7,768) -- -- (7,768)
--------- --------- --------- --------- --------- --------- ---------
Balance at April 2, 2000 .................. 26,935 269 122,533 (12,313) 901 22,654 134,044
Net income ................................ -- -- -- -- -- 2,717 2,717
Net unrealized gains on retained
interests in notes receivable sold, net
of income taxes .......................... -- -- -- -- 570 -- 570
---------
Comprehensive income ...................... 3,287
Shares issued to employees and
directors upon exercise of stock
options .................................. 11 -- 28 -- -- -- 28
Income tax benefit from stock
options exercised ........................ -- -- 3 -- -- -- 3
Shares repurchased for treasury stock ..... -- -- -- (572) -- -- (572)
--------- --------- --------- --------- --------- --------- ---------
Balance at April 1, 2001 .................. 26,946 269 122,564 (12,885) 1,471 25,371 136,790
Net income ................................ -- -- -- -- -- 11,732 11,732
Net unrealized gains on retained
interests in notes receivable sold, net
of income taxes .......................... -- -- -- -- 962 -- 962
---------
Comprehensive income ...................... 12,694
Shares issued to employees and
directors upon exercise of stock
options .................................. 113 2 154 -- -- -- 156
Income tax benefit from stock options
exercised ................................ -- -- 16 -- -- -- 16
--------- --------- --------- --------- --------- --------- ---------
Balance at March 31, 2002 ................. 27,059 $ 271 $ 122,734 $ (12,885) $ 2,433 $ 37,103 $ 149,656
========= ========= ========= ========= ========= ========= =========
See accompanying notes to consolidated financial statements.
45
BLUEGREEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended
---------------------------------
March 31, April 1, April 2,
2002 2001 2000
---------------------------------
Operating activities:
Net income ........................................................ $ 11,732 $ 2,717 $ 6,777
Adjustments to reconcile net income to net cash provided (used)
by operating activities:
Minority interest in income (loss) of consolidated subsidiary . 249 (871) (267)
Depreciation .................................................. 5,280 4,263 3,206
Amortization .................................................. 3,006 2,463 1,556
Amortization of discount on note payable ...................... 374 708 1,039
Gain on sale of notes receivable .............................. (6,280) (3,281) (2,063)
Loss on sale of property and equipment ........................ 166 45 347
Loss on exchange of REMIC certificates ........................ -- -- 179
Provision for loan losses ..................................... 4,851 4,887 5,338
Provision (benefit) for deferred income taxes ................. 7,895 5,801 (360)
Interest accretion on investments in securities ............... (3,754) (2,627) (2,274)
Proceeds from sale of notes receivable ........................ 85,975 73,244 46,969
Proceeds from borrowings collateralized by notes receivable ... 23,163 34,634 13,771
Payments on borrowings collateralized by notes receivable ..... (16,600) (35,964) (11,530)
Changes in operating assets and liabilities:
Contracts receivable .......................................... (3,311) (10,588) 11,763
Notes receivable .............................................. (97,795) (89,786) (62,882)
Prepaid expenses .............................................. 959 (8,592) (1,349)
Inventory ..................................................... 13,542 21,500 (22,035)
Other assets .................................................. (4,423) (1,096) (2,935)
Accounts payable, accrued liabilities and other ............... 6,621 4,615 2,492
-------- -------- --------
Net cash provided (used) by operating activities .................. 31,650 2,072 (12,258)
-------- -------- --------
Investing activities:
Cash received from retained interests in notes receivable sold .. 7,856 6,890 6,201
Investment in note receivable ................................... (1,685) (4,711) --
Principal payments received on investment in note receivable .... 4,643 68 --
Loan to related party ........................................... -- -- (256)
Principal payments received on loan to related party ............ -- -- 459
Business and minority interest acquisitions, net of cash acquired -- (250) (675)
Purchases of property and equipment ............................. (12,940) (9,549) (10,846)
Proceeds from sales of property and equipment ................... 44 79 1,516
-------- -------- --------
Net cash used by investing activities ............................. (2,082) (7,473) (3,601)
-------- -------- --------
Financing activities:
Proceeds from borrowings under line-of-credit facilities and
notes payable ................................................. 59,870 11,121 27,885
Payments under line-of-credit facilities and notes payable ...... (79,327) (29,135) (7,516)
Payment of debt issuance costs .................................. (1,568) (1,551) (2,007)
Proceeds from issuance of common stock .......................... -- -- 14,973
Proceeds from exercise of employee and director stock options ... 156 28 261
Payments for treasury stock ..................................... -- (572) (7,768)
-------- -------- --------
Net cash provided (used) by financing activities .................. (20,869) (20,109) 25,828
-------- -------- --------
Net increase (decrease) in cash and cash equivalents .............. 8,699 (25,510) 9,969
Cash and cash equivalents at beginning of year .................... 40,016 65,526 55,557
-------- -------- --------
Cash and cash equivalents at end of year .......................... 48,715 40,016 65,526
Restricted cash and cash equivalents at end of year ............... (27,669) (22,363) (21,129)
-------- -------- --------
Unrestricted cash and cash equivalents at end of year ............. $ 21,046 $ 17,653 $ 44,397
======== ======== ========
46
BLUEGREEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
(in thousands)
Year Ended
--------------------------------
March 31, April 1, April 2,
2002 2001 2000
--------------------------------
Supplemental schedule of non-cash operating, investing
and financing activities
Inventory acquired through foreclosure or deedback in lieu of
foreclosure ....................................................... $ 7,596 $ 5,859 $ 6,982
======== ======== ========
Inventory acquired through financing ................................ $ -- $ 8,952 $ 25,867
======== ======== ========
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 ................... $ 427 $ 891 $ 713
======== ======== ========
Retained interests in notes receivable sold ......................... $ 21,207 $ 7,903 $ 3,436
======== ======== ========
Sale of inventory in exchange for an investment in securities ....... $ -- $ -- $ 2,500
======== ======== ========
Net change in unrealized gains on investments ....................... $ 1,557 $ 928 $ 259
======== ======== ========
Supplemental schedule of operating cash flow information
Interest paid, net of amounts capitalized ........................... $ 11,947 $ 14,474 $ 11,760
======== ======== ========
Income taxes refunded (paid) ........................................ $ 2,014 $ (316) $ (3,858)
======== ======== ========
See accompanying notes to consolidated financial statements.
47
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") acquires, develops and markets Timeshare Interests in resorts
generally located in popular, high-volume, "drive-to" vacation destinations.
"Timeshare Interests" are of two types: one which entitles the fixed-week buyer
to a fully-furnished vacation residence for an annual one-week period in
perpetuity and the second which entitles the buyer of the points-based Bluegreen
Vacation Club(TM) product to an annual allotment of "points" in perpetuity
(supported by an underlying deeded fixed timeshare week being held in trust for
the buyer). "Points" may be exchanged by the buyer in various increments for
lodging for varying lengths of time in fully-furnished vacation residences at
the Company's participating resorts. The Company currently develops, markets and
sells Timeshare Interests in twelve resorts located in the United States and
Aruba. The Company also markets and sells Timeshare Interests in its resorts at
two 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 homesites 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
March 31, 2002, sales generated by the Company's Resorts Division and
Residential Land and Golf Division comprised approximately 60% and 40%,
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. The only non-wholly owned
subsidiary, Bluegreen/Big Cedar Vacations LLC (the "Joint Venture"), is
consolidated as the Company holds a 51% equity interest in the Joint Venture,
has an active role as the day-to-day manager of the Joint Venture's activities
and has majority voting control of the Joint Venture's management committee. 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. The years ended March 31, 2002,
April 1, 2001 and April 2, 2000 were 52, 52 and 53 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. The Company's 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
48
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.
Restricted cash consists of funds collected as servicer of notes receivable
owned by other parties and customer deposits held in escrow accounts. As of
March 31, 2002 and April 1, 2001, the Company held $19.2 million and $14.7
million, respectively, of funds collected as servicer of notes receivable owned
by or pledged to other parties, primarily notes receivable previously sold to
these other parties by the Company. All such funds are held in separate
custodial bank accounts. In the case of notes receivable previously sold, funds
collected and held in these accounts are periodically transferred to third-party
cash administrators, who in turn make payments to the owners of the notes
receivables and to the Company for servicing fees and payments on any retained
interests in the notes receivable sold. The Company has recorded a corresponding
liability, which is included in accrued liabilities on the consolidated balance
sheet, for its restricted cash held in connection with its servicing activities
for previously sold notes receivable. In the case of notes receivable previously
pledged, funds collected and held in these accounts are periodically transferred
to the lenders as payment on the Company's receivable-backed notes payable
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
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 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 $469,000 and $434,000
at March 31, 2002 and April 1, 2001, respectively.
