Bluegreen Corporation Reports 2008 First Quarter Financial Results

Bluegreen Corporation (NYSE: BXG), a leading provider of Colorful Places to Live and Play®, today announced financial results for the first quarter ended March 31, 2008 (see attached tables). Total sales in the first quarter of 2008 were $111.3 million, as compared to total sales of $121.8 million in the first quarter of 2007. Although vacation ownership ("Resorts”) sales rose 4% to $90.3 million in the first quarter of 2008 from $86.9 million in the first quarter of 2007, homesite ("Bluegreen Communities”) sales declined by 40% to $20.9 million from $34.9 million. Field Operating Profit (1) at Bluegreen Resorts decreased 25% to $5.8 million, or 6% of sales, from $7.7 million, or 9% of sales, in the first quarter of 2007. This decrease was primarily due to an approximately $5.0 million increase in estimated uncollectible vacation ownership interest ("VOI”) notes receivable during the 2008 quarter compared to the same period last year. While generating lower sales, Bluegreen Communities generated Field Operating Profit of $3.9 million, or 19% of sales, as compared to Field Operating Profit of $8.8 million, or 25% of sales, in the same period last year. Net income in the first quarter of 2008 was $1.4 million, or $0.04 per diluted share, as compared to net income of $5.3 million, or $0.17 per diluted share, in the first quarter of 2007. The decline in earnings per share was due primarily to lower sales and profits at Bluegreen Communities, which accounted for a $0.10 per share decline, as well as the recognition of a $0.05 per share charge for the impairment of retained interests in notes receivable sold, which is reflected as a reduction of interest income. The impairment was the result of the higher discount rate used in the valuation of the retained interests, reflective of current interest rates in the securitization market, as well as higher estimated defaults. (1) We define Field Operating Profit as operating profit prior to the allocation of corporate overhead, interest income, other income (expense), interest expense, income taxes, and minority interest. BLUEGREEN RESORTS Higher Resorts sales were primarily attributable to a significant increase in sales to existing Bluegreen Vacation Club® owners as compared to the first quarter of 2007; these sales comprised 46% of Resorts sales for the first quarter of 2008 as compared to 38% of Resorts sales during the comparable prior year period. Higher Resorts sales also reflected increased same-resort sales, led by increases in sales at The Fountains™ sales office in Orlando, Florida, Carolina Grande™ sales office in Myrtle Beach, South Carolina, and an offsite sales office in Las Vegas, Nevada. Higher sales were also attributable to an 8% system-wide price increase that went into effect during January 2008. Results for the first quarter of 2008 also included a gain on sales of notes receivable of $8.2 million realized in connection with the private offering and sale of $60.0 million of timeshare loan-backed securities on March 31, 2008. This compares to an $8.0 million gain on sales of notes receivable in the first quarter of 2007. Resorts cost of sales, as a percentage of gross sales (prior to the impact of estimated uncollectible VOI notes receivable and gain on sales of notes receivable), was 21% in both the first quarter of 2008 and the first quarter of 2007. In accordance with Statement of Financial Accounting Standards No. 152, "Accounting for Real Estate Time-sharing Transactions" ("SFAS 152"), as of March 31, 2008 approximately $29.7 million and $17.5 million of Resorts sales and profits, respectively, were deferred because the contracted sales had not yet met the requirements for revenue recognition. These amounts compare to $24.6 million and $14.3 million of Resorts sales and profits, respectively, which were deferred as of December 31, 2007. Deferred amounts are expected to be recognized in future periods. Therefore, net amounts of revenues and profits deferred under SFAS 152 in the first quarter of 2008 totaled $5.1 million and $3.2 million, respectively, compared to a net deferral of $5.5 million of revenues and $3.0 million of profits in the 2007 first quarter. In addition, SFAS 152 requires that Resorts sales be reduced by estimated uncollectible VOI notes receivable, which were estimated to be $16.4 million for the first quarter of 2008 and $11.4 million for the first quarter of 2007. John M. Maloney Jr., President and Chief Executive Officer of Bluegreen, commented, "We believe the Bluegreen Vacation Club® is being well-received