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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

|X| - Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the Quarterly period ended March 31, 2004

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 Identification No.)
incorporation or organization)

4960 Conference Way North, Suite 100, Boca Raton, Florida 33431
(Address of principal executive offices) (Zip Code)

(561) 912-8000
(Registrant's telephone number, including area code)


- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

Indicate by check mark whether the registrant is an accelerated filer (as
defined in 12b-2 of the Exchange Act). Yes |_| No |X|

Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

As of May 13, 2004, there were 28,814,065 shares of Common Stock, $.01 par
value per share, issued, 2,755,300 treasury shares and 26,058,765 shares
outstanding.



BLUEGREEN CORPORATION
Index to Quarterly Report on Form 10-Q



Part I - Financial Information

Item 1. Financial Statements (Unaudited) Page
----

Condensed Consolidated Balance Sheets at December 31, 2003 and March 31, 2004 .................. 3

Condensed Consolidated Statements of Income - Three Months Ended March 31, 2003 and 2004 ....... 4

Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2003 and 2004 ... 5

Notes to Condensed Consolidated Financial Statements ........................................... 7

Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition .......... 16

Item 3. Quantitative and Qualitative Disclosures About Market Risk ..................................... 28

Item 4. Controls and Procedures ........................................................................ 29

Part II - Other Information

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities ............... 30

Item 6. Exhibits and Reports on Form 8-K ............................................................... 30

Signatures ................................................................................................ 30


Note: The terms "Bluegreen" and "Bluegreen Vacation Club" are registered in the
U.S. Patent and Trademark office by Bluegreen Corporation.


2


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

BLUEGREEN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)



December 31, March 31,
2003 2004
--------- ---------

(Note) (Unaudited)
ASSETS
Cash and cash equivalents (including restricted cash of approximately $33,540
and $40,193 at December 31, 2003 and March 31, 2004, respectively) ........... $ 73,031 $ 79,490
Contracts receivable, net ....................................................... 25,522 41,155
Notes receivable, net ........................................................... 94,194 80,731
Prepaid expenses ................................................................ 9,925 10,033
Other assets .................................................................... 19,711 18,551
Inventory, net .................................................................. 219,890 212,016
Retained interests in notes receivable sold ..................................... 60,975 66,549
Property and equipment, net ..................................................... 63,430 65,874
Intangible assets ............................................................... 3,728 3,535
--------- ---------
Total assets .......................................................... $ 570,406 $ 577,934
========= =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable ................................................................ $ 6,983 $ 8,825
Accrued liabilities and other ................................................... 52,175 60,419
Deferred income ................................................................. 18,646 24,352
Deferred income taxes ........................................................... 43,924 46,640
Receivable-backed notes payable ................................................. 24,921 25,960
Lines-of-credit and notes payable ............................................... 87,858 68,178
10.50% senior secured notes payable ............................................. 110,000 110,000
8.25% convertible subordinated debentures ....................................... 34,371 31,126
--------- ---------
Total liabilities ............................................................ 378,878 375,500

Minority interest ............................................................... 4,648 5,477

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; 27,702 and 28,535
shares issued at December 31, 2003 and March 31, 2004, respectively .......... 277 285
Additional paid-in capital ...................................................... 124,931 130,644
Treasury stock, 2,755 common shares at both December 31, 2003 and March 31,
2004, at cost ................................................................ (12,885) (12,885)
Accumulated other comprehensive income, net of income taxes ..................... 1,830 1,486
Retained earnings ............................................................... 72,727 77,427
--------- ---------
Total shareholders' equity ................................................. 186,880 196,957
--------- ---------
Total liabilities and shareholders' equity ............................ $ 570,406 $ 577,934
========= =========


Note: The condensed consolidated balance sheet at December 31, 2003 has been
derived from the audited consolidated financial statements at that date but does
not include all of the information and footnotes required by accounting
principles generally accepted in the United States for complete financial
statements.

See accompanying notes to condensed consolidated financial statements.


3


BLUEGREEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)



Three Months Ended
March 31, March 31,
2003 2004
-------- --------

Revenues:
Sales of real estate ........................................... $ 61,782 $ 86,191
Other resort and communities operations revenue ................ 13,212 13,625
Interest income ................................................ 3,755 5,021
Gain on sales of notes receivable .............................. 1,561 2,380
Other income ................................................... 572 --
-------- --------
80,882 107,217
Costs and expenses:
Cost of real estate sales ...................................... 19,060 29,240
Cost of other resort and communities operations ................ 14,147 13,760
Selling, general and administrative expenses ................... 39,230 50,675
Interest expense ............................................... 3,004 3,999
Provision for loan losses ...................................... 1,526 870
Other expense .................................................. -- 201
-------- --------
76,967 98,745
-------- --------
Income before minority interest and provision for income taxes .... 3,915 8,472
Minority interest in income of consolidated subsidiary ............ 457 829
-------- --------
Income before provision for income taxes .......................... 3,458 7,643
Provision for income taxes ........................................ 1,331 2,943
-------- --------
Net income ........................................................ $ 2,127 $ 4,700
======== ========

Income per common share:
Basic ......................................................... $ 0.09 $ 0.19
======== ========
Diluted ....................................................... $ 0.09 $ 0.17
======== ========

Weighted average number of common and common equivalent shares:
Basic ......................................................... 24,588 25,190
======== ========
Diluted ....................................................... 24,687 30,319
======== ========


See accompanying notes to condensed consolidated financial statements.


4


BLUEGREEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)



Three Months Ended
March 31, March 31,
2003 2004
-------- --------

Operating activities:
Net income ................................................................ $ 2,127 $ 4,700
Adjustments to reconcile net income to net cash provided by
operating activities:
Minority interest in income of consolidated subsidiary .............. 457 829
Depreciation and amortization ....................................... 3,374 4,000
Gain on sale of notes receivable .................................... (1,561) (2,380)
(Gain) loss on sale of property and equipment ....................... (218) 24
Provision for loan losses ........................................... 1,526 870
Provision for deferred income taxes ................................. 1,331 2,943
Interest accretion on retained interests in notes receivable sold ... (1,314) (1,838)
Proceeds from sales of notes receivable ............................. 24,427 33,582
Proceeds from borrowings collateralized by notes receivable ......... 9,258 3,591
Payments on borrowings collateralized by notes receivable ........... (433) (2,581)
Change in operating assets and liabilities:
Contracts receivable ................................................... (2,935) (15,633)
Notes receivable ....................................................... (27,671) (28,407)
Inventory .............................................................. (2,304) 9,797
Other assets ........................................................... (756) 113
Accounts payable, accrued liabilities and other ........................ 12,875 16,219
-------- --------
Net cash provided by operating activities .................................... 18,183 25,829
-------- --------
Investing activities:
Purchases of property and equipment ....................................... (1,974) (4,593)
Sales of property and equipment ........................................... 138 --
Cash received from retained interests in notes receivable sold ............ 1,146 3,682
-------- --------
Net cash used by investing activities ........................................ (690) (911)
-------- --------
Financing activities:
Payments under line-of-credit facilities and other notes payable .......... (10,015) (19,804)
Payment of debt issuance costs ............................................ (1,046) (694)
Proceeds from exercise of stock options ................................... -- 2,039
-------- --------
Net cash used by financing activities ........................................ (11,061) (18,459)
-------- --------
Net increase in cash and cash equivalents .................................... 6,432 6,459
Cash and cash equivalents at beginning of period ............................. 46,905 73,031
-------- --------
Cash and cash equivalents at end of period ................................... 53,337 79,490
Restricted cash and cash equivalents at end of period ........................ (27,127) (40,193)
-------- --------
Unrestricted cash and cash equivalents at end of period ...................... $ 26,210 $ 39,297
======== ========


See accompanying notes to condensed consolidated financial statements.


5


BLUEGREEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
(In thousands)
(Unaudited)



Three Months Ended
March 31, March 31,
2003 2004
------- ------

Supplemental schedule of non-cash operating, investing
and financing activities:

Inventory acquired through financing ............................. $14,271 $ 75
======= ======
Inventory acquired through foreclosure or deedback in lieu of
foreclosure ................................................... $ 1,939 $1,848
======= ======
Income tax benefit from stock options exercised .................. $ -- $ 560
======= ======
Property and equipment acquired through financing ................ $ 463 $ 49
======= ======
Retained interests in notes receivable sold ...................... $ 5,698 $7,978
======= ======
Net change in unrealized losses in retained interests in notes
receivable sold ............................................... $ 109 $ 560
======= ======
Conversion of 8.25% convertible subordinated debentures .......... $ -- $3,245
======= ======


See accompanying notes to condensed consolidated financial statements.


6


BLUEGREEN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2004
(Unaudited)

1. Organization and Significant Accounting Policies

We have prepared the accompanying unaudited condensed consolidated
financial statements in accordance with accounting principles generally accepted
in the United States for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements.

The financial information furnished herein reflects all adjustments
consisting of normal recurring accruals that, in our opinion, are necessary for
a fair presentation of the results for the interim periods. The results of
operations for the three months ended March 31, 2004 are not necessarily
indicative of the results to be expected for the year ending December 31, 2004.
For further information, refer to our audited consolidated financial statements
for the year ended December 31, 2003, which are included in our Annual Report on
Form 10-K, filed with the Securities and Exchange Commission on March 29, 2004.

Organization

We are a leading provider of vacation and residential lifestyle choices
through our resorts and residential communities businesses. Our resorts business
("Bluegreen(R) Resorts") acquires, develops and markets vacation ownership
interests ("VOIs") in resorts generally located in popular, high-volume,
"drive-to" vacation destinations. VOIs in any of our resorts entitle the buyer
to an annual allotment of "points" in perpetuity (supported by an underlying
deeded vacation ownership interest being held in trust for the buyer) in our
Bluegreen Vacation Club(R). Members in our Bluegreen Vacation Club may use their
points to stay in any of our participating resorts or for other vacation
options, including cruises and stays at approximately 3,700 resorts offered by
third-party, worldwide vacation ownership exchange networks. We are currently
marketing and selling VOIs in 17 resorts located in the United States and Aruba
as well as at four off-site sales offices located in the United States. Our
residential communities business ("Bluegreen Communities(TM)") acquires,
develops and subdivides property and markets residential land homesites, the
majority of which are sold directly to retail customers who seek to build a home
in a high quality residential setting, in some cases on properties featuring a
golf course and other related amenities. During the three months ended March 31,
2004, sales generated by Bluegreen Resorts comprised approximately 62% of our
total sales of real estate while sales generated by Bluegreen Communities
comprised approximately 38% of our total sales of real estate. Our other resort
and communities operations revenues consist primarily of mini-vacation package
sales, vacation ownership tour sales, resort property management services,
resort title services, resort amenity operations, rental brokerage services,
realty operations and daily-fee golf course operations. We also generate
significant interest income by providing financing to individual purchasers of
VOIs and, to a lesser extent, homesites sold by Bluegreen Communities.

Principles of Consolidation

Our condensed consolidated financial statements include the accounts of
all of our wholly-owned subsidiaries and entities in which we hold a controlling
financial interest. The only non-wholly owned subsidiary that we consolidate is
Bluegreen/Big Cedar Vacations LLC (the "Joint Venture"), as we hold a 51% equity
interest in the Joint Venture, have an active role as the day-to-day manager of
the Joint Venture's activities and have majority voting control of the Joint
Venture's management committee. We have eliminated all significant intercompany
balances and transactions.

Use of Estimates

Accounting principles generally accepted in the United States require us
to make estimates and assumptions that affect the amounts reported in our
condensed consolidated financial statements and accompanying notes. Actual
results could differ from those estimates.

