Attached files
file | filename |
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10-K - FORM 10-K - Bluegreen Vacations Holding Corp | g22858e10vk.htm |
EX-21.1 - EX-21.1 - Bluegreen Vacations Holding Corp | g22858exv21w1.htm |
EX-31.3 - EX-31.3 - Bluegreen Vacations Holding Corp | g22858exv31w3.htm |
EX-23.2 - EX-23.2 - Bluegreen Vacations Holding Corp | g22858exv23w2.htm |
EX-31.2 - EX-31.2 - Bluegreen Vacations Holding Corp | g22858exv31w2.htm |
EX-32.1 - EX-32.1 - Bluegreen Vacations Holding Corp | g22858exv32w1.htm |
EX-32.2 - EX-32.2 - Bluegreen Vacations Holding Corp | g22858exv32w2.htm |
EX-31.1 - EX-31.1 - Bluegreen Vacations Holding Corp | g22858exv31w1.htm |
EX-32.3 - EX-32.3 - Bluegreen Vacations Holding Corp | g22858exv32w3.htm |
EX-23.1 - EX-23.1 - Bluegreen Vacations Holding Corp | g22858exv23w1.htm |
Exhibit 99.1
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
BLUEGREEN CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
December 31, | December 31, | |||||||
2008 | 2009 | |||||||
ASSETS |
||||||||
Cash and cash equivalents (including restricted cash of $21,214
and $23,908 at December 31, 2008 and 2009, respectively) |
$ | 81,775 | $ | 94,399 | ||||
Contracts receivable, net |
7,452 | 4,826 | ||||||
Notes receivable (net of allowance of $52,029 and $46,826 at
December 31, 2008 and 2009, respectively) |
340,644 | 309,307 | ||||||
Prepaid expenses |
9,801 | 7,884 | ||||||
Other assets |
27,488 | 35,054 | ||||||
Inventory |
503,269 | 515,917 | ||||||
Retained interests in notes receivable sold |
113,577 | 78,313 | ||||||
Property and equipment, net |
109,501 | 85,565 | ||||||
Total assets |
$ | 1,193,507 | $ | 1,131,265 | ||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
Liabilities |
||||||||
Accounts payable |
$ | 24,900 | $ | 14,846 | ||||
Accrued liabilities and other |
52,283 | 51,083 | ||||||
Deferred income |
29,854 | 14,883 | ||||||
Deferred income taxes |
91,802 | 87,797 | ||||||
Receivable-backed notes payable |
249,117 | 242,828 | ||||||
Lines-of-credit and notes payable |
222,739 | 185,781 | ||||||
Junior subordinated debentures |
110,827 | 110,827 | ||||||
Total liabilities |
781,522 | 708,045 | ||||||
Commitments and contingencies (Note 12) |
||||||||
Shareholders Equity |
||||||||
Preferred stock, $.01 par value, 1,000 shares authorized; none issued |
| | ||||||
Common stock, $.01 par value, 90,000 and 140,000 shares authorized;
33,996 and 34,099 shares issued at December 31, 2008 and 2009,
respectively |
339 | 341 | ||||||
Additional paid-in capital |
182,654 | 187,006 | ||||||
Treasury stock, 2,756 common shares at both December 31, 2008 and 2009,
at cost |
(12,885 | ) | (12,885 | ) | ||||
Accumulated other comprehensive income (loss), net of income taxes |
3,173 | (608 | ) | |||||
Retained earnings |
209,186 | 212,376 | ||||||
Total Bluegreen Corporation shareholders equity |
382,467 | 386,230 | ||||||
Non-controlling interest |
29,518 | 36,990 | ||||||
Total shareholders equity |
411,985 | 423,220 | ||||||
Total liabilities and shareholders equity |
$ | 1,193,507 | $ | 1,131,265 | ||||
See accompanying notes to consolidated financial statements.
BLUEGREEN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Year Ended | Year Ended | Year Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2007 | 2008 | 2009 | ||||||||||
Revenues: |
||||||||||||
Gross sales of real estate |
$ | 605,250 | $ | 542,632 | $ | 250,573 | ||||||
Estimated uncollectible VOI notes receivable |
(65,242 | ) | (75,847 | ) | (31,205 | ) | ||||||
Gains on sales of VOI notes receivable |
39,372 | 8,245 | | |||||||||
Sales of real estate |
579,380 | 475,030 | 219,368 | |||||||||
Other resort and communities operations revenue |
59,707 | 62,000 | 57,199 | |||||||||
Fee-based sales commission revenue |
| | 20,057 | |||||||||
Interest income |
44,703 | 57,831 | 69,337 | |||||||||
683,790 | 594,861 | 365,961 | ||||||||||
Costs and expenses: |
||||||||||||
Cost of real estate sales |
178,731 | 130,267 | 91,892 | |||||||||
Cost of other resort and communities operations |
42,459 | 40,917 | 37,970 | |||||||||
Selling, general and administrative expenses |
377,552 | 369,700 | 189,630 | |||||||||
Interest expense |
24,272 | 20,888 | 36,132 | |||||||||
Other expense, net |
1,743 | 1,637 | 1,810 | |||||||||
Restructuring charges |
| 15,617 | | |||||||||
Goodwill impairment charge |
| 8,502 | | |||||||||
624,757 | 587,528 | 357,434 | ||||||||||
Income before non-controlling interest, provision (benefit) for
income taxes
and discontinued operations |
59,033 | 7,333 | 8,527 | |||||||||
Provision (benefit) for income taxes |
19,177 | 753 | (2,640 | ) | ||||||||
Income from continuing operations |
39,856 | 6,580 | 11,167 | |||||||||
Discontinued operations: |
||||||||||||
Operations of sold properties, net of tax |
(209 | ) | (1 | ) | (440 | ) | ||||||
Loss on disposal of properties, net of tax |
| | (6,827 | ) | ||||||||
Loss from discontinued operations |
(209 | ) | (1 | ) | (7,267 | ) | ||||||
Net income |
39,647 | 6,579 | 3,900 | |||||||||
Less: Net income attributable to non-controlling interest |
7,721 | 7,095 | 7,472 | |||||||||
Net income (loss) attributable to Bluegreen Corporation |
$ | 31,926 | $ | (516 | ) | $ | (3,572 | ) | ||||
Income (loss) from continuing operations attributable to Bluegreen
Corporation per common share Basic: |
||||||||||||
Earnings (loss) per share from continuing operations attributable to
Bluegreen shareholders |
$ | 1.04 | $ | (0.02 | ) | $ | 0.12 | |||||
Loss per share for discontinued operations |
(0.01 | ) | | (0.23 | ) | |||||||
Earnings (loss) per share attributable to Bluegreen shareholders |
$ | 1.03 | $ | (0.02 | ) | $ | (0.11 | ) | ||||
Income (loss) from continuing operations attributable to Bluegreen
Corporation per common share Diluted: |
||||||||||||
Earnings (loss) per share from continuing operations attributable
to Bluegreen shareholders |
$ | 1.03 | $ | (0.02 | ) | $ | 0.12 | |||||
Loss per share for discontinued operations |
(0.01 | ) | | (0.23 | ) | |||||||
Earnings (loss) per share attributable to Bluegreen shareholders |
$ | 1.02 | $ | (0.02 | ) | $ | (0.11 | ) | ||||
Weighted average number of common shares: |
||||||||||||
Basic |
30,975 | 31,241 | 31,088 | |||||||||
Diluted |
31,292 | 31,241 | 31,100 | |||||||||
See accompanying notes to consolidated financial statements.
2
BLUEGREEN CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(in thousands)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(in thousands)
Equity Attributable to Bluegreen Shareholders | ||||||||||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||||||||||
Common | Treasury | Other Comprehensive | Equity Attributable | |||||||||||||||||||||||||||||
Shares | Common | Additional | Retained | Stock, at | Income (Loss), net | to Non-Controlling | ||||||||||||||||||||||||||
Outstanding | Total | Stock | Paid-in-Capital | Earnings | Cost | of Income Taxes | Interests | |||||||||||||||||||||||||
33,603 | Balance at Dec. 31, 2006 |
$ | 367,725 | $ | 336 | $ | 175,164 | $ | 177,776 | $ | (12,885 | ) | $ | 12,632 | 14,702 | |||||||||||||||||
| Net income |
39,647 | | | 31,926 | | | 7,721 | ||||||||||||||||||||||||
| Other comprehensive loss |
(2,824 | ) | | | | | (2,824 | ) | | ||||||||||||||||||||||
| Stock compensation |
2,052 | | 2,052 | | | | | ||||||||||||||||||||||||
140 | Shares issued upon exercise of stock options |
559 | 1 | 558 | | | | | ||||||||||||||||||||||||
214 | Vesting of restricted stock |
372 | 2 | 370 | | | | | ||||||||||||||||||||||||
33,957 | Balance at Dec. 31, 2007 |
407,531 | 339 | 178,144 | 209,702 | $ | (12,885 | ) | 9,808 | 22,423 | ||||||||||||||||||||||
| Net income (loss) |
6,579 | | | (516 | ) | | | 7,095 | |||||||||||||||||||||||
| Other comprehensive loss |
(6,635 | ) | | | | | (6,635 | ) | | ||||||||||||||||||||||
| Stock compensation |
4,378 | | 4,378 | | | | | ||||||||||||||||||||||||
39 | Shares issued upon exercise of stock options |
132 | | 132 | | | | | ||||||||||||||||||||||||
33,996 | Balance at Dec. 31, 2008 |
411,985 | 339 | 182,654 | 209,186 | (12,885 | ) | 3,173 | 29,518 | |||||||||||||||||||||||
| Net income (loss) |
3,900 | | | (3,572 | ) | | | 7,472 | |||||||||||||||||||||||
| Other comprehensive income |
405 | | | | | 405 | | ||||||||||||||||||||||||
| Stock compensation |
4,404 | | 4,404 | | | | | ||||||||||||||||||||||||
103 | Vesting of restricted stock |
2 | 2 | | | | | | ||||||||||||||||||||||||
| Stock issuance costs |
(52 | ) | | (52 | ) | | | | | ||||||||||||||||||||||
| Cumulative effect (See Note 4) |
2,576 | | | 6,762 | | (4,186 | ) | | |||||||||||||||||||||||
34,099 | Balance at Dec. 31, 2009 |
$ | 423,220 | $ | 341 | $ | 187,006 | $ | 212,376 | $ | (12,885 | ) | $ | (608 | ) | $ | 36,990 | |||||||||||||||
See accompanying notes to consolidated financial statements.
3
BLUEGREEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended | Year Ended | Year Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2007 | 2008 | 2009 | ||||||||||
Operating activities: |
||||||||||||
Net income |
$ | 39,647 | $ | 6,579 | $ | 3,900 | ||||||
Adjustments to reconcile net income to net cash provided
(used) by operating activities: |
||||||||||||
Communities inventory impairment |
| 5,204 | 13,159 | |||||||||
Non-cash stock compensation expense |
2,422 | 4,378 | 4,406 | |||||||||
Depreciation and amortization |
17,669 | 15,084 | 15,579 | |||||||||
Gain on sales of notes receivable |
(39,372 | ) | (8,245 | ) | | |||||||
Loss on disposal of property and equipment |
688 | 5,140 | 173 | |||||||||
Loss on sales of golf courses |
| | 10,544 | |||||||||
Provision for loan losses |
65,419 | 76,079 | 31,641 | |||||||||
Provision (benefit) for deferred income taxes |
12,468 | (2,804 | ) | (3,409 | ) | |||||||
Interest accretion on retained interests in notes
receivable sold |
(15,157 | ) | (17,729 | ) | (19,186 | ) | ||||||
Proceeds from sales of notes receivable |
229,067 | 55,705 | | |||||||||
Goodwill impairment |
| 8,502 | | |||||||||
Changes in operating assets and liabilities: |
||||||||||||
Contracts receivable |
3,324 | 13,080 | 2,626 | |||||||||
Notes receivable |
(305,972 | ) | (313,661 | ) | (21,332 | ) | ||||||
Prepaid expenses and other assets |
(473 | ) | 3,898 | (5,080 | ) | |||||||
Inventory |
(59,322 | ) | (53,470 | ) | 6,178 | |||||||
Accounts payable, accrued liabilities and other |
28,471 | (26,407 | ) | (21,930 | ) | |||||||
Net cash (used in) provided by operating activities |
(21,121 | ) | (228,667 | ) | 17,269 | |||||||
Investing activities: |
||||||||||||
Cash received from retained interests in notes receivable
sold |
35,949 | 44,884 | 43,741 | |||||||||
Business acquisitions |
| (6,105 | ) | | ||||||||
Investments in statutory business trusts |
(619 | ) | | | ||||||||
Purchases of property and equipment |
(15,855 | ) | (22,883 | ) | (7,521 | ) | ||||||
Proceeds from sales of property and equipment |
2 | 58 | 13 | |||||||||
Proceeds from sales of golf courses, net |
| | 9,414 | |||||||||
Net cash provided by investing activities |
19,477 | 15,954 | 45,647 | |||||||||
Financing activities: |
||||||||||||
Proceeds from borrowings collateralized by notes
receivable |
151,973 | 287,478 | 81,683 | |||||||||
Payments on borrowings collateralized by notes receivable |
(120,145 | ) | (94,964 | ) | (90,180 | ) | ||||||
Proceeds from borrowings under line-of-credit facilities
and
notes payable |
147,835 | 105,832 | 11,861 | |||||||||
Payments under line-of-credit facilities and notes payable |
(123,320 | ) | (90,907 | ) | (48,944 | ) | ||||||
Payments on 10.50% senior secured notes |
| (55,000 | ) | | ||||||||
Proceeds from issuance of junior subordinated debentures |
20,619 | | | |||||||||
Payments of debt issuance costs |
(2,052 | ) | (3,056 | ) | (4,660 | ) | ||||||
Stock issuance cost |
| | (52 | ) | ||||||||
Proceeds from exercise of employee and director stock
options |
559 | 132 | | |||||||||
Net cash provided (used in) by financing activities |
75,469 | 149,515 | (50,292 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents |
73,825 | (63,198 | ) | 12,624 | ||||||||
Cash and cash equivalents at beginning of period |
71,148 | 144,973 | 81,775 | |||||||||
Cash and cash equivalents at end of period |
144,973 | 81,775 | 94,399 | |||||||||
Restricted cash and cash equivalents at end of period |
(19,460 | ) | (21,214 | ) | (23,908 | ) | ||||||
Unrestricted cash and cash equivalents at end of period |
$ | 125,513 | $ | 60,561 | $ | 70,491 | ||||||
See accompanying notes to consolidated financial statements
4
BLUEGREEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS(Continued)
(in thousands)
CONSOLIDATED STATEMENTS OF CASH FLOWS(Continued)
(in thousands)
Year Ended | Year Ended | Year Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2007 | 2008 | 2009 | ||||||||||
Supplemental schedule of non-cash operating,
investing and financing activities: |
||||||||||||
Inventory acquired through financing |
$ | 26,425 | $ | 10,132 | $ | | ||||||
Property and equipment acquired through financing |
$ | 1,188 | $ | 4,639 | $ | | ||||||
Retained interests in notes receivable sold |
$ | 36,222 | $ | 9,624 | $ | (11,078 | ) | |||||
Net change in unrealized gains and losses in
retained interests in notes receivable sold |
$ | (4,554 | ) | $ | (10,391 | ) | $ | 369 | ||||
Supplemental schedule of operating cash flow
information: |
||||||||||||
Interest paid, net of amounts capitalized |
$ | 24,407 | $ | 21,813 | $ | 36,372 | ||||||
Income taxes paid |
$ | 9,823 | $ | 5,390 | $ | 2,475 | ||||||
See accompanying notes to consolidated financial statements.
