Bluegreen Corporation Reports 2011 Third Quarter Financial Results

Bluegreen Corporation (NYSE: BXG), a leading timeshare sales, marketing and resort management company, today announced financial results for the three and nine months ended September 30, 2011.

John M. Maloney Jr., President and Chief Executive Officer of Bluegreen, commented, “We believe that our results from continuing operations for the third quarter of 2011 validate our strategy of utilizing our core product, the points-based Bluegreen Vacation Club, as a platform to support three potential sources of revenue: our traditional timeshare (VOI) business; a growing fee-based services business; and a finance business. During the third quarter, we increased system-wide sales, generated higher income from continuing operations than in the comparable 2010 period, and produced Free Cash Flow of $41.1 million. During Q3 2011, fee-based services contributed 81% of total Resorts operating profit. Additionally, during the nine months ended September 30, 2011 we reduced our debt by more $100 million from December 31, 2010. We believe that our business model continues to move toward our goal of growing our fee-based services business, which has low capital requirements and which generates significant Free Cash Flow.”

Additional operating highlights included:
  • In connection with its fee-based services business, Resorts sold $34.0 million of third-party VOI inventory in Q3 2011, generating sales and marketing commissions of approximately $23.5 million and contributing an estimated $6.2 million to Resorts operating profit. This compares to sales of $22.1 million of third-party VOI inventory, which generated sales and marketing commissions of $15.1 million and contributed an estimated $4.7 million to Resorts operating profit in Q3 2010. In Q3 2011, Bluegreen provided sales and marketing services to 7 resorts under fee-based service arrangements, as compared to 5 such arrangements during Q3 2010;
  • Total revenues from fee-based services rose 30% to $42.3 million in Q3 2011. As of September 30, 2011, Bluegreen managed 45 timeshare resort properties and hotels compared to 43 as of September 30, 2010;
  • Cash received from Resorts sales - either at closing or within 30 days of closing and including down payments received on financed sales - represented 55% of Resorts sales for the first nine months of 2011;
  • Debt-to-equity (recourse and non-recourse) declined to 2.32:1 at September 30, 2011 from 2.58:1 at December 31, 2010. Debt-to-equity (recourse only) declined to 1.08:1 at September 30, 2011 from 1.22:1 at December 31, 2010;
  • In September 2011, Bluegreen entered into a $30.0 million revolving timeshare receivables hypothecation facility with CapitalSource Bank; and
  • In October 2011, Bluegreen amended, restated, and extended by one year its existing timeshare receivables purchase facility with BB&T. The amended revolving facility allows for maximum outstanding borrowings of $50.0 million. As of September 30, 2011, $20.6 million was outstanding under this facility.

Income from continuing operations attributable to Bluegreen shareholders (defined as income from continuing operations less net income attributable to non-controlling interest) rose to $9.7 million, or $0.30 per diluted share, compared to a loss of $0.6 million, or $0.02 per diluted share in Q3 2010. Income from continuing operations for Q3 2010 included a non-cash charge of $24.5 million to increase the reserve for loan losses on VOI notes receivable generated prior to December 15, 2008 (the date Bluegreen implemented credit underwriting standards), partially offset by a related $8.7 million non-cash reduction of cost of sales.

As previously disclosed, Bluegreen’s Board of Directors made a determination during June 2011 to seek to sell Bluegreen Communities or all or substantially all of its assets. As a consequence, Bluegreen Communities is accounted for as a discontinued operation for all periods in the accompanying consolidated financial statements. On October 12, 2011, the Company entered into a Purchase and Sale Agreement (the “Agreement”) with a third-party (the “Buyer”), providing for the sale of substantially all of the assets that comprise Bluegreen Communities for a purchase price of i) $31.5 million in cash, and ii) a cash amount equal to 20% of the net proceeds (as calculated in accordance with the terms of the Agreement) the Buyer receives upon its sale, if any, of two specified parcels of real estate to be purchased by the Buyer under the Agreement. The Buyer has advised Bluegreen that they need to obtain debt and/or equity financing in order to close the transaction, but obtaining such financing is not a Buyer condition of closing. There can be no assurance that the transaction will be consummated on the contemplated terms, including the contemplated time frame, or at all. Additional information regarding this proposed transaction is available in Bluegreen’s filings with the Securities and Exchange Commission.