Earnings Per Common Share

Basic earnings per common share is computed by dividing net income by the
weighted average number of common shares outstanding. Diluted earnings per
common share is computed in the same manner as basic earnings per share, but
also gives effect to all dilutive stock options using the treasury stock method
and includes an adjustment, if dilutive, to both


7


net income and shares outstanding as if our 8.25% convertible subordinated
debentures were converted into common stock at the beginning of the periods
presented. We have excluded approximately 1.6 million anti-dilutive stock
options from our computation of earnings per common share for the three months
ended March 31, 2003. There were no anti-dilutive stock options for the three
months ended March 31, 2004.

The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share data):



Three Months Ended
March 31, March 31,
2003 2004
----------------------

Basic earnings per share - numerator:
Net income ........................................... $ 2,127 $ 4,700
====================

Diluted earnings per share - numerator:
Net income - basic ................................... $ 2,127 $ 4,700
Effect of dilutive securities, net of income taxes ... -- 318
--------------------
Net income - diluted ................................ $ 2,127 $ 5,018
====================

Denominator:
Denominator for basic earnings per share -
weighted-average shares ........................... 24,588 25,190
Effect of dilutive securities:
Stock options ..................................... 99 1,022
Convertible securities ............................ -- 4,107
--------------------
Dilutive potential common shares ......................... 99 5,129
--------------------
Denominator for diluted earnings per share - adjusted
weighted-average shares and assumed conversions .... 24,687 30,319
====================
Basic earnings per common share .......................... $ 0.09 $ 0.19
====================
Diluted earnings per common share ........................ $ 0.09 $ 0.17
====================


Retained Interest in Notes Receivable Sold

When we sell our notes receivable either pursuant to our vacation
ownership receivables purchase facilities (more fully described in Note 3), term
securitizations or, in the case of land mortgages receivable, private-placement
Real Estate Mortgage Investment Conduits ("REMICs"), we evaluate whether or not
such transfers should be accounted for as a sale pursuant to Statement of
Financial Accounting Standards ("SFAS") No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" and related
interpretations. The evaluation of sale treatment under SFAS No. 140 involves
legal assessments of the transactions, which include determining whether the
transferred assets have been isolated from us (i.e. put presumptively beyond our
reach and our creditors, even in bankruptcy or other receivership), determining
whether each transferee has the right to pledge or exchange the assets it
received, and ensuring that we do not maintain effective control over the
transferred assets through either an agreement that (1) both entitles and
obligates us to repurchase or redeem the assets before their maturity or (2)
provides us with the ability to unilaterally cause the holder to return the
assets (other than through a cleanup call).

In connection with such transactions, we retain subordinated tranches,
rights to excess interest spread and servicing rights, all of which are retained
interests in the notes receivable sold. Gain or loss on the 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.

We consider our retained interests in notes receivable sold as
available-for-sale investments and, accordingly, carry them 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 our
retained interests in notes receivable sold are included in our shareholders'
equity, net of income taxes. Declines in fair value that are determined to be
other than temporary are charged to operations.

We measure the fair value of the retained interests in the notes
receivable sold initially and periodically based on the present value of future
expected cash flows estimated using our best estimates of the key assumptions -
prepayment rates, loss severity rates, default rates and discount rates
commensurate with the risks involved. We revalue our retained interests in notes
receivable sold on a quarterly basis.

Interest on the retained interests in notes receivable sold is accreted
using the effective yield method.


8


Stock-Based Compensation

SFAS No. 123, "Accounting for Stock-Based Compensation", as amended by
SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure", encourages, but does not require companies to record compensation
cost for employee stock options at fair value. We have elected to continue to
account for our employee 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 our
employee stock options is measured as the excess, if any, of the quoted market
price of our stock at the date of the grant over the exercise price of the
option.

Pro forma information regarding net income and earnings per share as if we
had accounted for the grants of stock options to our employees under the fair
value method of SFAS No. 123 is presented below. There were no stock options
granted to our employees or non-employee directors during the three months ended
March 31, 2004. The fair value for stock options granted during the three months
ended March 31, 2003 was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions: risk free
investment rate of 2.8%; dividend yield of 0%; a volatility factor of the
expected market price of our common stock of 0.733; and a weighted average life
of the options of 5.0 years.

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 our stock
option grants. Our pro forma information is as follows (in thousands, except per
share data).



Three Months Ended
March 31, 2003 March 31, 2004
-------------- --------------

Net income, as reported ........................ $ 2,127 $ 4,700
Pro forma stock-based employee compensation
cost, net of income taxes ................... (125) (64)
--------- ---------
Pro forma net income ........................... $ 2,002 $ 4,636
========= =========

Earnings per share, as reported:
Basic ........................................ $ .09 $ .19
Diluted ...................................... $ .09 $ .17
Pro forma earnings per share:
Basic ........................................ $ .08 $ .18
Diluted ...................................... $ .08 $ .16


Other Comprehensive Income

Other comprehensive income on our condensed consolidated balance sheets is
comprised of net unrealized gains on retained interests in notes receivable
sold, which are held as available-for-sale investments. The following table
discloses the components of our comprehensive income for the periods presented
(in thousands):



Three Months Ended
March 31, 2003 March 31, 2004
-------------- --------------

Net income ....................................... $ 2,127 $ 4,700
Net unrealized losses on retained interests in
notes receivable sold, net of income taxes .... (67) (344)
------- -------
Total comprehensive income ....................... $ 2,060 $ 4,356
======= =======


Recent Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board (the "FASB")
issued Interpretation No. 46, "Consolidation of Variable Interest Entities - an
interpretation of ARB No. 51" ("FIN 46"). FIN 46 addresses the consolidation of
variable interest entities. FIN 46 expands the criteria for consideration in
determining whether a variable interest entity should be consolidated by a
business entity, and requires existing unconsolidated variable interest entities
(which include, but are not limited to, certain special purpose entities) to be
consolidated by their primary beneficiaries if the entities do not effectively
disperse risks among parties involved. This interpretation's consolidation
provisions applied immediately to variable interests in variable interest
entities created after January 31, 2003. Pursuant to a subsequent FASB revision
in December 2003, variable interest entities that were created before February
1, 2003 and were not reported as consolidated in


9


accordance with FIN 46 previously are required to be reported as consolidated
first interim or annual period ended after March 15, 2004. The adoption of FIN
46 did not have a material impact on our financial position or results of
operations as of and for the three months ended March 31, 2004.

In February 2003, the FASB released for public comment an exposure draft
of an American Institute of Certified Public Accountants ("AICPA") Statement of
Position ("SOP"), "Accounting for Real Estate Time-Sharing Transactions" and a
proposed FASB Statement, "Accounting for Real Estate Time-Sharing
Transactions--an amendment of FASB Statements No. 66 and No. 67." The proposed
SOP and related FASB Statement, if cleared by the FASB, would have provided
accounting guidance for vacation ownership interest transactions, including: a
framework for sales and revenue recognition, the accounting for cost of sales
and inventory, credit losses and changes in estimates. In January 2004, the FASB
recommended that the proposed SOP not include any revenue recognition guidance
and that the Accounting Standards Executive Committee of the AICPA meet with the
FASB staff to identify the topics to be retained and addressed by the proposed
SOP. Based on the foregoing, we have not yet completely evaluated the impact of
the proposed SOP on our financial position or results of operations, however, we
do not believe that the proposed SOP will have a material impact on us as it is
currently proposed.

2. Acquisition

On October 2, 2002, Great Vacation Destinations, Inc. ("GVD"), one of our
wholly-owned subsidiaries, with no prior operations, acquired substantially all
of the assets and assumed certain liabilities of TakeMeOnVacation, LLC, RVM
Promotions, LLC and RVM Vacations, LLC (collectively, "TMOV") for $2.8 million
in cash, $500,000 of which was paid on March 31, 2003. In addition, if certain
earnings targets are met, GVD agreed to pay additional consideration up to a
maximum of $12.5 million through December 31, 2007. Should any contingent
consideration be paid, we will record that amount as goodwill. Based on GVD's
results of operations to date, we have not accrued any contingent consideration
as of March 31, 2004.

3. Sales of Notes Receivable

In June 2001, we executed agreements for a vacation ownership receivables
purchase facility (the "Purchase Facility") with Credit Suisse First Boston
("CSFB") acting as the initial purchaser. In April 2002, ING Capital, LLC
("ING"), an affiliate of ING Bank NV, 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 from CSFB. On
October 8, 2003, Resort Finance, LLC ("RFL"), acquired and assumed ING's rights,
obligations and commitments as the initial purchaser in the Purchase Facility by
purchasing the outstanding principal balance under the facility from ING (CSFB,
ING and RFL are also individually referred to as the "Initial Purchaser" during
their applicable terms in this role for the Purchase Facility). In connection
with its assumption of the Purchase Facility and subsequent amendments, RFL
increased the size of the Purchase Facility to $150.0 million and extended the
term of the Purchase Facility on a revolving basis through September 30, 2004.

The Purchase Facility utilizes an owner's trust structure, pursuant to
which we sell receivables to Bluegreen Receivables Finance Corporation V, one of
our wholly-owned, special purpose finance subsidiaries (the "Finance
Subsidiary"), and the Finance Subsidiary sells the receivables to an owners'
trust (a qualified special purpose entity) without recourse to us or the Finance
Subsidiary except for breaches of certain representations and warranties at the
time of sale. We did not enter into any guarantees in connection with the
Purchase Facility. 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 of 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 is deferred until such time as the
Initial Purchaser has received a specified return and all servicing, custodial,
agent and similar fees and expenses have been paid. The Initial Purchaser earned
a return equal to the London Interbank Offered Rate ("LIBOR") plus 1.00% through
April 15, 2003, LIBOR plus 1.25% through October 7, 2003 and LIBOR plus an
additional return ranging from 2.00% to 3.25% (based on the amount outstanding
under the Purchase Facility) from October 8, 2003 through September 30, 2004,
subject to the use of alternate return rates in certain circumstances. In
addition, the Initial Purchaser received or will receive a 0.25% annual facility
fee through April 15, 2003 and from October 8, 2003 through September 30, 2004.
The Purchase Facility also provides for the sale of land notes receivable, under
modified terms.

RFL'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 us of the representations or warranties in the
Purchase Facility agreements, (2) a failure by us to perform the covenants in
the Purchase Facility agreements, including, without limitation, a failure by us
to pay principal or interest due to RFL, (3) the commencement of a bankruptcy
proceeding or the like against us, (4) a material adverse change to us since
December 31, 2001, (5) the amount borrowed under the Purchase Facility exceeding
the borrowing base, (6) significant


10


delinquencies or defaults on the receivables sold, (7) a payment default by us
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
our tangible net worth or (b) causes, or permits the holder of indebtedness to
cause, an amount in excess of 5% of our tangible net worth to become due, (9)
our tangible net worth not equaling at least $110.0 million plus 50% of net
income and 100% of the proceeds from new equity financing following the first
closing under the Purchase Facility, (10) our ratio of debt to tangible net
worth exceeding 6 to 1, or (11) our failure to perform our servicing
obligations.

We act 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.

During the three months ended March 31, 2004, we sold $39.5 million of
aggregate principal balance of notes receivable under the Purchase Facility for
a cumulative purchase price of $33.6 million. In connection with these sales, we
recognized an aggregate gain of $2.4 million and recorded retained interests in
notes receivable sold of $8.0 million and servicing assets totaling $407,000.
The following assumptions were used to measure the initial fair value of the
retained interests in notes receivable sold during the three months ended March
31, 2004: Prepayment rates ranging from 17% to 14% per annum as the portfolios
mature; loss severity rate of 45%; default rates ranging from 7% to 1% per annum
as the portfolios mature; and a discount rate of 14%.

Based on sales of receivables under the Purchase Facility and receipts
from customers of the principal balance of the receivables sold, the remaining
availability under the Purchase Facility was $25.4 million at March 31, 2004.