by existing members and new owners, as evidenced by an owner base of approximately 186,500 at March 31, 2008 and continued success in our owner upgrade program. Our vacation ownership receivables portfolio also continues to perform within historical norms. Delinquencies over 30 days on the entire serviced portfolio at March 31, 2008 were 3.9%, down from 4.5% at December 31, 2007, which we believe is consistent with historical seasonal patterns. Average annual default rate for the twelve months ended March 31, 2008 was 7.9%, up from 7.3% for the twelve months ended March 31, 2007, but down from 8.5% in 2004 and 2005. While we continue to closely monitor our receivables performance, we believe that the fundamentals of our business remain strong.” "We recently announced our entry into the Atlantic City market with the purchase of 1,200 VOIs and timeshare operations at the beachfront Royal Suites at Atlantic Palace, located on the world-famous Atlantic City Boardwalk. We plan to renovate approximately 16,000 square feet of the resort in order to establish a sales preview center. Bluegreen Vacation Club sales in Atlantic City are expected to begin in the second quarter of 2008. We also recently expanded our agreement with Cedar Fair Theme Parks, one of the largest regional amusement park operators in the world. This new agreement expands Bluegreen’s on-site sales presence from three Cedar Fair locations to 11 parks across the United States and Canada, as well as four adjacent hotel properties. We commenced selling three-day, two-night introductory vacation packages at five Cedar Fair parks to a demographic population that we believe mirrors our Bluegreen Vacation Club members, and we anticipate being active in all of the Cedar Fair locations pursuant to our expanded agreement by Memorial Day 2008.” Mr. Maloney continued, "In addition to monitoring the impact of the overall economy, we are closely watching the commercial credit markets. We have been pleased with our ability to continue to access the credit markets to date, and believe that it reflects the quality of our receivables, the historically resilient nature of the vacation ownership industry during periods of economic slow down, and our long-standing financial relationships. To date this year, we have completed the following Resorts financings: a $60.0 million term securitization with Branch Banking & Trust Company ("BB&T”) as initial purchaser; a $150.0 million renewal and expansion of a timeshare receivables purchase facility with BB&T and a $75.0 million Acquisition, Development and Construction credit facility with Textron Financial Corporation. We further strengthened our balance sheet by the March 31, 2008 repayment, in full, of our $55.0 million, 10.5% Senior Secured Notes plus all accrued interest, immediately prior to the maturity of the Notes on April 1, 2008. The related annual interest on these Notes was approximately $5.8 million.” BLUEGREEN COMMUNITIES Lower sales at Bluegreen Communities reflected the slowdown in the residential real estate market coupled with reduced inventory levels due to the substantial sellout of two communities prior to December 31, 2007. Sales in the 2007 first quarter also included the recognition of $7.1 million in 2006 sales previously deferred as the related property did not receive final platting until the 2007 quarter. Bluegreen Communities’ cost of sales, as a percentage of sales, in the first quarter of 2008 declined to 49.0% from 51.2% in the same period one year ago, resulting from a favorable mix in property sold in 2008. Mr. Maloney commented, "We are extremely satisfied that we were able to maintain profitability at Bluegreen Communities during the continued down turn in the residential real estate market. We continue to focus our efforts on aligning the operations of our Communities business to current market demand.” As of March 31, 2008, approximately $10.8 million and $4.2 million of Bluegreen Communities sales and profits, respectively, were deferred under the percentage-of-completion method of accounting. It is expected that these amounts will be recognized in future periods ratably with the development of Communities projects. These amounts compare to $13.2 million and $5.5 million of sales and profits, respectively, deferred as of December 31, 2007. Therefore, net recognition in the first quarter of 2008 of revenue and profits previously deferred under the percentage of completion method of accounting totaled $2.4 million and $1.4 million, respectively. SELECTED OTHER FINANCIAL INFORMATION   As of or for the three months ended March 31,   December 