5
BLUEGREEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies
Organization
We provide Colorful Places to Live and Play® through our resorts and residential communities
businesses. Our resorts business (Bluegreen Resorts) markets, sells and manages real
estate-based vacation ownership interests (VOIs) in resorts, which are generally located in
popular, high-volume, drive-to vacation destinations, and were either developed or acquired by us
or developed by others, in which case we earn fees for providing these services. VOIs in our
resorts and those sold by us on behalf of others typically entitle the buyer to use resort
accommodations through an annual or biennial allotment of points which represent their ownership
and beneficial use rights in perpetuity in the Bluegreen Vacation Club (supported by an underlying
deeded VOI held in trust for the buyer). Members in the Bluegreen Vacation Club may stay in any of
the 54 participating resorts or take advantage of an exchange program offered by a third-party
world-wide vacation ownership exchange network of over 4,000 resorts and other vacation experiences
such as cruises and hotel stays.
Our residential communities business (Bluegreen Communities) acquires, develops and subdivides
property and markets residential homesites, the majority of which are sold directly to retail
customers who seek to build a home generally in the future, in some cases on properties featuring a
golf course and other related amenities.
Our other resort and communities operations revenues consist primarily of resort property and
homeowners association management services, resort title services, resort amenity operations,
non-cash sales incentives provided to buyers of VOIs, realty operations and daily-fee golf course
operations. We also generate significant interest income by providing financing to individual
purchasers of VOIs.
Principles of Consolidation
Our 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 Bluegreen/Big Cedar
Joint Venture), as we hold a 51% equity interest in the Bluegreen/Big Cedar Joint Venture, have an
active role as the day-to-day manager of the Bluegreen/Big Cedar Joint Ventures activities, and
have majority voting control of the Bluegreen/Big Cedar Joint Ventures management committee. We
do not consolidate our statutory business trusts formed to issue trust preferred securities as
these entities are each variable interest entities in which we are not the primary beneficiary as
defined by Financial Accounting Standards Board (FASB) ASC 810-10. The statutory business trusts
are accounted for under the equity method of accounting. We have eliminated all significant
intercompany balances and transactions.
Basis of Presentation
On December 30, 2009, we sold four of our golf courses located in North Carolina and Virginia for
an aggregate purchase price of approximately $9.4 million. The related golf operations and the
2009 pre-tax loss of $10.5 million recognized upon disposal have been presented as discontinued
operations in the Consolidated Statements of Operations for the years ended December 31, 2007,
2008, and 2009.
Use of Estimates
United States generally accepted accounting principles (GAAP) require us to make estimates and
assumptions that affect the amounts reported in our consolidated financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
We invest cash in excess of our immediate operating requirements in short-term time deposits and
money market instruments generally with original maturities at the date of purchase of three months
or less. We maintain cash and
6
cash equivalents with various financial institutions. These financial institutions are located
throughout the United States, Canada and Aruba. Our policy is designed to limit exposure to any one
institution. However, a significant portion of our unrestricted cash is maintained with a single
bank and, accordingly, we are subject to credit risk. Periodic evaluations of the relative credit
standing of financial institutions maintaining our deposits are performed to evaluate and mitigate,
if necessary, credit risk.
Restricted cash consists primarily of customer deposits held in escrow accounts.
Revenue Recognition and Contracts Receivable
In accordance with the requirements of the Financial Accounting Standards Boards (FASB)
Accounting Standards Codification (ASC) ASC 970 (for homesite sales) and under the timeshare
accounting rules, we recognize revenue on VOI and homesite sales when a minimum of 10% of the sales
price has been received in cash (demonstrating the buyers commitment), the legal 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 related to the real estate sold. We believe that we use a reasonably reliable
methodology to estimate the collectibility of the receivables representing the remainder of the
sales price of real estate sold. See further discussion of our policies regarding the estimation of
credit losses on our notes receivable below. Should our estimates regarding the collectibility of
our receivables change adversely, we may have to defer the recognition of sales and our results of
operations could be negatively impacted. Under the provisions of timeshare accounting rules, the
calculation of the adequacy of a buyers commitment for the sale of VOIs requires that cash
received towards the purchase of our VOIs be reduced by the value of certain incentives provided to
the buyer at the time of sale. If after considering the value of the incentive the 10% requirement
is not met, the VOI sale, and the related cost and direct selling expenses, are deferred until such
time that sufficient cash is received from the customer, generally through receipt of mortgage
payments. Changes to the quantity, type, or value of sales incentives that we provide to buyers of
our VOIs may result in additional VOI sales being deferred, in which case our results of operations
may be materially adversely impacted.
In cases where all development has not been completed, we recognize revenue in accordance with the
percentage-of-completion method of accounting. Should our estimates of the total anticipated cost
of completing one of our Bluegreen Resorts or Bluegreen Communities projects increase, we may be
required to defer a greater amount of revenue or may be required to defer revenue for a longer
period of time, which may materially and adversely impact our results of operations.
Contracts receivable consists of: (1) amounts receivable from customers on recent sales of VOIs
pending recording of the customers notes receivable in our loan servicing system; (2) receivables
related to unclosed homesite sales; and (3) receivables from third-party escrow agents on recently
closed homesite sales. Contracts receivable are stated net of a reserve for loan losses of $0.2
million and $0.6 million at December 31, 2008 and 2009, respectively.
Under timeshare accounting rules, rental operations, including accommodations provided through the
use of our Sampler program, are accounted for as incidental operations whereby incremental carrying
costs in excess of incremental revenue are charged to expense as incurred. Conversely, incremental
revenue in excess of incremental carrying costs is recorded as a reduction to VOI inventory.
Incremental carrying costs include costs that have been incurred by us during the holding period of
the unsold VOIs, such as developer subsidies and maintenance fees. During the years ended December
31, 2009 and 2008, all of our rental revenue and Sampler revenue earned was recorded as an off-set
to cost of other resort and communities operations as such amounts were less than the incremental
carrying cost.
In addition to sales of real estate, we also generate revenue from the activities listed below.
The table provides a brief description of the applicable revenue recognition policy:
Activity | Revenue is recognized as: |
|
Resort title fees | Escrow amounts are released and title documents are completed. |
|
Resort Management and service fees | Management services are rendered. |
7
Activity | Revenue is recognized as: |
|
Fee-based sales commissions | Sales of third party VOIs are completed. |
|
Rental and Sampler program | Guests complete stays at the resorts. Rental and Sampler
program proceeds are classified as a reduction to Cost of
other resort and communities operations. |
|
Realty commissions | Sales of third-party-owned real estate are completed. |
|
Golf course and ski hill daily fees | Services are provided. |
Our cost of other resort and communities operations consists of the costs associated with the
various revenues described above as well as developer subsidies and maintenance fees on our unsold
VOIs.
Notes Receivable
Our notes receivable are carried at amortized cost less an allowance for bad debts. Interest income
is suspended and previously accrued but unpaid interest income is reversed on all delinquent notes
receivable when principal or interest payments are more than three months contractually past due
and not resumed until such loans are less than three months past due. As of December 31, 2008 and
2009, $5.8 million and $15.5 million, respectively, of our notes receivable were more than three
months contractually past due and, hence, were not accruing interest income. Our notes receivable
are generally charged off as uncollectible when they have become approximately 120 days past due.
We estimate uncollectibles for VOI notes receivable in accordance with timeshare accounting rules.
Under these rules, the estimate of uncollectibles is based on historical uncollectibles for similar
VOI notes receivable over the applicable historical period. We use a static pool analysis, which
tracks uncollectibles for each years sales over the entire life of the notes. We also consider
whether the historical economic conditions are comparable to current economic conditions, as well
as variations in underwriting standards. Additionally, under timeshare accounting rules, no
consideration is given for future recoveries of defaulted inventory in the estimate of
uncollectible VOI notes receivable. We review our reserve for loan losses on at least a quarterly
basis. We estimate credit losses on our notes receivable portfolios generated in connection with
the sale of homesites in accordance with the accounting rules for contingencies, as our notes
receivable portfolios consist of large groups of smaller-balance, homogeneous loans. Under these
accounting rules, the amount of loss is reduced by the estimated value of the defaulted inventory
to be recovered.
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) or through term securitizations, we evaluate whether or
not such transfers should be accounted for as a sale pursuant to the accounting rules under ASC 860
for the transfers and servicing of financial assets and extinguishments of liabilities. The
evaluation of sale treatment under ASC 860 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 the reach of 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 an agreement that either: (1) 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 and rights to excess interest
spread which are retained interests in the notes receivable sold. We also continue to service the
notes for a fee. Historically, we have structured the majority of such transactions to be
accounted for as off-balance sheet sales. 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. Unrealized gains or losses on our retained interests in
notes receivable sold are included in our
8
shareholders equity as accumulated other comprehensive income, net of income taxes. The portion
of other-than-temporary declines in fair value that represent credit losses are charged to
operations.
We measure the fair value of the retained interests in the notes receivable sold initially and on a
quarterly basis based on the present value of estimated future expected cash flows using our best
estimates of the key assumptions prepayment rates, loss severity rates, default rates and
discount rates commensurate with the risks involved. Interest on the retained interests in notes
receivable sold is accreted using the effective yield method.
Inventory
Our inventory consists of completed VOIs, VOIs under construction, land held for future vacation
ownership development and residential land acquired or developed for sale. We carry our completed
inventory at the lower of i) cost, including costs of improvements and amenities incurred
subsequent to acquisition, capitalized interest, real estate taxes plus other costs incurred during
construction, or ii) estimated fair value, less cost to dispose. VOI inventory and cost of sales
is accounted for under the provisions of timeshare accounting rules, which defines a specific
method of the relative sales value method for relieving VOI inventory and recording cost of sales.
Under the relative sales value method required by timeshare accounting rules, cost of sales is
calculated as a percentage of net sales using a cost-of-sales percentagethe ratio of total
estimated development cost to total estimated VOI revenue, including the estimated incremental
revenue from the resale of VOI inventory repossessed, generally as a result of the default of the
related receivable. Also, pursuant to timeshare accounting rules, we do not relieve inventory for
VOI cost of sales related to anticipated credit losses (accordingly, no adjustment is made when
inventory is reacquired upon default of the related receivable). For Communities real estate
projects, costs are allocated to individual homesites in the Communities projects based on the
relative estimated sales value of each homesite in accordance with ASC 970, which defines the
accounting for costs of real estate projects. Under this method, the allocated cost of a unit is
relieved from inventory and recognized as cost of sales upon recognition of the related sale.
Homesites reacquired upon default of the related receivable are considered held for sale and are
recorded at fair value less costs to sell.
During 2008 and 2009, we recorded charges totaling $5.2 million and $13.2 million, respectively, to
reduce our carrying value of certain completed inventory in our residential communities property
(see Note 5 for further discussion). We also periodically evaluate the recovery of the carrying
amount of our incomplete or undeveloped resort and residential communities properties under the
guidelines of ASC 360, which provides guidance relating to the accounting for the impairment or
disposal of long-lived assets.
Deferred Financing Costs
Deferred financing costs are comprised of costs incurred in connection with securing financing from
third-party lenders and are capitalized and amortized to interest expense over the terms of the
related financing arrangements. We recognized amortization of deferred financing costs for the
years ended December 31, 2007, 2008, and 2009 of approximately $3.2 million, $1.8 million, and $3.9
million, respectively.
Property and Equipment
Our property and equipment acquired is recorded at cost. We record depreciation and amortization in
a manner that recognizes the cost of our depreciable assets in operations over their estimated
useful lives using the straight-line method. Leasehold improvements are amortized over the shorter
of the terms of the underlying leases or the estimated useful lives of the improvements.
Depreciation expense includes the amortization of assets recorded under capital leases.
Impairment of Long-Lived Assets
We evaluate the recovery of the carrying amounts of our long-lived assets under the guidelines of
ASC 360. We review the carrying amounts of our long-lived assets for possible impairment whenever
events or changes in circumstances indicate that the carrying amount of such assets may not be
recoverable. If estimated cash flows are insufficient to recover the investment, an impairment loss
is recognized equal to the estimated fair value of the asset less its carrying value and any costs
of disposition.
Goodwill
9
Our goodwill related to various business acquisitions made by the Resort Division during and prior
to 2008. We account for our goodwill under the provisions of ASC 350. This statement requires
that goodwill deemed to have indefinite lives not be amortized, but rather be tested for impairment
on an annual basis. In 2008, we recorded $4.2 million of goodwill related to business acquisitions
for Bluegreen Resorts, increasing total goodwill to $8.5 million. During the year ended December
31, 2008, we completed the required annual impairment testing of the goodwill recorded in our
Bluegreen Resorts reporting unit. As a result of our annual impairment testing of goodwill as of
December 31, 2008, we determined that the fair value of our Bluegreen Resorts reporting unit, based
on our overall market capitalization, could not support the book value of goodwill. Accordingly,
we wrote-off the balance of our goodwill and recorded a charge of $8.5 million for the year ended
December 31, 2008.
Treasury Stock
We account for repurchases of our common stock, if any, using the cost method with common stock in
treasury classified in our consolidated balance sheets as a reduction of shareholders equity.
Income Taxes
Income tax expense is recognized at applicable U.S. or international tax rates. Certain revenue and
expense items may be recognized in one period for financial statement purposes and in a different
periods income tax return. The tax effects of such differences are reported as deferred income
taxes. Valuation allowances are recorded for periods in which realization of deferred tax assets
does not meet a more likely than not standard. See Note 13 for additional information on income
taxes.
Advertising Expense
We expense advertising costs, which include marketing costs, as incurred. Advertising expense for
the years ended December 31, 2007, 2008, and 2009, was $130.5 million, $126.6 million and $39.0
million, respectively. Advertising expense is included in selling, general and administrative
expenses in our consolidated statements of operations.
Stock-Based Compensation
We account for stock-based compensation using the fair value method of expense recognition. We
utilize the Black-Scholes option pricing model for calculating the fair value of each option
granted. The Black-Scholes option-pricing model was developed for use in estimating the fair value
of traded options that have no vesting restrictions and are fully transferable. In addition, this
model requires the input of subjective assumptions, including the expected price volatility of the
underlying stock. Projected data related to the expected volatility and expected life of stock
options is based upon historical and other information. Changes in these subjective assumptions can
materially affect the fair value of the estimate, and therefore, the existing valuation models do
not provide a precise measure of the fair value of our employee stock options.
The fair value for these options was estimated at the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions:
During the year ended December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
Risk free investment rate |
4.9 | % | 3.1 | % | 2.4 | % | ||||||
Dividend yield |
0.0 | % | 0.0 | % | 0.0 | % | ||||||
Volatility factor of expected market price |
45.8 | % | 49.4 | % | 84.2 | % | ||||||
Expected term |
5.0 years | 5.5 years | 5.0 years |
The Company uses historical data to estimate option exercise behavior and employee termination.
The risk-free investment rate for periods within the contractual life of the option is based on the
U.S. Treasury yield curve in effect at the time of grant. The Company uses the historical
volatility of its common stock to estimate the volatility factor of expected market price.
We recognize stock-based compensation expense on a straight-line basis over the service or vesting
period of the instrument. Total compensation costs related to stock-based compensation charged
against income during the year ended December 31, 2009 was $4.4 million. Total stock-based
compensation recorded in 2009 consists of $2.2
10
million related to stock options and $2.2 million related to restricted stock. Total stock-based
compensation recorded in 2008 of $4.4 million consists of $2.5 million related to stock options and
$1.9 million related to restricted stock. Total compensation costs related to stock-based
compensation charged against income during the year ended December 31, 2007 was $2.4 million, which
consists of $2.0 million related to the expense of existing and newly granted stock options and
$0.4 million related to existing and newly granted restricted stock. At the grant date, the
Company estimates the number of shares expected to vest and subsequently adjusts compensation costs
for the estimated rate of forfeitures at the option grant date and on an annual basis. The Company
uses historical data to estimate option exercise behavior and employee termination in determining
the estimated forfeiture rate.
Earnings (Loss) Per Common Share
We compute basic earnings per common share 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 common share, but also gives effect to all dilutive stock options and unvested
restricted stock using the treasury stock method.