4. Note Offering

On April 1, 1998, we consummated a private placement offering (the
"Offering") of $110 million in aggregate principal amount of 10.5% senior
secured notes due April 1, 2008 (the "Notes"). None of the assets of Bluegreen
Corporation secure its obligations under the Notes, and the Notes are
effectively subordinated to our secured indebtedness to any third party to the
extent of assets serving as security therefore. The Notes are unconditionally
guaranteed, jointly and severally, by each of our 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 cover
the full amount of the Notes and each of the Subsidiary Guarantors is 100%
owned, directly or indirectly, by us. Supplemental financial information for
Bluegreen Corporation, its combined Non-Guarantor Subsidiaries and its combined
Subsidiary Guarantors is presented below:


11


CONDENSED CONSOLIDATING BALANCE SHEETS
(In thousands)



December 31, 2003
---------------------------------------------------------------------------

Combined Combined
Bluegreen Non-Guarantor Subsidiary
Corporation Subsidiaries Guarantors Eliminations Consolidated
----------- ------------ ---------- ------------ ------------

ASSETS
Cash and cash equivalents .......................... $ 29,872 $ 28,100 $ 15,059 $ -- $ 73,031
Contracts receivable, net .......................... -- 1,075 24,447 -- 25,522
Intercompany receivable ............................ 100,191 -- -- (100,191) --
Notes receivable, net .............................. 847 19,232 74,115 -- 94,194
Other assets ....................................... 6,229 3,372 23,763 -- 33,364
Inventory, net ..................................... -- 22,225 197,665 -- 219,890
Retained interests in notes receivable sold ........ -- 60,975 -- -- 60,975
Investments in subsidiaries ........................ 185,162 -- 3,230 (188,392) --
Property and equipment, net ........................ 11,936 1,900 49,594 -- 63,430
--------- --------- --------- --------- ---------
Total assets ................................ $ 334,237 $ 136,879 $ 387,873 $(288,583) $ 570,406
========= ========= ========= ========= =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable, accrued liabilities and other .. $ 13,266 $ 29,258 $ 35,280 $ -- $ 77,804
Intercompany payable ............................. -- 1,127 99,064 (100,191) --
Deferred income taxes ............................ (19,954) 29,314 34,564 -- 43,924
Lines-of-credit and notes payable ................ 5,026 22,759 84,994 -- 112,779
10.50% senior secured notes payable .............. 110,000 -- -- -- 110,000
8.25% convertible subordinated debentures ........ 34,371 -- -- -- 34,371
--------- --------- --------- --------- ---------
Total liabilities ........................... 142,709 82,458 253,902 (100,191) 378,878
Minority interest ................................ -- -- -- 4,648 4,648
Total shareholders' equity ....................... 191,528 54,421 133,971 (193,040) 186,880
--------- --------- --------- --------- ---------
Total liabilities and shareholders' equity .. $ 334,237 $ 136,879 $ 387,873 $(288,583) $ 570,406
========= ========= ========= ========= =========


March 31, 2004
(Unaudited)
---------------------------------------------------------------------------

Combined Combined
Bluegreen Non-Guarantor Subsidiary
Corporation Subsidiaries Guarantors Eliminations Consolidated
----------- ------------ ---------- ------------ ------------

ASSETS
Cash and cash equivalents .......................... $ 30,861 $ 33,754 $ 14,875 $ -- $ 79,490
Contracts receivable, net .......................... -- 1,734 39,421 -- 41,155
Intercompany receivable ............................ 92,695 -- -- (92,695) --
Notes receivable, net .............................. 1,058 19,696 59,977 -- 80,731
Other assets ....................................... 4,684 3,802 23,633 -- 32,119
Inventory, net ..................................... -- 22,199 189,817 -- 212,016
Retained interests in notes receivable sold ........ -- 66,549 -- -- 66,549
Investments in subsidiaries ........................ 196,944 -- 3,230 (200,174) --
Property and equipment, net ........................ 12,641 2,080 51,153 -- 65,874
--------- --------- --------- --------- ---------
Total assets ................................ $ 338,883 $ 149,814 $ 382,106 $(292,869) $ 577,934
========= ========= ========= ========= =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable, accrued liabilities and other .. $ 14,565 $ 32,325 $ 46,706 $ -- $ 93,596
Intercompany payable ............................. 5,127 87,568 (92,695) --
Deferred income taxes ............................ (24,083) 31,343 39,380 -- 46,640
Lines-of-credit and notes payable ................ 4,841 22,509 66,788 -- 94,138
10.50% senior secured notes payable .............. 110,000 -- -- -- 110,000
8.25% convertible subordinated debentures ........ 31,126 -- -- -- 31,126
--------- --------- --------- --------- ---------
Total liabilities ........................... 136,449 91,304 240,442 (92,695) 375,500
Minority interest ................................ -- -- -- 5,477 5,477
Total shareholders' equity ....................... 202,434 58,510 141,664 (205,651) 196,957
--------- --------- --------- --------- ---------
Total liabilities and shareholders' equity .. $ 338,883 $ 149,814 $ 382,106 $(292,869) $ 577,934
========= ========= ========= ========= =========



12


CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)



Three Months Ended March 31, 2003
---------------------------------------------------------------------------

Combined Combined
Bluegreen Non-Guarantor Subsidiary
Corporation Subsidiaries Guarantors Eliminations Consolidated
----------- ------------ ---------- ------------ ------------

REVENUES
Sales of real estate ............................. $ -- $ 6,427 $ 55,355 $ -- $ 61,782
Other resort and communities operations revenue .. -- 1,145 12,067 -- 13,212
Management fees .................................. 7,141 -- -- (7,141) --
Equity income from subsidiaries .................. 3,835 -- -- (3,835) --
Interest income .................................. 73 1,808 1,874 -- 3,755
Gain on sales of notes receivable ................ -- 1,561 -- -- 1,561
Other income ..................................... 83 21 468 -- 572
--------- --------- --------- --------- ---------
11,132 10,962 69,764 (10,976) 80,882

COSTS AND EXPENSES
Cost of real estate sales ........................ -- 1,848 17,212 -- 19,060
Cost of other resort and communities operations .. -- 421 13,726 -- 14,147
Management fees .................................. -- 211 6,930 (7,141) --
Selling, general and administrative expenses ..... 7,702 3,871 27,657 -- 39,230
Interest expense ................................. 2,372 88 544 -- 3,004
Provision for loan losses ........................ -- 342 1,184 -- 1,526
--------- --------- --------- --------- ---------
10,074 6,781 67,253 (7,141) 76,967
--------- --------- --------- --------- ---------
Income before minority interest and provision
(benefit) for income taxes .................... 1,058 4,181 2,511 (3,835) 3,915
Minority interest in income of consolidated
subsidiary .................................... -- -- -- 457 457
--------- --------- --------- --------- ---------
Income before provision (benefit) for income
taxes ........................................ 1,058 4,181 2,511 (4,292) 3,458
Provision (benefit) for income taxes ............. (1,069) 1,117 1,283 -- 1,331
--------- --------- --------- --------- ---------
Net income ....................................... $ 2,127 $ 3,064 $ 1,228 $ (4,292) $ 2,127
========= ========= ========= ========= =========


Three Months Ended March 31, 2004
---------------------------------------------------------------------------

Combined Combined
Bluegreen Non-Guarantor Subsidiary
Corporation Subsidiaries Guarantors Eliminations Consolidated
----------- ------------ ---------- ------------ ------------

REVENUES
Sales of real estate ............................. $ -- $ 8,307 $ 77,884 $ -- $ 86,191
Other resort and communities operations revenue .. -- 2,049 11,576 -- 13,625
Management fees .................................. 198 -- -- (198) --
Equity income from subsidiaries .................. 11,297 -- -- (11,297) --
Interest income .................................. 97 2,687 2,237 -- 5,021
Gain on sales of notes receivable ................ -- 2,380 -- -- 2,380
--------- --------- --------- --------- ---------
11,592 15,423 91,697 (11,495) 107,217
--------- --------- --------- --------- ---------
COSTS AND EXPENSES
Cost of real estate sales ........................ -- 1,787 27,453 -- 29,240
Cost of other resort and communities operations .. -- 813 12,947 -- 13,760
Management fees .................................. -- 198 -- (198) --
Selling, general and administrative expenses ..... 8,137 4,941 37,597 -- 50,675
Interest expense ................................. 2,555 389 1,055 -- 3,999
Provision for loan losses ........................ -- 274 596 -- 870
Other expense (income) ........................... 329 332 (460) -- 201
--------- --------- --------- --------- ---------
11,021 8,734 79,188 (198) 98,745
--------- --------- --------- --------- ---------
Income before minority interest and provision
(benefit) for income taxes .................... 571 6,689 12,509 (11,297) 8,472
Minority interest in income of consolidated
subsidiary .................................... -- -- -- 829 829
--------- --------- --------- --------- ---------
Income before provision (benefit) for income
taxes ........................................ 571 6,689 12,509 (12,126) 7,643
Provision (benefit) for income taxes ............. (4,129) 2,256 4,816 -- 2,943
--------- --------- --------- --------- ---------
Net income (loss) ................................ $ 4,700 $ 4,433 $ 7,693 $ (12,126) $ 4,700
========= ========= ========= ========= =========



13


CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)



Three Months Ended March 31, 2003
---------------------------------------------------------
Combined Combined
Bluegreen Non-Guarantor Subsidiary
Corporation Subsidiaries Guarantors Consolidated
----------- ------------ ---------- ------------

Operating activities:
Net cash provided by operating activities .......................... $ 1,794 $ 4,915 $ 11,474 $ 18,183
-------- -------- -------- --------
Investing activities:
Purchases of property and equipment .............................. (216) (59) (1,699) (1,974)
Sales of property and equipment .................................. -- -- 138 138
Cash received from retained interests in notes receivable sold ... -- 1,146 -- 1,146
-------- -------- -------- --------
Net cash provided (used) by investing activities ................... (216) 1,087 (1,561) (690)
-------- -------- -------- --------
Financing activities:
Payments under line-of-credit facilities and notes payable ....... (1,547) -- (8,468) (10,015)
Payment of debt issuance costs ................................... (51) (850) (145) (1,046)
-------- -------- -------- --------
Net cash used by financing activities .............................. (1,598) (850) (8,613) (11,061)
-------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents ............... (20) 5,152 1,300 6,432
Cash and cash equivalents at beginning of period ................... 22,373 17,951 6,581 46,905
-------- -------- -------- --------
Cash and cash equivalents at end of period ......................... 22,353 23,103 7,881 53,337
Restricted cash and cash equivalents at end of period .............. (173) (21,455) (5,499) (27,127)
-------- -------- -------- --------
Unrestricted cash and cash equivalents at end of period ............ $ 22,180 $ 1,648 $ 2,382 $ 26,210
======== ======== ======== ========


Three Months Ended March 31, 2004
---------------------------------------------------------
Combined Combined
Bluegreen Non-Guarantor Subsidiary
Corporation Subsidiaries Guarantors Consolidated
----------- ------------ ---------- ------------

Operating activities:
Net cash provided by operating activities .......................... $ 1,068 $ 4,695 $ 20,066 $ 25,829
-------- -------- -------- --------
Investing activities:
Cash received from retained interests in notes receivable sold ... -- 3,682 -- 3,682
Purchases of property and equipment .............................. (1,393) (288) (2,912) (4,593)
-------- -------- -------- --------
Net cash provided (used) by investing activities ................... (1,393) 3,394 (2,912) (911)
-------- -------- -------- --------
Financing activities:
Payments under line-of-credit facilities and notes payable ....... (185) (2,244) (17,375) (19,804)
Payment of debt issuance costs ................................... (540) (191) 37 (694)
Proceeds from exercise of stock options .......................... 2,039 -- -- 2,039
-------- -------- -------- --------
Net cash (used) provided by financing activities ................... 1,314 (2,435) (17,338) (18,459)
-------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents ............... 989 5,654 (184) 6,459
Cash and cash equivalents at beginning of period ................... 29,872 28,100 15,059 73,031
-------- -------- -------- --------
Cash and cash equivalents at end of period ......................... 30,861 33,754 14,875 79,490
Restricted cash and cash equivalents at end of period .............. (173) (27,983) (12,037) (40,193)
-------- -------- -------- --------
Unrestricted cash and cash equivalents at end of period ............ $ 30,688 $ 5,771 $ 2,838 $ 39,297
======== ======== ======== ========


5. Convertible Subordinated Debentures

During the three months ended March 31, 2004, $3.2 million of our 8.25%
Convertible Subordinated Debentures (the "Debentures") were voluntarily
converted by the holders of the Debentures at a conversion price of $8.24 per
share. Such conversions resulted in the issuance of 393,783 shares of our common
stock.