31, 2008   2007 Unrestricted cash (2) $ 75.4 million $ 125.5 million Net interest spread (3) (4) $ 5.0 million $ 4.7 million Book value $ 12.37 per share $ 12.34 per share Debt-to-equity ratio (2) 0.95:1 1.03:1 (2)   reflects repayment, in full, of $55 million, 10.5% Senior Secured Notes plus all accrued interest on March 31, 2008 (3) interest income minus interest expense (4) the three months ended March 31, 2008 has been reduced by the $2.7 million impairment of the Company's retained interests in notes receivables sold The Company is continuing to review its capital needs. While Bluegreen previously announced that it was considering pursuing a common stock rights offering, the Company intends to broaden its sources of potential capital. Accordingly, Bluegreen plans to file a "shelf” registration statement which would, in the future, permit it to raise long-term capital through the issuance of common stock, preferred stock, debt and/or convertible debt. In the event such an offering were ultimately consummated, the purpose would be to further strengthen Bluegreen’s balance sheet and to support growth, including growth through acquisitions. We recognize that a common stock offering would be highly dilutive at our current stock price and, as such, we have no immediate plans to pursue an offering of our common stock. MANAGEMENT REMARKS Management’s pre-recorded remarks regarding the 2008 first quarter financial results will be available beginning Friday, May 9, 2008 at 8:30 am Eastern Time. There will be no question and answer session following management’s prepared remarks. To access management’s remarks, dial (888) 286-8010 (Domestic) or (617) 801-6888 (International) and use the code 26223976. The telephonic recording will be available until May 16, 2008. Management’s remarks will also be accessible at Bluegreen’s corporate web site, www.bluegreencorp.com, for approximately 90 days. ABOUT BLUEGREEN CORPORATION Bluegreen Corporation (NYSE: BXG) is a leading provider of Colorful Places to Live and Play® through two principal operating divisions. With more than 186,500 owners, Bluegreen Resorts markets a flexible, real estate-based vacation ownership plan that provides access to over 40 resorts and an exchange network of over 3,700 resorts and other vacation experiences such as cruises and hotel stays. Bluegreen Communities has sold over 56,300 planned residential and golf community homesites in 32 states since 1985. Founded in 1966, Bluegreen is headquartered in Boca Raton, Fla., and currently employs over 6,000 associates. More information about Bluegreen is available at 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, competitive and other factors affecting the Company and its operations, markets, products and services, as well as the risk that growth and profitability will not occur as anticipated; the Company may be unable to sell notes receivable on satisfactory terms, if at all, adversely impacting the Company’s liquidity and profitability; the performance of the Company’s vacation ownership notes receivables may 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 or replace such lines of credit; 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; that the Company will not be able to acquire land or identify new projects, as anticipated; sales and marketing strategies related to new Resorts and Communities properties will not be as successful as anticipated; new Resort and Communities properties will not open when expected, will cost more to develop or may not be as successful as anticipated; the relationship with Cedar Fair Theme Parks will not be put in place or be as successful as anticipated; retail prices and homesite yields for Communities properties will be below the Company’s estimates; cost of sales will not be as expected; sales to existing owners will not continue at current levels; deferred sales will 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 3, 2008. Matters discussed in this press release contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended the ("Exchange Act”), that involve substantial risks and uncertainties, including but not limited to the risk that because of business, economic or market conditions Bluegreen may decide not to pursue an offering of its securities or that the offering may not be made in the amounts contemplated, if at all. In addition to the risks and uncertainties identified above, reference is also made to other risks and uncertainties detailed in reports filed by Bluegreen with the Securities and Exchange Commission. The Company cautions that the foregoing factors are not