During the years ended December 31, 2007 and 2008, a total of 140,313 and 38,500, respectively,
common shares were issued as a result of stock option exercises. No stock options were exercised
in 2009. There were approximately 1.3 million, 2.7 million, and 2.7 million stock options not
included in diluted earnings per common share during the years ended December 31, 2007, 2008, and
2009, respectively, as the effect would be anti-dilutive.
The following table sets forth our computation of basic and diluted earnings (loss) per common
share (in thousands, except per share data):
Year Ended December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
Basic and diluted earnings per common share numerator: |
||||||||||||
Income from continuing operations |
$ | 39,856 | $ | 6,580 | $ | 11,167 | ||||||
Net income attributable to non-controlling interests |
7,721 | 7,095 | 7,472 | |||||||||
Income (loss) from continuing operations attributable to
Bluegreen Corporation |
$ | 32,135 | $ | (515 | ) | $ | 3,695 | |||||
Denominator: |
||||||||||||
Denominator for basic earnings per common
share-weighted-average shares |
30,975 | 31,241 | 31,088 | |||||||||
Effect of dilutive securities: |
||||||||||||
Stock options and unvested restricted stock |
317 | | 12 | |||||||||
Denominator for diluted earnings (loss) per common
share-adjusted weighted-average shares and assumed
conversions |
31,292 | 31,241 | 31,100 | |||||||||
Income (loss) from continuing operations attributable
to Bluegreen Corporation per common share Basic: |
$ | 1.04 | $ | (0.02 | ) | $ | 0.12 | |||||
Income (loss) from continuing operations attributable
to Bluegreen Corporation per common share Diluted: |
$ | 1.03 | $ | (0.02 | ) | $ | 0.12 |
Comprehensive Income (Loss)
Comprehensive income (loss) represents the change in shareholders equity from transactions and
other events and circumstances arising from non-shareholder sources. Our comprehensive income
(loss) includes net income (loss) and the change in net unrealized gains or losses on our retained
interests in notes receivable sold, which are held as available-for-sale investments. Comprehensive
income (loss) is shown as a subtotal within our consolidated statements of shareholders equity for
each period presented.
Business Combinations
11
During 2008, we purchased real estate and operations at two resorts, The Royal Suites at Atlantic
Palace in Atlantic City, New Jersey, and Club La Pension in New Orleans, Louisiana. Each of these
acquisitions constituted the purchase of a business under ASC 805, which contains the accounting
rules for business combinations. The combined purchase price of these acquisitions was $21.8
million, which was allocated as follows: VOI inventory of $9.9 million, property and equipment of
$7.7 million, and goodwill of $4.2 million. These acquisitions, individually and in the aggregate,
were immaterial to our operations. The goodwill generated from these acquisitions was subsequently
charged to operations as impairment in 2008.
Recently Adopted Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial
Statements-an Amendment of Accounting Research Bulletin (ARB) No. 51 (SFAS No. 160). This
statement, which we adopted on January 1, 2009, establishes new accounting and reporting standards
for noncontrolling interests, previously known as minority interests, in a subsidiary and for the
deconsolidation of a subsidiary. Specifically, this statement requires the recognition of
noncontrolling interests as equity in the consolidated financial statements separate from the
parents equity. The amount of net income or loss attributable to the noncontrolling interests is
included in consolidated net income on the face of the income statement. This statement clarifies
that changes in a parents ownership interest in a subsidiary that do not result in deconsolidation
are equity transactions if the parent retains its controlling financial interest. In addition, this
statement requires that a parent recognize a gain or loss in net income attributable to Bluegreen
Corporation when a subsidiary is deconsolidated. Such gain or loss is measured using the fair
value of the noncontrolling equity investment on the deconsolidation date. This topic also includes
expanded disclosure requirements regarding the interests of the parent and its noncontrolling
interests. This topic is applied prospectively for fiscal years and interim periods within those
fiscal years, beginning with the current fiscal year, except for the presentation and disclosure
requirements, which are applied retrospectively for all periods presented. The adoption of this
topic did not have a material impact on our financial statements.
In April 2009, we adopted FASB Staff Position FAS 107-1 and Accounting Principles Board (APB)
28-1, Interim Disclosures about Fair Value of Financial Instruments (FAS 107-1). The related
guidance under the new Accounting Standards Codification for this recently adopted accounting
pronouncement is ASC 825. ASC 825 requires disclosures about fair value of financial instruments
for interim reporting periods of publicly traded companies as well as in annual financial
statements. It also required those disclosures in summarized information in interim reporting
periods.
In April 2009, we adopted FASB Staff Position FAS 115-2, FAS 124-2, and Emerging Issue Task
Force (EITF) 99-20-2, Recognition and Presentation of Other-Than-Temporary Impairments (FAS
115-2). The related guidance under the new Accounting Standards Codification for this recently
adopted accounting pronouncement is ASC 325. ASC 325 amends the other-than-temporary impairment
guidance in U.S. GAAP for certain securities, including retained interest in securities classified
as available-for-sale investments, and also expands the required disclosure of other-than-temporary
impairments on such securities in the financial statements and notes thereto. It does not amend
existing recognition and measurement guidance related to other-than-temporary impairments of equity
securities. The impact of this new standard is disclosed in Note 4 below.
In April 2009, we adopted FASB Staff Position FAS 157-4, Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability has Significantly Decreased and Identifying
Transactions that are Not Orderly (FAS 157-4). The related guidance under the new Accounting
Standards Codification for this recently adopted accounting pronouncement is ASC 320. ASC 320
provides additional guidance for estimating fair value in accordance with SFAS 157 when the volume
and level of activity for the asset or liability have significantly decreased. It also provides
guidance on identifying circumstances that indicate a transaction is not orderly. It emphasizes
that even if there has been a significant decrease in the volume and level of activity for the
asset or liability and regardless of the valuation technique used, the objective of a fair value
measurement remains the same. Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or
distressed sale) between market participants at the measurement date under current market
conditions. The adoption of this pronouncement did not have a material impact on our financial
statements.
During the second quarter of 2009, we adopted SFAS No. 165, Subsequent Events (SFAS No. 165).
The relative guidance under the new Accounting Standards Codification for this recently adopted
accounting pronouncement is ASC 855, as amended by ASU 2010-09. ASC 855 provides general
standards of accounting for and disclosure of events that occur after the balance sheet date but
before financial statements are issued or are available to be issued.
12
The statement sets forth the circumstances under which an entity should recognize events or
transactions occurring after the balance sheet date in its financial statements. This statement
also identifies the disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. The adoption of this pronouncement did not affect our
results of operations or financial condition, but did require additional disclosure in our
financial statements.
Accounting Pronouncements Not Yet Adopted
In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, an
amendment of FASB Statement No. 140 (which has subsequently been renamed ASC 860), which became
effective for us on January 1, 2010. FASB ASC 860 requires the disclosure of more information about
transfers of financial assets, including securitization transactions and transactions where
companies have continuing exposure to the risks related to the transferred financial assets. It
also eliminates the concept of a qualifying special-purpose entity (QSPE), changes the
requirements for derecognizing financial assets, and requires additional disclosures. See
discussion of SFAS No. 167, below, for the anticipated impact on Bluegreen of the adoption of SFAS
No. 166.
In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (which has
subsequently been renamed ASC 810), which became effective for us on January 1, 2010. ASC 810
addresses the effects of eliminating the qualified special purpose entity (QSPE) concept and
responds to concerns about the application of certain key provisions of previous accounting rules,
including concerns over the transparency of an enterprises involvement with variable interest
entities (VIEs). As a result of the adoption of this pronouncement on January 1, 2010, we expect
that we will in the future be required to consolidate our QSPEs described in Note 4 to our
consolidated financial statements. Accordingly, we expect to record a one-time non-cash after-tax
adjustment to shareholders equity in the first quarter of 2010 of approximately $35.0 million to
$55.0 million as a cumulative effect of a change in accounting principle. The cumulative effect
will consist primarily of the reversal of previously recognized sales of notes receivable, the
recognition of the related non-recourse receivable-backed notes payable, the elimination of
retained interest in notes receivable sold, and adjustments to inventory and deferred income taxes
payable as a result of these changes. We anticipate that our adoption of these standards will have
the following impacts on our balance sheet: (1) assets will increase by approximately $335.0
million to $345.0 million; (2) liabilities will increase by approximately $380.0 million to $390.0
million; and (3) shareholders equity will decrease by approximately $35.0 million to $55.0
million.
2. Notes Receivable
The table below sets forth additional information relative to our notes receivable (in thousands).
As of December 31, | ||||||||
2008 | 2009 | |||||||
Notes receivable secured by VOIs |
$ | 388,014 | $ | 351,232 | ||||
Notes receivable secured by homesites |
4,659 | 4,901 | ||||||
Notes receivable, gross |
392,673 | 356,133 | ||||||
Allowance for loan losses |
(52,029 | ) | (46,826 | ) | ||||
Notes receivable, net |
$ | 340,644 | $ | 309,307 | ||||
The weighted-average interest rate on our notes receivable was 13.8%, 14.4%, and 14.8% at December
31, 2007, 2008, and 2009, respectively. All of our VOI loans bear interest at fixed rates. The
weighted-average interest rate charged on loans secured by VOIs was 13.9%, 14.4%, and 14.9% at
December 31, 2007, 2008, and 2009, respectively. Approximately 84% of our notes receivable secured
by homesites bear interest at variable rates, while the balance bears interest at fixed rates. The
weighted-average interest rate charged on loans secured by homesites was 12.1%, 10.1%, and 8.8% at
December 31, 2007, 2008, and 2009, respectively.
Our VOI loans are generally secured by property located in Florida, Louisiana, Nevada, New Jersey,
Michigan, Missouri, Nevada, Pennsylvania, South Carolina, Tennessee, Virginia, Wisconsin, and
Aruba. The majority of Bluegreen Communities notes receivable are secured by homesites in Georgia,
Texas, and Virginia.
13
The table below sets forth the activity in our allowance for uncollectible notes receivable
for 2008 and 2009 (in thousands):
Year Ended | ||||||||
December 31, | ||||||||
2008 | 2009 | |||||||
Balance, beginning of year |
$ | 17,458 | $ | 52,029 | ||||
Provision for loan losses |
76,079 | 31,641 | ||||||
Less: Allowance on sold receivables |
(10,964 | ) | | |||||
Less: Write-offs of uncollectible receivables |
(30,544 | ) | (36,844 | ) | ||||
Balance, end of year |
$ | 52,029 | $ | 46,826 | ||||
Installments due on our notes receivable during each of the five years subsequent to December 31,
2008 and 2009, and thereafter are set forth below (in thousands):
2008 | 2009 | |||||||
Due in 1 year |
$ | 58,989 | $ | 44,969 | ||||
Due in 2 years |
23,988 | 26,793 | ||||||
Due in 3 years |
27,537 | 30,447 | ||||||
Due in 4 years |
31,473 | 34,416 | ||||||
Due in 5 years |
35,712 | 38,374 | ||||||
Thereafter |
214,974 | 181,134 | ||||||
Total |
$ | 392,673 | $ | 356,133 | ||||
The following table summarizes our allowance for loan losses by division as of December 31, 2008
and 2009 (dollars in thousands):
Bluegreen | Bluegreen | |||||||||||
Resorts | Communities | Total | ||||||||||
December 31, 2008: |
||||||||||||
Notes receivable |
$ | 388,014 | $ | 4,659 | $ | 392,673 | ||||||
Allowance for loan losses |
(51,785 | ) | (244 | ) | (52,029 | ) | ||||||
Notes receivable, net |
$ | 336,229 | $ | 4,415 | $ | 340,644 | ||||||
Allowance as a % of gross notes
receivable |
13 | % | 5 | % | 13 | % | ||||||
December 31, 2009: |
||||||||||||
Notes receivable |
$ | 351,232 | $ | 4,901 | $ | 356,133 | ||||||
Allowance for loan losses |
(46,302 | ) | (524 | ) | (46,826 | ) | ||||||
Notes receivable, net |
$ | 304,930 | $ | 4,377 | $ | 309,307 | ||||||
Allowance as a % of gross notes
receivable |
13 | % | 11 | % | 13 | % | ||||||
14
3. Sales of Notes Receivable
Sales of VOI notes receivable through qualified special purpose finance entities during the years
ended December 31, 2007 and 2008, were as follows (in millions):
Year Ended December 31, 2007
Aggregate | ||||||||||||||||
Principal | Initial Fair | |||||||||||||||
Balance of | Value of | |||||||||||||||
Notes | Purchase | Gain | Retained | |||||||||||||
Facility | Receivable | Price | Recognized | Interest | ||||||||||||
2006-A GE Purchase Facility |
$ | 66.9 | $ | 60.2 | $ | 10.6 | $ | 8.3 | ||||||||
2007 Term Securitization |
200.0 | 168.9 | 28.8 | 36.3 | ||||||||||||
Total |
$ | 266.9 | $ | 229.1 | $ | 39.4 | $ | 44.6 | ||||||||
Year Ended December 31, 2008
Aggregate | ||||||||||||||||
Principal | Initial Fair | |||||||||||||||
Balance of | Value of | |||||||||||||||
Notes | Purchase | Gain | Retained | |||||||||||||
Facility | Receivable | Price | Recognized | Interest | ||||||||||||
2008 Term Securitization |
$ | 68.6 | $ | 60.0 | $ | 8.2 | $ | 11.7 | ||||||||
In connection with these transactions, we retained subordinated tranches and rights to excess
interest spread and account for these assets and interest as retained interests. The following
assumptions were used to measure the initial fair value of our retained interest in notes
receivable sold for each of the periods listed above:
For the year ended | ||||||||
December 31, | ||||||||
2007 | 2008 | |||||||
Prepayment rates |
29% - 11 | % | 31% - 17 | % | ||||
Loss severity rates |
38% - 72 | % | 38 | % | ||||
Default rates |
12% - 1 | % | 7.2% - 1.0 | % | ||||
Discount rates |
9% - 12.6 | % | 13.4 | % |
The assumptions take into account our intended actions relating to our right to either acquire or
substitute for defaulted loans, pursuant to the terms of each transaction.
We did not sell any of our notes receivable in 2009.
See Note 4 Retained Interest in Notes Receivable Sold below for further discussion of our
retained interest.
15
4. Retained Interests in Notes Receivable Sold
Our retained interests in notes receivable sold, which are classified as available-for-sale
investments, and their associated unrealized gain (loss) are set forth below (in thousands):
Gross | ||||||||||||
Amortized | Unrealized | |||||||||||
As of December 31, 2008: | Cost | Gain (Loss) | Fair Value | |||||||||
2002 Term Securitization |
$ | 7,505 | $ | | $ | 7,505 | ||||||
2004 Term Securitization |
8,508 | 1,037 | 9,545 | |||||||||
2004 GE Purchase Facility |
3,380 | 78 | 3,458 | |||||||||
2005 Term Securitization |
16,267 | | 16,267 | |||||||||
2006 GE Purchase Facility |
16,177 | (1,687 | ) | 14,490 | ||||||||
2006 Term Securitization |
13,730 | 670 | 14,400 | |||||||||
2007 Term Securitization |
31,145 | 5,029 | 36,174 | |||||||||
2008 Term Securitization |
11,437 | 301 | 11,738 | |||||||||
Total |
$ | 108,149 | $ | 5,428 | $ | 113,577 | ||||||
Gross | ||||||||||||
Amortized | Unrealized | |||||||||||
As of December 31, 2009: | Cost | Gain (Loss) | Fair Value | |||||||||
2004 Term Securitization |
$ | 7,731 | $ | 391 | $ | 8,122 | ||||||
2004 GE Purchase Facility (1) |
3,864 | (598 | ) | 3,266 | ||||||||
2005 Term Securitization |
11,852 | 834 | 12,686 | |||||||||
2006 GE Purchase Facility (2) |
15,408 | (2,328 | ) | 13,080 | ||||||||
2006 Term Securitization |
10,107 | 573 | 10,680 | |||||||||
2007 Term Securitization (1) |
20,220 | (211 | ) | 20,009 | ||||||||
2008 Term Securitization |
10,098 | 372 | 10,470 | |||||||||
Total |
$ | 79,280 | $ | (967 | ) | $ | 78,313 | |||||
(1) | This security has been in a continuous unrealized loss position for less than 12 months. | |
(2) | This security has been in a continuous unrealized loss position for more than 12 months. |
The following assumptions (which are classified as Level 3 inputs under ASC 820) were used to
measure the fair value of the above retained interests as of December 31, 2008 and 2009:
As of December 31, | ||||||||
2008 | 2009 | |||||||
Prepayment rates |
23% - 4 | % | 20% - 3 | % | ||||
Loss severity rates |
3% - 38 | % | 18% - 38 | % | ||||
Default rates |
12% - 0 | % | 7% - 0 | % | ||||
Discount rates |
19.5 | % | 24.5 | % |
These assumptions take into account our intended actions, which can change from time to time,
relating to our right to either repurchase or substitute for defaulted loans, pursuant to the terms
of each transaction.
