Bluegreen Corporation Reports 2009 Third Quarter Financial Results

November 9, 2009 8:30 AM EST

Q3 2009 Overview

    --  Resorts sales of $65.0 million compared to $136.2 million in Q3 2008
        o Reflects the deliberate reduction of Bluegreen-financed Resorts sales
          in light of challenging commercial credit markets
        o Despite lower sales, Q3 2009 Resorts operating profit (1) was 25% of
          gross Resorts sales, or $18.0 million, as compared to 13% of gross
          Resorts sales, or $20.8 million in Q3 2008
    --  Q3 2009 included revenue of approximately $7.0 million and Resorts
        operating profit of $1.7 million from commissions earned through the
        selling and marketing of outside developer inventory for a fee (one of
        the Company's "fee-based services")
    --  Bluegreen Communities sales decline to $6.3 million from $10.7 million
        in Q3 2008
    --  Net income of $3.9 million, or 5.5% of total sales, compared to net
        income of $6.8 million, or 4.6% of total sales, in Q3 2008
    --  Diluted EPS of $0.13 compared to diluted EPS of $0.21 in Q3 2008
    --  Unrestricted cash and equivalents of $55.0 million at September 30, 2009
    --  Anticipated material reduction of book value per share in January 2010
        upon adoption of required changes in accounting

BOCA RATON, Fla.--(BUSINESS WIRE)-- Bluegreen Corporation (NYSE: BXG), a leading provider of Colorful Places to Live and Play(R), today announced financial results for the third quarter ended September 30, 2009.

John M. Maloney Jr., President and Chief Executive Officer of Bluegreen, commented, "The third quarter of 2009 marks approximately one year since we introduced strategic initiatives designed to materially reduce Resorts sales while increasing their associated profitability, preserving cash, and conserving availability under our receivables credit facilities, all steps taken in response to a significantly contracted commercial credit market and weak general economic conditions. While there is still much work to be done, we believe that our efforts are being validated based on a number of important metrics achieved during the third quarter of 2009. Although net income and Resorts operating profit were lower on a dollar basis compared to the third quarter of 2008, each rose as a percentage of sales compared to the prior year period, with Resorts operating profit nearly doubling to 25% during the third quarter of 2009. We are also generating new, cash revenue streams by marketing fee-based services to outside timeshare developers and others; these services utilize our core management, financial, sales and marketing, and operating abilities. During the third quarter of 2009, we sold $11.3 million of outside developer inventory and earned a sales and marketing commission of $7.0 million as compared to no such revenues in the third quarter of 2008. We are continuing to pursue additional fee-based services relationships.

     Resort operating profit (loss) is defined as operating profit (loss) prior
     to the allocation of corporate overhead, interest income, other income
(1)  (expense) net, interest expense, non-controlling interest, restructuring
     charges, goodwill impairment charges and income taxes. A reconciliation of
     Resort operating profit to income before non-controlling interest and
     provision for income taxes is included below.

"We also benefited from decreased cash requirements as a result of lower sales and marketing expenses, and reduced capital spending for inventory and fixed assets. We realized -- either at closing or within thirty days - 42% of our Resorts sales in cash during the third quarter of 2009, up significantly from 22% during the same period last year."

He continued, "During this process, we have continued to focus on the customer to ensure their continued satisfaction with the Bluegreen Vacation Club. In measuring our success in this regard, we note that during the third quarter of 2009 our Resorts owner base increased, sales to existing owners rose as a percentage of sales, and average sales prices per transaction increased. New prospect conversion rates also improved compared to the same period in 2008. We continue to work with current and potential lenders to extend the maturities of our debt and to secure additional financing. We are also continuing to explore various potential alternatives to obtain new sources of liquidity. At September 30, 2009, our total cash position was $81.6 million and we had receivable-backed credit facilities with revolving capacity of up to $255.0 million with current availability of $52.5 million."