6. Contingencies

On August 21, 2000, we received a notice of Field Audit Action (the "First
Notice") from the State of Wisconsin Department of Revenue (the "DOR") alleging
that two corporations purchased by us had failed to collect and remit sales and
use taxes totaling $1.9 million to the State of Wisconsin prior to the purchase
during the period from January 1, 1994 through September 30, 1997. On May 24,
2003, we received a second Notice of Field Audit Action (the "Second Notice")
from DOR alleging that the two subsidiaries failed to collect and remit sales
and use taxes to the State of Wisconsin during the period from April 1, 1998
through March 31, 2002 totaling $1.4 million. The majority of the assessment is
based on the subsidiaries not charging sales tax to purchasers of VOIs at our
Christmas Mountain Village(TM) resort during the period from January 1, 1994
through December 31, 1999, when the Wisconsin statute requiring sales tax on
certain VOI sales was repealed. As of March 31, 2004, aggregate interest and
penalties under the First Notice and the Second Notice total approximately $2.9
million in addition to the $3.3 million claimed due. We filed petitions for
redetermination with respect to the First Notice on October 19, 2000, and with
respect to the Second Notice on July 9, 2003. If the petitions are unsuccessful,
we intend to vigorously appeal the assessments.

We acquired the subsidiaries that were the subject of the notices in
connection with the acquisition of RDI Group, Inc. ("RDI") on September 30,
1997. Under the RDI purchase agreement, we believe we have the right to set off
payments owed by us to RDI's former stockholders pursuant to a $1.0 million
outstanding note payable balance and to make a claim


14


against such stockholders for $500,000 previously paid to them for any breach of
representations and warranties. One of the former RDI stockholders is currently
employed by us as the Senior Vice President of Sales for Bluegreen Resorts. We
have filed an action against the RDI stockholders for damages arising out of the
Wisconsin assessments based on this right of indemnification and offset under
the RDI purchase agreement and related promissory note. The RDI stockholders
have filed a counterclaim against us and a third-party complaint against us and
one of our wholly-owned subsidiaries alleging that we and our subsidiary have
failed to make the payments required under the terms of the promissory note.

As the statute requiring the assessment of sales tax on sales of certain
VOIs in Wisconsin was repealed in December 1999 and based on the applicable
statutes of limitations, we believe our exposure in these matters is limited to
that discussed above. We have been engaging in active discussions with the DOR
in an effort to settle all claims related to the First Notice and the Second
Notice. There is no assurance that we will be successful in negotiating a
favorable settlement with the DOR or avoid incurring significant legal costs to
defend these matters. Based on our position in our petitions for
redetermination, our position that we have indemnification rights and a right of
offset against the former RDI stockholders, our intention to defend this matter
vigorously and other factors, we do not believe that the possible sales tax
assessment pursuant to the First Notice and the Second Notice will have a
material adverse impact on our results of operations or financial position, and
therefore we have not accrued any amounts relating to this matter. Should our
attempts to reach a favorable settlement with the DOR regarding this matter fail
there is no assurance that the outcome of this matter will be favorable and that
in such case the impact may have a material adverse impact on our results of
operations and financial position.

7. Business Segments

We have two reportable business segments. Bluegreen Resorts develops,
markets and sells VOIs in our resorts, through the Bluegreen Vacation Club, and
provides resort management services to resort property owners associations.
Bluegreen Communities 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 homesites. Required disclosures for our
business segments are as follows (in thousands):



Bluegreen Bluegreen
Resorts Communities Totals
------- ----------- ------

As of and for the three months ended March 31, 2003
Sales of real estate .................................. $ 44,562 $ 17,220 $ 61,782
Other resort and communities operations revenue ....... 11,933 1,279 13,212
Depreciation expense .................................. 795 398 1,193
Field operating profit ................................ 7,227 1,192 8,419
Inventory, net ........................................ 75,979 115,666 191,645

As of and for the three months ended March 31, 2004
Sales of real estate .................................. $ 53,147 $ 33,044 $ 86,191
Other resort and communities operations revenue ....... 12,278 1,347 13,625
Depreciation expense .................................. 1,102 458 1,560
Field operating profit ................................ 8,067 5,219 13,286
Inventory, net ........................................ 104,029 107,987 212,016


Reconciliations to Consolidated Amounts

Field operating profit for our reportable segments reconciled to our
consolidated income before provision for income taxes and minority interest is
as follows (in thousands):



Three Months Ended
March 31, 2003 March 31, 2004
-------------- --------------

Field operating profit for reportable segments ..... $ 8,419 $ 13,286
Interest income .................................... 3,755 5,021
Gain on sales of notes receivable .................. 1,561 2,380
Other income (expense) ............................. 572 (201)
Corporate general and administrative expenses ...... (5,862) (7,145)
Interest expense ................................... (3,004) (3,999)
Provision for loan losses .......................... (1,526) (870)
-------- --------
Consolidated income before minority interest and
provision for income taxes ...................... $ 3,915 $ 8,472
======== ========



15


Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.

Cautionary Statement Regarding Forward-Looking Statements and Risk Factors

We desire to take advantage of the "safe harbor" provisions of the Private
Securities Reform Act of 1995 (the "Act") and are making the following
statements pursuant to the Act to do so. Certain statements in this Quarterly
Report and our other filings with the SEC constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act, and Section
21E of the Securities Exchange Act. You may identify these statements 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 our products,
remaining life of project sales, our expected future sales, financial position,
operating results, liquidity and capital resources, our business strategy,
financial plan and expected capital requirements as well as trends in our
operations or results are forward-looking statements. These forward-looking
statements are subject to known and unknown risks and uncertainties, many of
which are beyond our control, including changes in economic conditions,
generally, in areas where we operate, or in the travel and tourism industry,
increases in interest rates, changes in regulations, results of claims or
litigation pending or brought against us in the futureand other factors
discussed throughout our SEC filings, all of which could cause our actual
results, performance or achievements, or industry trends, to differ materially
from any future results, performance, or achievements or trends expressed or
implied herein. Given these uncertainties, investors are cautioned not to place
undue reliance on these forward-looking statements and no assurance can be given
that the plans, estimates and expectations reflected herein will be achieved.
Factors that could adversely affect our future results can also be considered
general "risk factors" with respect to our business, whether or not they relate
to a forward-looking statement. We wish to caution you that the important
factors set forth below and elsewhere in this report in some cases have
affected, and in the future could affect, our actual results and could cause our
actual consolidated results to differ materially from those expressed in any
forward-looking statements. Please also see our Annual Report on Form 10-K for
the year ended December 31, 2003 for further discussion of the factors set forth
below.

o Our continued liquidity depends on our ability to sell or borrow
against our notes receivable.

o We depend on additional funding to finance our operations.

o Our success depends on our ability to market our products
efficiently.

o We would incur substantial losses if the customers we finance
default on their obligations to pay the balance of the purchase
price and our results of operations and financial condition could be
adversely impacted if our estimates concerning our notes receivable
are incorrect.

o We are subject to the risks of the real estate market.

o We may not successfully execute our growth strategy.

o We may face a variety of risks when we expand our operations.

o Excessive claims for development-related defects could adversely
affect our financial condition and operating results.

o We may face additional risks as we expand into new markets.

o The limited resale market for VOIs could adversely affect our
business.

o Extensive federal, state and local laws and regulations affect the
way we conduct our business.

o Environmental liabilities, including claims with respect to mold or
hazardous or toxic substances, could have a material adverse impact
on our business.

o We could incur costs to comply with laws governing accessibility of
facilities by disabled persons.

Executive Overview

We operate through two business segments. Bluegreen Resorts develops, markets
and sells VOIs in our resorts, through the Bluegreen Vacation Club, and provides
resort management services to resort property owners associations. Bluegreen


16


Communities 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 homesites.

We have historically experienced and expect to continue to experience seasonal
fluctuations in our gross revenues and net earnings. This seasonality may cause
significant fluctuations in our quarterly operating results, with the majority
of our gross revenues and net earnings historically occurring in the quarters
ending in June and September each year. Other material fluctuations in operating
results may occur due to the timing of development and the requirement that we
use 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. We expect that we will continue to invest in projects that will
require substantial development (with significant capital requirements), and
hence that our results of operations may fluctuate significantly between
quarterly and annual periods as a result of the required use of the
percentage-of-completion method of accounting.

We do not believe that inflation and changing prices currently have had or will
have for the foreseeable future a material impact on our revenues and results of
operations, other than to the extent that we continually review and have
historically increased the sales prices of our VOIs annually and that
construction costs are expected to increase. There is no assurance that we will
be able to continue to increase our sales prices or that increased construction
costs will not have a material adverse impact on our gross profit. To the extent
inflationary trends affect interest rates, a portion of our debt service costs
may be adversely affected.

We recognize revenue on homesite and VOI 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 we have completed substantially all of our
obligations with respect to any development of the real estate sold. In cases
where all development has not been completed, we recognize income in accordance
with the percentage-of-completion method of accounting.

Costs associated with the acquisition and development of vacation ownership
resorts and residential communities, 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.

A portion of our revenues historically has been and is expected to continue to
be comprised of gains on sales of notes receivable. The gains are recorded on
our consolidated statement of income and the related retained interests in the
notes receivable sold are recorded on our consolidated balance sheet at the time
of sale. The amount of gains recognized and the fair value of the retained
interests recorded are based in part on management's best estimates of future
prepayment, default rates, loss severity rates, discount rates and other
considerations in light of then-current conditions. If actual prepayments with
respect to loans occur more quickly than we 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 operations. 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 the cash flow from the retained interests in
notes receivable sold would decrease. Also, to the extent the portfolio of
receivables sold fails to satisfy specified performance criteria (as may occur
due to, for example, an increase in default rates or loan loss severity) or
certain other events occur, the funds received from obligors must be distributed
on an accelerated basis to investors. If the accelerated payment formula were to
become applicable, the cash flow to us from the retained interests in notes
receivable sold would be reduced until the outside investors were paid or the
regular payment formula was resumed. If these situations were to occur on a
material basis, it could cause a decline in the fair value of the retained
interests and a charge to earnings currently. There is no assurance that the
carrying value of our retained interests in notes receivable sold will be fully
realized or that future loan sales will be consummated or, if consummated,
result in gains. See "Vacation Ownership Receivables Purchase Facility - An Off
Balance Sheet Arrangement," below.

Critical Accounting Policies and Estimates

Our discussion and analysis of results of operations and financial condition are
based upon our 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 revenue recognition under the
percentage-of-completion method of accounting; our 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, golf courses, 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


17


making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ materially
from these estimates under different assumptions and conditions. If actual
results significantly differ from management's estimates, our results of
operations and financial condition could be materially adversely impacted. For a
more detailed discussion of these critical accounting policies see "Critical
Accounting Policies and Estimates" appearing in our Annual Report on Form 10-K
for the year ended December 31, 2003.