The net unrealized gain (loss) on our retained interests in notes receivable sold, which is
presented as a separate component of our shareholders equity net of income taxes, was a gain of
approximately $3.2 million and a loss of approximately $0.6 million as of December 31, 2008 and
2009, respectively. Our maximum exposure to loss as a result of our involvement with our qualified
special purpose finance subsidiaries described below is the value of our retained interest.
During the years ended December 31, 2007, 2008, and 2009, we recorded charges for
other-than-temporary decreases in the fair value of certain of our retained interest in notes
receivable sold totaling approximately $2.4
16
million, $5.0 million, and $1.1 million, respectively.
The decrease in the fair value of our retained interest in notes receivable sold, primarily
resulted from an increase in the discount rates applied to estimated future cash flows on our
retained interests to reflect current interest rates in the securitization market and unfavorable
changes in the amount and timing of estimated future cash flows. These charges have been netted
against interest income on our consolidated statements of operations.
In May 2009, we, in our capacity as servicer of the 2002 Term Securitization, exercised our
servicer option, which caused the full redemption of all classes of notes issued under the 2002
Term Securitization. As a result of this exercise and the ultimate redemption, we exchanged cash
of approximately $4.2 million and the retained interest in the 2002 Term Securitization for notes
receivable and VOI inventory with an estimated fair value totaling approximately $17.9 million.
On April 1, 2009, we adopted the provisions of FASB ASC 325-40 (previously FAS 115-2), which
amended existing requirements for measuring and disclosing other-than-temporary impairment of debt
securities and retained interests in securities classified as available-for-sale investments.
Among other changes, if a holder has the positive
intent and ability to hold a security to maturity, the other-than-temporary impairment recognized
in earnings should be equal to the amount representing credit loss, with any remaining loss being
unrealized and included as a component of equity. Since we have the positive intent and ability to
hold all of our retained interests in notes receivable sold through maturity, upon the adoption of
FASB ASC 325-40, we recorded additional unrealized losses of $6.8 million in accumulated other
comprehensive income related to other-than-temporary impairments previously recognized in earnings
through a cumulative-effect adjustment to our retained earnings.
We measure credit loss based upon the performance indicators of the underlying assets of the
retained interest in notes receivable sold. As of December 31, 2009, the aggregate amount of
unrealized losses in accumulated other comprehensive loss was $3.1 million.
The following table is a rollforward for the year ended December 31, 2009 of the amount of other
comprehensive loss on our retained interest in notes receivable sold related to credit losses for
which a portion of such losses was recognized in earnings (in thousands):
Balance at April 1, 2009 of the amount related to credit losses for
which a portion of an other-than-temporary impairment was
recognized in other comprehensive income |
$ | | ||
Additions for the amount related to the credit losses for which an
other-than-temporary impairment was not previously recognized |
1,777 | |||
Reductions for other-than-temporary impairment realized in
earnings, net of tax |
(311 | ) | ||
Balance at December 31, 2009 of the amount related to credit losses
for which a portion of an other-than-temporary impairment was
recognized in other comprehensive income |
$ | 1,466 | ||
The contractual maturities of our retained interest in notes receivable sold as of December 31,
2009, based on the final maturity dates of the underlying notes receivable, are as follows:
Amortized | ||||||||
Cost | Fair Value | |||||||
After one year but within five |
$ | 7,731 | $ | 8,122 | ||||
After five years but within ten |
71,549 | 70,191 | ||||||
Total |
$ | 79,280 | $ | 78,313 | ||||
17
The following table shows the hypothetical fair value of our retained interests in notes
receivable sold based on a 10% and a 20% adverse change in each of the assumptions used to measure
the fair value of those retained interests (dollars in thousands):
Hypothetical Fair Value at December 31, 2009 | ||||||||||||||||||||||||||||||||
Prepayment Rate | Loss Severity Rate | Default Rate | Discount Rate | |||||||||||||||||||||||||||||
Adverse Change Percentage | 10% | 20% | 10% | 20% | 10% | 20% | 10% | 20% | ||||||||||||||||||||||||
2004 Term Securitization |
$ | 8,086 | $ | 8,050 | $ | 8,074 | $ | 8,025 | $ | 8,098 | $ | 8,073 | $ | 7,851 | $ | 7,596 | ||||||||||||||||
2004 GE Purchase Facility |
3,249 | 3,233 | 3,259 | 3,252 | 3,258 | 3,250 | 3,130 | 3,005 | ||||||||||||||||||||||||
2005 Term Securitization |
12,661 | 12,637 | 12,347 | 12,009 | 12,107 | 11,535 | 12,080 | 11,522 | ||||||||||||||||||||||||
2006 GE Purchase Facility |
13,041 | 13,002 | 12,862 | 12,644 | 12,794 | 12,512 | 12,499 | 11,968 | ||||||||||||||||||||||||
2006 Term Securitization |
10,642 | 10,605 | 10,404 | 10,129 | 10,192 | 9,712 | 10,167 | 9,700 | ||||||||||||||||||||||||
2007 Term Securitization |
20,008 | 20,008 | 19,498 | 18,987 | 19,103 | 18,211 | 19,026 | 18,132 | ||||||||||||||||||||||||
2008 Term Securitization |
10,465 | 10,461 | 10,302 | 10,135 | 10,250 | 10,034 | 10,137 | 9,833 |
The table below summarizes certain cash flows received from and (paid to) our qualifying special
purpose finance subsidiaries (in thousands):
For the Year Ended December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
Proceeds from sales of notes receivables |
$ | 229,067 | $ | 55,705 | $ | | ||||||
Collections on previously sold notes receivables |
(173,448 | ) | (175,551 | ) | (136,685 | ) | ||||||
Servicing fees received |
8,697 | 9,436 | 7,612 | |||||||||
Purchases of defaulted receivables |
(3,420 | ) | (3,547 | ) | (920 | ) | ||||||
Resales of foreclosed assets |
(44,786 | ) | (50,314 | ) | (14,802 | ) | ||||||
Remarketing fees received |
25,858 | 29,581 | 8,187 | |||||||||
Cash received on retained interests in notes
receivable sold |
35,949 | 44,884 | 43,741 | |||||||||
Cash paid to fund required reserve accounts |
(10,044 | ) | (8,288 | ) | (1,148 | ) | ||||||
Purchases of upgraded accounts |
(28,251 | ) | (47,045 | ) | (516 | ) |
In addition to the cash paid for the purchase of defaulted receivables included in the above table,
we also acquire defaulted receivables from our qualifying special purpose finance subsidiaries in
exchange for unencumbered receivables (a process known as substitution). During the years ended
December 31, 2008 and 2009, we acquired notes receivable totaling $32.2 million and $66.5 million,
respectively, through substitutions. Although we are not obligated to repurchase or substitute for
defaulted notes receivable from our qualifying special purpose finance subsidiaries, we may do so
from time to time. The VOIs securing the defaulted receivables received by us in this manner are
typically recovered and put back in VOI inventory and resold in the normal course of business.
Quantitative information about the portfolios of VOI notes receivable previously sold without
recourse in which we hold the above retained interests is as follows (in thousands):
As of December 31, 2009 | ||||||||||||
Total | Principal | |||||||||||
Outstanding | Amount | |||||||||||
Principal | of Sold Loans | Balance Owed | ||||||||||
Amount of | 60 or More | to Note | ||||||||||
Sold Loans | Days Past Due | Holders | ||||||||||
2004 Term Securitization |
$ | 28,552 | $ | 869 | $ | 26,765 | ||||||
2004 GE Purchase Facility |
13,870 | 400 | 12,072 | |||||||||
2005 Term Securitization |
81,261 | 2,389 | 74,822 | |||||||||
2006 GE Purchase Facility |
69,003 | 2,353 | 61,433 | |||||||||
2006 Term Securitization |
71,450 | 2,502 | 66,206 | |||||||||
2007 Term Securitization |
137,645 | 4,251 | 123,935 | |||||||||
2008 Term Securitization |
51,810 | 1,530 | 46,136 | |||||||||
Total |
$ | 453,591 | $ | 411,369 | ||||||||
18
5. Inventory
Our inventory holdings, summarized by division, are set forth below (in thousands):
As of December 31, | ||||||||
2008 | 2009 | |||||||
Bluegreen Resorts |
$ | 342,779 | $ | 370,470 | ||||
Bluegreen Communities |
160,490 | 145,447 | ||||||
$ | 503,269 | $ | 515,917 | |||||
Bluegreen Resorts inventory as of December 31, 2008 consisted of $42.3 million of real estate for
future development, $87.9 million of construction-in-progress and $212.6 million of completed VOI
units. Bluegreen Resorts inventory as of December 31, 2009 consisted of $91.9 million of real
estate for future development, $8.2 million of construction-in-progress and $270.4 million of
completed VOI units.
As a result of our decreased sales volume and its impact of extending the anticipated sell-out
period of certain of our projects, we recorded a charge to cost of real estate sales of
approximately $5.2 million and $13.2 million during the years ended December 31, 2008 and 2009,
respectively, to write-down the inventory balances of certain of our completed Communities
properties to their estimated fair value. We calculated the estimated fair value of these impaired
properties based on our analysis of their estimated future cash flows (Level 3 input), discounted
at rates commensurate with the risk inherent in the property.
Interest capitalized to inventory during the years ended December 31, 2007, 2008, and 2009 totaled
$15.5 million, $12.8 million and $1.6 million, respectively. The interest expense reflected in our
consolidated statements of operations is net of capitalized interest.
6. Property and Equipment
Our property and equipment consisted of (dollars in thousands):
As of December 31, | ||||||||||||
Useful Life | 2008 | 2009 | ||||||||||
Office equipment, furniture and fixtures |
3-14 years | $ | 62,572 | $ | 60,657 | |||||||
Golf course land, land improvements,
buildings and equipment |
5-39 years | 33,346 | 7,591 | |||||||||
Land, buildings and building improvements |
3-31 years | 67,359 | 70,323 | |||||||||
Leasehold improvements |
2-14 years | 12,650 | 11,952 | |||||||||
Transportation and equipment |
3-5 years | 2,334 | 1,999 | |||||||||
178,261 | 152,522 | |||||||||||
Accumulated depreciation and
amortization of leasehold improvements |
(68,760 | ) | (66,957 | ) | ||||||||
Total |
$ | 109,501 | $ | 85,565 | ||||||||
19
7. Receivable-Backed Notes Payable
The table below sets forth the balances of our receivable-backed notes payable facilities (in
thousands):
As of | ||||||||||||||||||||||||
December 31, 2008 | December 31, 2009 | |||||||||||||||||||||||
Balance of | Balance of | |||||||||||||||||||||||
Pledged/ | Pledged/ | |||||||||||||||||||||||
Debt | Interest | Secured | Debt | Interest | Secured | |||||||||||||||||||
Balance | Rate | Receivables | Balance | Rate | Receivables | |||||||||||||||||||
BB&T Purchase Facility (nonrecourse) |
$ | 139,057 | 2.19 | % | $ | 167,538 | $ | 131,302 | 5.75 | % | $ | 166,562 | ||||||||||||
Liberty Bank Facility |
43,505 | 5.75 | % | 48,603 | 59,055 | 5.75 | % | 68,175 | ||||||||||||||||
GE Bluegreen/Big Cedar Receivables
Facility |
33,725 | 2.19 | % | 39,681 | 32,834 | 1.98 | % | 35,935 | ||||||||||||||||
The Wells Fargo Facility |
24,096 | 4.00 | % | 26,117 | 14,409 | 4.00 | % | 15,926 | ||||||||||||||||
GMAC Receivables Facility |
7,698 | 4.44 | % | 8,737 | 5,228 | 4.23 | % | 6,331 | ||||||||||||||||
Textron Facility |
1,036 | 6.00 | % | 1,194 | | | | |||||||||||||||||
$ | 249,117 | $ | 291,870 | $ | 242,828 | $ | 292,929 | |||||||||||||||||
BB&T Purchase Facility. On June 30, 2009, we amended and restated an existing timeshare notes
receivable purchase facility with Branch Banking and Trust Company (BB&T) (the BB&T Purchase
Facility), extending the revolving advance period under the facility to June 29, 2010. Should a
takeout financing (as defined in the applicable facility agreements) occur prior to June 29,
2010, the facility limit will either remain at the current facility limit of $150.0 million or
decrease to $100.0 million, under certain circumstances. The BB&T Purchase Facility provides for
the sale of our timeshare receivables at an advance rate of 67.5% of the principal balance up to a
cumulative purchase price of $150.0 million on a revolving basis, subject to the terms of the
facility, eligible collateral and customary terms and conditions. While ownership of the
receivables is transferred for legal purposes, the transfers of receivables under the facility are
accounted for as a financing transaction for financial accounting purposes. Accordingly, the
receivables will continue to be reflected as assets and the associated obligations will be
reflected as liabilities on our balance sheet. The BB&T Purchase Facility is nonrecourse and was
not guaranteed by us.
The existing outstanding balance as of June 30, 2009 initially remained at its then current advance
rate of 82.4%; however, we will equally share with BB&T in the excess cash flows generated by the
receivables sold (excess meaning after customary payments of fees, interest and principal under the
facility) until the advance rate on the existing receivables reduces to 67.5% as the outstanding
balance amortizes. As of December 31, 2009, the outstanding balance of the BB&T Purchase Facility
reflected an advance of 80.7% on the receivables transferred to BB&T under the facility. The
interest rate on the BB&T Purchase Facility is the prime rate plus 2.5%.
During 2009, we pledged $31.9 million of VOI notes receivable to this facility and received cash
proceeds of $24.5 million. We also made repayments of $32.2 million on the facility during 2009.
Liberty Bank Facility. During August 2008, we entered into a $75.0 million revolving timeshare
receivables hypothecation facility with a syndicate of lenders led by Liberty Bank and assembled by
Wellington Financial. The facility provides for a 90% advance on eligible receivables pledged
under the facility during a two-year period ending on August 27, 2010, subject to customary terms
and conditions. Amounts borrowed under the facility and interest incurred will be repaid as cash
is collected on the pledged receivables, with the remaining balance, if any, due on August 27,
2014. The facility bears interest at a rate equal to the one-month LIBOR plus 2.5%, subject to a
floor of 5.75%. As the Liberty Bank facility is revolving, availability under the facility
increases up to the $75.0 million facility limit as cash is received on the VOI notes receivable
collateralized under the facility and Liberty Bank is repaid through the expiration of the advance
period, pursuant to the terms of the facility.
20
During 2009, we pledged $33.5 million of VOI notes receivable to this facility and received cash
proceeds of $30.9 million. We also made repayments of $15.3 million under the facility during
2009.
In 2010, we pledged $6.8 million of VOI notes receivable to Liberty and received cash proceeds of
$6.1 million. Subsequent to this borrowing, and based on subsequent repayments, we had $13.8
million in availability under this facility.