The loss from discontinued operations, net of income taxes, for Q3 2011 was $2.6 million, or $0.08 per diluted share, compared to a loss of $16.1 million, or $0.52 per diluted share, in Q3 2010. The loss from discontinued operations for Q3 2010 included non-cash pre-tax inventory impairment charges of $20.8 million.

As a result of the above-referenced items, net income for Q3 2011 was $7.1 million, or $0.22 per diluted share, as compared to a net loss of $16.7 million, or $0.54 per diluted share, in Q3 2010.
 

BLUEGREEN RESORTS

Supplemental Financial Data and Reconciliation of System-Wide Sales of VOIs to GAAP Gross Sales of VOIs

Three and Nine Months Ended September 30, 2011 and September 30, 2010

(In 000’s, except percentages) (unaudited)
       
Three Months Ended September 30, 2011 Three Months Ended September 30, 2010

Traditional

Timeshare

Business
 

Fee-Based

Services

Business
  Total  

% of

System-

wide sales

of VOIs, net

(6)

Traditional

Timeshare

Business
 

Fee-Based

Services

Business
  Total  

% of

System-

wide sales

of VOIs,

net(6)
System-wide sales of VOI’s (1) $56,993 $33,983 $90,976 $67,383 $22,090 $89,473

Change in sales deferred under timeshare accounting rules
(335 ) -   (335 ) 4,854   -   4,854  
System-wide sales of VOIs, net (1) 56,658 33,983 90,641 100 % 72,237 22,090 94,327 100 %
Less: Sales of third-party VOIs -   (33,983 ) (33,983 ) (37 ) -   (22,090 ) (22,090 ) (23 )
Gross sales of VOIs 56,658 - 56,658 63 72,237 - 72,237 77

Estimated uncollectible VOI notes receivable (2)
(10,770 ) -   (10,770 ) (19 ) (33,448 ) -   (33,448 ) (46 )
Sales of VOIs 45,888 - 45,888 51 38,789 - 38,789 41
Cost of VOIs sold (3) (11,349 ) -   (11,349 ) (25 ) (13,696 ) -   (13,696 ) (35 )
Gross profit (3) 34,539 - 34,539 75 25,093 - 25,093 65
Fee-based sales commission revenue - 23,460 23,460 26 - 15,148 15,148 16
Other resort fee-based services revenues - 18,838 18,838 21 - 17,476 17,476 19
Cost of other resort fee-based services - (10,550 ) (10,550 ) (12 ) - (9,255 ) (9,255 ) (10 )
Net carrying cost of VOI inventory (2,362 ) - (2,362 ) (3 ) (2,329 ) - (2,329 ) (2 )
Selling and marketing expense (4) (25,462 ) (15,272 ) (40,734 ) (45 ) (30,263 ) (9,255 ) (39,518 ) (42 )
Resorts G & A expense (4) (3,334 ) (2,000 ) (5,334 ) (6 ) (3,818 ) (1,167 ) (4,985 ) (5 )
Bluegreen Resorts operating profit (5) $3,381   $14,476   $17,857   20 % ($11,317 ) $12,947   $1,630   2 %
       
Nine Months Ended September 30, 2011 Nine Months Ended September 30, 2010

Traditional

Timeshare

Business
 

Fee-Based

Services

Business
  Total  

% of

System-

wide sales

of VOIs, net

(6)

Traditional

Timeshare

Business
 

Fee-Based

Services

Business
  Total  

% of

System-

wide sales

of VOIs,

net (6)
System-wide sales of VOI’s (1) $150,755 $77,844 $228,599 $168,185 $56,045 $224,230

Change in sales deferred under timeshare accounting rules
(1,639 ) -   (1,639 ) (1,660 ) -   (1,660 )
System-wide sales of VOIs, net (1) 149,116 77,844 226,960 100 % 166,525 56,045 222,570 100 %
Less: Sales of third-party VOIs -   (77,844 ) (77,844 ) (34 ) -   (56,045 ) (56,045 ) (25 )
Gross sales of VOIs 149,116 - 149,116 66 166,525 - 166,525 75