exclusive. BLUEGREEN CORPORATION Condensed Consolidated Statements of Income (In 000's, Except Per Share Data)   Three Months Ended March 31,   March 31, 2008 2007 (Unaudited) REVENUES:   Vacation ownership sales $ 90,347 $ 86,924 Homesite sales   20,909   34,874 Total sales 111,256 121,798   Other resort and communities operations revenue 17,870 15,018 Interest income 9,961 9,842 Other income, net   265   - Total operating revenues   139,352   146,658   EXPENSES: Cost of sales: Vacation ownership cost of sales 20,714 18,877 Homesite cost of sales   10,244   17,855 Total cost of sales 30,958 36,732 Cost of other resort and communities operations 12,687 12,419 Selling, general and administrative expenses 87,669 81,393 Interest expense 4,949 5,151 Other expense   -   727 Total operating expenses   136,263   136,422 Income before minority interest and provision for income taxes 3,089 10,236 Minority interest in income of consolidated subsidiary   838   1,634 Income before provision for income taxes 2,251 8,602 Provision for income taxes   855   3,269   Net income $ 1,396 $ 5,333   Net income per share: Basic $ 0.04 $ 0.17 Diluted $ 0.04 $ 0.17 Weighted average number of common and common equivalent shares: Basic   31,241   30,889 Diluted   31,490   31,294 BLUEGREEN CORPORATION Supplemental Segment Financial Data Three- Month Periods Ended March 31, 2008 and March 31, 2007       (In 000's, except percentages)         BLUEGREEN RESORTS   Q1 2008 % of Gross Sales     Q1 2007 % of Gross Sales (unaudited) (unaudited) Gross sales of real estate $ 98,469 100 $ 90,370 100 Estimated uncollectible VOI notes receivable (16,367 ) (17 ) (11,413 ) (13 ) Gain on sales of notes receivable   8,245   8     7,967   9   Sales of real estate 90,347 92 86,924 96 Cost of sales on real estate   (20,714 ) (21 )   (18,877 ) (21 ) Gross profit on real estate 69,633 71 68,047 75   Sales of other services 13,962 14 12,838 14 Cost of sales of other services   (9,751 ) (10 )   (10,029 ) (11 ) Gross profit on other services 4,211 2,809   Selling and marketing expense (60,669 ) (62 ) (55,301 ) (61 ) Field G & A expense   (7,378 ) (7 )   (7,807 ) (9 ) Total field operating expense   (68,047 )   (63,108 )   Field operating profit $ 5,797   6   $ 7,748   9     BLUEGREEN COMMUNITIES Q1 2008 % of Sales   Q1 2007 % of Sales (unaudited) (unaudited) Sales of real estate $ 20,909 100 $ 34,874 100 Cost of sales of real estate   (10,244 ) (49 )   (17,855 ) (51 ) Gross profit on real estate 10,665 51 17,019 49   Sales of other services 3,908 19 2,180 6 Cost of sales of other services   (2,936 ) (14 )   (2,390 ) (7 ) Gross profit on other services 972 (210 )   Selling and marketing expense (5,135 ) (25 ) (5,068 ) (15 ) Field G & A expense   (2,633 ) (13 )   (2,933 ) (8 ) Total field operating expense   (7,768 )   (8,001 )   Field operating profit $ 3,869   19   $ 8,808   25   BLUEGREEN CORPORATION Reconciliation of Field Operating Profit to Income Before Minority Interest and Provision for Income Taxes (In 000's)   Three Months Ended March 31,   March 31, 2008 2007 (unaudited) (unaudited)   Field operating profit for Bluegreen Resorts $ 5,797 $ 7,748 Field operating profit for Bluegreen Communities 3,869 8,808 Interest Income 9,961 9,842 Other income (expense), net 265 (727 ) Corporate general and administrative expenses (11,854 ) (10,284 ) Interest expense   (4,949 )   (5,151 ) Income before minority interest and provision for income taxes $ 3,089   $ 10,236   BLUEGREEN CORPORATION Condensed Consolidated Balance Sheets (In 000's)       March 31, December 31, 2008 2007 ASSETS (unaudited)   Cash and cash equivalents (unrestricted) $ 75,351 $ 125,513 Cash and cash equivalents (restricted)   21,740   19,460 Total cash and cash equivalents 97,091 144,973 Contracts receivable, net 23,270 20,532 Notes receivable, net 151,022 160,665 Prepaid expenses 18,899 14,824 Other assets 24,003 23,405 Inventory, net 459,694 434,968 Retained interests in notes receivable sold 142,029 141,499 Property and equipment, net 95,582 94,421 Goodwill   4,291   4,291 Total assets $ 1,015,881 $ 1,039,578   LIABILITIES AND SHAREHOLDERS’ EQUITY Accounts payable $ 38,454 $ 38,901 Accrued liabilities and other 66,144 60,421 Deferred income 38,410 36,559 Deferred income taxes 98,359 98,362 Receivable-backed notes payable 44,327 54,999 Lines-of-credit and notes payable 210,163 176,978 10.50% senior secured notes - 55,000 Junior subordinated debentures   110,827   110,827 Total liabilities 606,684 632,047   Minority interest 23,261 22,423   Total shareholders’ equity   385,936   385,108 Total liabilities and shareholders’ equity $ 1,015,881 $ 1,039,578