The GE Bluegreen/Big Cedar Receivables Facility. In April 2007, the Bluegreen/Big Cedar Joint
Venture entered into a $45.0 million revolving VOI receivables credit facility with GE (the GE
Bluegreen/Big Cedar Receivables Facility). Bluegreen Corporation has guaranteed the full payment
and performance of the Bluegreen/Big Cedar Joint Venture in connection with the GE Bluegreen/Big
Cedar Receivables Facility. The advance period under this facility expired on April 16, 2009, and
all outstanding borrowings mature no later than April 16, 2016. The facility has detailed
requirements with respect to the eligibility of receivables for inclusion and other conditions to
funding. The 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 facility. Indebtedness under the facility bears interest adjusted monthly
at a rate equal to the 30 day LIBOR rate plus 1.75%.
During 2009, we pledged $6.0 million of VOI notes receivable as collateral for this facility and
received cash proceeds of $5.8 million. In addition, during the first quarter of 2009, we received
approximately $4.7 million which represented an additional borrowing to up to the 97% borrowing
base, without pledging any additional VOI receivables. During 2009, we repaid $11.4 million on
this facility.
The Wells Fargo Facility. We have a credit facility with Wells Fargo Foothill, LLC (Wells
Fargo). Historically, we have primarily used this facility for borrowings collateralized by the
pledge of certain VOI receivables which typically have been our one-year term receivables. The
borrowing period for advances on eligible receivables expired on December 31, 2009, and the
maturity date of all borrowings is December 31, 2010. The advance rate ranges from 85% to 90% of
certain VOI receivables. Borrowings under this facility are subject to eligible collateral and
customary terms and conditions. The interest rate charged on outstanding receivable borrowings
under the facility, as amended, is the prime lending rate plus 0.25% when the average monthly
outstanding loan balance under certain sub-lines is greater than or equal to $15.0 million. If the
average monthly outstanding loan balance under certain sub-lines 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.
During 2009, we pledged $18.5 million of notes receivable to this facility and received cash
proceeds of $16.6 million. We also made repayments of $27.4 million during 2009.
8. Lines-of-Credit and Notes Payable
We have outstanding borrowings with various financial institutions and other lenders, which have
been used to finance the acquisition and development of our inventory and to fund operations.
Financial data related to our borrowing facilities is set forth below (dollars in thousands):
As of | ||||||||||||||||||||
December 31, 2008 | December 31, 2009 | |||||||||||||||||||
Carrying | Carrying | |||||||||||||||||||
Amount of | Amount of | |||||||||||||||||||
Interest | Pledged | Interest | Pledged | |||||||||||||||||
Balance | Rate | Assets | Balance | Rate | Assets | |||||||||||||||
The GMAC AD&C Facility |
$ | 99,776 | 4.94% | $ | 149,814 | $ | 87,415 | 4.73% | $ | 145,031 | ||||||||||
The GMAC Communities Facility |
59,372 | 4.25% | 126,293 | 38,479 | 10.00% | 117,872 | ||||||||||||||
Wachovia Notes Payable |
30,347 | 2.44 2.79% | 46,542 | 24,497 | 2.23 2.58% | 44,686 | ||||||||||||||
Wachovia Line-of-Credit |
9,949 | 2.19% | | 15,700 | 1.98% | | ||||||||||||||
Textron AD&C Facility |
15,456 | 4.50 4.75% | 24,887 | 12,757 | 4.50 4.75% | 27,582 | ||||||||||||||
Fifth Third Bank Note Payable |
3,400 | 3.44% | 4,841 | 3,381 | 3.23% | 4,841 | ||||||||||||||
Other |
4,439 | 5.86 11.03% | 5,249 | 3,552 | 4.25 12.50% | 3,851 | ||||||||||||||
Total |
$ | 222,739 | $ | 357,626 | $ | 185,781 | $ | 343,863 | ||||||||||||
21
The table below sets forth the contractual minimum principal payments required on our
lines-of-credit and notes payable and capital lease obligations for each of the five years and
thereafter subsequent to December 31, 2009. Such minimum contractual payments may differ from
actual payments due to the effect of principal payments required on a homesite or VOI release basis
for certain of the above obligations (in thousands):
2010 |
$ | 73,071 | ||
2011 |
51,841 | |||
2012 |
50,838 | |||
2013 |
4,147 | |||
2014 |
688 | |||
Thereafter |
5,196 | |||
Total |
$ | 185,781 | ||
The GMAC Communities Facility. We have an outstanding balance under a credit facility (the GMAC
Communities Facility) historically used to finance our Bluegreen Communities real estate
acquisitions and development activities. The GMAC Communities Facility is secured by the real
property homesites (and personal property related thereto) at the following Bluegreen Communities
projects (the Secured Projects): Havenwood at Hunters Crossing (New Braunfels, Texas); The
Bridges at Preston Crossings (Grayson County, Texas); King Oaks (College Station, Texas); Vintage
Oaks at the Vineyard (New Braunfels, Texas); and Sanctuary Cove at St. Andrews Sound (Waverly,
Georgia). In addition, the GMAC Communities Facility is secured by certain of our golf courses:
The Bridges at Preston Crossings (Grayson County, Texas) and Sanctuary Cove (Waverly, Georgia).
The period during which we can add additional projects to the GMAC Communities Facility has
expired.
On July 1, 2009, we amended this credit facility extending the maturity of the facility to December
31, 2012. In connection with the amendment, we repaid $10.0 million of the outstanding balance
under the GMAC Communities Facility at closing, and agreed to make minimum quarterly cumulative
payments commencing in January 2010 through the final maturity of December 31, 2012. Principal
payments are effected through agreed-upon release prices as real estate collateralizing the GMAC
Communities Facility is sold, subject to the minimum required amortization discussed above. The
interest rate on the GMAC Communities Facility was increased to the prime rate plus 2%, subject to
the following floors: (1) 10% until the balance of the loan has been reduced by a total of $25
million (inclusive of the $10 million principal pay down referred to above) from the closing date
balance, (2) 8% until the balance of the loan is less than or equal to $20 million, and (3) 6%
thereafter. In addition to the existing residential community projects and golf courses which
already collateralized the GMAC Communities Facility, we pledged three of our other golf courses as
additional collateral for the facility. We also agreed to pay certain fees and expenses in
connection with the amendment, a portion of which was deferred until the maturity date and may be
waived under certain circumstances.
In connection with the previously discussed sale of our golf courses at Carolina National
(Southport, North Carolina), the Preserve at Jordan Lake (Chapel Hill, North Carolina), Brickshire
(New Kent, Virginia), and Chapel Ridge (Pittsboro, NC) during December 2009, we repaid $7.1 million
under this facility as a release payment for the sold courses which had been part of the collateral
for the GMAC Communities Facility. During 2009, we repaid a total of $20.9 million under this
facility.
The GMAC AD&C Facility. This facility was used to finance the acquisition and development of
certain of our resorts and currently has three outstanding project loans. The maturity date for
the project loan collateralized by our Bluegreen Club 36TM resort in Las Vegas, Nevada
(the Club 36 Loan), is June 30, 2012 approximately $70.1 million was outstanding on this loan as
of December 31, 2009. Maturity dates for two project loans related to our Fountains resort in
Orlando, Florida (the Fountains Loans) are September 2010 and March 2011, with $10.6 million and
$6.7 million, respectively, outstanding as of December 31, 2009. Principal payments are effected
through agreed-upon release prices as timeshare interests in the resorts collateralizing the GMAC
AD&C Facility are sold, subject to periodic minimum required amortization on the Club 36 Loan and
the Fountains Loans. The facility bears interest at a rate equal to the 30-day LIBOR plus 4.50%.
In addition, in July 2009 we pledged two of our existing undeveloped resort properties as
additional collateral under the GMAC AD&C Facility. During 2009,
22
we repaid $12.4 million of the outstanding balance under this facility. As of December 31, 2009,
we had no availability under this facility.
Textron AD&C Facility. In April 2008, Bluegreen Vacations Unlimited, Inc. (BVU), our wholly-owned
subsidiary, entered into a $75.0 million, revolving master acquisition, development and
construction facility loan agreement (the Textron AD&C Facility) with Textron Financial
Corporation (Textron). The Textron AD&C Facility has historically been used to facilitate the
borrowing of funds for resort acquisition and development activities. We have guaranteed all
sub-loans under the master agreement. Interest on the Textron AD&C Facility is equal to the prime
rate plus 1.25% 1.50% and is due monthly.
On October 28, 2009, we entered into an amendment to the Textron AD&C Facility and a sub-loan under
the Facility used to fund the acquisition and development of our Odyssey Dells Resort (the Odyssey
Sub-Loan). The amendment to the Odyssey Sub-Loan extended the final maturity of outstanding
borrowings under the Odyssey Sub-Loan to December 31, 2011, and revised the periodic minimum
required principal amortization. As amended, our next minimum required principal payment will be
approximately $0.4 million in March 2010 with additional minimum required principal payments of
$1.0 million per quarter thereafter through maturity. We will continue to pay Textron principal
payments as we sell each timeshare interests that collateralize the Odyssey Sub-Loan, and these
payments will count towards the minimum required principal payments. As of December 31, 2009, our
outstanding borrowings under the Sub-Loan totaled approximately $7.0 million.
The Textron AD&C Facility originally had a facility limit of $75 million which represented the
maximum amount of credit that Textron would extend for resort acquisition and development
activities, subject to Textrons further approval of sub-loans for specific projects. As of
September 30, 2009, the remaining available credit under the Textron Facility was approximately
$50.6 million. We had previously substantially completed our development activities on existing
projects under the Textron AD&C Facility and BVU had no plans to acquire additional projects prior
to the expiration of the Textron AD&C Facilitys project approval period in April 2010. Therefore,
in exchange for the extended maturities on the Odyssey Sub-Loan, we agreed to amend the Textron
Facility to terminate our remaining availability.
The maturity date of the other outstanding sub-loan under the Textron AD&C Facility, subject to
minimum required amortization during the periods prior to maturity, is April 2013. Our outstanding
balance on the sub-loan used to acquire our Atlantic Palace Resort in Atlantic City, New Jersey was
$5.8 million as of December 31, 2009.
During 2009, we borrowed $3.8 million and repaid $6.5 million under this facility.
The Wachovia Notes Payable. As of December 31, 2009, we had approximately $24.5 million of
outstanding debt to Wachovia Bank, N.A. (Wachovia) under various notes payable collateralized by
certain of our timeshare resorts or sales offices (the Wachovia Notes Payable). We extended the
maturity of a $10.5 million note payable to Wachovia collateralized by our Williamsburg resort to
April 30, 2010 and the other Wachovia Notes Payable have maturities ranging from July 2010 through
May 2021. We have a non-binding term sheet with Wachovia to consolidate and refinance the Wachovia
Notes Payable, making the maturity 24 months after the closing of the extension. The term sheet
also would consolidate and refinance the Wachovia Line-of-credit (See section below Unsecured
Credit Facility Wachovia Line-of-Credit) which had a balance of $15.7 million as of December 31,
2009, and which is currently due on April 30 , 2010. The term sheet required that we make release
principal payments as the VOIs which will collateralize the extended loan are sold, subject to a
minimum monthly amortization. The extended loan would bear interest at the 3-month LIBOR + 6.87%.
The term sheet contemplates us providing additional collateral for this facility and amending
covenants, other terms and conditions. There are no assurances that the transactions contemplated
by the term sheet will occur on these terms, if at all.
In February 2010, we made a required principal payment of $2.5 million related to one of the
Wachovia Note Payable loans.
For the year ended December 31, 2009, we determined that we had failed to comply with an interest
coverage ratio covenant contained in this note. In March 2010, we received a waiver of
non-compliance for this covenant from Wachovia.
The Wachovia Line-of-Credit. We have an unsecured line-of-credit with Wachovia Bank, N.A. Amounts
borrowed under the line bear interest at 30-day LIBOR plus 1.75% (1.98% at December 31, 2009).
Interest is due monthly. The line-of-credit agreement contains certain covenants and conditions
typical of arrangements of this type.
23
On July 30, 2009, we extended the maturity of this line-of-credit for 90 days to October 30, 2009
and paid $2.2 million reducing the outstanding balance under the line-of-credit to $15.7 million.
In connection with the extension, we agreed to amend the line-of-credit to terminate any future
availability. Subsequently, the maturity of this line-of-credit was extended to April 30, 2010,
and we have a non-binding term sheet with Wachovia to refinance the outstanding balance of debt
with Wachovia Bank, extending the maturities to occur over a 24-month period. Execution of the
term sheet would consolidate all Wachovia Notes Payable and the Wachovia Line-of-Credit into one
term loan, which bears interest at the 3-month LIBOR + 6.87%. The term sheet contemplates us
providing additional collateral for this facility and amending covenants, other terms and
conditions. There can be no assurances that such refinancing will be obtained on the terms
contemplated in the term sheet, if at all, as this transaction is subject to further approval and
certain conditions precedent.
During 2009, we borrowed $8.0 million under this line-of-credit for general corporate purposes.
There is no further availability under the Wachovia Line-of-Credit. In March 2010, we made a
required payment of $1.2 million relating to the Wachovia Line-of-Credit.
Fifth Third Bank Note Payable. In April 2008, we purchased a building in Myrtle Beach, South
Carolina. The purchase price was $4.8 million, of which $3.4 million was financed by a note
payable to Fifth Third Bank. The note payable allows for total borrowings of $7.1 million. The
remaining $3.7 million was available to fund refurbishment of the building through October 2009.
Interest is payable monthly through the earlier of the construction completion date or October 31,
2009, and bears interest at a rate equal to the one-month LIBOR plus 3.00%. Interest and principal
payments are currently made monthly until maturity. The note payable matures in April 2023.
9. Junior Subordinated Debentures
We have formed statutory business trusts (collectively, the Trusts), each of which issued trust
preferred securities and invested the proceeds thereof in our junior subordinated debentures. The
Trusts are variable interest entities in which we are not the primary beneficiary as defined by ASC
810. Accordingly, we do not consolidate the operations of the Trusts; instead, the Trusts are
accounted for under the equity method of accounting. In each of these transactions, the applicable
Trust issued trust preferred securities as part of a larger pooled trust securities offering which
was not registered under the Securities Act of 1933. The applicable Trust then used the proceeds
from issuing the trust preferred securities to purchase an identical amount of junior subordinated
debentures from us. Interest on the junior subordinated debentures and distributions on the trust
preferred securities are payable quarterly in arrears at the same interest rate. Distributions on
the trust preferred securities are cumulative and based upon the liquidation value of the trust
preferred security. The trust preferred securities are subject to mandatory redemption, in whole
or in part, upon repayment of the junior subordinated debentures at maturity or their earlier
redemption. The junior subordinated debentures are redeemable in whole or in part at the Companys
option at any time after five years from the issue date or sooner following certain specified
events. In addition, we made an initial equity contribution to each Trust in exchange for its
common securities, all of which are owned by us, and those proceeds were also used to purchase an
identical amount of junior subordinated debentures from us. The terms of each Trusts common
securities are nearly identical to the trust preferred securities.