Estimated uncollectible VOI notes receivable (2)
(21,521 ) -   (21,521 ) (14 ) (58,050 ) -   (58,050 ) (35 )
Sales of VOIs 127,595 - 127,595 56 108,475 - 108,475 49
Cost of VOIs sold (3) (32,003 ) -   (32,003 ) (25 ) (32,130 ) -   (32,130 ) (30 )
Gross profit (3) 95,592 - 95,592 75 76,345 - 76,345 70
Fee-based sales commission revenue - 52,532 52,532 23 - 37,458 37,458 17
Other resort fee-based services revenues - 53,325 53,325 23 - 50,181 50,181 23
Cost of other resort fee-based services - (28,286 ) (28,286 ) (12 ) - (25,197 ) (25,197 ) (11 )
Net carrying cost of VOI inventory (9,863 ) - (9,863 ) (4 ) (7,910 ) - (7,910 ) (4 )
Selling and marketing expense (4) (68,514 ) (35,767 ) (104,281 ) (46 ) (76,331 ) (25,690 ) (102,021 ) (46 )
Resorts G & A expense (4) (9,372 ) (4,893 ) (14,265 ) (6 ) (10,839 ) (3,648 ) (14,487 ) (7 )
Bluegreen Resorts operating profit (5) $7,843   $36,911   $44,754   20 % ($18,735 ) $33,104   $14,369   6 %
 
(1)   Amount for “fee-based services business” represents sales of VOIs made on behalf of third parties, which are transacted as sales of timeshare interests in the Bluegreen Vacation Club and through the same sales and marketing process as the sale of the Company’s VOI inventory as represented under “traditional timeshare business.”
(2) Percentages for estimated uncollectible VOI notes receivable are calculated as a percentage of gross sales of VOIs.
(3) Percentages for cost of VOIs sold and the associated gross profit are calculated as a percentage of sales of VOIs.
(4) Selling and marketing expenses and Resorts G&A expenses are allocated pro rata based on system-wide sales of VOIs, net.
(5) General and administrative expenses attributable to corporate overhead have been excluded from the table. Corporate general and administrative expenses totaled $9.3 million and $7.8 million for the three months ended September 30, 2011 and 2010, respectively, and $28.5 million and $30.1 million for the nine months ended September 30, 2011 and 2010, respectively.
(6) Unless otherwise indicated.
 

System-wide sales of VOIs rose to $91.0 million in Q3 2011 from $89.5 million in Q3 2010, the result of a higher number of sales transactions, partially offset by a decline in average sales price per transaction. Total VOI sales transactions rose to 7,662 in Q3 2011 from 7,361 in Q3 2010, with a deliberate decrease in Bluegreen VOIs sales transactions (traditional timeshare business) offset by an increase in the number of sales made on behalf of third parties (fee-based services business). Total prospect tours in Q3 2011 rose to 48,773 from 47,750 in Q3 2010, with new prospect tours increasing to 29,125 in Q3 2011 from 28,463 in Q3 2010. Total sale-to-tour conversion ratio in Q3 2011 rose to 15.7% from 15.4% in Q3 2010, and the new prospect sale-to-tour conversion ratio was 11.1% in Q3 2011 compared to 10.1% in Q3 2010. Average sales price per transaction declined to $11,851 for Q3 2011 from $12,240 for Q3 2010.

Charges for estimated uncollectible VOI notes receivable decreased by 68% in Q3 2011 from Q3 2010. The Company updates its estimates of uncollectible VOI notes receivable each quarter, and consequently, the charge against sales in a particular quarter for such uncollectibles may be impacted, favorably or unfavorably, by a change in expected losses on prior periods’ financed sales. In Q3 2010 and, to a lesser extent, in Q3 2011, we increased our allowance for loan losses for loans generated prior to December 15, 2008, the date on which we implemented our FICO score-based credit standards.