BLUEGREEN RESORTS

Supplemental Segment Financial Data

Three and Nine Months Ended September 30, 2009 and September 30, 2008

(In 000's, except percentages)

(unaudited)

                          Three Months Ended                        Nine Months Ended

                          September 30,                             September 30,

                          2009         % of    2008         % of    2009          % of    2008          % of
                                       Sales                Sales                 Sales                 Sales

Contract sales            $ 69,862             $ 154,040            $ 171,063             $ 393,858

Recognition (deferral)
of sales under timeshare

accounting rules            1,992                5,927                12,836                (9,125   )

Impact of                   -                    382                  -                     -
percentage-of-completion

Gross sales of real         71,854     100 %     160,349    100 %     183,899     100 %     384,733     100 %
estate

Estimated uncollectible     (6,877  )  (10 )%    (24,146 )  (15 )%    (23,425  )  (13 )%    (59,308  )  (15 )%
VOI notes receivable

Gain on sales of notes      -          0   %     -          0   %     -           0   %     8,245       2   %
receivable

Sales of real estate        64,977     90  %     136,203    85  %     160,474     87  %     333,670     87  %

Cost of sales of real       (22,237 )  (31 )%    (31,490 )  (20 )%    (51,895  )  (28 )%    (75,594  )  (20 )%
estate sales

Gross profit                42,740     59  %     104,713    65  %     108,579     59  %     258,076     67  %

Fee-Based Sales             7,026      10  %     -          0   %     7,026       4   %     -           0   %
Commission revenue

Sales of other services     14,711     20  %     15,839     10  %     41,395      23  %     44,868      12  %

Cost of sales of other      (9,558  )  (13 )%    (11,734 )  (7  )%    (25,402  )  (14 )%    (30,059  )  (8  )%
services

                            5,153      7   %     4,105      3   %     15,993      9   %     14,809      4   %

Selling and marketing       (32,733 )  (45 )%    (80,519 )  (50 )%    (85,918  )  (47 )%    (219,640 )  (57 )%
expense

Resorts G & A expense       (4,216  )  (6  )%    (7,543  )  (5  )%    (14,150  )  (8  )%    (21,319  )  (6  )%

Total Resorts operating     (36,949 )  (51 )%    (88,062 )  (55 )%    (100,068 )  (55 )%    (240,959 )  (63 )%
expense

Resorts operating profit  $ 17,970     25  %   $ 20,756     13  %   $ 31,530      17  %   $ 31,926      8   %

                            For the Three Months            For the Nine Months

                            Ended September 30,             Ended September 30,

Other data (not in 000's):  Q3 2009         Q3 2008         Q3 2009    Q3 2008

Sales to Bluegreen
Vacation Club owners, as a    57%             49%             55%        46%
percentage of Resort sales

Number of VOI sales           7,106           13,846          16,391     35,546
transactions

Average sales price per     $ 11,729        $ 11,098        $ 11,317   $ 11,046
transaction

Total marketing prospect      44,416          99,800          103,065    260,400
tours

New marketing prospect        25,366          72,000          59,737     185,800
tours

Sale-to-tour ratio (total     16.0%           13.9%           15.9%      13.7%
prospects)

Sale-to-tour ratio (new       11.0%           8.8%            11.8%      9.5%
prospects)

Sales deferred under
timeshare accounting rules  $ 10.4 million  $ 33.7 million
as of end of period

Resorts operating profit
deferred under timeshare
accounting rules            $ 5.1 million   $ 19.5 million

as of end of period

Lower Resorts sales during the third quarter of 2009 reflected the deliberate downsizing of the Company's sales and marketing operations in connection with the Company's strategic initiatives implemented in the fourth quarter of 2008. During the third quarter of 2009, Bluegreen operated 20 sales offices as compared to 29 sales offices in the third quarter of 2008.

Gross profit declined to 59% from 65% in the third quarter of 2008, representing the sale of high cost vacation ownership interests (VOIs), a result of a change in the mix of inventory sold and the relatively higher cost of VOIs reacquired in connection with consumer loan defaults on previously sold notes receivable.