24
We had the following junior subordinated debentures outstanding at December 31, 2008 and 2009
(dollars in thousands):
Outstanding | ||||||||||||||||||||
Amount | Initial | Fixed | Variable | Beginning | ||||||||||||||||
of Junior | Equity | Interest | Interest | Optional | ||||||||||||||||
Subordinated | In Trust | Rate | Rate | Redemption | Maturity | |||||||||||||||
Trust | Debentures | (3) | Issue Date | (1) | (2) | Date | Date | |||||||||||||
Bluegreen Statutory Trust I
|
$ | 23,196 | $ | 696 | 3/15/05 | 9.160 | % | 3-month LIBOR + 4.90% | 3/30/10 | 3/30/35 | ||||||||||
Bluegreen Statutory Trust
II
|
25,774 | 774 | 5/04/05 | 9.158 | % | 3-month LIBOR + 4.85% | 7/30/10 | 7/30/35 | ||||||||||||
Bluegreen Statutory Trust
III
|
10,310 | 310 | 5/10/05 | 9.193 | % | 3-month LIBOR + 4.85% | 7/30/10 | 7/30/35 | ||||||||||||
Bluegreen Statutory Trust
IV
|
15,464 | 464 | 4/24/06 | 10.130 | % | 3-month LIBOR + 4.85% | 6/30/11 | 6/30/36 | ||||||||||||
Bluegreen Statutory Trust V
|
15,464 | 464 | 7/21/06 | 10.280 | % | 3-month LIBOR + 4.85% | 9/30/11 | 9/30/36 | ||||||||||||
Bluegreen Statutory Trust
VI
|
20,619 | 619 | 2/26/07 | 9.842 | % | 3-month LIBOR + 4.80% | 4/30/12 | 4/30/37 | ||||||||||||
$ | 110,827 | $ | 3,327 | |||||||||||||||||
(1) | Both the trust preferred securities and junior subordinated debentures bear interest at a fixed interest rate from the issue date through the beginning optional redemption date. | |
(2) | Both the trust preferred securities and junior subordinated debentures bear interest at a variable interest rate from the beginning optional redemption date through the maturity date. | |
(3) | Initial equity in trust is recorded as part of other assets in our consolidated balance sheets. |
10. Fair Value of Financial Instruments
We used the following methods and assumptions in estimating the fair values of our financial
instruments:
Cash and cash equivalents: The amounts reported in our consolidated balance sheets for cash and
cash equivalents approximate fair value.
Contracts receivable: The amounts reported in our consolidated balance sheets for contracts
receivable approximate fair value. Contracts receivable related to unclosed homesite sales are
non-interest bearing and generally convert into cash or an interest-bearing mortgage note
receivable within thirty to forty-five days.
Notes receivable: The fair values of our notes receivable are based on estimated future cash flows
considering contractual payments and estimates of prepayments and defaults, discounted at a market
rate.
Retained interests in notes receivable sold: Our retained interests in VOI notes receivable sold
are carried at fair value. See Note 4 for additional information on the methods and assumptions
used to estimate the fair value of these financial instruments.
Lines-of-credit, notes payable, and receivable-backed notes payable: The amounts reported in our
consolidated balance sheets approximate fair value for indebtedness that provides for variable
interest rates.
25
Junior subordinated debentures: The fair values of our junior subordinated debentures were based
on the discounted value of contractual cash flows at a market discount rate or market price quotes
from the over-the-counter bond market.
The carrying amounts and estimated fair value of our financial instruments are as follows (in
thousands):
As of December 31, 2008 | As of December 31, 2009 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||
Cash and cash equivalents |
$ | 81,775 | $ | 81,775 | $ | 94,399 | $ | 94,399 | ||||||||
Contracts receivable, net |
7,452 | 7,452 | 4,826 | 4,826 | ||||||||||||
Notes receivable, net |
340,644 | 340,644 | 309,307 | 279,208 | ||||||||||||
Retained interests in notes receivable sold |
113,577 | 113,577 | 78,313 | 78,313 | ||||||||||||
Lines-of-credit, notes payable, and receivable-backed notes payable |
471,856 | 471,856 | 428,609 | 428,609 | ||||||||||||
Junior subordinated debentures |
110,827 | 47,161 | 110,827 | 60,522 |
11. Common Stock and Stock Option Plans
Bluegreen Corporation Common Stock
At the Annual Meeting of our Shareholders held on November 4, 2009, our shareholders approved an
amendment to Article 3 of our Restated Articles of Organization to increase the number of
authorized shares of Common Stock from 90 million shares to 140 million shares. The amendment was
previously approved and recommended for shareholder approval by our Board of Directors. The
amendment had no impact on the relative rights, powers and limitations of the Common Stock, and
holders of Common Stock do not have preemptive rights to acquire or subscribe for any of the
additional shares of Common Stock authorized by the amendment.
Bluegreen Corporation 2008 Stock Incentive Plan
During 2008, the Board of Directors and shareholders approved our 2008 Stock Incentive Plan
(referred to within this section as the Plan), which provides for the issuance of restricted
stock awards and for the grant of options to purchase shares of our Common Stock. The Plan
previously limited the total number of shares of Common Stock available for grant under the Plan to
4 million shares. Any shares subject to stock awards or option grants under the plan which expire
or are terminated, forfeited, or canceled without having been exercised or vested in full, are
available for further grant under the Plan.
At the Annual Meeting of our Shareholders held on November 4, 2009, our shareholders approved an
amendment to the Plan to, among other things, increase the aggregate number of shares available for
grant under the Plan to 10 million shares and give the committee administering the Plan the
discretion to re-price previously granted stock options and/or substitute new awards for previously
granted awards which have less favorable terms, including higher exercise prices. The amendment was
previously approved and recommended for shareholder approval by our Board of Directors.
Shareholders Rights Plan
On July 27, 2006, the Board of Directors adopted rights agreement (the Rights Agreement) and
declared a dividend of one preferred share purchase right (a Right) for each outstanding share of
the Companys common stock. The Board of Directors authorized the adoption of the Rights Agreement
to protect shareholders from coercive or otherwise unfair takeover tactics. In general terms, the
Rights Agreement imposes a significant penalty upon any person or group which acquires beneficial
ownership of 10% or more of the Companys outstanding common stock without the prior approval of
the Board of Directors. Excluded from this rule is the Company, its subsidiaries, employee benefit
plans or any of its subsidiaries and any entity holding common stock for or pursuant to the terms
of any such employee benefit plan, as well as Woodbridge Holdings and its affiliates (including BFC
Financial Corporation), successors and assigns.
26
Share-Based Compensation
Under our employee stock option plans, options can be granted with various vesting periods. Options
granted to employees subsequent to December 31, 2002 vest 100% on the five-year anniversary of the
date of grant. Our options are granted at exercise prices that either equal or exceed the quoted
market price of our common stock at the respective dates of grant. All of our options expire ten
years from the date of grant.
All options granted to non-employee directors subsequent to December 31, 2002 vested either
immediately upon grant or on the five-year anniversary of the date of grant, subject to accelerated
vesting pursuant to change in control provisions included in the terms of certain grants. All
non-employee director stock options are nonqualified and expire ten years from the date of grant,
subject to alternative expiration dates under certain circumstances.
The following table lists relevant information pertaining to our grants of stock options and
restricted stock (in thousands):
Stock Option Awards | Restricted Stock Awards | |||||||||||||||
For the Year Ended | Grant Date Fair | Grant Date Fair | ||||||||||||||
December 31, 2007 | Quantity | Value | Quantity | Value | ||||||||||||
Directors |
137 | $ | 761 | 17 | $ | 200 | ||||||||||
Employees |
| | 197 | 2,358 | ||||||||||||
Total |
137 | $ | 761 | 214 | $ | 2,558 | ||||||||||
Stock Option Awards | Restricted Stock Awards | |||||||||||||||
For the Year Ended | Grant Date Fair | Grant Date Fair | ||||||||||||||
December 31, 2008 | Quantity | Value | Quantity | Value | ||||||||||||
Directors |
295 | $ | 937 | 184 | $ | 1,246 | ||||||||||
Employees |
777 | 2,518 | 1,184 | 9,208 | ||||||||||||
Total |
1,072 | $ | 3,455 | 1,368 | $ | 10,454 | ||||||||||
Stock Option Awards | Restricted Stock Awards | |||||||||||||||
For the Year Ended | Grant Date Fair | Grant Date Fair | ||||||||||||||
December 31, 2009 | Quantity | Value | Quantity | Value | ||||||||||||
Directors |
120 | $ | 221 | 92 | $ | 255 | ||||||||||
Employees |
| | | | ||||||||||||
Total |
120 | $ | 221 | 92 | $ | 255 | ||||||||||
Total stock-based compensation expense for non-employee directors and employees during the years
ended December 31, 2007, 2008, and 2009 was $2.4 million, $4.4 million and $4.4 million,
respectively. The following table sets forth certain information related to our unrecognized
compensation for our stock-based awards as of December 31, 2009:
Weighted Average | ||||||||
Remaining | Unrecognized | |||||||
As of December 31, 2009 | Recognition Period | Compensation | ||||||
(in years) | (000s) | |||||||
Stock Option Awards |
2.4 | $ | 4,261 | |||||
Restricted Stock Awards |
3.1 | $ | 8,050 |
27
Changes in our outstanding stock option plans are presented below (outstanding options and number
of shares exercisable in thousands):
Weighted | ||||||||||||||||
Average | ||||||||||||||||
Outstanding | Exercise Price | Number of Shares | Aggregate Intrinsic | |||||||||||||
Options | Per Share | Exercisable | Value | |||||||||||||
Balance at December 31, 2007 |
1,938 | $ | 11.51 | 579 | $ | 1,922 | ||||||||||
Granted |
1,072 | $ | 7.60 | |||||||||||||
Forfeited |
(241 | ) | $ | 13.51 | ||||||||||||
Expired |
(20 | ) | $ | 9.11 | ||||||||||||
Exercised |
(39 | ) | $ | 3.48 | ||||||||||||
Balance at December 31, 2008 |
2,710 | $ | 9.91 | 871 | $ | 32 | ||||||||||
Granted |
120 | $ | 2.75 | |||||||||||||
Forfeited |
(1 | ) | $ | 3.48 | ||||||||||||
Expired |
(34 | ) | $ | 7.35 | ||||||||||||
Exercised |
| $ | | |||||||||||||
Balance at December 31, 2009 |
2,795 | $ | 9.64 | 956 | $ | 7 | ||||||||||
During the years ended December 31, 2007, 2008, and 2009, the grant-date fair value of stock
options that vested was approximately $616,000, $897,000 and $221,000, respectively. The
aggregate intrinsic value of our stock options outstanding and exercisable was $32,000 and $7,300
as of December 31, 2008 and 2009, respectively. The total intrinsic value of our stock options
exercised during the years ended December 31, 2007 and 2008 was $1.1 million, and $223,000,
respectively. No stock options were exercised during 2009.
The weighted-average exercise prices and weighted-average remaining contractual lives of our
outstanding stock options at December 31, 2009 (grouped by range of exercise prices) were:
Weighted- | Weighted- | |||||||||||||||||||
Average | Weighted- | Average | ||||||||||||||||||
Number | Number of | Remaining | Average | Exercise Price | ||||||||||||||||
of Options | Vested Options | Contractual Term | Exercise Price | (Vested Only) | ||||||||||||||||
(In 000s) | (In 000s) | (In years) | ||||||||||||||||||
$2.11 - $3.00 |
155 | 155 | 7.7 | $ | 2.63 | $ | 2.63 | |||||||||||||
$3.01 - $4.52 |
378 | 378 | 2.8 | $ | 3.46 | $ | 3.46 | |||||||||||||
$4.53 - $6.79 |
168 | 168 | 5.3 | $ | 5.92 | $ | 5.92 | |||||||||||||
$6.80 - $10.20 |
965 | | 5.7 | $ | 7.69 | $ | | |||||||||||||
$10.21 - $15.31 |
604 | 114 | 6.7 | $ | 11.94 | $ | 11.47 | |||||||||||||
$15.32 - $18.36 |
525 | 141 | 5.6 | $ | 18.27 | $ | 18.04 | |||||||||||||
2,795 | 956 | 5.6 | $ | 9.64 | $ | 6.87 | ||||||||||||||
28
A summary of the status of the Companys unvested restricted stock awards and activity during the
years ended December 31, 2008 and 2009 are as follows:
Weighted-Average | ||||||||
Number | Grant-Date | |||||||
Non-vested Restricted Shares | of Shares | Fair Value per Share | ||||||
(In 000s) | ||||||||
Unvested at January 1, 2008 |
207 | $ | 11.98 | |||||
Granted |
1,368 | 7.64 | ||||||
Vested |
(27 | ) | 8.20 | |||||
Forfeited |
(131 | ) | 9.01 | |||||
Unvested at December 31, 2008 |
1,417 | $ | 8.14 | |||||
Granted |
92 | 2.75 | ||||||
Vested |
(63 | ) | 4.04 | |||||
Forfeited |
(20 | ) | 10.14 | |||||
Unvested at December 31, 2009 |
1,426 | $ | 7.94 | |||||
12. Commitments and Contingencies
At December 31, 2009, the estimated cost to complete development work in subdivisions or resorts
from which homesites or VOIs have been sold totaled $9.6 million. Development is estimated to be
completed as follows: 2010 $1.8 million; 2011 $1.4 million; 2012 $2.8 million; thereafter -
$3.6 million.
In 2006, we entered into a separation agreement with our former CEO, George Donovan. Under the
terms of this agreement, Mr. Donovan will be paid a total of $3.0 million over a seven year period
in exchange for his services to be available on a when and if needed basis. We recorded an expense
of $2.6 million in 2006, which represents the then present value of the seven year agreement. As
of December 31, 2009, the remaining amount due to Mr. Donovan was $1.5 million, the present value
of which is recorded as a liability on our consolidated balance sheet.
Rent expense for the years ended December 31, 2007, 2008, and 2009 totaled approximately $13.0
million, $14.7 million and $12.9 million, respectively. Lease commitments under these and our
various other noncancelable operating leases for each of the five years subsequent to December 31,
2009 and thereafter are as follows (in thousands, inclusive of terminated leases as a result of our
2008 restructuring described below in Note 17):
2010 |
$ | 11,747 | ||
2011 |
9,515 | |||
2012 |
7,661 | |||
2013 |
5,264 | |||
2014 |
4,961 | |||
Thereafter |
30,987 | |||
Total future minimum lease payments |
$ | 70,135 | ||
In the ordinary course of our business, we become subject to claims or proceedings from time to
time relating to the purchase, subdivision, sale or financing of real estate. Additionally, from
time to time, we become involved in disputes with existing and former employees, vendors, taxing
jurisdictions and various other parties. Unless otherwise described below, we believe that these
claims are routine litigation incidental to our business. The following are matters that we are
describing in more detail in accordance with the accounting rules surrounding the accounting for
contingencies.
Bluegreen Resorts
29
Tennessee Tax Audit
In 2005, the State of Tennessee Audit Division (the Division) audited certain subsidiaries within
Bluegreen Resorts for the period from December 1, 2001 through December 31, 2004. On September 23,
2006, the Division issued a notice of assessment for approximately $652,000 of accommodations tax
based on the use of Bluegreen Vacation Club accommodations by Bluegreen Vacation Club members who
became members through the purchase of non-Tennessee property. We believe the attempt to impose
such a tax is contrary to Tennessee law and have vigorously opposed, and intend to continue to
vigorously oppose, such assessment by the Division. An informal conference was held in December
2007 to discuss this matter with representatives of the Division. No formal resolution of the issue
was reached during the conference and no further action has to date been initiated by the State of
Tennessee. While the timeshare industry has been successful in challenging the imposition of sales
taxes on the use of accommodations by timeshare owners, there is no assurance that we will be
successful in contesting the current assessment.
Kelly Fair Labor Standards Act Lawsuit
In Cause No. 08-cv-401-bbc, styled Steven Craig Kelly and Jack Clark, individually and on
behalf of others similarly situated v. Bluegreen Corporation, in the United States District
Court for the Western District of Wisconsin, two former sales representatives brought a lawsuit on
July 28, 2008 in the Western District of Wisconsin on behalf of themselves and putative class
members who are or were employed by us as sales associates and compensated on a commission-only
basis. Plaintiffs alleged that we violated the Fair Labor Standards Act (FLSA) and that they and
the collective class are or were covered, non-exempt employees under federal wage and hour laws,
and were entitled to minimum wage and overtime pay consistent with the FLSA. On July 10, 2009, the
parties settled the case and we agreed to pay approximately $1.5 million (including attorneys fees
and costs) without admitting any wrongdoing. As of December 31, 2009, the settlement was paid and
the case dismissed.