Results of Operations

We review financial information, allocate resources and manage our business as
two segments, Bluegreen Resorts and Bluegreen Communities. The information
reviewed is based on internal reports and excludes general and administrative
expenses attributable to corporate overhead. The information provided is based
on a management approach and is used by us for the purpose of tracking trends
and changes in results. It does not reflect the actual economic costs,
contributions or results of operations of the segments as stand alone
businesses. If a different basis of presentation or allocation were utilized,
the relative contributions of the segments might differ but the relative trends,
in our view, would likely not be materially impacted. The table below sets forth
net revenue and income from operations by segment.



Bluegreen Bluegreen
Resorts Communities Total
------- ----------- -----
Percentage Percentage Percentage
Amount of Sales Amount of Sales Amount of Sales
------ -------- ------ -------- ------ --------
(dollars in thousands)

Three Months Ended March 31, 2003
Sales of real estate ................ $ 44,562 100% $ 17,220 100% $ 61,782 100%
Cost of real estate sales ........... (9,640) (22) (9,420) (55) (19,060) (31)
-------- -------- --------
Gross profit ........................ 34,922 78 7,800 45 42,722 69
Other resort and communities
operations revenues ............. 11,933 27 1,279 7 13,212 21
Cost of other resort and
communities operations .......... (12,573) (28) (1,574) (9) (14,147) (23)
Selling and marketing
expenses ........................ (23,496) (53) (3,920) (23) (27,416) (44)
Field general and administrative
expenses (1) .................... (3,559) (8) (2,393) (14) (5,952) (10)
-------- -------- --------
Field Operating Profit .............. $ 7,227 16% $ 1,192 7% $ 8,419 14%
======== ======== ========

Three Months Ended March 31, 2004
Sales of real estate ................ $ 53,147 100% $ 33,044 100% $ 86,191 100%
Cost of real estate sales ........... (10,859) (20) (18,381) (56) (29,240) (34)
-------- -------- --------
Gross profit ........................ 42,288 80 14,663 44 56,951 66
Other resort and communities
operations revenues ............. 12,278 23 1,347 4 13,625 16
Cost of other resort and
communities operations .......... (12,289) (23) (1,471) (4) (13,760) (16)
Selling and marketing
expenses ........................ (29,535) (56) (6,798) (21) (36,333) (42)
Field general and Administrative
expenses (1) ...................... (4,675) (9) (2,522) (8) (7,197) (8)
-------- -------- --------
Field Operating Profit .............. $ 8,067 15% $ 5,219 16% $ 13,286 15%
======== ======== ========


- ----------

(1) General and administrative expenses attributable to corporate overhead
have been excluded from the tables. Corporate general and administrative
expenses totaled $5.9 million for the three months ended March 31, 2003
and $7.1 million for the three months ended March 31, 2004. See "Corporate
General and Administrative Expenses," below, for further discussion.


18


Sales and Field Operations. Consolidated sales increased 40% from $61.8 million
for the three months ended March 31, 2003 to $86.2 million for the three months
ended March 31, 2004.

Bluegreen Resorts. During the three months ended March 31, 2003 and March 31,
2004, sales of VOIs contributed $44.6 million (72%) and $53.1 million (62%) of
our total consolidated sales, respectively.

The following table sets forth certain information for sales of VOIs for the
periods indicated, before giving effect to the percentage-of-completion method
of accounting.

Three Months Ended
---------------------
March 31, March 31,
2003 2004
------ ------

Number of VOI sale transactions .......... 4,761 5,953
Average sales price per transaction ...... $9,360 $9,718
Gross margin ............................. 78% 80%

The $8.6 million or 19% increase in Bluegreen Resorts' sales during the three
months ended March 31, 2004, as compared to the three months ended March 31,
2003, was due primarily to the opening of three new sales sites: an off-site
sales office in Harbor Springs, Michigan (opened in March 2003 on the campus of
the Boyne Highlands resort, pursuant to a marketing agreement with Boyne USA
Resorts), Grande Villas at World Golf Village(R) (opened in November 2003) and
The Fountains(TM) in Orlando, Florida (opened in December 2003). These new sales
sites generated a combined $5.1 million of incremental sales during the three
months ended March 31, 2004. The remainder of the sales increase was due to
same-store sales increases primarily as a result of a greater focus on marketing
to our growing Bluegreen Vacation Club owner base and to sales prospects
referred to us by existing Bluegreen Vacation Club owners and other prospects.
Sales to owner and referral prospects increased by 65% during the three months
ended March 31, 2004 as compared to the three months ended March 31, 2003. This,
combined with a 26% overall increase in the number of sales prospects seen by
Bluegreen Resorts from approximately 39,000 prospects during the three months
ended March 31, 2003 to approximately 48,000 prospects during the three months
ended March 31, 2004 and an increase in the sale-to-tour conversion ratio from
13% to 14% during these periods, respectively, significantly contributed to the
overall sales increase during the three months ended March 31, 2004 as compared
to the three months ended March 31, 2003. The increase in the average sales
price per transaction reflected in the above table also contributed to the
increase in sales.

Gross margin percentages vary between periods based on the relative costs of the
specific VOIs sold in each respective period.

Selling and marketing expenses for Bluegreen Resorts increased as a percentage
of sales from 53% during the three months ended March 31, 2003 to 56% during the
three months ended March 31, 2004. A greater percentage of our sales to
first-time customers were generated from telemarketing programs, which are among
our higher cost programs, during the three months ended March 31, 2004 as
compared to the three months ended March 31, 2003. In addition, during the three
months ended March 31, 2004, we did not use a special sales program to encourage
our existing owners to upgrade their VOIs as we did during the three months
ended March 31, 2003. As this special sales program was marketed to existing
owners, it had a relatively low marketing cost, thus lowering selling and
marketing expenses as a percentage of sales during the three months ended March
31, 2003. We believe that selling and marketing expense as a percentage of sales
is an important indicator of the performance of Bluegreen Resorts and our
performance as a whole. No assurance can be given that selling and marketing
expenses will not increase as a percentage of sales in future periods.

Field general and administrative expenses for Bluegreen Resorts increased $1.1
million or 31% during the three months ended March 31, 2004 as compared to the
three months ended March 31, 2003. The majority of this increase was due to the
expansion of our regional management team in connection with the growth of
Bluegreen Resorts since March 31, 2003. The remaining increase was due to the
addition of the Harbor Springs (Boyne Highlands), Grande Villas at World Golf
Village(R) and The Fountains sales offices.

As of December 31, 2003, Bluegreen Resorts had no sales or Field Operating
Profit deferred under percentage-of-completion accounting. As of March 31, 2004,
Bluegreen Resorts had $3.1 million of sales and $1.1 million of Field Operating
Profit deferred under percentage-of-completion accounting.

Bluegreen Communities. During the three months ended March 31, 2003 and March
31, 2004, Bluegreen Communities generated $17.2 million (28%) and $33.0 million
(38%) of our total consolidated sales, respectively.


19


The table below sets forth the number of homesites sold by Bluegreen Communities
and the average sales price per homesite for the periods indicated, before
giving effect to the percentage-of-completion method of accounting and excluding
sales of bulk parcels.

Three Months Ended
------------------
March 31, March 31,
2003 2004
------- -------

Number of homesites sold ............. 417 716
Average sales price per homesite ..... $44,895 $64,812
Gross margin ......................... 45% 44%

Bluegreen Communities' sales increased $15.8 million or 92% during the three
months ended March 31, 2004 as compared to the three months ended March 31,
2003. In March 2003, Bluegreen Communities acquired 1,142 acres in Braselton,
Georgia for the development of a new golf course community known as the
Traditions of Braselton(TM). This new project, which began sales in April 2003,
recognized sales of approximately $4.3 million during the three months ended
March 31, 2004. In November 2003, we acquired and commenced sales at our
approximately 500-acre golf course community in Brunswick, Georgia known as
Sanctuary Cove at St. Andrews Sound. Sanctuary Cove recognized sales of
approximately $5.8 million during the three months ended March 31, 2004. Both of
these projects have an aggregate $16.6 million of sales deferred under the
percentage-of-completion method of accounting. The remaining increase was
generated at several of our existing communities and sales generated by three
new projects in Texas, specifically i) Quail Springs Ranch near the Dallas/Fort
Worth area, ii) Mountain Springs Ranch in the Hill Country region and iii) Terra
Medina Ranch also in the Hill Country.

Bluegreen Communities intends to primarily focus its resources on developing new
golf course communities and continuing to support its successful projects in
Texas. During the three months ended March 31, 2004, our golf communities and
communities in Texas comprised approximately 53% and 46%, respectively, of
Bluegreen Communities' sales.

Bluegreen Communities' gross margin remained relatively constant during the
three months ended March 31, 2003 and March 31, 2004. Variations in cost
structures and the market pricing of projects available for sale as well as the
opening of phases of projects which include premium homesites (e.g., water
frontage, preferred views, larger acreage homesites, etc.) will impact the gross
margin of Bluegreen Communities from period to period. These factors, as well as
the impact of percentage-of-completion accounting, will cause variations in
gross margin between periods, although the gross margin of Bluegreen Communities
has historically been between 44% and 51% of sales and is expected to
approximate these percentages for the foreseeable future.

Selling and marketing expenses for Bluegreen Communities decreased as a
percentage of sales from 23% to 21% during the three months ended March 31, 2003
and March 31, 2004, respectively, due to relatively low selling and marketing
expenses as a percentage of sales at our new golf course communities in Georgia
as compared to our other projects.

As of December 31, 2003, Bluegreen Communities had $18.9 million of sales and
$8.1 million of Field Operating Profit deferred under percentage-of-completion
accounting. As of March 31, 2004, Bluegreen Communities had $29.8 million of
sales and $12.5 million of Field Operating Profit deferred under
percentage-of-completion accounting.

Corporate General and Administrative Expenses. Our corporate general and
administrative expenses consist primarily of expenses associated with
administering the various support functions at our corporate headquarters,
including accounting, human resources, information technology, mergers and
acquisitions, mortgage servicing, treasury and legal. Such expenses were $5.9
million and $7.1 million for the months ended March 31, 2003 and March 31, 2004,
respectively. As a percentage of sales of real estate, corporate general and
administrative expenses were 10% and 8% during the three months ended March 31,
2003 and March 31, 2004, respectively.

The $1.3 million or 22% increase in corporate general and administrative
expenses during the three months ended March 31, 2004 as compared to the three
months ended March 31, 2003 was primarily due to an increased number of
personnel and other expenses incurred in our information technology and
acquisition and development areas to help support our growth. Also, banking
charges and credit card discounts were higher in connection with the increase in
sales during the three months ended March 31, 2004 as compared to the three
months ended March 31, 2003. In addition, outside legal expenses were higher
during the three months ended March 31, 2004 as compared to March 31, 2003.

For a discussion of field selling, general and administrative expenses, please
see "Sales and Field Operations," above.


20


Interest Income. Interest income is earned from our notes receivable, retained
interests in notes receivable sold (including REMIC transactions) and cash and
cash equivalents. Interest income was $3.8 million for the three months ended
March 31, 2003 and $5.0 million for the three months ended March 31, 2004.

The $1.3 million or 34% increase in interest income during the three months
ended March 31, 2004 was due to higher interest income earned from our notes
receivable commensurate with higher average aggregate notes receivable balances
during the period as compared to the three months ended March 31, 2003.

Gain on Sales of Notes Receivable. During the three months ended March 31, 2003
and March 31, 2004, we recognized gains on the sale of notes receivable totaling
$1.6 million and $2.4 million, respectively. The sales of vacation ownership
notes receivable were primarily pursuant to vacation ownership receivables
purchase facilities in place during the respective periods.

The gain on sale of notes receivable increased $819,000 or 53% during the three
months ended March 31, 2004 as compared to the three months ended March 31,
2003, as we sold $39.5 million in receivables during the three months ended
March 31, 2004 as compared to $28.7 million in receivables sold during the three
months ended March 31, 2003.