Other resort and golf operations revenues consist primarily of sales and
service fees from the activities listed below together with a brief description
of the applicable revenue recognition policy:
Activity Revenue is recognized as:
- -------- -------------------------
Resort title fees Escrow amounts are released and title
documents are completed.
Bluegreen Vacation Club and other Management services are performed.
resort management fees
Rental commissions Rental services are provided.
Rental of Company-owned timeshare Guests complete stays at the resorts.
interests
Golf course and ski hill daily fees Services are provided.
Retail merchandise, food and beverage Sales are consummated.
sales
49
Notes Receivable
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.
The Company considers any note receivable with a principal payment 30 days
past its due date to be delinquent. As of March 31, 2002 and April 1, 2001, $6.3
million and $3.0 million, respectively, of the Company's notes receivable owned
were delinquent.
The Company considers many factors when establishing and evaluating the
adequacy of its reserve for loan losses. These factors include recent and
historical default rates, current delinquency rates, contractual payment terms,
loss severity rates along with present and expected economic conditions. The
Company examines these factors and adjusts its reserve for loan losses on at
least a quarterly basis.
Retained Interest in Notes Receivable Sold
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, private-placement 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 allocation of the previous carrying amount of
the financial assets involved in the transfer 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 using management's best estimates of the key assumptions - prepayment
rates, loss severity rates, default rates and discount rates commensurate with
the risks involved.
The Company's retained interests in notes receivable sold relate to notes
receivable previously sold to others through either REMICs or timeshare purchase
facility transactions. 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 initially and 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.
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" (see Note 6).
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.
50
Goodwill
Goodwill is amortized over periods ranging from 8 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 March 31, 2002 and April 1, 2001, goodwill and related accumulated
amortization, included in other assets on the consolidated balance sheets, are
as follows (in thousands):
March 31, April 1,
2002 2001
---- ----
Goodwill $3,100 $3,286
Accumulated amortization (669) (601)
------ ------
Goodwill, net $2,431 $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
$50.6 million, $54.6 million and $44.3 million for the years ended March 31,
2002, April 1, 2001 and April 2, 2000, 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 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.
51
The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share data):
Year Ended
-----------------------------
March 31, April 1, April 2,
2002 2001 2000
-----------------------------
Basic earnings per share - numerators:
Net income .............................................. $11,732 $ 2,717 $ 6,777
======= ======= =======
Diluted earnings per share - numerators:
Net income .............................................. $11,732 $ 2,717 $ 6,777
Effect of dilutive securities (net of income tax effects) 2,039 -- 297
------- ------- -------
Net income - diluted .................................... $13,771 $ 2,717 $ 7,074
======= ======= =======
Denominator:
Denominator for basic earnings per share-weighted-
average shares ........................................ 24,256 24,242 23,323
Effect of dilutive securities:
Stock options ......................................... 35 74 522
Convertible securities ................................ 5,702 -- 1,530
------- ------- -------
Dilutive potential common shares ........................ 5,737 74 2,052
------- ------- -------
Denominator for diluted earnings per share-adjusted
weighted-average shares and assumed conversions ....... 29,993 24,316 25,375
======= ======= =======
Basic earnings per common share ........................... $ .48 $ .11 $ .29
======= ======= =======
Diluted earnings per common share ......................... $ .46 $ .11 $ .28
======= ======= =======
Comprehensive Income
SFAS No. 130, "Reporting Comprehensive Income", 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.
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. Currently, it appears that
a final pronouncement on timeshare transactions would not be effective until the
Company's fiscal year 2005.
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS
No. 133 was effective for the Company's fiscal year 2002 (beginning April 2,
2001). The adoption of SFAS No. 133 had no impact on the Company's results of
operations and financial position during the year ended March 31, 2002.
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 was effective for
transfers of financial assets occurring after March 31, 2001. The adoption of
SFAS No. 140 had no impact on the Company's results of operations and financial
position during the year ended March 31, 2002.
52
In September 2000, the Emerging Issues Task Force ("EITF") of the FASB
issued EITF Issue No. 99-20, "Recognition of Interest Income and Impairment on
Purchased and Retained Beneficial Interests in Securitized Financial Assets."
The Issue discusses how a transferor that retains an interest in securitized
financial assets should assess impairment and account for interest income. EITF
Issue No. 99-20 became effective for the Company on April 2, 2001. The adoption
of the Issue had no impact on the Company's results of operations and financial
position during the year ended March 31, 2002.
In June 2001, the FASB issued SFAS No. 141, "Business Combinations", and
SFAS No. 142, "Accounting for Goodwill and Other Intangible Assets", effective
for the Company's fiscal year 2003. Under the new rules, goodwill and intangible
assets deemed to have indefinite lives will no longer be amortized but will be
subject to annual impairment tests in accordance with SFAS No. 142. Other
intangible assets will continue to be amortized over their useful lives. The
Company will apply the new rules on accounting for goodwill and other intangible
assets beginning in the first quarter of fiscal 2003 (beginning April 1, 2002).
Application of the nonamortization provisions of SFAS No. 142 is expected to
result in an increase to net income of $72,000 (less than $0.01 per share) in
the year adoption. During fiscal 2003, the Company will perform the first of the
required impairment tests of goodwill and has not yet determined what the effect
of these tests will be on the earnings and financial position of the Company.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". This statement requires entities to record the fair
value of a liability for an asset retirement obligation in the period in which
it is incurred. This statement is effective for the Company's fiscal year 2004.
The new statement is not expected to have a material impact on the results of
operations or financial position of the Company.
In December 2001, the FASB issued SFAS No. 144 on asset impairment that is
applicable to the Company's fiscal 2003 financial statements. The FASB's new
rules on asset impairment supersede FASB Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
and provide a single accounting model for long-lived assets to be disposed of.
The new statement is not expected to have a material impact on the results of
operations or financial position of the Company.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44, and 62, Amendment of FASB Statement No. 13, and Technical
Corrections." For most companies, SFAS No. 145 will require gains and losses on
extinguishments of debt to be classified as income or loss from continuing
operations rather than as extraordinary items as previously required under SFAS
No. 4. Extraordinary treatment will be required for certain extinguishments as
provided in Accounting Principles Board Opinion No. 30. SFAS No. 145 also amends
SFAS No. 13 to require certain modifications to capital leases be treated as a
sale-leaseback and modifies the accounting for sub-leases when the original
lessee remains a secondary obligor (or guarantor). SFAS No. 145 is effective for
transactions occurring after May 15, 2002, and is not expected to have a
material impact on the results of operations or financial position of the
Company.
Reclassifications
Certain reclassifications of prior period amounts have been made to conform
to the current year presentation.
In addition, the Company reclassified the $9 million of prepaid commissions
and future member distributions paid to Bass Pro, Inc. (see Note 3) during the
year ended April 1, 2001 from cash flows from investing activities to cash flows
from operating activities in the Consolidated Statements of Cash Flows. The
impact of this reclassification was to decrease operating cash flows and
increase investing cash flow by $9 million for the year ended April 1, 2001.
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.
("Bass Pro"), to form a timeshare development, marketing and sales company known
as Bluegreen/Big Cedar Vacations LLC (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
53
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 March 31, 2002, the Company had advanced the Joint Venture $9.0
million due on demand and bearing interest at prime plus 1%. Subsequent to March
31, 2002, the Company loaned an additional $1.6 million to the Joint Venture on
identical terms. These advances have been eliminated in the Consolidated Balance
Sheets. 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.
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.
During the years ended March 31, 2002 and April 1, 2001, the Joint Venture
paid approximately $785,000 and $354,000, respectively, to Bass Pro and
affiliates for construction management services and furniture and fixtures in
connection with the development of the Joint Venture's timeshare resort and
sales office. In addition, the Joint Venture paid Big Cedar and affiliates
approximately $925,000 and $51,000 for gift certificates and hotel lodging
during the years ended March 31, 2002 and April 1, 2001, respectively, in
connection with the Joint Venture's timeshare marketing activities.
On December 15, 1997, the Company invested $250,000 of capital in Bluegreen
Properties N.V. ("BPNV"), an entity organized in Aruba that previously had no
operations, in exchange for a 50% ownership interest. Concurrently, the Company
and an affiliate of the other 50% owner of BPNV (who is not an affiliate of the
Company), each loaned BPNV $3 million pursuant to promissory notes due on
December 15, 2000 and bearing interest at the prime rate plus 1%. BPNV then
acquired from a third party approximately 8,000 unsold timeshare intervals at
the La Cabana Beach & Racquet Club, 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, 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 $9.0 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
54
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
periodically evaluates the Prepayment for any indications of impairment. The
Prepayment is included in prepaid expenses on the Consolidated Balance Sheets.