Pennsylvania Attorney General Lawsuit
On October 28, 2008, in Cause No. 479 M.D. 2008, styled Commonwealth of Pennsylvania Acting by
Attorney General Thomas W. Corbett, Jr. v. Bluegreen Corporation, Bluegreen Resorts, Bluegreen
Vacations Unlimited, Inc. and Great Vacation Destinations, Inc., in the Commonwealth Court of
Pennsylvania, the Commonwealth of Pennsylvania acting through its Attorney General filed a lawsuit
against Bluegreen Corporation, Bluegreen Resorts, Bluegreen Vacations Unlimited, Inc. and Great
Vacation Destinations, Inc. (a wholly owned subsidiary of Bluegreen Corporation) alleging
violations of Pennsylvanias Unfair Trade Practices and Consumer Protection Laws. The lawsuit
alleges that we have used, or are using, sales and marketing methods or practices that are unlawful
under Pennsylvania law and seeks a permanent injunction preventing us from using such methods and
practices in the future. The lawsuit also seeks civil penalties against us and restitution on
behalf of Pennsylvania consumers who may have suffered losses as a result of the alleged unlawful
sales and marketing methods and practices. The lawsuit does not seek to permanently restrain us or
any of our affiliates from doing business in the Commonwealth of Pennsylvania. The parties have
reached settlement on this matter and on March 15, 2010 we signed a consent petition and forwarded
it to the Attorney Generals office for counter-signature and filing with the appropriate court
offices. As of December 31, 2009, we had accrued $225,000 in connection with anticipated payments
to resolve this matter.
Destin, Florida Deposit Dispute Lawsuit
In Cause No. 2006-Ca-3374, styled Joseph M. Scheyd, Jr., P.A. vs. Bluegreen Vacations
Unlimited, Inc.,; Hubert A. Laird; and MSB of Destin, Inc., in the Circuit Court of the First
Judicial Circuit in and for Okaloosa County, Florida, the Plaintiff as escrow agent brought an
interpleader action seeking a determination as to whether we, as purchaser, or Hubert A. Laird and
MSB of Destin, Inc. as seller, were entitled to the $1.4 million escrow deposit being maintained
with the escrow agent pursuant to a purchase and sale contract for real property located in Destin,
Florida. Both we and the seller have brought cross-claims for breach of the underlying purchase
and sale contract. The seller alleges we failed to perform under the terms of the purchase and
sale contract and thus they are entitled to retain the escrow deposit. We maintain that our
decision not to close on the purchase of the subject real property was proper under the purchase
and sale contract and therefore we are entitled to a return of the full escrow deposit. The seller
has amended its complaint to include a fraud count.
Bluegreen Communities
30
Mountain Lakes Mineral Rights
Bluegreen Southwest One, L.P., (Southwest), a subsidiary of Bluegreen Corporation, is the
developer of the Mountain Lakes subdivision in Texas. In Cause No. 28006, styled Betty Yvon
Lesley et a1 v. Bluff Dale Development Corporation, Bluegreen Southwest One. L.P. et al., in
the 266th Judicial District Court, Erath County, Texas, the plaintiffs filed a declaratory judgment
action against Southwest seeking to develop their reserved mineral interests in, on and under the
Mountain Lakes subdivision. The plaintiffs claims are based on property law, oil and gas law,
contract and tort theories. The property owners association and some of the individual landowners
have filed cross actions against Bluegreen, Southwest and individual directors of the property
owners association related to the mineral rights and certain amenities in the subdivision as
described below. On January 17, 2007, the court ruled that the restrictions placed on the
development that prohibited oil and gas production and development were invalid and not enforceable
as a matter of law, that such restrictions did not prohibit the development of the plaintiffs
prior reserved mineral interests and that Southwest breached its duty to lease the minerals to
third parties for development. The court further ruled that Southwest was the sole holder of the
right to lease the minerals to third parties. The order granting the plaintiffs motion was
severed into a new cause styled Cause No. 28769 Betty Yvon Lesley et a1 v. Bluff Dale
Development Corporation, Bluegreen Southwest One. L.P. et al. in the 266th Judicial District
Court, Erath County, Texas. Southwest appealed the trial courts ruling. On January 22, 2009, in
Bluegreen Southwest One, L.P. et al. v. Betty Yvon Lesley et al., in the 11th Court of
Appeals, Eastland, Texas, the Appellate Court reversed the trial courts decision and ruled in
Southwests favor and determined that all executive rights were owned by Southwest and then
transferred to the individual property owners in connection with the sales of land. All property
owner claims were decided in favor of Southwest. It was also decided that Southwest did not breach
a fiduciary duty to the plaintiffs as an executive rights holder. As a result of this decision, no
damages or attorneys fees are owed to the plaintiffs. On May 14, 2009, the plaintiffs filed an
appeal with the Texas Supreme Court asking the Court to reverse the Appellate Courts decision in
favor of Bluegreen. No information is available as to when the Texas Supreme Court will render a
decision as to whether or not it will take the appeal.
Separately, one of the amenity lakes in the Mountain Lakes development did not reach the expected
water level after construction was completed. Owners of homesites within the Mountain Lakes
subdivision and the property owners Association of Mountain Lakes have asserted cross claims
against Southwest and Bluegreen regarding such failure as part of the Lesley litigation described
above as well as in Cause No. 067-223662-07, Property Owners Association of Mountain Lakes
Ranch, Inc. v. Bluegreen Southwest One, L.P. et al., in the 67th Judicial District
Court of Tarrant County, Texas. This case has been settled and the $3.4 million that was accrued
related to this matter as of December 31, 2009 was paid in March of 2010. Additional claims may be
pursued in the future by certain individual lot owners within the Mountain Lakes subdivision in
connection with these matters, but it is not possible at this time to estimate the likelihood of
loss or amount of potential exposure with respect to any such matters, including the likelihood
that any such loss may exceed the amount accrued.
Catawba Falls Preserve Homeowners Association Demand Letter
By letter dated October 2, 2008, the Catawba Falls Preserve Homeowners Association demanded payment
for (i) construction of pedestrian pathways and certain equestrian stables allegedly promised by us
but never constructed, (ii) repairs to roads and culverts within the community, and (iii)
landscaping improvements to the communitys gated entrance. The parties have reached tentative
settlement of the matter but several details remain to be resolved before the matter will be
concluded. As such, the parties have executed a tolling agreement which is effective until June
30, 2010. As of December 31, 2009, we have accrued approximately $340,000 covering cash payments
and conveyance of two (2) vacant parcels within the community to the homeowners association. There
is no assurance that this matter will be settled on the contemplated terms, or at all, or that the
amounts which we may ultimately owe with respect to this matter will not be in excess of the
amounts which we have accrued.
Marshall, et al. Lawsuit regarding Community Amenities
On September 14, 2009, in Cause No. 09-09-08763-CV, styled William Marshall and Patricia
Marshall, et al. v Bluegreen Southwest One, L.P., Bluegreen Southwest Land, Inc., Bluegreen
Corporation, Stephen Davis, and Bluegreen Communities of Texas, L.P., Plaintiffs brought suit
against us alleging fraud, negligent misrepresentation, breach of contract, and negligence with
regards to the Ridgelake Shores subdivision we developed in Montgomery County, Texas. More
specifically, the Plaintiffs allege misrepresentation concerning the usability of the lakes within
the community for fishing and sporting and the general level of quality at which the community
would be developed
and thereafter maintained. The lawsuit seeks material damages and the estimate cost to remediate
the lake is $500,000. We intend to vigorously defend the lawsuit.
31
Schawrz, et al. Lawsuit regarding Community Amenities
On September 18, 2008, in Cause No. 2008-5U-CV-1358-WI, styled Paul A. Schwarz and Barbara S.
Schwarz v. Bluegreen Communities of Georgia, LLC and Bluegreen Corporation, Plaintiffs brought
suit against us alleging fraud and misrepresentation with regards to the construction of a marina
at the Sanctuary Cove subdivision located in Camden County, Georgia. Plaintiff subsequently
withdrew the fraud and misrepresentation counts and replaced them with a count alleging violation
of racketeering laws, including mail fraud and wire fraud. On January 25, 2010, Plaintiffs filed a
second complaint seeking approval to proceed with the lawsuit as a class action representing more
than 100 persons who were harmed by the alleged racketeering activities in a similar manner as
Plaintiffs. No decision has yet been made by the Court as to whether they will certify a class.
We deny the allegations and intend to vigorously defend the lawsuit.
13. Income Taxes
Our provision (benefit) for (from) income taxes attributable to continuing operations consists of
the following (in thousands):
For the Year Ended | ||||||||||||
December 31, | December 31, | December 31, | ||||||||||
2007 | 2008 | 2009 | ||||||||||
Federal: |
||||||||||||
Current |
$ | 5,130 | $ | 2,392 | $ | (3,335 | ) | |||||
Deferred |
12,480 | (1,671 | ) | (474 | ) | |||||||
17,610 | 721 | (3,809 | ) | |||||||||
State and Other: |
||||||||||||
Current |
1,976 | 1,165 | 153 | |||||||||
Deferred |
(409 | ) | (1,133 | ) | 1,016 | |||||||
1,567 | 32 | 1,169 | ||||||||||
Total |
$ | 19,177 | $ | 753 | $ | (2,640 | ) | |||||
The reason for the difference between our provision (benefit) for income taxes and the amount that
results from applying the federal statutory tax rate to income from continuing operations before
provision (benefit) for income taxes are as follows (in thousands):
For the Year Ended | ||||||||||||
December 31, | December 31, | December 31, | ||||||||||
2007 | 2008 | 2009 | ||||||||||
Income tax expense at statutory rate |
$ | 17,961 | $ | 84 | $ | 369 | ||||||
Effect of state taxes, net of
federal tax benefit |
672 | 9 | 100 | |||||||||
Effect of state rate changes on net
deferred liabilities |
| (1,592 | ) | 1,395 | ||||||||
Change in valuation allowance |
| 1,251 | (379 | ) | ||||||||
Non-deductible items |
347 | 1,016 | (4,122 | ) | ||||||||
Other |
197 | (15 | ) | (3 | ) | |||||||
Total |
$ | 19,177 | $ | 753 | $ | (2,640 | ) | |||||
32
Our deferred income taxes consist of the following components (in thousands):
As of | ||||||||
December 31, | December 31, | |||||||
2008 | 2009 | |||||||
Deferred federal and state tax liabilities (assets): |
||||||||
Installment sales treatment VOI of notes receivable |
$ | 263,122 | $ | 224,941 | ||||
Deferred federal and state loss carryforwards/AMT
credits (net of valuation allowance of $3.1 million
and $3.2 million as of December 31, 2008 and 2009 ,
respectively) |
(164,797 | ) | (134,295 | ) | ||||
Book over tax carrying value of retained interests
in notes receivable sold |
24,284 | 30,392 | ||||||
Book reserves for loan losses and inventory |
(23,181 | ) | (23,502 | ) | ||||
Tax over book depreciation |
4,436 | 391 | ||||||
Unrealized gains (losses) on retained interests in
notes receivable sold (See Note 4) |
1,995 | (358 | ) | |||||
Deferral of VOI sales under timeshare accounting
rules |
(94 | ) | 4,618 | |||||
Deferral of rent |
(2,284 | ) | (2,202 | ) | ||||
Restructuring |
(1,810 | ) | (665 | ) | ||||
Accrued contingencies |
(2,533 | ) | (2,996 | ) | ||||
Goodwill |
(2,107 | ) | (1,926 | ) | ||||
Stock-based compensation |
(2,788 | ) | (4,175 | ) | ||||
Other |
(2,441 | ) | (2,426 | ) | ||||
Deferred income taxes |
$ | 91,802 | $ | 87,797 | ||||
Total deferred federal and state tax liabilities |
$ | 293,837 | $ | 260,342 | ||||
Total deferred federal and state tax assets |
(202,035 | ) | (172,545 | ) | ||||
Deferred income taxes |
$ | 91,802 | $ | 87,797 | ||||
As of December 31, 2009, related to continuing operations, we have federal net operating loss
carryforwards of approximately $230 million, which expire beginning in 2022 through 2029, and
alternative minimum tax credit carryforwards of approximately $35 million, which never expire.
Additionally, as of December 31, 2009, we have state operating loss carryforwards of approximately
$535 million, which expire beginning in 2012 through 2029.
Internal Revenue Code Section 382 addresses limitations on the use of net operating loss
carryforwards following a change in ownership, as defined in Section 382. We do not believe that
any such ownership change occurred during 2008 or 2009. If our interpretation were found to be
incorrect, there would be significant limitations placed on these carryforwards which would result
in an increase in the Companys tax liability and a reduction of its net income.
We and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various states
and foreign jurisdictions. With certain exceptions, we are no longer subject to U.S. federal,
state and local, or non-U.S. income tax examinations by tax authorities for years before 2005.
We evaluate our tax positions based upon FASB ASC 740-10 (previously FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes-an Interpretation of FASB Statement No. 109), which
clarifies the accounting for uncertainty in tax positions. Based on an evaluation of uncertain tax
provisions, we are required to measure tax benefits based on the largest amount of benefit that is
greater than 50% likely of being realized upon settlement. In
accordance with our accounting policy, we recognize interest and penalties related to unrecognized
taxes as a component of general and administrative expenses.
33
On May 1, 2009, we received a notice from the North Carolina Department of Revenue informing us of
its proposal to assess us for taxes, interest, and penalties totaling approximately $0.5 million.
These assessment notices relate to our corporate income tax returns for fiscal years 2004, 2005,
and 2006. We are currently challenging this assessment.
As of December 31, 2009, we did not have any significant amounts accrued for interest and penalties
and we had no significant amounts recorded for uncertain tax positions.
As discussed in Note 4, in our capacity as servicer of the 2002 Term Securitization, we exercised
our servicer option which caused the full redemption of all classes of notes as of May 8, 2009.
Since the ability to exercise this option became available to us earlier than originally
anticipated, certain book and tax differences (temporary differences) totaling $4.6 million became
permanent differences, resulting in a reduction to our income tax provision on the condensed
consolidated statement of operations for the year ended December 31, 2009.
14. Employee Retirement Savings Plan and Other Employee Matters
Our Employee Retirement Plan is an Internal Revenue Code section 401(k) Retirement Savings Plan
(the Retirement Plan). All U.S.-based employees at least 21 years of age with one year of
employment with us and 1,000 work hours are eligible to participate in the Retirement Plan. During
2008, the Retirement Plan provided an annual employer discretionary matching contribution and a
fixed-rate employer matching contribution equal to 100% of the first 3% of a participants
contribution with an annual limit of $1,500 per participant. Subsequent to December 31, 2008, the
fixed-rate employer matching contribution was amended and replaced with a discretionary match for
the 2009 plan year. During the years ended December 31, 2007 and 2008, we recognized expenses for
our contributions to the Retirement Plan of approximately $0.9 million and $1.3 million,
respectively. We did not make any contributions in 2009.
Four of our employees in New Jersey are subject to the terms of collective bargaining agreements.
These employees are located in New Jersey and comprise less than 1% of our total workforce.
15. Business Segments
We have two reportable business segments Bluegreen Resorts and Bluegreen Communities. 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 other related amenities) and sold, typically on a retail basis as
homesites. Our reportable segments are business units that offer different products. The reportable
segments are each managed separately because they sell distinct products with different
development, marketing and selling methods.
We evaluate the performance and allocate resources to each business segment based on its respective
segment operating profit. Segment operating profit is operating profit prior to the allocation of
corporate overhead, interest income, other income or expense items, interest expense, income
taxes, and non-controlling interests. Inventory, notes receivable and fixed assets are the only
assets that we evaluate on a segment basis all other assets are only evaluated on a consolidated
basis. The accounting policies of the reportable segments are the same as those described in the
summary of significant accounting policies in Note 1 to the Consolidated Financial Statements.