Selling and marketing expenses as a percentage of gross sales of real estate in the third quarter of 2009 declined to 45% from 50% in the third quarter of 2008. Total Resorts operating expenses (2) also declined to 51% of gross sales of real estate from 55% in the same period one year ago, which also reflects a 44% reduction in Resorts general and administrative expenses. Bluegreen believes that these improvements primarily resulted from the implementation of the Company's strategic initiatives, as well as reflect that a higher percentage of sales were to existing owners during the third quarter of 2009 (57%) as compared to the third quarter of 2008 (49%). Sales to existing owners generally involve lower marketing costs as compared to sales to new prospects.

Resorts operating profit was $18.0 million, or 25% of gross sales, as compared to $20.8 million, or 13% of gross sales, in the third quarter of 2008.

The number of owners in the Bluegreen Vacation Club increased to 167000 at September 30, 2009 from 164,000 at June 30, 2009. As expected, VOI sales transactions and tour flow declined reflecting the impact of the strategic initiatives; however, both total prospect conversion rates and new prospect conversion rates increased compared to the prior year period. Bluegreen believes this is a reflection of the quality of its products and services, the professionalism of its sales associates and its focus on what it believes to be its most efficient and effective marketing channels.

      Resorts operating expenses excludes the allocation of corporate overhead,
(2)   interest income, other income (expense) net, interest expense,
      non-controlling interest, restructuring charges, goodwill impairment
      charges and income taxes.

Delinquencies over 30 days on the total originated and serviced timeshare receivables portfolio at September 30, 2009 were 4.9% of approximately $825 million in receivables portfolio, compared to 4.9% of an approximately $846 million portfolio at June 30, 2009. The average annual default rate rose to 12.7% for the twelve months ended September 30, 2009 from 8.7% for the twelve months ended September 30, 2008. Although Bluegreen believes that the increase in the default rate is primarily a function of the growing unemployment rate in the United States, the Company expects that the performance of loans originated in 2009 will reflect its newly-implemented initiatives, which included new underwriting standards put in place in December 2008 and a focus on obtaining increased down payments at the time of sale.

BLUEGREEN COMMUNITIES

Supplemental Segment Financial Data

Three and Nine Months Ended September 30, 2009 and September 30, 2008

(In 000's, except percentages)

(unaudited)

                          Three Months Ended                       Nine Months Ended

                          September 30,                            September 30,

                          2009        % of     2008        % of    2009         % of    2008         % of
                                      Sales                Sales                Sales                Sales

Sales of real estate      $ 6,289     100  %   $ 10,704    100 %   $ 13,202     100 %   $ 44,579     100 %

Cost of sales of real       (6,284 )  (100 )%    (6,727 )  (63 )%    (10,870 )  (82 )%    (24,553 )  (55 )%
estate

Gross profit                5         0    %     3,977     37  %     2,332      18  %     20,026     45  %

Other Communities
operations                  2,264     36   %     2,170     20  %     6,203      47  %     8,817      20  %

revenues

Cost of other               (3,188 )  (51  )%    (2,573 )  (24 )%    (7,887  )  (60 )%    (8,009  )  (18 )%
Communities operations

Gross profit (loss) on      (924   )  (15  )%    (403   )  (4  )%    (1,684  )  (13 )%    808        2   %
other operations

Selling and marketing       (972   )  (15  )%    (2,264 )  (21 )%    (3,349  )  (25 )%    (10,611 )  (24 )%
expense

Communities G& A expense    (1,093 )  (17  )%    (1,863 )  (17 )%    (3,559  )  (27 )%    (5,872  )  (13 )%

Total Communities           (2,065 )  (32  )%    (4,127 )  (38 )%    (6,908  )  (52 )%    (16,483 )  (37 )%
operating expense