As of March 31, 2002 and April 1, 2001, the unamortized balance of the
Prepayment was approximately $8.9 million and $9.0 million, respectively.
During the years ended March 31, 2002 and April 1, 2001, the Company paid
Bass Pro Trademarks L.L.C., an affiliate of Bass Pro, approximately $333,000 and
$35,000, respectively, for advertising services.
4. Notes Receivable and Note Receivable Sale Facilities
The table below sets forth additional information relating to the Company's
notes receivable (in thousands).
March 31, April 1,
2002 2001
---- ----
Notes receivable secured by Timeshare Interests... $50,892 $64,245
Notes receivable secured by land.................. 7,079 9,001
Other notes receivable............................ 1,884 5,136
------- -------
Notes receivable, gross........................... 59,855 78,382
Reserve for loan losses........................... (4,207) (3,586)
------- -------
Notes receivable, net............................. $55,648 $74,796
======= =======
The weighted-average interest rate on notes receivable from customers was
14.7% and 15.2% at March 31, 2002 and April 1, 2001, respectively. All of the
Company's timeshare loans bear interest at fixed rates. The average interest
rate charged on loans secured by Timeshare Interests was 15.4% at March 31,
2002. Approximately 39.0% of the Company's notes receivable secured by land bear
interest at variable rates, while approximately 61.0% bear interest at fixed
rates. The average interest rate charged on loans secured by land was 11.1% at
March 31, 2002.
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, April 3, 2000....... $ 3,024
Provision for loan losses.................... 4,887
Charge-offs.................................. (4,325)
-------
Reserve for loan losses, April 1, 2001....... 3,586
Provision for loan losses.................... 4,851
Charge-offs.................................. (4,230)
-------
Reserve for loan losses, March 31, 2002...... $ 4,207
=======
Installments due on notes receivable held by the Company during each of the
five fiscal years subsequent to the year ended March 31, 2002, and thereafter,
are set forth below (in thousands).
2003......................... $ 9,044
2004......................... 6,649
2005......................... 5,013
2006......................... 5,353
2007......................... 5,796
Thereafter................... 28,000
-------
Total $59,855
=======
The First GE Purchase Facility
On June 26, 1998, the Company executed a timeshare receivables purchase
facility (the "First GE Purchase Facility") with Heller Financial, Inc., a
financial institution that has since been acquired by General Electric Capital
Real
55
Estate ("GE"). Under the First GE Purchase Facility, a special purpose finance
subsidiary of the Company sold $103.1 million aggregate principal amount of
timeshare receivables to GE in securitization transactions, which fully utilized
the First GE Purchase Facility. The First GE Purchase Facility had detailed
requirements with respect to the eligibility of receivables for purchase. Under
the First GE 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 GE 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 GE Purchase Facility for a fee, and is
required to make advances to GE to the extent it believes such advances will be
recoverable. The First GE Purchase Facility includes various provisions
customary for a transaction of this type.
During the year ended April 2, 2000, the Company sold approximately $48.3
million in aggregate principal amount of timeshare receivables under the First
GE Purchase Facility for a purchase price equal to 97% of the principal balance
and recognized an aggregate gain of $2.1 million. As a result of all receivables
sold under the First GE Purchase Facility, the Company recorded aggregate
retained interests in notes receivable sold of $8.6 million.
The Second GE Purchase Facility
In October 2000, the Company executed agreements for a new timeshare
receivables purchase facility (the "Second GE Purchase Facility") with two
financial institutions, including Barclays Bank, PLC (the "Senior Purchaser")
and GE (the "Subordinated Purchaser") (collectively, the "Purchasers"). The
Second GE Purchase Facility utilized an owner's trust structure, pursuant to
which the Company sold $95.4 million aggregate principal amount of timeshare
receivables to a special purpose finance subsidiary of the Company (the
"Subsidiary") and the Subsidiary sold the receivables to an owner's trust, which
fully utilized the Second GE Purchase Facility. Receivables were sold without
recourse except for breaches of customary representations and warranties at the
time of sale. Under the Second GE 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 was paid at closing in cash. For eligible notes generated by Bluegreen
Properties N.V., the Company's subsidiary in Aruba, the purchase price paid in
cash at closing was 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 was funded 71.58% by the Senior Purchaser and 28.42% by the
Subordinated Purchaser. For the Aruba receivables, the 85.00% purchase price was
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 Company
acts as servicer under the Second GE 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 GE Purchase Facility Agreement includes various
conditions to purchase, covenants, trigger events and other provisions customary
for a transaction of this type.
During the years ended March 31, 2002 and April 1, 2001, the Company sold
approximately $17.6 million and $77.7 million, respectively, in aggregate
principal amount of timeshare receivables under the Second GE Purchase Facility
for aggregate purchase prices of $16.8 million and $73.2 million, respectively,
and recognized aggregate gains of $978,000 and $3.3 million, respectively. As a
result of all receivables sold under the Second GE Purchase Facility, the
Company recorded aggregate retained interests in notes receivable sold of $10.3
million and servicing assets totaling $726,000.
The CSFB/ING Purchase Facility
In June 2001, the Company executed agreements for a new timeshare
receivables purchase facility (the "CSFB/ING Purchase Facility") with Credit
Suisse First Boston ("CSFB") acting as the initial purchaser. In April
56
2002, ING Capital, LLC ("ING"), an affiliate of ING Bank N.V., acquired and
assumed CSFB's rights, obligations and commitments as initial purchaser in the
CSFB/ING Purchase Facility by purchasing the outstanding principal balance under
the facility of $64.9 million from CSFB. In connection with its assumption of
the CSFB/ING Purchase Facility, ING expanded and extended the CSFB/ING Purchase
Facility's size and term. The CSFB/ING 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 "Finance Subsidiary") and the
Finance Subsidiary sells the receivables to an owners' trust without recourse to
the Company or the Finance Subsidiary except for breaches of customary
representations and warranties at the time of sale. Pursuant to the agreements
that constitute the CSFB/ING Purchase Facility (collectively, the "Purchase
Facility Agreements"), the Finance Subsidiary may receive $125.0 million of
cumulative purchase price (as more fully described below) on sales of timeshare
receivables to the owner's trust on a revolving basis, as the principal balance
of receivables sold amortizes, in transactions through April 16, 2003 (subject
to certain conditions as more fully described in the Purchase Facility
Agreements). The CSFB/ING Purchase Facility has detailed requirements with
respect to the eligibility of receivables for purchase and fundings under the
CSFB/ING Purchase Facility are subject to certain conditions precedent. Under
the Purchase Facility, a variable purchase price expected to approximate 85.00%
of the principal balance of the receivables sold, subject to certain terms and
conditions, is paid at closing in cash. The balance of the purchase price will
be deferred until such time as ING has received a specified return and all
servicing, custodial, agent and similar fees and expenses have been paid. ING
shall earn a return equal to the London Interbank Offered Rate ("LIBOR") plus
1.00%, subject to use of alternate return rates in certain circumstances. In
addition, ING will receive a 0.25% facility fee during the term of the facility.
The CSFB/ING Purchase Facility also provides for the sale of land notes
receivable, under modified terms.
ING's obligation to purchase under the CSFB/ING Purchase Facility may
terminate upon the occurrence of specified events. These specified events, some
of which are subject to materiality qualifiers and cure periods, include,
without limitation, (1) a breach by the Company of the representations or
warranties in the Purchase Facility Agreements, (2) a failure by the Company to
perform its covenants in the Purchase Facility Agreements, including, without
limitation, a failure to pay principal or interest due to ING, (3) the
commencement of a bankruptcy proceeding or the like with respect to the Company,
(4) a material adverse change to the Company since December 31, 2001, (5) the
amount borrowed under the Purchase Facility exceeding the borrowing base, (6)
significant delinquencies or defaults on the receivables sold, (7) a payment
default by the Company under any other borrowing arrangement of $5 million or
more (a "Significant Arrangement"), or an event of default under any indenture,
facility or agreement that results in a default under any Significant
Arrangement, (8) a default or breach under any other agreement beyond the
applicable grace period if such default or breach (a) involves the failure to
make a payment in excess of 5% of the Company's tangible net worth or (b)
causes, or permits the holder of indebtedness to cause, an amount in excess of
5% of the Company's tangible net worth to become due, (9) the Company's tangible
net worth not equaling at least $110 million plus 50% of net income and 100% of
the proceeds from new equity financing following the first closing under the
Purchase Facility, or (10) the ratio of the Company's debt to tangible net worth
exceeding 6 to 1.