The amount of notes receivable sold during a period depends on several factors,
including the amount of availability, if any, under receivables purchase
facilities, the amount of eligible receivables available for sale, our cash
requirements, the covenants and other provisions of the relevant vacation
ownership receivables purchase facility (as described further below) and
management's discretion. We have recognized gains on sales of notes receivable
each quarter since the three months ended December 31, 2000 (14 consecutive
quarters).

Interest Expense. Interest expense was $3.0 million and $4.0 million for the
three months ended March 31, 2003 and March 31, 2004, respectively. The $995,000
or 33% increase for the three months ended March 31, 2004 as compared to the
three months ended March 31, 2003, was primarily due interest expense related to
acquisition and development loans entered into in connection with inventory
acquisitions since March 31, 2003.

Provision for Loan Losses. We recorded provisions for loan losses totaling $1.5
million and $870,000 for the three months ended March 31, 2003 and March 31,
2004, respectively. The $656,000 or 43% decrease in the provision for loan
losses during the three months ended March 31, 2004 as compared to the three
months ended March 31, 2003, was primarily due to a lower notes receivable
balance outstanding at March 31, 2004 as compared to March 31, 2003. The lower
notes receivable balance was due to increased, non-recourse sales of notes
receivable pursuant to our vacation ownership receivables purchase facility
during the three months ended March 31, 2004 as compared to the three months
ended March 31, 2003.

The allowance for loan losses by division as of December 31, 2003 and March 31,
2004 was:



Bluegreen Bluegreen
Resorts Communities Other Total
------- ----------- ----- -----
(dollars in thousands)

December 31, 2003
Notes receivable ................... $ 90,820 $ 10,555 $ 1,425 $ 102,800
Allowance for loan losses .......... (8,255) (239) (112) (8,606)
--------- --------- --------- ---------
Notes receivable, net .............. $ 82,565 $ 10,316 $ 1,313 $ 94,194
========= ========= ========= =========
Allowance as a % of gross notes
receivable ....................... 9% 2% 8% 8%
========= ========= ========= =========

March 31, 2004
Notes receivable ................... $ 76,557 $ 10,028 $ 1,425 $ 88,010
Allowance for loan losses .......... (6,944) (223) (112) (7,279)
--------- --------- --------- ---------
Notes receivable, net .............. $ 69,613 $ 9,805 $ 1,313 $ 80,731
========= ========= ========= =========
Allowance as a % of gross notes
receivable ....................... 9% 2% 8% 8%
========= ========= ========= =========


Other notes receivable at December 31, 2003 and March 31, 2004, primarily
consists of a loan to the property owners' association that is responsible for
the maintenance of our La Cabana Beach and Racquet Club resort, Casa Grande
Cooperative Association I.


21


Minority Interest in Income of Consolidated Subsidiary. We include the results
of operations and financial position of Bluegreen/Big Cedar Vacations, LLC (the
"Subsidiary"), our 51%-owned subsidiary, in our consolidated financial
statements (see Note 1 of the Notes to Condensed Consolidated Financial
Statements). The minority interest in income of consolidated subsidiary is the
portion of our consolidated pre-tax income that is earned by Big Cedar, L.L.C.,
the unaffiliated 49% interest holder in the Subsidiary. Minority interest in
income of consolidated subsidiary was $457,000 and $829,000 for the three months
ended March 31, 2003 and March 31, 2004, respectively. Pre-tax income for the
Subsidiary has increased over the periods presented as sales at the Big Cedar
Wilderness Club have increased.

Summary. Based on the factors discussed above, our net income was $2.1 million
and $4.7 million for the three months ended March 31, 2003 and March 31, 2004,
respectively.

Changes in Financial Condition

The following table summarizes our cash flows for the three months ended March
31, 2003 and March 31, 2004 (in thousands):

Three months ended
------------------------
March 31, March 31,
2003 2004
-------- --------
Cash flows provided by operating activities $ 18,183 $ 25,829
Cash flows used by investing activities (690) (911)
Cash flows used by financing activities (11,061) (18,459)
-------- --------
Net increase in cash $ 6,432 $ 6,459
======== ========

Cash Flows From Operating Activities. Cash flows provided by operating
activities increased $7.6 million or 42% from $18.2 million to $25.8 million for
the three months ended March 31, 2003 and March 31, 2004, respectively. The
increase in operating cash flows during the three months ended March 31, 2004 as
compared to the three months ended March 31, 2003, was primarily due to the fact
that we had no significant acquisitions of inventory during the three months
ended March 31, 2004. During the three months ended March 31, 2003, we acquired
VOIs in the Casa Del Mar resort in Ormond Beach, Florida for $500,000 in cash
from operations plus a $4.8 million note payable and land for the development of
our Traditions of Braselton project in Braselton, Georgia for $3.8 million in
cash from operations plus an $8.5 million note payable.

In addition, proceeds from the sale of and borrowings collateralized by notes
receivable, net of payments on such borrowings, increased $1.3 million from
$33.3 million to $34.6 million during the three months ended March 31, 2003 and
March 31, 2004, respectively. We report 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
Bluegreen Resorts' sales result in the origination of notes receivable from its
customers. We believe that accelerating the conversion of such notes receivable
into cash, either through the pledge or sale of our notes receivable, on a
regular basis is an integral function of our operations, and have therefore
classified such activities as operating activities.

The remainder of the increase in cash flows provided by operating activities
during the three months ended March 31, 2004 as compared to the three months
ended March 31, 2003 was due to higher net income for the three months ended
March 31, 2004.

Cash Flows From Investing Activities. Cash flows used in investing activities
increased $221,000 or 32% from $690,000 to $911,000 for the three months ended
March 31, 2003 and March 31, 2004, respectively. The increase was primarily due
to higher cash expenditures for property and equipment during the three months
ended March 31, 2004 as compared to the three months ended March 31, 2003. These
increased expenditures were partially offset by higher amounts of cash received
from our retained interests in notes receivable sold, as we had not begun
receiving cash flows on our retained interest in a 2002 term securitization
transaction until September 2003.

Cash Flows From Financing Activities. Cash flows used by financing activities
increased $7.4 million or 67% from $11.1 million to $18.5 million during the
three months ended March 31, 2003 and March 31, 2004, respectively. Payments
under line-of-credit facilities increased from $10.0 million to $19.8 million
for the three months ended March 31, 2003 and March 31, 2004, respectively. The
impact of these higher debt service payments was partially offset by $2.0
million of cash received upon the exercise of stock options during the three
months ended March 31, 2004.


22


Liquidity and Capital Resources

Our capital resources are provided from both internal and external sources. Our
primary capital resources from internal operations are: (i) cash sales, (ii)
downpayments on homesite and VOI sales which are financed, (iii) proceeds from
the sale of, or borrowings collateralized by, notes receivable, including cash
received from our retained interests in notes receivable sold, (iv) principal
and interest payments on the purchase money mortgage loans and contracts for
deed owned arising from sales of VOIs and homesites and (v) net cash generated
from other resort services and other communities operations. Historically,
external sources of liquidity have included non-recourse sales of notes
receivable, borrowings under secured and unsecured lines-of-credit, seller and
bank financing of inventory acquisitions and the issuance of debt securities.
Our capital resources are used to support our operations, including (i)
acquiring and developing inventory, (ii) providing financing for customer
purchases, (iii) funding operating expenses and (iv) satisfying our debt and
other obligations. As we are continually selling and marketing real estate (VOIs
and homesites), it is necessary for us to continually acquire and develop new
resorts and communities in order to maintain adequate levels of inventory to
support operations. We anticipate that we will continue to require external
sources of liquidity to support our operations, satisfy our debt and other
obligations and to provide funds for future acquisitions.

Our level of debt and debt service requirements has several important effects on
our operations, including the following: (i) we have significant cash
requirements to service debt, reducing funds available for operations and future
business opportunities and increasing our vulnerability to adverse economic and
industry conditions; (ii) our leveraged position increases our vulnerability to
competitive pressures; (iii) the financial covenants and other restrictions
contained in the indentures, the credit agreements and other agreements relating
to our indebtedness require us to meet certain financial tests and restrict our
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 our competitors
operate on a less leveraged basis and have greater operating and financial
flexibility than we do.

We intend to continue to pursue a growth-oriented strategy, particularly with
respect to our Bluegreen Resorts business segment. In connection with this
strategy, we may from time to time acquire, among other things, additional
resort properties and completed but unsold VOIs; land upon which additional
resorts may be built; management contracts; loan portfolios of vacation
ownership mortgages; portfolios which include properties or assets which may be
integrated into our operations; interests in joint ventures; and operating
companies providing or possessing management, sales, marketing, development,
administration and/or other expertise with respect to our operations in the
vacation ownership industry. In addition, we intend to continue to focus
Bluegreen Communities on larger, more capital intensive projects particularly in
those regions where we believe the market for our products is strongest, such as
new golf communities in the Southeast and other areas and continued growth in
our successful regions in Texas.

The following is a discussion of our purchase and credit facilities that were
important sources of our liquidity as of March 31, 2004. These facilities do not
constitute all of our outstanding indebtedness as of March 31, 2004. Our other
indebtedness includes outstanding convertible subordinated debentures, senior
secured notes payable, borrowings collateralized by real estate inventories that
were not incurred pursuant to an ongoing credit facility and capital leases.

Vacation Ownership Receivables Purchase Facility - An Off Balance Sheet
Arrangement

Our ability to sell and/or borrow against our notes receivable from VOI buyers
is a critical factor in our continued liquidity. When we sell VOIs, a financed
buyer is only required to pay a minimum of 10% of the purchase in cash at the
time of sale, however, selling, marketing and administrative expenses are
primarily cash expenses and, in our case for the three months ended March 31,
2004, approximated 65% of sales. Accordingly, having facilities available for
the hypothecation and sale of these vacation ownership receivables is a critical
factor to our ability to meet our short and long-term cash needs.

On October 8, 2003, Resort Finance, LLC ("RFL") acquired and assumed the rights,
obligations and commitments of ING as initial purchaser in an existing vacation
ownership receivables purchase facility (the "Purchase Facility") originally
executed between ING and us in April 2002. In connection with its assumption of
the Purchase Facility, RFL expanded and extended the Purchase Facility's size
and term. The Purchase Facility utilizes an owner's trust structure, pursuant to
which we sell receivables to Bluegreen Receivables Finance Corporation V, our
wholly-owned, special purpose finance subsidiary ("BRFCV"), and BRFCV sells the
receivables to an owners' trust (a qualified special purpose entity) without
recourse to us or BRFCV except for breaches of certain representations and
warranties at the time of sale. We did not enter into any guarantees in
connection with the Purchase Facility. 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 of 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 is
deferred until such time as RFL has received a specified return and all
servicing, custodial, agent and similar fees and expenses have been paid. RFL
earns a


23


return equal to the one-month London Interbank Offered Rate ("LIBOR") plus an
additional return ranging from 2.00% to 3.25%, based on the amount outstanding
under the Purchase Facility, subject to use of alternate return rates in certain
circumstances. In addition, RFL receives a 0.25% annual program fee. The
Purchase Facility also provides for the sale of land notes receivable, under
modified terms. We act as servicer under the Purchase Facility for a fee.

The Purchase Facility includes various conditions to purchase, covenants,
trigger events and other provisions customary for a transaction of this type.
RFL'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,
(i) our breach of the representations or warranties in the Purchase Facility;
(ii) our failure to perform our covenants in the Purchase Facility, including,
without limitation, a failure to pay principal or interest due to RFL; (iii) our
commencement of a bankruptcy proceeding or the like; (iv) a material adverse
change to us since December 31, 2001; (v) the amount borrowed under the Purchase
Facility exceeding the borrowing base, (vi) significant delinquencies or
defaults on the receivables sold; (vii) a payment default by us under any other
borrowing arrangement of $5 million or more, or an event of default under any
indenture, facility or agreement that results in a default under any borrowing
arrangement; (viii) 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 our tangible net worth or (b) causes, or
permits the holder of indebtedness to cause, an amount in excess of 5% of our
tangible net worth to become due; (ix) our 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; (x)
the ratio of our debt to tangible net worth exceeding 6 to 1; or (xi) our
failure to perform our servicing obligations.