Communities operating     $ (2,984 )  (47  )%  $ (553   )  (5  )%    (6,260  )  47  )%  $ 4,351      10  %
profit (loss)

Other data (not in
000's):

Average sales price per   $ 54,356             $ 79,277            $ 54,938             $ 81,137
homesite

Sales deferred under
percentage-

of-completion accounting
as of end

of period                                                          $ 0.2                $ 2.5
                                                                     million              million

Communities operating
profit deferred

under
percentage-of-completion

accounting as of end of                                            $ 0.1                $ 0.7
period (3)                                                           million              million

(3)  It is expected that these amounts will be recognized in future periods
     ratably with the development of Communities projects.

Sales at Bluegreen Communities continue to be adversely impacted by the deterioration of the general economy and the real estate markets, in particular. There has been a decline in demand for the Company's homesites, especially for higher priced premium homesites. During the third quarter of 2009, the Company significantly reduced prices on completed homesites at certain of its communities. While this promotional pricing generated sales volume during the quarter, it was the primary reason why cost of sales of real estate increased as a percentage of sales. In addition, cost of sales during the third quarter of 2009 was adversely impacted by inventory impairment charges totaling $1.6 million. Bluegreen Communities continues to focus its efforts on reducing its costs in response to declining sales volumes. As a result of a focused effort to reduce costs, Communities general and administrative expenses in the third quarter of 2009 decreased by 41% compared to the third quarter of 2008.

In May 2009, we entered into contracts to sell four golf courses located in North Carolina and Virginia for the combined purchase price of approximately $10.2 million. The combined carrying amount of the assets as of September 30, 2009 was approximately $19.8 million. On September 30, 2009, these contracts expired without the contemplated sales being consummated. However, if in the future these sales are effected or become probable at the previously contracted price, then we would recognize a loss on disposal of approximately $9.5 million. At this time, we are continuing to operate these assets and we anticipate that the golf courses will provide cash flows at an amount sufficient to support their carrying amounts, although this may not continue to be true in the future.

SELECTED OTHER FINANCIAL INFORMATION

Net interest spread (interest income minus interest expense) was $6.3 million for the third quarter of 2009 compared to $8.5 million in the same period last year, reflecting a higher average debt balance. Bluegreen's debt balance was higher reflecting that virtually all of the Company's receivable financing activities since March 2008 has been accounted for as on-balance sheet borrowings. Higher interest expense was partially offset by higher interest income earned on notes receivable, both as a result of a higher balance of notes receivable on Bluegreen's balance sheet and due to an interest rate increase on timeshare notes receivable originated after November 1, 2008.

The Company has signed a non-binding term sheet with Wells Fargo Foothill, LLC (Foothill) to refinance approximately $40.3 million of debt with Wachovia Bank. As contemplated, the maturities would be extended to occur over a 48 month period. In addition, the Company's existing Foothill receivable-backed credit facility would be expanded and extended. There can be no assurances that this refinancing will occur on favorable terms to the Company or at all, as it is subject to final approval and customary conditions precedent.

On October 28, 2009, the Company and Textron Financial Corporation (Textron) extended the maturity on approximately $7.4 million of debt which previously was to mature within the next twelve months to instead be due over the period through December 31, 2011. In connection with this extension, the Company agreed to terminate the advance period under Textron's existing $75 million master facility, which was in place primarily for future acquisition and development projects, if any, approved by Textron through April 2010. The Company had previously substantially completed its near-term intended development activities on existing projects under this facility and had no intention to acquire additional projects prior to the expiration of the project approval period under this facility.

The Company has continued to work with its current and potential new lenders to extend or refinance certain debt obligations with near-term maturities. If such obligations are not extended or refinanced when due, the Company's liquidity and financial position would be materially adversely impacted.