The Company acts as servicer under the CSFB/ING Purchase Facility for a
fee. The Purchase Facility Agreement includes various conditions to purchase,
covenants, trigger events and other provisions customary for a transaction of
this type.
During the year ended March 31, 2002, the Company sold $83.2 million of
aggregate principal balance of notes receivable under the CSFB/ING Purchase
Facility for a cumulative purchase price of $70.7 million. In connection with
these sales, the Company recognized an aggregate $5.2 million gain and recorded
retained interests in notes receivable sold of $18.8 million and servicing
assets totaling $800,000.
The following assumptions were used to measure the initial fair value of
the retained interests for the above sales under the CSFB/ING 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%.
57
Other Notes Receivable
On June 26, 2001, the Company loaned $1.7 million to the Casa Grande Resort
Cooperative Association I (the "Association"), the property owners' association
controlled by the timeshare owners at the La Cabana Beach and Racquet Club
resort in Aruba. This unsecured loan bears interest at Prime plus 1%, payable in
semi-annual installments commencing on December 26, 2001, and matures on June
26, 2003.
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 Group, Inc. ("RDI"), an entity which was acquired by
the Company on September 30, 1997.
5. Retained Interests in Notes Receivable Sold and Servicing Assets
Retained Interests in Notes Receivable Sold
The Company's retained interests in notes receivable sold, which are
classified as available-for-sale investments, and associated unrealized gains
and losses are set forth below (in thousands).
Gross Gross
Amortized Unrealized Unrealized
Cost Gain Loss Fair Value
---- ---- ---- ----------
March 31, 2002
- --------------
1995 REMIC retained interest ....... $ 2,066 $ 442 $ -- $ 2,508
1996 REMIC retained interests ...... 1,248 65 -- 1,313
First GE Purchase Facility retained
interest (see Note 4) ............ 4,462 -- 96 4,366
Second GE Purchase Facility retained
interest (see Note 4) ............ 9,201 2,198 -- 11,399
CSFB/ING Purchase Facility retained
interest (see Note 4) ............ 17,602 1,372 -- 18,974
------- ------- ------- -------
Total ............................ $34,579 $ 4,077 $ 96 $38,560
======= ======= ======= =======
58
Gross Gross
Amortized Unrealized Unrealized
Cost Gain Loss Fair Value
---- ---- ---- ----------
April 1, 2001
- -------------
1995 REMIC retained interest ....... $ 2,236 $ 1,060 $ -- $ 3,296
1996 REMIC retained interests ...... 1,594 -- 6 1,588
First GE Purchase Facility retained
interest (see Note 4) ............ 5,427 494 -- 5,921
Second GE Purchase Facility retained
interest (see Note 4) ............ 8,217 876 -- 9,093
------- ------- ------- -------
Total ............................ $17,474 $ 2,430 $ 6 $19,898
======= ======= ======= =======
Contractual maturities are set forth below (in thousands), based on the final
maturity dates of the underlying notes receivable sold:
Amortized
Cost Fair Value
After one year but within five....... $ 3,773 $ 4,168
After five years but within ten...... 30,806 34,392
------- -------
Total $34,579 $38,560
======= =======
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 45%; default rates ranging from
9% to 0.75% per annum as the portfolios mature; and a discount rates ranging
from 14% to 15%.
The following table shows the hypothetical fair value of the Company's
retained interests in notes receivable sold of both a 10% and a 20% adverse
change in each of the assumptions used to measure the fair value of those
retained interests (the impacts on the fair value of the 1995 REMIC and 1996
REMIC retained interest were not material):
Hypothetical Fair Value at March 31, 2002 of:
---------------------------------------------
First GE Second GE CSFB/ING
Assumption Purchase Facility Purchase Facility Purchase Facility
Retained Interest Retained Interest Retained Interest
----------------- ----------------- -----------------
Prepayment rate: 10% adverse change $4,334 $11,237 $18,832
20% adverse change 4,302 11,081 18,546
Loss severity rate: 10% adverse change 4,053 10,845 18,716
20% adverse change 3,746 10,283 18,283
Default rate: 10% adverse change 4,056 10,792 18,527
20% adverse change 3,750 10,184 17,921
Discount rate: 10% adverse change 4,337 11,134 18,541
20% adverse change 4,307 10,882 17,964
59
The table below summarizes certain cash flows received from and (paid to)
special purpose finance subsidiaries of the Company (in thousands):
Year Ended
----------
March 31, April 1,
2002 2001
---- ----
Proceeds from new sales of receivables $ 85,975 $ 73,244
Proceeds from collection of previously sold receivables (61,862) (41,292)
Servicing fees received 2,693 1,853
Purchases of foreclosed assets (632) (1,224)
Proceeds from resales of foreclosed assets (4,403) (2,962)
Remarketing fees received 1,812 974
Cash received on investment in securities 7,856 6,890
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 March 31, 2002 March 31, 2002
-------------------------------------------------
Total Principal Amount
Principal of Loans More
Amount of Than 60 Days Credit Losses, Net
Loans Past Due of Recoveries
----- -------- -------------
1995 REMIC - land mortgages $ 4,383 $ 256 $ 208
1996 REMIC - land mortgages 2,795 14 35
First GE Purchase Facility - timeshare receivables 40,972 1,300 --
Second GE Purchase Facility - timeshare receivables 67,576 2,607 925
CSFB/ING Purchase Facility - timeshare receivables 75,969 1,596 --
The net unrealized gain on available-for-sale securities, presented as a
separate component of shareholders' equity, is net of income taxes of
approximately $1.6 million.
During the year ended April 2, 2000, the Company exchanged its
retained interest in a 1994 REMIC transaction for the underlying mortgages. The
1994 REMIC retained interest 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 retained interest.
Servicing Assets
The changes in the Company's servicing assets, included in other assets in
the Consolidated Balance Sheets, for the years ended March 31, 2002 and April 1,
2001 were as follows (in thousands):
Balance at April 3, 2000............................. $ --
Additions............................................ 593
Less: amortization................................... (31)
------
Balance at April 1, 2001............................. 562
Additions............................................ 932
Less: amortization................................... (305)
------
Balance at March 31, 2002............................ $1,189
======
The estimated fair value of the servicing assets approximated their
carrying amounts as of March 31, 2002 and 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
60
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 March 31, 2002
and April 1, 2001, no such valuation allowance was necessary.
6. Inventory
The Company's net inventory holdings, summarized by division, are set forth
below (in thousands).
March 31, April 1,
2002 2001
Resorts.................................................. $ 86,288 $ 97,012
Residential Land and Golf................................ 101,400 96,622
-------- --------
$187,688 $193,634
======== ========
Resorts Division inventory as of March 31, 2002, consisted of land
inventory of $10.0 million, $31.0 million of construction-in-progress and $45.3
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 $69.5 million of completed units.
Interest capitalized during the years ended March 31, 2002, April 1, 2001
and April 2, 2000, totaled approximately $8.0 million, $7.5 million and $6.9
million, respectively. Interest expense in the consolidated statements of income
is net of capitalized interest.
During the years ended March 31, 2002, April 1, 2001 and April 2, 2000, the
Company recognized impairment charges of $4.1 million, $2.0 million and
$187,000, respectively, on the Company's Crystal Cove residential land project
in Rockwood, Tennessee. These impairment charges are included in cost of sales
in the consolidated statements of income. Certain aspects of the Crystal Cove
project have required changes in planned development methods, which are
estimated to be more costly than the Company's original estimates. The fair
value of the Crystal Cove project was determined based on the estimated
aggregate retail sales prices of the home sites in the project.
7. Property and Equipment
The table below sets forth the property and equipment held by the Company
(in thousands).
Useful March 31, April 1,
Life 2002 2001
---- ---- ----
Office equipment, furniture and fixtures ..... 3-14 years $ 23,225 $ 19,486
Golf course land, land improvements, buildings
and equipment .............................. 10-30 years 24,958 18,940
Land, buildings and building improvements .... 10-30 years 11,171 8,386
Leasehold improvements ....................... 3-14 years 5,245 5,143
Aircraft ..................................... 3-5 years 1,070 1,070
Vehicles and equipment ....................... 3-5 years 618 703
-------- --------
66,287 53,728
Accumulated depreciation and amortization of
leasehold improvements ..................... (16,949) (12,266)
-------- --------
Total ................................ $ 49,338 $ 41,462
======== ========
8. Receivable-Backed Notes Payable
During the year ended March 31, 2002, the Company had a timeshare
receivables warehouse loan facility (the "Warehouse Facility"), which expired on
April 16, 2002, with GE. Loans under the Warehouse Facility bear interest at
LIBOR plus 3.5%. The Warehouse Facility had detailed requirements with respect
to the eligibility of receivables for inclusion and other conditions to funding.