The Purchase Facility, as increased by amendment, allows for sales of notes
receivable for a cumulative purchase price of up to $150.0 million on a
revolving basis through September 30, 2004, at a variable purchase price of
85.00% of the principal balance, subject to the eligibility requirements and
certain conditions precedent. Based on sales of receivables under the Purchase
Facility and cash payments of the principal balance of the receivables sold, the
remaining availability under the Purchase Facility as of March 31, 2004 was
$25.4 million.

We have chosen to monetize our receivables through the Purchase Facility and,
historically, other similar facilities as these off-balance sheet arrangements
provide us with cash inflows both currently and in the future at what we believe
to be competitive rates without adding leverage to our balance sheet or
retaining recourse for losses on the receivables sold. In addition, these sale
transactions have generated gains on our income statement on a quarterly basis,
which would not be realized under a traditional financing arrangement.

The Purchase Facility discussed above is the only receivables purchase facility
under which we currently have the ability to sell receivables. We are currently
working to finalize terms for a potential new vacation ownership receivables
purchase facility with an unaffiliated financial institution, and discussing
terms for another such facility with another unaffiliated financial institution.
There is no assurance that either of these potential new facilities will be
obtained on favorable terms or at all. Factors which could adversely impact our
ability to obtain new or additional vacation ownership receivable purchase
facilities include 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 enter into facilities with
vacation ownership companies; a deterioration in the performance of our vacation
ownership notes receivable or in the performance of portfolios sold in prior
transactions, specifically increased delinquency, default and loss severity
rates; and a deterioration in our performance generally. There can be no
assurance that we will obtain new purchase facilities to replace the Purchase
Facility when it is completed or expires. As indicated above, our inability to
sell vacation ownership receivables under a current or future facility could
have a material adverse impact on our liquidity. However, management believes
that to the extent we could not sell receivables under a purchase facility, we
could potentially mitigate the adverse impact on our liquidity by using our
receivables as collateral under existing or future credit facilities.

We have also been a party to a number of securitization-type transactions, all
of which in our opinion utilize customary structures and terms for transactions
of this type. In each securitization-type transaction, we sold receivables to a
wholly-owned special purpose entity which, in turn, sold the receivables either
directly to third parties or to a trust established for the transaction. In each
transaction, the receivables were sold on a non-recourse basis (except for
breaches of certain representations and warranties) and the special purpose
entity has a retained interest in the receivables sold. We have acted as
servicer of the receivables pools in each transaction for a fee, with the
servicing obligations specified under the applicable transaction documents.
Under the terms of the applicable securitization transaction, the cash payments
received from obligors on the receivables sold are distributed to the investors
(which, depending on the transaction, may acquire the receivables directly or
purchase an interest in, or make loans secured by the receivables to, a trust
that owns the receivables), parties providing services in connection with the
facility, and our special purpose subsidiary as the holder of the retained
interests in the receivables according to specified formulas. In general,
available funds are applied monthly to pay fees to service providers, make
interest and principal payments to investors, fund required reserves, if any,
and pay distributions in respect of the retained interests in the receivables.
Pursuant to the terms of the transaction documents,


24


however, to the extent the portfolio of receivables fails to satisfy specified
performance criteria (as may occur due to an increase in default rates or loan
loss severity) or other trigger events, the funds received from obligors are
distributed on an accelerated basis to investors. In effect, during a period in
which the accelerated payment formula is applicable, funds go to outside
investors until they receive the full amount owed to them and only then are
payments made to our subsidiary in its capacity as the holder of the retained
interests. Depending on the circumstances and the transaction, the application
of the accelerated payment formula may be permanent or temporary until the
trigger event is cured. If the accelerated payment formula were to become
applicable, the cash flow on the retained interests in the receivables would be
reduced until the outside investors were paid or the regular payment formula was
resumed. Such a reduction in cash flow could cause a decline in the fair value
of our retained interests in the receivables sold. Declines in fair value that
are determined to be other than temporary are charged to operations in the
current period. In each facility, the failure of the pool of receivables to
comply with specified portfolio covenants can create a trigger event, which
results in the use of the accelerated payment formula (in certain circumstances
until the trigger event is cured and in other circumstances permanently) and, to
the extent there was any remaining commitment to purchase receivables from our
special purpose subsidiary, the suspension or termination of that commitment. In
addition, in each securitization facility certain breaches of our obligations as
servicer or other events allow the investor to cause the servicing to be
transferred to a substitute third party servicer. In that case, our obligation
to service the receivables would terminate and we would cease to receive a
servicing fee.

The following is a summary of significant financial information related to the
Purchase Facility and prior similar facilities during the periods presented
below (in thousands):



December 31, March 31,
2003 2004
--------------------------

On Balance Sheet:

Retained interests in notes receivable sold $ 60,975 $ 66,549
Servicing assets (included in other assets) 2,677 2,855

Off Balance Sheet:

Notes receivable sold without recourse 266,662 292,175
Principal balance owed to note receivable purchasers 238,258 245,246


Three Months Ended
--------------------------
Income Statement: March 31, March 31,
2003 2004
--------------------------

Gain on sales of notes receivable $ 1,561 $ 2,380
Interest accretion on retained interests in notes receivable sold 1,314 1,838
Servicing fee income 1,030 1,048
Amortization of servicing assets (176) (228)


Credit Facilities for Bluegreen Resorts' Receivables and Inventories

In addition to the Purchase Facility, we maintain various credit facilities with
financial institutions that provide receivable, acquisition and development
financing for our vacation ownership projects.

In February 2003, we entered into a revolving vacation ownership receivables
credit facility (the "GMAC Receivables Facility") with Residential Funding
Corporation ("RFC"), an affiliate of GMAC. The borrowing limit under the GMAC
Receivables Facility, as increased by amendment, is $75.0 million. The borrowing
period on the GMAC Receivables Facility expires on March 10, 2005, and
outstanding borrowings mature no later than March 10, 2012. The GMAC Receivables
Facility has detailed requirements with respect to the eligibility of
receivables for inclusion and other conditions to funding. The borrowing base
under the GMAC Receivables Facility is 90% of the outstanding principal balance
of eligible notes arising from the sale of VOIs. The GMAC Receivables Facility
includes affirmative, negative and financial covenants and events of default.
All principal and interest payments received on pledged receivables are applied
to principal and interest due under the GMAC Receivables Facility. Indebtedness
under the facility bears interest at LIBOR plus 4%. During the three months
ended March 31, 2004, we pledged approximately $4.0 million in aggregate
principal balance of vacation ownership receivables under the GMAC Receivables
Facility and received $3.6 million in cash borrowings. At March 31, 2004, $20.0
million was outstanding under the GMAC Receivables Facility.


25


RFC has also provided us with a $45.0 million acquisition, development and
construction revolving credit facility for Bluegreen Resorts (the "GMAC AD&C
Facility"). The borrowing period on the GMAC AD&C Facility expires on February
10, 2005, and outstanding borrowings mature no later than February 10, 2009,
although specific draws typically are due four years from the borrowing date.
Principal will be repaid through agreed-upon release prices as VOIs are sold at
the financed resorts, subject to minimum required amortization. Indebtedness
under the facility bears interest at LIBOR plus 4.75%. Interest payments are due
monthly. In September 2003, we borrowed $17.4 million under the GMAC AD&C
Facility in connection with our acquisition of The Fountains (TM) resort in
Orlando, Florida. The balance of our borrowings under the GMAC AD&C Facility was
collateralized by VOIs and land held for future development at our 51% owned Big
Cedar Wilderness Club(TM) resort. As of March 31, 2004, $21.9 million was
outstanding under the GMAC AD&C Facility.

During December 2003, we signed a combination $30.0 million Acquisition and
Development and Timeshare Receivables facility with Textron Financial
Corporation (the "Textron Facility"). The borrowing period for acquisition and
development loans under the Textron Facility expires on October 1, 2004, and
outstanding acquisition and development borrowings mature no later than January
1, 2006. The borrowing period for vacation ownership receivables loans under the
Textron Facility expires on March 1, 2006, and outstanding vacation ownership
receivables borrowings mature no later than March 31, 2009. Principal will be
repaid semi-annually commencing September 14, 2004, subject to minimum required
amortization, with the balance due upon the earlier of i) the date that 85% of
the VOIs in the financed resort are sold or ii) the maturity date. Acquisition
and development indebtedness under the facility bears interest at the prime
lending rate plus 1.25%, subject to a minimum interest rate of 6.25%. Interest
payments are due monthly. We utilized this facility to borrow approximately $9.7
million of the purchase price of The Hammocks at Marathon(TM) resort in December
2003. The balance of this facility will be available to finance the cost of
renovations on the Marathon property and for borrowings collateralized by our
vacation ownership receivables. Receivable-backed borrowings under the Textron
Facility will bear interest at the prime lending rate plus 1.00%, subject to a
6.00% minimum interest rate. As of March 31, 2004, $9.7 million was outstanding
under the Textron Facility.

Under an existing $30.0 million revolving credit facility with Wells Fargo
Foothill, Inc. ("Foothill") primarily for the use of borrowing against Bluegreen
Communities receivables, we can borrow up to $10.0 million of the facility
collateralized by the pledge of vacation ownership receivables. See "Credit
Facilities for Bluegreen Communities' Receivables and Inventories," below, for
further details on this facility.

Credit Facilities for Bluegreen Communities' Receivables and Inventories

We have a $30.0 million revolving credit facility with Foothill secured by the
pledge of Bluegreen Communities' receivables, with up to $10.0 million of the
total facility available for Bluegreen Communities' inventory borrowings and up
to $10.0 million of the total facility available for the pledge of Bluegreen
Resorts' receivables. The interest rate charged on outstanding receivable
borrowings under the revolving credit facility, as amended, is the prime lending
rate plus 0.25% when the average monthly outstanding loan balance is greater
than or equal to $15.0 million. If the average monthly outstanding loan balance
is less than $15.0 million, the interest rate is the greater of 4.00% or the
prime lending rate plus 0.50%. All principal and interest payments received on
pledged receivables are applied to principal and interest due under the
facility. In September 2003, Foothill extended our ability to borrow under the
facility through December 31, 2006, and extended the maturity date to December
31, 2008 for borrowings collateralized by receivables. At March 31, 2004, the
outstanding principal balance under this facility was approximately $5.9
million, $2.4 million of which related to Bluegreen Resorts' receivables
borrowings and $3.5 million of which related to Bluegreen Communities'
receivables borrowings.