                                                          As of

                                            September 30,         December 31,

                                            2009                  2008

Unrestricted cash                         $ 55.0 million        $ 60.6 million

Book value per share                      $ 12.87               $ 12.24

Debt-to-equity ratio: recourse and          1.38:1                1.52:1
non-recourse debt

Debt-to-equity ratio: recourse debt only    1.05:1                1.16:1

In June 2009, the Financial Accounting Standards Board issued accounting guidance that we believe will require the consolidation of certain special-purpose finance entities into the Company's financial statements, when adopted by the Company on January 1, 2010. While we have not completed our evaluation of the effects that this change in accounting will have on our financial statements, we anticipate that our net worth, leverage and book value per share will be materially adversely impacted as a result of the reversal of previously recognized sales of notes receivable, the recognition of the related, non-recourse receivable-backed notes payable, and elimination of retained interest in notes receivable sold.

ABOUT BLUEGREEN CORPORATION

Founded in 1966 and headquartered in Boca Raton, FL, Bluegreen Corporation (NYSE: BXG) is the leader in providing Colorful Places to Live and Play(R) through its vacation ownership resort and residential real estate business segments. Our more than 3,800 employees are passionate about delivering extraordinary experiences for our owners, travelers and business partners. Since 1996, Bluegreen has managed, marketed and sold a flexible, real estate-based vacation ownership plan with more than 215,400 owners, over 53 owned or managed resorts, and access to more than 3,700 resorts worldwide. Since 1985, Bluegreen Communities has developed master-planned residential and golf communities primarily in the southern and southeastern U.S., and has sold over 55,000 homesites. We also offer a portfolio of comprehensive, turnkey, fee-for-service resort management, financial services, customer generation and sales solutions to third-party developers and lenders. For more information, visit www.bluegreencorp.com.

Statements in this release may constitute forward looking statements and are made pursuant to the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. Forward looking statements are based largely on expectations and are subject to a number of risks and uncertainties including but not limited to the risks and uncertainties associated with economic, credit market, competitive and other factors affecting the Company and its operations, markets, products and services, as well as the risk that the Company may not be able to refinance or restructure outstanding debt; the Company's strategic initiatives are not maintained successfully, do not have the expected impact on the Company's financial position, results of operations, liquidity and credit prospects; the performance of the Company's vacation ownership notes receivable may continue to deteriorate in the future; the Company may not be in a position to draw down on its existing credit lines or may be unable to renew, extend or replace such lines of credit; the Company may require new credit lines to provide liquidity for its operations, including facilities to sell or finance its notes receivable; real estate inventories, notes receivable, retained interests in notes receivable sold or other assets will be determined to be impaired in the future; risks relating to pending or future litigation, claims and assessments; sales and marketing strategies related to Resorts and Communities properties may not be successful; retail prices and homesite yields for Communities properties may be below the Company's estimates; marketing costs will increase and not result in increased sales; sales to existing owners will not continue at current levels; fee-for-service initiatives may not be successful; deferred sales may not be recognized to the extent or at the time anticipated; and the risks and other factors detailed in the Company's SEC filings, including its most recent Annual Report on Form 10-K filed on March 16, 2009, Form 10K/A filed on April 30, 2009, and Form 10-Q to be filed on November 9, 2009.

BLUEGREEN CORPORATION

Condensed Consolidated Statements of Income

(In 000's, Except Per Share Data)

(unaudited)

                      Three Months Ended            Nine Months Ended

                      September 30,  September 30,  September 30,  September 30,

                      2009           2008           2009           2008

REVENUES:

Vacation ownership    $ 64,977       $ 136,203      $ 160,474      $ 333,670
sales

Homesite sales          6,289          10,704         13,202         44,579

Total sales             71,266         146,907        173,676        378,249

Other resort and
communities             16,975         18,009         47,598         53,685
operations revenue

Fee-based sales         7,026          -              7,026          -
commission revenue

Interest income         16,745         14,870         52,933         38,334

Other income, net       665            -              1,964          -

Total operating         112,677        179,786        283,197        470,268
revenues

EXPENSES:

Cost of sales:

Vacation ownership      22,237         31,490         51,895         75,594
cost of sales