The borrowing base under the Warehouse Facility was 90% 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 was 80%. The Warehouse Facility includes affirmative,
negative and financial covenants and events of default. During the year ended
March 31, 2002, the Company borrowed an aggregate $22.2 million under the
Warehouse Facility, of which the Company repaid an
61
aggregate $13.7 million by using cash generated from principal and interest
payments on the underlying loans and proceeds from the sale of the underlying
receivables under a previous timeshare receivables purchase facility with the
same financial institution. The remaining balance of the Warehouse Facility was
due in April 16, 2002, however, GE has represented to the Company that the
remaining balance is not considered to be in default pending GE's approval of a
new combined warehouse and purchase facility. The remaining balance on the
Warehouse Facility continues to be repaid as principal and interest payments are
collected on the timeshare notes receivable. As of March 31, 2002, there was
$9.8 million outstanding under the Warehouse Facility.
The Company has a $30.0 million revolving credit facility with Foothill
Capital Corporation 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 and up to $10 million of the total facility
available for the pledge of timeshare receivables. The interest rate charged on
outstanding borrowings ranges from prime plus 0.5% to 1.0%, with 7.0% being the
minimum interest rate. At March 31, 2002, the outstanding principal balance
under this facility was approximately $4.1 million, all of which related to
Residential Land and Golf Division 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 $704,000 of receivable-backed notes payable balances is
related to notes receivable sold by RDI with recourse, prior to the acquisition
of RDI by the Company.
At March 31, 2002, $15.8 million in notes receivable secured the Company's
$14.6 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 (in thousands).
March 31, April 1,
2002 2001
---- ----
Lines-of-credit secured by inventory with a carrying value of $62.7
million at March 31, 2002. Interest rates range from 4.88% to 6.0% at
March 31, 2002 and from 7.75% to 9.25% at April 1, 2001. Maturities
range from July 2003 to January 2006 ................................... $27,954 $40,631
Notes and mortgage notes secured by certain inventory, property and
equipment and investments with an aggregate carrying value of
$29.0 million at March 31, 2002. Interest rates ranging from 4.75% to
12.00% at March 31, 2002 and from 6.25% to 12.00% at April 1,
2001. Maturities range from December 2002 to September 2015 ............ 10,977 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
5.75%. Maturities range from May 2003 to February 2005 ................. 331 390
------- -------
Total ............................................................ $40,262 $58,918
======= =======
62
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 the year ended March 31, 2002. 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).
2003...................................... $ 9,028
2004...................................... 8,272
2005...................................... 19,761
2006...................................... 2,767
2007...................................... 73
Thereafter................................ 633
-------
Total................................... 40,534
Less: unamortized discount based on
an imputed interest rate of 12%..... (272)
-------
$40,262
=======
The following is a discussion of the Company's significant credit
facilities and material new borrowings during the year ended March 31, 2002:
The Company has a $12.5 million unsecured line-of-credit with First Union
National Bank. Amounts borrowed under the line bear interest at LIBOR plus 2%.
Interest is due monthly and all principal amounts are due on December 31, 2002.
The Company is only allowed to borrow under the line-of-credit in amounts less
than the remaining availability under its current, active timeshare receivables
purchase facility plus availability under certain receivable warehouse
facilities, less any outstanding letters of credit. The line-of-credit agreement
contains certain covenants and conditions typical of arrangements of this type.
The Company borrowed and repaid $10 million loans under this line of credit five
times during the year ended March 31, 2002. As of March 31, 2002, there was no
amount outstanding under the line.
In addition, GE 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 July 2006. Principal will be repaid
through agreed-upon release prices as Timeshare Interests are sold at the
financed resorts, 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 of this loan must be repaid by November 1, 2005, through
agreed-upon release prices as Timeshare Interests in the Company's Lodge Alley
Inn resort in Charleston, South Carolina are sold, subject to minimum required
amortization. On December 20, 1999, the Company borrowed approximately $13.9
million under the acquisition and development facility. The principal of this
loan must be repaid by January 1, 2006, through agreed-upon release prices as
Timeshare Interests in the Company's Shore Crest II resort are sold, subject to
minimum required amortization. The outstanding balance under the A&D Facility at
March 31, 2002 was $10.1 million.
The Company has a $35.0 million revolving credit facility, which expired in
March 2002, with Finova Capital Corporation. The Company used this facility to
finance the acquisition and development of residential land projects. The
facility is secured by the real property (and personal property related thereto)
with respect to which borrowings are made. 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
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 home sites
in Lake Ridge II and in another recently purchased section of Lake Ridge are
sold. The principal of this loan must be repaid by September 14, 2004. On
October 6, 1999, in connection with the acquisition of 6,966 acres for the
Company's Mystic Shores residential land project in Canyon Lake, Texas, the
Company borrowed $11.9 million under the revolving credit facility. 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 project.
Principal payments on these loans are effected through agreed-upon release
prices as home sites in Mystic Shores are sold. The principal under the $11.9
million and $2.1 million loans for Mystic Shores must be repaid by October 6,
2004 and May 5, 2004, respectively. The aggregate outstanding balance on the
revolving credit facility was $17.1 million at March 31, 2002
63
On September 24, 1999, the Company obtained a $4.2 million line-of-credit
with Branch Banking and Trust Company for the purpose of developing a golf
course on the Brickshire property (the "Golf Course Loan"). During the years
ended March 31, 2002 and April 1, 2001, the Company borrowed $1.4 million and
$2.6 million, respectively, under the Golf Course Loan. The outstanding balances
under the Golf Course Loan bears interest at prime plus 0.5% and interest is due
monthly. Principal payments are payable in equal monthly installments of
$35,000. The principal must be repaid by October 1, 2005. The loan is secured by
the Brickshire golf course property. As of March 31, 2002, $3.7 million was
outstanding under the Golf Course Loan.
On August 2, 2001, the Company obtained a revolving line-of-credit with
IndyMac Bank F.S.B. ("IndyMac") for the purpose of developing the Company's golf
course community in Raleigh, North Carolina known as The Preserve at Jordan
Lake. The line-of-credit has an aggregate borrowing capacity of approximately
$6.7 million outstanding at any one time. Through March 2002, the Company
borrowed an aggregate $7.9 million under the line-of-credit, on a revolving
basis. The outstanding balances under the line-of-credit bear interest at prime
plus 1.0% and interest is due monthly. Principal payments are effected through
agreed-upon release prices as home sites in The Preserve at Jordan Lake are
sold. As of March 31, 2002, there was $737,000 outstanding on the
line-of-credit.
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, 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"). Each of the Note guarantees covers the full
amount of the Notes and each of the Subsidiary Guarantors is 100% owned,
directly or indirectly, by the Company. 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 March 31, 2002, the Pledged Properties had an aggregate carrying value of
approximately $12.7 million. The Notes' indenture includes certain negative
covenants including restrictions on the incurrence of debt and liens and on
payments of cash dividends.