As a percentage of system-wide sales of VOIs, net, selling and marketing expenses rose to 45% in Q3 2011 from 42% in Q3 2010, due to the fluctuations in the mix of marketing programs, including a reduced proportion of sales to existing owners, which carry a relatively lower marketing cost, and changes in sales deferred under timeshare accounting rules. Selling and marketing expenses during the nine months ended September 30, 2011 were consistent with such expenses for the nine months ended September 30, 2010, at 46% of system-wide sales in both periods.

Operating profit from the fee-based services business rose to $14.5 million in Q3 2011 from $12.9 million in Q3 2010, reflecting an increase in sales of third-party inventory.

Operating profit at Resorts rose to $17.9 million, or 20% of system-wide sales of VOI’s, net, for Q3 2011 from $1.6 million, or 2% of system-wide sales of VOI’s, net, for Q3 2010. Resorts operating profit for Q3 2010 included the previously discussed non-cash charge to increase the reserve for loan losses on VOI notes receivable generated prior to December 15, 2008, partially offset by the related non-cash reduction of cost of sales.

INTEREST INCOME AND INTEREST EXPENSE

Net interest spread is the excess of interest income primarily earned on $635.9 million of VOI notes receivable held as of September 30, 2011, net of interest expense incurred on $497.0 million of receivable-backed debt and $214.8 million of other debt as of September 30, 2011. Pre-tax income from net interest spread in Q3 2011 was $10.3 million as compared to $11.3 million in Q3 2010, due to the continued decrease in Bluegreen’s VOI notes receivable portfolio, reflecting continuing efforts to increase the amount of sales that are realized in cash, and growth in sales on behalf of fee-based services clients, as such sales typically do not result in a Bluegreen note receivable.

DEFINITIVE MERGER AGREEMENT WITH BFC FINANCIAL CORPORATION

As Bluegreen announced today, it has entered into a definitive merger agreement with BFC Financial Corporation (“BFC”) (Pink Sheets: BFCF.PK) which provides for a merger that will, subject to the terms and conditions of the agreement, result in Bluegreen becoming a wholly-owned subsidiary of BFC.

ABOUT BLUEGREEN CORPORATION

Founded in 1966 and headquartered in Boca Raton, FL, Bluegreen Corporation (NYSE:BXG) is a leading timeshare sales, marketing and resort management company. Bluegreen Resorts manages, markets and sells the Bluegreen Vacation Club, a flexible, points-based, deeded vacation ownership plan with more than 160,000 owners, over 59 owned or managed resorts, and access to more than 4,000 resorts worldwide. Bluegreen also offers a portfolio of comprehensive, turnkey, fee-based service resort management, financial services, and sales and marketing on behalf of third parties. 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; risks relating to the merger with BFC, including the potential benefits of the merger and the risk that the merger may not be consummated in accordance with the contemplated terms, including in the contemplated timeframe, or at all; the general risks associated with strategic transactions, including the Company’s decision to sell Bluegreen Communities; additional impairment charges may be required with respect to the assets of Bluegreen Communities; the agreement to sell Bluegreen Communities may not be consummated on the terms of the agreement or at all; the sale of Communities may not result in anticipated improvements in our operating results and financial condition; the Company’s efforts to improve its liquidity through cash sales and larger down payments on financed sales may not be successful; the performance of the Company’s vacation ownership notes receivable may deteriorate, and the FICO® score-based credit underwriting standards may not have the expected effects on the performance of the receivables; 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; the Company may not be able to successfully securitize additional timeshare loans and/or obtain adequate receivable credit facilities in the future; risks relating to pending or future litigation, regulatory proceedings, claims and assessments; sales and marketing strategies may not be successful; marketing costs may increase and not result in increased sales; sales to existing owners may not continue at current levels or decrease; fee-based service initiatives may not be successful and may not grow or generate profits as anticipated; 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 those contained in the “Risk Factors” sections of such filings.
 