Required disclosures for our business segments are as follows, excluding the impact of discontinued
operations (in thousands):
Bluegreen | Bluegreen | |||||||||||
Resorts | Communities | Totals | ||||||||||
For the year ended December 31, 2007: |
||||||||||||
Sales of real estate |
$ | 450,163 | (1) | $ | 129,217 | $ | 579,380 | |||||
Other resort and communities operations revenue |
53,624 | 6,083 | (4) | 59,707 | ||||||||
Depreciation expense |
8,356 | 659 | 9,015 | |||||||||
Segment operating profit |
62,890 | 23,452 | (4) | 86,342 |
34
Bluegreen | Bluegreen | |||||||||||
Resorts | Communities | Totals | ||||||||||
For the year ended December 31, 2008: |
||||||||||||
Sales of real estate |
$ | 428,010 | (1) | $ | 47,020 | $ | 475,030 | |||||
Other resort and communities operations revenue |
58,473 | 3,527 | (4) | 62,000 | ||||||||
Depreciation expense |
7,294 | 579 | 7,873 | |||||||||
Segment operating profit (loss) |
46,999 | (2) | (3,574 | )(3)(4) | 43,425 |
Bluegreen | Bluegreen | |||||||||||
Resorts | Communities | Totals | ||||||||||
For the year ended December 31, 2009: |
||||||||||||
Sales of real estate |
$ | 201,755 | (1) | $ | 17,613 | $ | 219,368 | |||||
Other resort and communities operations revenue |
55,609 | 1,590 | (4) | 57,199 | ||||||||
Depreciation expense |
5,349 | 589 | 5,938 | |||||||||
Segment operating profit (loss) |
37,748 | (21,099) | (3)(4) | 16,649 |
(1) | For the years ended December 31, 2007 and 2008, includes approximately $39.4 million and $8.2 million, respectively, related to gains on the sales of VOI notes receivable through off-balance sheet transactions. There was no such gain during the year ended December 31, 2009. | |
(2) | Amount excludes $15.6 million related to the restructuring (discussed in Note 17, below) and $8.5 million related to the impairment of goodwill (discussed in Note 1 above). | |
(3) | Amount includes a charge of $5.2 million and $13.2 million related to the impairment of certain completed communities projects for the years ended December 31, 2008 and 2009, respectively. (See Note 5) | |
(4) | Amounts restated to exclude results from discontinued operations. For a detailed discussion related to discontinued operations see Note 16. |
Bluegreen | Bluegreen | |||||||||||
Resorts | Communities | Total | ||||||||||
As of December 31, 2008 |
||||||||||||
Notes receivable, net |
$ | 336,229 | $ | 4,415 | $ | 340,644 | ||||||
Inventory |
342,779 | 160,490 | 503,269 | |||||||||
Property and equipment, net |
69,138 | 27,097 | 96,235 |
Bluegreen | Bluegreen | |||||||||||
Resorts | Communities | Total | ||||||||||
As of December 31, 2009 |
||||||||||||
Notes receivable, net |
$ | 304,930 | $ | 4,377 | $ | 309,307 | ||||||
Inventory |
370,470 | 145,447 | 515,917 | |||||||||
Property and equipment, net |
70,036 | 6,153 | 76,189 |
Reconciliations to Consolidated Amounts
Segment operating profit for our reportable segments reconciled to our consolidated income before
non-controlling interests, provision (benefit) for (from) income taxes and discontinued operations
are as follows (in thousands):
Year Ended December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
Segment operating profit from continuing operations
for reportable segments |
$ | 86,342 | $ | 43,425 | $ | 16,649 | ||||||
Interest income |
44,703 | 57,831 | 69,337 | |||||||||
Other expense, net |
(1,743 | ) | (1,637 | ) | (1,810 | ) | ||||||
Corporate general and administrative expenses |
(45,997 | ) | (47,279 | ) | (39,517 | ) | ||||||
Interest expense |
(24,272 | ) | (20,888 | ) | (36,132 | ) | ||||||
Restructuring charges |
| (15,617 | ) | | ||||||||
Goodwill impairment |
| (8,502 | ) | | ||||||||
Consolidated income before non-controlling interests,
provision (benefit) for income taxes and
discontinued operations |
$ | 59,033 | $ | 7,333 | $ | 8,527 | ||||||
35
Depreciation expense for our reportable segments reconciled to our consolidated depreciation
expense is as follows, excluding the impact of discontinued operations (in thousands):
Year Ended December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
Depreciation expense for reportable segments |
$ | 9,015 | $ | 7,873 | $ | 5,938 | ||||||
Depreciation expense for corporate fixed assets |
4,418 | 4,331 | 4,846 | |||||||||
Consolidated depreciation expense |
$ | 13,433 | $ | 12,204 | $ | 10,784 | ||||||
Assets for our reportable segments reconciled to our consolidated assets (in thousands):
As of | ||||||||
December 31, | December 31, | |||||||
2008 | 2009 | |||||||
Notes receivable for reportable segments, net
|
$ | 340,644 | $ | 309,307 | ||||
Inventory for reportable segments
|
503,269 | 515,917 | ||||||
Fixed assets for reportable segments
|
96,235 | 76,189 | ||||||
Assets not allocated to reportable segments
|
253,359 | 229,852 | ||||||
Total assets
|
$ | 1,193,507 | $ | 1,131,265 | ||||
Geographic Information
Sales of real estate by geographic area are as follows (in thousands):
Year Ended December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
United States |
$ | 571,931 | $ | 467,500 | $ | 213,907 | ||||||
Aruba |
7,449 | 7,530 | 5,461 | |||||||||
Consolidated totals |
$ | 579,380 | $ | 475,030 | $ | 219,368 | ||||||
Total assets by geographic area are as follows (in thousands):
As of December 31, | ||||||||
2008 | 2009 | |||||||
United States |
$ | 1,183,176 | $ | 1,123,841 | ||||
Aruba |
10,331 | 7,424 | ||||||
Totals assets |
$ | 1,193,507 | $ | 1,131,265 | ||||
16. Discontinued Operations
On December 30, 2009, we sold four of our golf courses located in North Carolina and Virginia for
an aggregate purchase price of approximately $9.8 million. In connection with these sales, we
recognized a pre-tax loss on disposal of approximately $10.5 million.
36
The Company has reported the results of golf operations for the years ended December 31, 2007,
2008, and 2009, and the $10.5 million loss on disposal, referenced above, as discontinued
operations, which consist of the following (in thousands):
During the year ended December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
Golf operations revenue |
$ | 7,704 | $ | 7,182 | $ | 6,244 | ||||||
Cost of operations |
7,523 | 7,170 | 6,924 | |||||||||
Income (loss) from discontinued
operations before provision for
income taxes |
181 | 12 | (680 | ) | ||||||||
Loss on the disposal of golf courses |
| | (10,544 | ) | ||||||||
Provision (benefit) for income taxes |
390 | 13 | (3,957 | ) | ||||||||
Loss from discontinued operations |
$ | (209 | ) | $ | (1 | ) | $ | (7,267 | ) | |||
The following is a summary of assets and liabilities of discontinued operations from our golf
division. The amounts presented below were derived from historical financial information and
adjusted to exclude intercompany receivables and payables between the golf division and the Company
(in thousands):
As of | ||||
December 31, | ||||
2008 | ||||
Assets: |
||||
Cash |
$ | 107 | ||
Other assets |
536 | |||
Property and Equipment, net |
20,469 | |||
Total assets |
$ | 21,112 | ||
Liabilities: |
||||
Accounts payable |
$ | 60 | ||
Lease payable |
66 | |||
Deferred revenue |
107 | |||
Total liabilities |
$ | 233 | ||
17. Restructuring Charges
During the fourth quarter of 2008, we implemented strategic initiatives in the Resort Division in
an attempt to significantly reduce sales, conserve cash, and conserve availability under our
receivables credit facilities. Such initiatives included closing certain sales offices;
significantly eliminating what we have identified as lower-efficiency marketing programs; reducing
overhead, including eliminating a significant number of staff positions across a variety of areas
at various locations; reducing our overall capital spending; limiting sales to borrowers who meet
newly applied FICO® score-based underwriting standards; and increasing interest rates on new sales
transactions for which we provide financing.
This restructuring involved incurring cost associated with lease termination obligations, the write
down of certain fixed assets, and employee severance and benefits. The total charge associated
with this restructuring is presented as a separate line item on our Consolidated Statements of
Operations, and the remaining unpaid liability as of December 31, 2008 and 2009 is included as a
component of accrued liabilities on our Consolidated Balance Sheets. Restructuring costs were
accounted for in accordance with ASC 420. During 2008, pretax restructuring charges were
$15.6 million.
37
Activity during the year ended December 31, 2008 related to the restructuring liability was as
follows (in thousands):
Cash Payments | Liability at | |||||||||||
Charges | made during | December 31, | ||||||||||
during 2008 | 2008 | 2008 | ||||||||||
Severance and benefit-related costs(1) |
$ | 5,608 | $ | 2,068 | $ | 3,540 | ||||||
Lease termination obligation(2) |
4,766 | 687 | 4,079 | |||||||||
Fixed Assets write-downs, net of proceeds (3) |
3,760 | | | |||||||||
Other |
1,483 | 173 | 349 | |||||||||
Total Restructuring |
$ | 15,617 | $ | 2,928 | $ | 7,968 | ||||||
Activity during the year ended December 31, 2009 related to the restructuring liability, as well as
our remaining liability, was as follows (in thousands):
Liability at | Charges and | Cash Payments | Liability at | |||||||||||||
December 31, | Other | made during | December | |||||||||||||
2008 | Adjustments | 2009 | 31, 2009 | |||||||||||||
Severance and benefit-related costs(1) |
$ | 3,540 | $ | 594 | $ | 4,134 | $ | | ||||||||
Lease termination obligations(2)(4) |
4,079 | (556 | )(5) | 1,803 | 1,720 | |||||||||||
Other |
349 | (134 | ) | 215 | | |||||||||||
Total Restructuring |
$ | 7,968 | $ | (96 | ) | $ | 6,152 | $ | 1,720 | |||||||
(1) | Includes severance payments made to employees, payroll taxes and other benefit relates costs in connection with the terminations of approximately 2,200 employees. | |
(2) | Includes costs associated with non-cancelable property and equipment leases that we have ceased to use, as well as termination fees related to the cancellation of certain contractual lease obligations. Included in this amount are future minimum lease payments in excess of estimated sublease income, fees and expenses. | |
(3) | Includes write-downs of $1.6 million and $2.2 million for leasehold improvements and property and equipment, respectively, net of a nominal amount of cash proceeds from sales of certain assets. | |
(4) | Continuing lease obligations will be paid monthly through November 2012. | |
(5) | During 2009, we successfully terminated certain of our lease obligations, resulting in a reduction of liability of $724,000. |
18. Related Party Transactions
During 2009, we worked with Woodbridge Holdings LLC (the wholly owned subsidiary of BFC which
beneficially owns 52% of our outstanding common stock) to explore possible alternatives to obtain
liquidity in the sale or financing of our receivables. Potential alternatives include, among
others, Woodbridge forming a broker dealer to raise capital through private or public offerings.
In connection with those efforts, we agreed to reimburse Woodbridge for certain expenses, including
legal and professional fees. During 2009, we reimbursed or accrued approximately $3.2 million for
such expenses. While we may continue to explore additional alternatives in the future, we do not
believe that our previous efforts or the related expenditures are likely to result in future
benefits. Accordingly, we expensed the $3.2 million, and this amount is reflected as other expense
in our 2009 statement of operations.
During 2009, we also incurred approximately $0.6 million to Snapper Creek Equity Management, LLC, a
subsidiary of BFC Financial, to perform a variety of management advisory services for the Company.
38
19. Quarterly Financial Information (Unaudited)
A summary of the quarterly financial information for the years ended December 31, 2008 and 2009 is
presented below (in thousands, except for per share information):
For the Three Months Ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
2008 | 2008 | 2008 | 2008 | |||||||||||||
Sales of real estate |
$ | 111,256 | $ | 120,086 | $ | 146,907 | $ | 96,781 | ||||||||
Gross profit |
80,298 | 89,114 | 108,690 | 66,661 | ||||||||||||
Income (loss) from continuing operations
attributable to Bluegreen Corporation |
1,378 | 3,483 | 6,809 | (12,185 | )(1) | |||||||||||
Discontinued operations |
18 | (38 | ) | 12 | 7 | |||||||||||
Net income (loss) |
2,234 | 4,765 | 9,943 | (10,363 | )(1) | |||||||||||
Net income (loss) attributable to Bluegreen
Corporation |
$ | 1,396 | $ | 3,445 | $ | 6,821 | $ | (12,178 | )(1) | |||||||
Income (loss) from continuing operations
attributable to Bluegreen Corporation per common
share: |
||||||||||||||||
Diluted earnings (loss) per share from continuing
operations attributable to Bluegreen shareholders |
$ | 0.04 | $ | 0.11 | $ | 0.22 | $ | (0.39 | ) | |||||||
Diluted loss per share for discontinued operations |
| | | | ||||||||||||
Diluted earnings(loss) per share attributable to
Bluegreen shareholders |
$ | 0.04 | $ | 0.11 | $ | 0.22 | $ | (0.39 | ) | |||||||
For the Three Months Ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
2009 | 2009 | 2009 | 2009 | |||||||||||||
Sales of real estate |
$ | 45,855 | $ | 56,555 | $ | 71,266 | $ | 45,692 | ||||||||
Gross profit |
33,750 | 34,416 | 42,745 | 16,565 | ||||||||||||
Income (loss) from continuing operations
attributable to Bluegreen Corporation |
3,695 | 6,582 | 4,138 | (10,720 | ) | |||||||||||
Discontinued operations |
(142 | ) | 232 | (205 | ) | (7,152 | ) | |||||||||
Net income (loss) |
4,739 | 8,364 | 6,580 | (15,783 | )(2) | |||||||||||
Net income (loss) attributable to Bluegreen
Corporation |
$ | 3,553 | $ | 6,814 | $ | 3,933 | $ | (17,872 | )(2) | |||||||
Income (loss) from continuing operations
attributable to Bluegreen Corporation per common
share: |
||||||||||||||||
Diluted earnings (loss) per share from
continuing operations attributable to Bluegreen
shareholders |
$ | 0.12 | $ | 0.21 | $ | 0.13 | $ | (0.34 | ) | |||||||
Diluted loss per share for discontinued operations |
(0.01 | ) | 0.01 | | (0.23 | ) | ||||||||||
Diluted earnings (loss) per share attributable to
Bluegreen shareholders |
$ | 0.11 | $ | 0.22 | $ | 0.13 | $ | (0.57 | ) | |||||||
(1) | Amount reflects a $15.6 million charge related to the previously discussed restructuring, $8.5 million of impairment charges for goodwill in our Resorts Division, and a charge of $5.2 million to adjust the carrying amount of inventory to fair value on certain of our Communities Division real estate developments. |
39
(2) | Amount reflects a charge of $10.9 million to adjust the carrying amount of inventory to net realizable value on certain of our Communities Division real estate developments. |
40
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of
Bluegreen Corporation
Bluegreen Corporation
We have audited the accompanying consolidated balance sheets of Bluegreen Corporation as of
December 31, 2009 and 2008, and the related consolidated statements of operations, shareholders
equity, and cash flows for each of the three years in the period ended December 31, 2009. These
financial statements are the responsibility of the Companys management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Bluegreen Corporation at December 31, 2009 and
2008, and the consolidated results of its operations and its cash flows for each of the three years
in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in
which it accounts for non-controlling interests effective January 1, 2009. As discussed in Notes 1
and 4, in 2009 the Company changed the method by which it evaluates its retained interests in notes
receivable sold for other-than-temporary impairment.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), Bluegreen Corporations internal control over financial reporting as of
December 31, 2009, based on criteria established in Internal Control-Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 31,
2010 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Certified Public Accountants
Certified Public Accountants
West Palm Beach, Florida
March 31, 2010
March 31, 2010
41