Supplemental financial information for Bluegreen Corporation, its combined
Non-Guarantor Subsidiaries and its combined Subsidiary Guarantors is presented
below:
64
CONDENSED CONSOLIDATING BALANCE SHEETS
(IN THOUSANDS) MARCH 31, 2002
---------------------------------------------------------------------
COMBINED
NON- COMBINED
BLUEGREEN GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
---------------------------------------------------------------------
ASSETS
Cash and cash equivalents ................. $ 18,611 $ 21,575 $ 8,529 $ -- $ 48,715
Contracts receivable, net ................. -- 605 21,213 -- 21,818
Intercompany receivable ................... 113,436 -- -- (113,436) --
Notes receivable, net ..................... 1,749 6,367 47,532 -- 55,648
Inventory, net ............................ -- 19,456 168,232 -- 187,688
Retained interests in notes receivable sold -- 38,560 -- -- 38,560
Investments in subsidiaries ............... 7,730 -- 3,230 (10,960) --
Property and equipment, net ............... 10,009 2,017 37,312 -- 49,338
Other assets .............................. 6,968 2,663 23,763 -- 33,394
--------- --------- --------- --------- ---------
Total assets ............................ $ 158,503 $ 91,243 $ 309,811 $(124,396) $ 435,161
========= ========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable, accrued liabilities
and other ............................... $ 11,554 $ 21,138 $ 16,643 $ -- $ 49,335
Intercompany payable ...................... -- 12,267 101,169 (113,436) --
Deferred income taxes ..................... (19,279) 23,173 23,925 -- 27,819
Lines-of-credit and notes payable ......... 3,476 5,649 45,765 -- 54,890
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 ....................... 146,122 62,227 187,502 (113,436) 282,415
Minority interest ......................... -- -- 3,090 3,090
Total shareholders' equity ................ 12,381 29,016 122,309 (14,050) 149,656
--------- --------- --------- --------- ---------
Total liabilities and shareholders'
equity ................................ $ 158,503 $ 91,243 $ 309,811 $(124,396) $ 435,161
========= ========= ========= ========= =========
65
APRIL 1, 2001
---------------------------------------------------------------------
COMBINED
NON- COMBINED
BLUEGREEN 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
Retained interests in notes receivable sold -- 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 ............................... 7,432 1,682 22,254 -- 31,368
--------- --------- --------- --------- ---------
Total assets ............................. $ 163,402 $ 64,426 $ 327,464 $(135,611) $ 419,681
========= ========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable, accrued liabilities
and other ................................ $ 9,806 $ 18,036 $ 14,888 $ -- $ 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 ....... 6,000 -- -- -- 6,000
payable to related parties
8.25% convertible subordinated
debentures ............................... 34,371 -- -- -- 34,371
--------- --------- --------- --------- ---------
Total liabilities ........................ 146,813 44,938 212,950 (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 $ 163,402 $ 64,426 $ 327,464 $(135,611) $ 419,681
========= ========= ========= ========= =========
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(IN THOUSANDS)
YEAR ENDED MARCH 31, 2002
---------------------------------------------------------------------
COMBINED
NON- COMBINED
BLUEGREEN GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
---------------------------------------------------------------------
REVENUES
Sales .................................. $ -- $ 21,604 $ 219,024 $ -- $ 240,628
Other resort and golf operations ....... -- 3,943 21,527 -- 25,470
Management fees ........................ 26,133 -- -- (26,133) --
Interest income ........................ 564 4,968 9,915 -- 15,447
Gain on sales of notes receivable ...... -- 6,280 -- -- 6,280
--------- --------- --------- --------- ---------
26,697 36,795 250,466 (26,133) 287,825
COSTS AND EXPENSES
Cost of sales .......................... -- 6,606 79,919 -- 86,525
Cost of other resort and golf operations -- 1,532 22,067 -- 23,599
Management fees ........................ -- 1,086 25,047 (26,133) --
Selling, general and administrative
expenses ............................. 25,686 12,234 102,269 -- 140,189
Interest expense ....................... 8,371 578 4,068 -- 13,017
Provision for loan losses .............. -- 242 4,609 -- 4,851
Other expense (income) ................. (239) 1,105 (704) -- 162
--------- --------- --------- --------- ---------
33,818 23,383 237,275 (26,133) 268,343
--------- --------- --------- --------- ---------
Income (loss) before income taxes and
minority interest .................... (7,121) 13,412 13,191 -- 19,482
Provision (benefit) for income taxes ... (2,742) 4,846 5,397 -- 7,501
Minority interest in income of
consolidated subsidiary .............. -- -- -- 249 249
--------- --------- --------- --------- ---------
Net income (loss) ...................... $ (4,379) $ 8,566 $ 7,794 $ (249) $ 11,732
========= ========= ========= ========= =========
66
YEAR ENDED APRIL 1, 2001
---------------------------------------------------------------------
COMBINED
NON- COMBINED
BLUEGREEN GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
---------------------------------------------------------------------
REVENUES
Sales .................................. $ 58 $ 11,107 $ 218,709 $ -- $ 229,874
Other resort and golf operations ....... -- 3,508 21,141 -- 24,649
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
--------- --------- --------- --------- ---------
26,599 22,051 251,634 (25,163) 275,121
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 7,138 113,369 -- 147,592
Interest expense ....................... 10,189 941 4,364 -- 15,494
Provision for loan losses .............. -- 69 4,818 -- 4,887
Other expense (income) ................. 44 885 (529) -- 400
--------- --------- --------- --------- ---------
37,318 13,880 246,084 (25,163) 272,119
--------- --------- --------- --------- ---------
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
========= ========= ========= ========= =========
YEAR ENDED APRIL 2, 2000
---------------------------------------------------------------------
COMBINED
NON- COMBINED
BLUEGREEN 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 (expense) ................. 454 (462) 200 -- 192
--------- --------- --------- --------- ---------
49,526 18,354 208,326 (22,066) 254,140
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 6,676 79,273 -- 128,491
Interest expense ....................... 8,843 2,053 2,945 -- 13,841
Provision for loan losses .............. -- 413 4,925 -- 5,338
--------- --------- --------- --------- ---------
58,669 14,832 192,140 (22,066) 243,575
--------- --------- --------- --------- ---------
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
========= ========= ========= ========= =========
67
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED MARCH 31, 2002
------------------------------------------------------
COMBINED
NON- COMBINED
BLUEGREEN GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS CONSOLIDATED
------------------------------------------------------
Operating activities:
Net cash provided by operating activities ........ $ 5,261 $ 3,107 $ 23,282 $ 31,650
-------- -------- -------- --------
Investing activities:
Cash received from retained interests in notes
receivable sold ................................. -- 7,856 -- 7,856
Investment in note receivable .................... (1,685) -- -- (1,685)
Principal payments received on investment in
note receivable ................................. 4,643 -- -- 4,643
Purchases of property and equipment .............. (2,722) (1,472) (8,746) (12,940)
Proceeds from sales of property and equipment .... 4 -- 40 44
-------- -------- -------- --------
Net cash (used) provided by investing activities ... 240 6,384 (8,706) (2,082)
-------- -------- -------- --------
Financing activities:
Proceeds from borrowings under line-of-credit
facilities and notes payable .................... 50,225 -- 9,645 59,870
Payments under line-of-credit facilities and notes
payable ......................................... (50,447) (3,876) (25,004) (79,327)
Payment of debt issuance costs ................... (114) (1,165) (289) (1,568)
Proceeds from exercise of employee and
director stock options ......................... 156 -- -- 156
-------- -------- -------- --------
Net cash used by financing activities .............. (180) (5,041) (15,648) (20,869)
-------- -------- -------- --------
Net increase (decrease) in cash and cash
equivalents ...................................... 5,321 4,450 (1,072) 8,699
Cash and cash equivalents at beginning of year ..... 13,290 17,125 9,601 40,016
-------- -------- -------- --------
Cash and cash equivalents at end of year ........... 18,611 21,575 8,529 48,715
Restricted cash and cash equivalents at end of year -- (20,199) (7,963) (28,162)
-------- -------- -------- --------
Unrestricted cash and cash equivalents at end of
year ............................................. $ 18,611 $ 1,376 $ 566 $ 20,553
======== ======== ======== ========
68
YEAR ENDED APRIL 1, 2001
---------------------------------------------------------------------
COMBINED
NON- COMBINED
BLUEGREEN GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
---------------------------------------------------------------------
Operating activities:
Net cash provided (used) by operating activities ... $(24,250) $ 2,312 $ 24,010 $ -- $ 2,072
-------- -------- -------- -------- --------
Investing activities:
Cash received from investments in securities ..... -- 6,890 -- -- 6,890
Investment in note receivable .................... (4,711) -- -- -- (4,711)
Principal payments received on investment in
note receivable ................................ 68 -- -- -- 68
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 (10,672) 3,230 (7,473)
-------- -------- -------- -------- --------
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 (used) provided by financing activities ... 629 (3,796) (13,712) (3,230) (20,109)
-------- -------- -------- -------- --------
Net (decrease) increase 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
======== ======== ======== ======== ========
69
YEAR ENDED APRIL 2, 2000
---------------------------------------------------------------------
COMBINED
NON- COMBINED
BLUEGREEN 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
======== ======== ======== ======== ========
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 March 31, 2002 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 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
70
consecutive quarters, the Company is required to make an offer to purchase 20%
of the outstanding Debentures at par, plus accrued interest.
12. Fair Value of Financial Instruments
In estimating the fair values of its financial instruments, the Company
used the following methods and assumptions:
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.
Retained interests in notes receivable sold: Retained interests in notes
receivable 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 Consolidated 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.