Homesite cost of        6,284          6,727          10,870         24,553
sales

Total cost of sales     28,521         38,217         62,765         100,147

Cost of other resort
and communities         12,746         14,307         33,289         38,068
operations

Selling, general and
administrative          51,274         105,825        138,827        294,133
expenses

Interest expense        10,485         6,366          25,920         13,356

Other expense, net      -              948            -              475

Total operating         103,026        165,663        260,801        446,179
expenses

Income before
non-controlling
interests and           9,651          14,123         22,396         24,089
provision for income
taxes

Provision for income    3,071          4,180          2,713          7,147
taxes (4)

Net income            $ 6,580        $ 9,943        $ 19,683       $ 16,942

Less: Net income
attributable to         2,647          3,122          5,383          5,280
non-controlling
interest

Net income
attributable to       $ 3,933        $ 6,821        $ 14,300       $ 11,662
Bluegreen
Corporation

Net income per share

Basic:                $ 0.13         $ 0.22         $ 0.46         $ 0.37

Diluted:              $ 0.13         $ 0.21         $ 0.46         $ 0.37

Weighted average
number of common and
common equivalent
shares:

Basic:                  31,093         31,250         31,079         31,230

Diluted:                31,109         31,822         31,085         31,482

     Provision for income taxes for the nine months ended September 30, 2009
     included an adjustment to deferred income taxes in the second quarter of
(4)  2009 of approximately $4.6 million, a result of certain temporary book and
     tax difference becoming permanent. Excluding this benefit, Bluegreen
     estimates its effective tax rate for the 2009 nine-month period to be
     approximately 43%.

BLUEGREEN CORPORATION

Condensed Consolidated Balance Sheets

(In 000's)

                                             September 30,  December 31,

                                             2009           2008

ASSETS                                       (Unaudited)

Cash and cash equivalents (unrestricted)     $ 55,040       $ 60,561

Cash and cash equivalents (restricted)         26,515         21,214

Total cash and cash equivalents                81,555         81,775

Contracts receivable, net                      4,140          7,452

Notes receivable, net                          323,630        340,644

Prepaid expenses                               11,201         9,801

Other assets                                   35,273         27,488

Inventory, net                                 515,032        503,269

Retained interests in notes receivable sold    82,712         113,577

Property and equipment, net                    107,246        109,501

Total assets                                 $ 1,160,789    $ 1,193,507

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities

Accounts payable                             $ 9,863        $ 24,900

Accrued liabilities and other                  50,142         52,283

Deferred income                                16,824         29,854

Deferred income taxes                          90,685         91,802

Receivable-backed notes payable                243,617        249,117

Lines-of credit and notes payable              201,947        222,739

Junior subordinated debentures                 110,827        110,827

Total liabilities                              723,905        781,522

Total equity                                   436,884        411,985

Total liabilities and shareholders' equity   $ 1,160,789    $ 1,193,507

BLUEGREEN CORPORATION

Reconciliation of Resort Operating Profit and Communities Operating Profit
(Loss) to Income Before

Non-controlling Interest and Income Taxes

(in 000's)

(Unaudited)

                    Three Months Ended            Nine Months Ended

                    September 30,  September 30,  September 30,  September 30,

                    2009           2008           2009           2008

Resort operating    $ 17,970       $ 20,756       $ 31,530       $ 31,926
profit

Communities
operating profit      (2,984  )      (553    )      (6,260  )      4,351
(loss)

Interest Income       16,745         14,870         52,933         38,334

Other income          665            (948    )      1,964          (475    )
(expense), net

Corporate general
and administrative    (12,260 )      (13,636 )      (31,851 )      (36,691 )
expenses

Interest expense      (10,485 )      (6,366  )      (25,920 )      (13,356 )

Income before
non-controlling
interest and
provision

for income taxes    $ 9,651        $ 14,123       $ 22,396       $ 24,089

    Source: Bluegreen Corporation

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