On September 25, 2002, certain of our direct and indirect wholly-owned
subsidiaries entered into a $50 million revolving credit facility (the "GMAC
Communities Facility") with RFC. We are the guarantor on the GMAC Communities
Facility. The GMAC Communities Facility is secured by the real property
homesites (and personal property related thereto) at the following Bluegreen
Communities projects, as well as any Bluegreen Communities projects acquired by
us with funds borrowed under the GMAC Communities Facility (the "Secured
Projects"): Brickshire (New Kent County, Virginia); Mountain Lakes Ranch
(Bluffdale, Texas); Ridge Lake Shores (Magnolia, Texas); Riverwood Forest
(Fulshear, Texas); Waterstone (Boerne, Texas); Catawba Falls Preserve(TM) (Black
Mountain, North Carolina) and Yellowstone Creek Ranch (Pueblo, Colorado). In
addition, the GMAC Communities Facility is secured by our Carolina National and
The Preserve at Jordan Lake golf courses in Southport, North Carolina and Chapel
Hill, North Carolina, respectively. Borrowings under the GMAC Communities
Facility can be drawn through September 25, 2004. Principal payments are
effected through agreed-upon release prices paid to RFC as homesites in the
Secured Projects are sold. The outstanding principal balance of any borrowings
under the GMAC Communities Facility must be repaid by September 25, 2006. The
interest charged on outstanding borrowings is at the prime lending rate plus
1.00% and is payable monthly. The GMAC Communities Facility includes customary
conditions to funding, acceleration and event of default provisions and certain
financial affirmative and negative covenants. We use the proceeds from the GMAC
Communities Facility to repay outstanding indebtedness on Bluegreen Communities
projects, finance the acquisition and development of Bluegreen Communities
projects and for general corporate purposes. As of March 31, 2004, $6.9 million
was outstanding under the GMAC Communities Facility.


26


Over the past several years, we have received substantially all of our homesite
sales proceeds in cash. Accordingly, in recent years we have reduced the
borrowing capacity under credit agreements secured by Bluegreen Communities'
receivables. We attribute the significant volume of cash sales to an increased
willingness on the part of banks to extend direct customer homesite financing at
attractive interest rates. No assurances can be given that local banks will
continue to provide such customer financing.

Historically, we have funded development for road and utility construction,
amenities, surveys and engineering fees from internal operations and have
financed the acquisition of Bluegreen Communities 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 homesite releases. The release price is usually an amount based on a
pre-determined percentage (typically 25% to 55%) of the gross selling price of
the homesites in the subdivision. In addition, the agreements generally call for
minimum cumulative annual amortization. When we provide financing for our
customers (and therefore the release price is not available in cash at closing
to repay the lender), we are 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.

Unsecured Credit Facility

We have a $15.0 million unsecured line-of-credit with Wachovia Bank, N.A.
Amounts borrowed under the line bear interest at LIBOR plus 2%. Interest is due
monthly and all outstanding amounts are due on December 31, 2004. We are only
allowed to borrow under the line-of-credit in amounts less than the remaining
availability under our current, active vacation ownership receivables purchase
facility plus availability under certain receivables 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,
2004, no borrowings were outstanding under the line. In April 2004, we issued
$2.3 million of irrevocable letters of credit under this line-of-credit as
required in connection with the obtaining of plats for one of our Bluegreen
Communities projects. These letters of credit expire on December 31, 2004. This
line-of-credit has historically been a source of short-term liquidity for us.

Commitments

Our material commitments as of March 31, 2004 included the required payments due
on our receivable-backed debt, lines of credit and other notes and debentures
payable, commitments to complete our vacation ownership and communities projects
based on our sales contracts with customers and commitments under noncancelable
operating leases.

The following table summarizes the contractual minimum principal payments
required on all of our outstanding debt (including our receivable-backed debt,
lines-of-credit and other notes and debentures payable) and our noncancelable
operating leases as of March 31, 2004, by period due (in thousands):



Payments Due by Period
------------------------------------------------------------
Less
than 1 -- 3 4 -- 5 After 5
Contractual Obligations 1 year Years Years Years Total
----------------------- -------- -------- -------- -------- --------

Receivable-backed notes payable $ -- $ -- $ 5,936 $ 20,024 $ 25,960
Lines-of-credit and notes payable 27,976 34,992 5,023 187 68,178
10.5% senior secured notes -- -- 110,000 -- 110,000
8.25% convertible subordinated debentures -- 3,526 9,200 18,400 31,126
Noncancelable operating leases 4,094 5,081 2,952 4,397 16,524
-------- -------- -------- -------- --------
Total contractual obligations $ 32,070 $ 43,599 $133,111 $ 43,008 $251,788
======== ======== ======== ======== ========


In addition, we have issued $3.8 million in letters of credits. In January 2003,
we issued a $1.4 million letter-of-credit, which is collateralized by a
certificate of deposit, in connection with the issuance of a performance bond on
a Bluegreen Communities project. This letter of credit expires in January 2008.
In April 2004, we issued $2.3 million of irrevocable letters of credit under the
unsecured line-of-credit with Wachovia Bank, N.A. as required in connection with
the obtaining of plats for one of our Bluegreen Communities projects. These
letters of credit expire on December 31, 2004.

From April 1, 2004 through May 10, 2004, the holders of $2.1 million of our
8.25% convertible subordinated debentures converted their debentures into our
common stock at a conversion price of $8.24. These subsequent conversions will
lower our May 2006 sinking fund requirement on these debentures by an additional
$2.1 million (to $1.4 million).

We intend to use cash flow from operations, including cash received from the
sale of vacation ownership notes receivable, and cash received from new
borrowings under existing or future debt facilities in order to satisfy the
above principal


27


payments. While we believe that we will be able to meet all required debt
payments when due, there can be no assurance that this will be the case.

We estimate 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 to be approximately $4.9 million as of March 31, 2004.
We estimate that the total cash required to complete our Bluegreen Communities
projects in which sales have occurred to be approximately $55.4 million as of
March 31, 2004. These amounts assume that we are not obligated to develop any
building, project or amenity in which a commitment has not been made through a
sales contract to a customer; however, we anticipate that we will incur such
obligations in the future. We plan 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 assurance that we
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.

We believe that our 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 purchase
facility and one or more replacement facilities we will seek to put in place
will be sufficient to meet our anticipated working capital, capital expenditures
and debt service requirements for the foreseeable future. We will be required to
renew or replace credit and receivables purchase facilities that have expired or
that will expire in the near term. We will, in the future, also require
additional credit facilities or will be required to issue corporate debt or
equity securities in connection with acquisitions or otherwise. Any debt
incurred or issued by us may be secured or unsecured, bear fixed or variable
rate interest and may be subject to such terms as the lender may require and
management deems prudent. There can be no assurance that the credit facilities
or receivables purchase facilities which have expired or which are scheduled to
expire in the near term will be renewed or replaced or that sufficient funds
will be available from operations or under existing, proposed or future
revolving credit or other borrowing arrangements or receivables purchase
facilities to meet our cash needs, including, our debt service obligations. To
the extent we are not able to sell notes receivable or borrow under such
facilities, our ability to satisfy our obligations would be materially adversely
affected.

We have a large number of credit facilities, indentures, and other outstanding
debt instruments, and a receivables purchase facility which 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, portfolio performance
requirements and events of default or termination. No assurance can be given
that we will not be required to seek waivers of such covenants or that such
covenants will not limit our ability to raise funds, sell receivables, satisfy
or refinance our obligations or otherwise adversely affect our operations. In
addition, our future operating performance and ability to meet our financial
obligations will be subject to future economic conditions and to financial,
business and other factors, many of which will be beyond our control.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Foreign Currency Risk

Our total revenues and net assets denominated in a currency other than U.S.
dollars during the three months ended March 31, 2004 were less than 1% of
consolidated revenues and consolidated assets, respectively. Sales generated by
Bluegreen Properties, N.V., our subsidiary in Aruba, are transacted in U.S.
dollars. The effects of changes in foreign currency exchange rates have not
historically been significant to our operations or net assets.

Interest Rate Risk

We sold $28.7 million and $39.5 million of fixed-rate vacation ownership notes
receivable during the three months ended March 31, 2003 and March 31, 2004,
respectively, under the Purchase Facility (see Note 3 of the Notes to Condensed
Consolidated Financial Statements). Our gain on sale recognized is generally
based upon either fixed or 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, annual default and discount rates. We
also retain residual interests in pools of fixed and variable rate Bluegreen
Communities notes receivable sold in private placement REMIC transactions. We
believe that we have used conservative assumptions in valuing the residual
interests retained in the vacation ownership and land notes sold through the
Purchase Facility and REMIC transactions, respectively, and that such
assumptions should mitigate the impact of a


28


hypothetical one-percentage point interest rate change on these valuations, but
there is no assurance that the assumptions will prove to be correct.

As of March 31, 2004, we had fixed interest rate debt of approximately $142.6
million and floating interest rate debt of approximately $92.6 million. In
addition, our notes receivable from VOI and homesite customers were comprised of
$81.3 million of fixed rate loans and $5.3 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 affect the market value of the 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 our after-tax earnings by an immaterial
amount for both the three months ended March 31, 2003 and March 31, 2004, based
on the impact of increased interest expense on variable rate debt, partially
offset by the increased interest income on variable rate Bluegreen Communities
notes receivable and cash and cash equivalents. A similar change in the interest
rate would decrease the total fair value of our fixed rate debt, excluding our
8.25% convertible, subordinated debentures (the "Debentures") and our 10.5%
senior secured notes payable (the "Notes"), by an immaterial amount. The fact
that the Debentures are publicly traded and convertible into our 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 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. The 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, we would likely attempt to
take actions to mitigate our 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 our financial structure.

Item 4. Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation
under the supervision and with the participation of our principal executive
officer and principal financial officer of the effectiveness of our disclosure
controls and procedures, as defined in Exchange Act Rules 13a-15(e) and
15d-15(e), as of March 31, 2004. Based on such evaluation, such officers have
concluded that our disclosure controls and procedures are effective in timely
alerting them to material information relating to us required to be included in
our periodic SEC filings. There has been no change in our internal control over
financial reporting during the quarter ended March 31, 2004 that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting. In addition, there have been no significant changes in
our internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation.

Management, including the Chief Executive Officer and Chief Financial Officer,
does not expect that our disclosure controls and procedures and internal
controls will prevent all error and all improper conduct. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that we have detected all control
issues and instances of improper conduct, if any. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two
or more people, or by management override of the control.

Further, the design of any system of controls also is based in part upon
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions; over time, controls may become inadequate because of changes
in conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.

Chief Executive Officer and Chief Financial Officer Certifications

Appearing as Exhibits 31.1 and 31.2 to this quarterly report are the
Certifications of the principal executive officer and the principal financial
officer. The Certifications are required in accordance with Section 302 of the
Sarbanes-Oxley Act of 2002. This Item of this quarterly report is the
information concerning the evaluation referred to in the Section 302


29


Certifications and this information should be read in conjunction with the
Section 302 Certifications for a more complete understanding of the topics
presented.

PART II - OTHER INFORMATION

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities

We did not purchase any of our equity securities registered pursuant to Section
12 of the Securities Exchange Act of 1934. From time to time, our Board of
Directors has adopted and publicly announced a share repurchase program.
Repurchases under such programs are subject to the price of our stock,
prevailing market conditions, our financial condition and available resources,
other investment alternatives and other factors. We are not required to seek
shareholder approval of share repurchase programs, have not done so in the past,
and do not anticipate doing so in the future, except to the extent we may be
required to do so under applicable law. We have not repurchased any shares since
the fiscal year ended April 1, 2001. As of March 31, 2004, there were 694,500
shares remaining for purchase under our current repurchase program, however we
have no present intention of acquiring these remaining shares in the foreseeable
future.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits:

31.1 Certification of Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.

31.2 Certification of Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.

32.1 Certification of Chief Executive Officer pursuant to Section 902 of
the Sarbanes-Oxley Act of 2002.

32.2 Certification of Chief Financial Officer pursuant to Section 902 of
the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K: None.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

BLUEGREEN CORPORATION
(Registrant)


Date: May 13, 2004 By: /S/ GEORGE F. DONOVAN
-------------------------------------
George F. Donovan
President and
Chief Executive Officer


Date: May 13, 2004 By: /S/ JOHN F. CHISTE
-------------------------------------
John F. Chiste
Senior Vice President,
Treasurer and Chief Financial Officer
(Principal Financial Officer)


Date: May 13, 2004 By: /S/ ANTHONY M. PULEO
-------------------------------------
Anthony M. Puleo
Senior Vice President and
Chief Accounting Officer
(Principal Accounting Officer)


30