March 31, 2002 April 1, 2001
---------------------------------------------
(in thousands) Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
------ ---------- ------ ----------
Cash and cash equivalents ..................... $ 48,715 $ 48,715 $ 40,016 $ 40,016
Contracts receivable, net ..................... 21,818 21,818 18,507 18,507
Notes receivable, net ......................... 55,648 55,648 74,796 74,796
Retained interests in notes receivable sold ... 38,560 38,560 19,898 19,898
Lines-of-credit, notes payable, and receivable-
backed notes payable ......................... 54,890 54,890 67,620 67,620
10.50% senior secured notes payable ........... 110,000 85,800 110,000 59,400
8.00% convertible subordinated notes payable to
related parties .............................. 6,000 6,084 6,000 6,000
8.25% convertible subordinated debentures ..... 34,371 25,091 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
71
aggregate of $35 million and $15 million during the years ended March 28, 1999
and April 2, 2000, respectively. Legal and other stock issuance costs totaled
approximately $774,000.
Treasury Stock
During the year ended April 2, 2000, the Company repurchased approximately
1.6 million common shares at an aggregate cost of $7.8 million under a
repurchase plan approved by the Company's Board of Directors during the year
ended March 28, 1999 and expanded during the year ended April 2, 2000. During
the year ended April 1, 2001, the Company repurchased approximately 198,000
common shares at an aggregate cost of $572,000 under the expanded repurchase
plan. No common stock was repurchased during the year ended March 31, 2002.
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.
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 29, 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
Granted ................. -- 50 $2.29
Forfeited ............... (81) (654) $2.29-$9.50
Exercised ............... (78) (78) $1.25-$1.46
----- -----
Balance at March 31, 2002 . 3,470 2,011 $1.46-$9.50 1,457
===== =====
Outside Directors Plans
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
Granted ................. -- 120 $2.11
Forfeited ............... (2) (30) $2.88
Exercised ............... (36) (36) $1.46
----- -----
Balance at March 31, 2002 . 865 772 $1.77-$9.31 562
===== =====
The weighted-average fair values of options granted during the year ended
March 31, 2002 were: Exercise price equal to fair value at grant date: employees
$1.34, directors - $1.24
72
The weighted-average exercise prices and weighted-average remaining
contractual lives of the Company's outstanding stock options at March 31, 2002
(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:
$1.46 24 24 (a) $1.46 $1.46
$2.29-$3.13 546 395 6 $2.87 $2.97
$3.58-$4.88 698 595 5 $4.28 $4.19
$8.50-$9.50 743 443 7 $9.19 $9.19
----- -----
2,011 1,457
===== =====
(a) - Weighted-average remaining contractual life is less than one year.
Weighted-
Average Weighted-
Remaining Weighted- Average
Number Number of Contractual Life Average Exercise Price
of Options Vested Options (in years) Exercise Price (vested only)
---------- -------------- ---------- -------------- -------------
Directors:
$1.77-$2.11 156 36 8 $2.03 $1.77
$2.82-$3.80 406 356 5 $3.21 $3.26
$5.94 120 80 7 $5.94 $5.94
$9.31 90 90 6 $9.31 $9.31
----- -----
772 562
===== =====
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 the years ended March 31, 2002,
April 1, 2001 and April 2, 2000, respectively: risk free investment rates of
2.0%, 5.5% and 5.7%, dividend yields of 0%, 0% and 0%, a volatility factor of
the expected market price of the Company's common stock of .698, .532 and .448
and a weighted average life of the options of 5.0 years, 5.0 years and 5.3
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 31, April 1, April 2,
2002 2001 2000
---- ---- ----
Pro forma net income ........ $11,790 $ 1,873 $5,934
======= ======= ======
Pro forma earnings per share:
Basic ..................... $ .49 $ .08 $ .25
Diluted ................... $ .46 .08 .25
73
Common Stock Reserved For Future Issuance
As of March 31, 2002, 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.............. 3,470
Upon exercise of outside director stock options...... 865
------
10,036
======
14. Commitments and Contingencies
At March 31, 2002, the estimated cost to complete development work in
subdivisions or resorts from which lots or Timeshare Interests have been sold
totaled $46.6 million. Development is estimated to be completed within the next
three fiscal years and thereafter as follows: 2003--$33.1 million, 2004--$4.1
million, 2005--$2.3 million, Thereafter--$7.1 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.
Rent expense for the years ended March 31, 2002, April 1, 2001 and April 2,
2000, totaled approximately $4.4 million, $4.2 million and $3.5 million,
respectively. Lease commitments under these noncancelable operating leases for
each of the five fiscal years subsequent to March 31, 2002, and thereafter are
as follows (in thousands):
2003....................................... $2,973
2004....................................... 2,177
2005....................................... 1,464
2006....................................... 215
2007....................................... 45
Thereafter................................. 34
------
Total future minimum lease payments $6,908
======
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 a proceeding 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, 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. 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.
74
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 March 31,
2002, aggregate interest was approximately $1.5 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 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.
One of the former RDI stockholders is currently employed by the Company in a key
management position. The Company has notified the former RDI 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 31, April 1, April 2,
2002 2001 2000
---- ---- ----
Federal:
Current ...... $ (394) $(4,645) $ 3,719
Deferred ..... 7,254 5,481 (303)
------- ------- -------
6,860 836 3,416
State and other:
Current ...... -- -- 696
Deferred ..... 641 320 (57)
------- ------- -------
641 320 639
------- ------- -------
Total .......... $ 7,501 $ 1,156 $ 4,055
======= ======= =======
The reasons for the difference between the provision for income taxes and
the amount that results from applying the federal statutory tax rate in the
years ended March 31, 2002, April 1, 2001 and April 2, 2000 to income before
provision for income taxes and minority interest are as follows (in thousands):
Year Ended
-------------------------------
March 31, April 1, April 2,
2002 2001 2000
---- ---- ----
Income tax expense at statutory rate ............ $6,819 $1,051 $3,698
Effect of state taxes, net of federal tax benefit 682 105 357
------ ------ ------
$7,501 $1,156 $4,055
====== ====== ======
75
At March 31, 2002 and April 1, 2001, deferred income taxes consist of the
following components (in thousands):
March 31, April 1,
2002 2001
---- ----
Deferred federal and state tax liabilities (assets):
Installment sales treatment of notes ................................. $ 53,115 $ 32,565
Deferred federal and state loss carryforwards/AMT credits ............ (29,588) (16,078)
Tax over book depreciation ........................................... 1,721 1,384
Tax over book carrying value of notes receivable ..................... 2,863 1,305
Other ................................................................ 188 153
-------- --------
Deferred income taxes .................................................. $ 28,299 $ 19,329
======== ========
The Company has available net operating loss carryforwards of $62.1 million,
which expire in 2021 and 2022, and alternative minimum tax credit carryforwards
of $6.5 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. During
the year ended March 31, 2002, the Plan was amended when the Company agreed to
make a minimum matching contribution to the Plan of $226,000, which was
equivalent to 50% of the first 3% of each participating employee's contribution
to the Plan. During the years ended April 1, 2001 and April 2, 2002, employer
contributions to the Plan were at the sole discretion of the Company and no such
contributions were made.
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 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 (see Note 1).