 

Condensed Consolidated Statements of Operations

(In 000's, except per share data)

(Unaudited)
       

For the Three Months

Ended September 30,

For the Nine Months

Ended September 30,
2011   2010 2011   2010
Revenues:
Gross sales of VOIs $ 56,658 $ 72,237 $ 149,116 $ 166,525
Estimated uncollectible VOI notes receivable   (10,770 )   (33,448 )   (21,521 )   (58,050 )
Sales of VOIs 45,888 38,789 127,595 108,475
 
Fee-based sales commission revenue 23,460 15,148 52,532 37,458
Other fee-based services revenues 18,838 17,476 53,325 50,181
Interest income   23,533     26,461     71,986     80,878  
  111,719     97,874     305,438     276,992  
Costs and expenses:
Cost of VOIs sold 11,349 13,696 32,003 32,130
Cost of other resort operations 12,912 11,584 38,149 33,107
Selling, general and administrative expenses 56,098 53,164 149,448 149,191
Interest expense 13,225 15,182 41,746 46,469
Other expense, net       2,008     910     2,397  
  93,584     95,634     262,256     263,294  

Income before non-controlling interest, provision (benefit) for income taxes and discontinued operations
18,135 2,240 43,182 13,698
Provision (benefit) for income taxes   5,939     (371 )   14,650     2,888  
Income from continuing operations 12,196 2,611 28,532 10,810
Loss from discontinued operations, net of income taxes   (2,626 )   (16,130 )   (40,389 )   (24,969 )
Net income(loss) 9,570 (13,519 ) (11,857 ) (14,159 )
Less: Net income attributable to non-controlling interest   2,520     3,189     5,261     6,097  
Net income (loss) attributable to Bluegreen Corporation $ 7,050   $ (16,708 ) $ (17,118 ) $ (20,256 )
 
Income (loss) attributable to Bluegreen Corporation per common share - Basic

Earnings (loss) per share from continuing operations attributable to Bluegreen shareholders
$ 0.31 $ (0.02 ) $ 0.75 $ 0.15
Loss per share from discontinued operations   (0.08 )   (0.52 )   (1.29 )   (0.80 )
Earnings (loss) per share attributable to Bluegreen shareholders $ 0.23   $ (0.54 ) $ (0.55 ) $ (0.65 )
 
Income (loss) attributable to Bluegreen Corporation per common share - Diluted
Earnings (loss) per share from continuing operations attributable to
Bluegreen shareholders $ 0.30 $ (0.02 ) $ 0.72 $ 0.15
Loss per share from discontinued operations   (0.08 )   (0.52 )   (1.26 )   (0.79 )
Earnings (loss) per share attributable to Bluegreen shareholders $ 0.22   $ (0.54 ) $ (0.54 ) $ (0.64 )
 
Weighted average number of common shares:
Basic   31,245     31,178     31,211     31,162  
Diluted   32,429     31,178     32,156     31,527  
 
 

Condensed Consolidated Balance Sheets

(In 000's)
         
September 30, December 31,
2011 2010
ASSETS (Unaudited)
 
Unrestricted cash and cash equivalents $   70,396 $   72,085
Restricted cash ($42,932 and $41,243 held by VIEs at September 30, 2011
and December 31, 2010, respectively) 56,521 53,922
Notes receivable including gross securitized notes of and $471,595
$533,479 (net of allowance of $111,820 and $143,160 at September 30, 2011
and December 31, 2010, respectively) 530,206 568,985
Prepaid expenses 8,201 4,882
Other assets 51,940 56,790
Inventory 308,179 337,684
Property and equipment, net 70,739 73,815
Assets held for sale     30,250     87,769
Total assets $   1,126,432 $   1,255,932
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable $ 9,137 $ 8,243
Accrued liabilities and other 60,464 60,518
Deferred income 24,010 17,550
Deferred income taxes 14,738 25,605
Receivable-backed notes payable - recourse ($17,271 and $22,759 held by
by VIEs at September 30, 2011 and December 31, 2010, respectively) 114,955 135,660
Receivable-backed notes payable - non-recourse (held by VIEs) 382,089 436,271
Lines-of-credit and notes payable 103,981 142,120
Junior subordinated debentures     110,827     110,827
Total liabilities 820,201 936,794
 
 
Total shareholders’ equity     306,231     319,138
Total liabilities and shareholders' equity $   1,126,432 $   1,255,932
 

Copyright Business Wire 2010

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