76
Required disclosures for the Company's business segments are as follows (in
thousands):
Residential
Land and
As of and for the year ended March 31, 2002 Resorts Golf Totals
------- ---- ------
Sales .................................... $144,226 $ 96,402 $240,628
Other resort and golf operations revenues 23,149 2,321 25,470
Depreciation expense ..................... 2,532 1,077 3,609
Field operating profit ................... 19,729 15,415 35,144
Inventory ................................ 86,288 101,400 187,688
As of and for the year ended April 1, 2001
Sales .................................... $140,975 $ 88,899 $229,874
Other resort and golf operations revenues 22,762 1,887 24,649
Depreciation expense ..................... 1,986 873 2,859
Field operating profit ................... 9,724 12,991 22,715
Inventory ................................ 97,012 96,622 193,634
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
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 31, April 1, April 2,
2002 2001 2000
---------------------------------
Field operating profit for reportable segments $ 35,144 $ 22,715 $ 29,997
Interest income ............................... 15,447 17,317 15,652
Gain on sales of notes receivable ............. 6,280 3,281 2,063
Other income (expense) ........................ (162) (400) 192
Corporate general and administrative expenses . (19,359) (19,530) (18,160)
Interest expense .............................. (13,017) (15,494) (13,841)
Provision for loan losses ..................... (4,851) (4,887) (5,338)
-------- -------- --------
Consolidated income before provision for income
taxes and minority interest ................. $ 19,482 $ 3,002 $ 10,565
======== ======== ========
Depreciation expense for reportable segments reconciled to consolidated
depreciation expense (in thousands):
Year Ended
-------------------------------
March 31, April 1, April 2,
2002 2001 2000
-------------------------------
Depreciation expense for reportable segments .. $3,609 $2,859 $2,134
Depreciation expense for corporate fixed assets 1,671 1,404 1,072
------ ------ ------
Consolidated depreciation expense ............. $5,280 $4,263 $3,206
====== ====== ======
77
Assets for reportable segments reconciled to consolidated assets (in
thousands):
March 31, April 1, April 2,
2002 2001 2000
------------------------------
Inventory for reportable segments ......... $187,688 $193,634 $197,093
Assets not allocated to reportable segments 247,473 226,047 216,890
-------- -------- --------
Total assets .............................. $435,161 $419,681 $413,983
======== ======== ========
Geographic Information
Sales by geographic area are as follows (in thousands):
Year Ended
------------------------------
March 31, April 1, April 2,
2002 2001 2000
------------------------------
United States ..... $230,179 $219,885 $203,899
Aruba ............. 10,441 9,964 10,575
Canada ............ 8 25 14
-------- -------- --------
Consolidated totals $240,628 $229,874 $214,488
======== ======== ========
Inventory by geographic area is as follows (in thousands):
March 31, April 1,
2002 2001
-------------------
United States ..... $177,575 $181,676
Aruba ............. 10,107 11,951
Canada ............ 6 7
-------- --------
Consolidated totals $187,688 $193,634
======== ========
18. Quarterly Financial Information (Unaudited)
Summarized quarterly financial information for the years ended March 31,
2002 and April 1, 2001 is presented below (in thousands, except for per share
information).
Three Months Ended
---------------------------------------------------
July 1, September 30, December 30, March 31,
2001 2001 2001 2002
---- ---- ---- ----
Sales ........................... $60,183 $69,235 $55,285 $55,925
Gross profit .................... 40,112 45,157 35,301 33,533
Net income ...................... 4,135 4,577 1,972 1,048
Earnings per common share:
Basic ......................... 0.17 0.19 0.08 0.04
Diluted ....................... 0.16 0.17 0.08 0.04
Three Months Ended
---------------------------------------------------
July 2, October 1, December 31, April 1,
2000 2000 2000 2001
---- ---- ---- ----
Sales ........................... $63,165 $65,600 $45,485 $55,624
Gross profit .................... 41,282 44,705 29,435 35,657
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)
78
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 March 31, 2002 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 March 31, 2002. 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 March 31, 2002 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 March 31, 2002, in conformity with accounting principles generally
accepted in the United States.
ERNST & YOUNG LLP
West Palm Beach, Florida
May 28, 2002
79
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 March 31, 2002 and April 1, 2001
Consolidated Statements of Income for each of the three years in the period
ended March 31, 2002
Consolidated Statements of Shareholders' Equity for each of the three years
in the period ended March 31, 2002
Consolidated Statements of Cash Flows for each of the three years in the
period ended March 31, 2002
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
80
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 83 through 88 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.
81
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 25, 2002 By: /S/ GEORGE F. DONOVAN
------------------------------------------------------
George F. Donovan,
President and Chief Executive Officer
Date: June 25, 2002 By: /S/ JOHN F. CHISTE
------------------------------------------------------
John F. Chiste,
Senior Vice President, Treasurer and Chief Financial
Officer
(Principal Financial Officer)
Date: June 25, 2002 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 25th day of June, 2002.
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
- ------------------------------ (Principal Financial Officer)
John F. Chiste
/S/ ANTHONY M. PULEO Vice President and Chief Accounting Officer
- ------------------------------ (Principal Accounting Officer)
Anthony M. Puleo
/S/ JOHN E. ABDO Director
- ------------------------------
John E. Abdo
/S/ RALPH A. FOOTE Director
- ------------------------------
Ralph A. Foote
/S/ JOHN LAGUARDIA Director
- ------------------------------
John Laguardia
/S/ ALAN B. LEVAN Director
- ------------------------------
Alan B. Levan
/S/ J. LARRY RUTHERFORD Director
- ------------------------------
J. Larry Rutherford
82
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).
4.9 - Second Supplemental Indenture dated as of December 31, 2000 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
4.10 - Third Supplemental Indenture dated as of October 31, 2001 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
4.11 - Fourth Supplemental Indenture dated as of December 31, 2001 to the
Indenture Dated as of April 1, 1998 among the Registrant, certain of
its subsidiaries and SunTrust Bank (formerly SunTrust Bank, Central
Florida, National Association), as Notes Trustee, relating to the
Company's $110 million aggregate principal amount of 10 1/2% Senior
Secured Notes due 2008 (incorporated by reference to exhibit of same
designation to Quarterly Report on Form 10-Q dated December 30, 2001).
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).
83
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.
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).
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).
84
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).
10.111 - Amended and Restated Sale and Servicing Agreement dated April 17,
2002, among the Registrant, Bluegreen Receivables Finance Corporation
V, BXG Receivables Note Trust 2001-A, Concord Servicing Corporation,
Vacation Trust, Inc. and U.S. Bank Trust National Association.
10.112 - Amended and Restated Note Purchase Agreement dated April 17, 2002,
among the Registrant, Bluegreen Receivables Finance Corporation V, BXG
Receivables Note Trust 2001-A, the Purchasers Parties Hereto and ING
Capital LLC.
10.113 - Amended and Restated Indenture dated April 17, 2002, between BXG
Receivables Note Trust 2001-A and U.S. Bank Trust National
Association.
10.114 - Amended and Restate Trust Agreement dated April 17, 2002, by and among
Bluegreen Receivables Finance Corporation V, GSS Holdings, Inc. and
Wilmington Trust Company.
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).
10.124 - Employment Agreement between George F. Donovan and the Company dated
December 19, 2001.
10.125 - Employment Agreement between John F. Chiste and the Company dated
December 27, 2001.
10.126 - Employment Agreement between Daniel C. Koscher and the Company dated
May 22, 2002.
10.128 - 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 10.129 to Registration Statement
on Form S-4, File No. 333-50717).
10.129 - 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 10.130 to Quarterly
Report on Form 10-Q dated October 3, 1999).
10.130 - 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 of same designation to
Registration Statement on Form S-4, File No. 333-50717).
10.131 - 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).
85
10.132 - Amendment Number Two to Loan and Security Agreement dated as of
November 9, 2001, by and between the Registrant and Foothill Capital
Corporation (incorporated by reference to exhibit 10.133 to Quarterly
Report on Form 10-Q dated December 31, 2001).
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).
10.137 - Fourth Amendment to Amended and Restated Loan and Security Agreement
dated as of October 16, 2001, among the Registrant, Bluegreen
Vacations Unlimited, Inc. and Heller Financial, Inc. (incorporated by
reference to exhibit of same designation to Quarterly Report on Form
10-Q dated September 30, 2001).
10.138 - Fifth Amendment to Amended and Restated Loan and Security Agreement
dated as of February 16, 2002, among the Registrant, Bluegreen
Vacations Unlimited, Inc. and Heller Financial, Inc.
10.139 - 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).
10.140 - 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).
10.141 - 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).
10.142 - 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).
10.143 - Building Loan Agreement dated July 31, 2001, between Jordan Lake
Preserve Corporation and IndyMac Bank F.S.B. d.b.a. Construction
Lending Corporation of America (incorporated by reference to exhibit
10.142 to Quarterly Report on Form 10-Q dated September 30, 2001).
86
10.144 - Revolving Line of Credit Promissory Note dated July 31, 2001, between
Jordan Lake Preserve Corporation and IndyMac Bank F.S.B. d.b.a.
Construction Lending Corporation of America (incorporated by reference
to exhibit 10.143 to Quarterly Report on Form 10-Q dated September 30,
2001).
10.145 - 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).
10.153 - Amended and Restated Loan Agreement dated December 31, 2001 by and
among the Registrant, certain subsidiaries of the Registrant and First
Union National Bank, for the $12.5 million, unsecured, revolving
line-of-credit due December 31, 2002 (incorporated by reference to
exhibit of same designation to Quarterly Report on Form 10-Q dated
December 30, 2001).
10.154 - Amended and Restated Promissory Note dated December 31, 2001 by and
among the Registrant, certain subsidiaries of the Registrant and First
Union National Bank, for the $12.5 million, unsecured, revolving
line-of-credit due December 31, 2002 (incorporated by reference to
exhibit of same designation to Quarterly Report on Form 10-Q dated
December 30, 2001).
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).
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).
87
21.1 - List of Subsidiaries.
23.1 - Consent of Ernst & Young LLP.
88