Bluegreen Corporation Reports 2008 Second Quarter Financial Results

Bluegreen Corporation (NYSE: BXG), a leading provider of Colorful Places to Live and Play®, today announced financial results for the second quarter ended June 30, 2008 (see attached tables). John M. Maloney Jr., President and Chief Executive Officer of Bluegreen, commented, "During the second quarter of 2008, Bluegreen Resorts continued to demonstrate the resiliency of its business model. While acknowledging the challenging macroeconomic environment, we believe that the fundamentals of our business remain strong. During the second quarter of 2008, our owner base increased to over 190,000 members, VOI sales transactions and tour flow rose, prospect conversion rates remained consistent with prior periods, and we continued to expand our portfolio of vacation properties. Our timeshare receivables portfolio also continued to perform well, with delinquencies and defaults performing within historical norms. While the difficult residential real estate market continued to impact results at Bluegreen Communities, this segment of our business recognized a profit during the second quarter of 2008.” He continued, "While we recently announced that we have entered into a letter of intent with respect to the possible sale of the Company, we intend to remain focused on our operations and on continuing to provide our members and owners with the service and quality vacations that they have come to expect.” BLUEGREEN RESORTS Supplemental Segment Financial Data Three-Month Periods Ended June 30, 2008 and June 30, 2007 (In 000’s, except percentages)     Three Months Ended Three Months Ended June 30,   % of June 30,   % of 2008 Gross Sales 2007 Gross Sales (unaudited) (unaudited) Contract sales $ 136,110 $ 124,542 Deferral of sales under SFAS No. 152 (9,968 ) (4,972 ) Impact of percentage-of-completion accounting   (227 )   858   Gross sales of real estate 125,915 100 % 120,428 100 % Estimated uncollectible VOI notes receivable   (18,795 ) (15 )%   (15,181 ) (13 )% Sales of real estate 107,120 85 % 105,247 87 % Cost of real estate sales   (23,390 ) (19 )%   (26,634 ) (22 )% Gross profit 83,730 66 % 78,613 65 %   Other operations revenue 15,067 12 % 12,235 10 % Cost of other operations   (8,574 ) (7 )%   (8,900 ) (7 )% 6,493 3,335   Selling and marketing expenses (78,452 ) (62 )% (66,111 ) (55 )% Field G & A expense   (6,398 ) (5 )%   (7,612 ) (6 )% Total field operating expenses (84,850 ) (67 )% (73,723 ) (61 )%   Field operating profit $ 5,373   4 % $ 8,225   7 %   Other data: Upgrade Sales to Bluegreen Vacation Club owners, as a percentage of Resorts sales 44.0 % 40.0 % Number of VOI sales transactions 12.3 11.2 Average sales price per transaction $ 11.1 $ 11.4 Total Marketing Prospect Tours 91.8 88.7 New Marketing Prospect Tours 66.8 66.5 Sale-to-tour ratio (total prospects) 13.3 % 12.6 % Sale-to-tour ratio (new prospects) 9.4 % 9.7 % Sales deferred under SFAS No. 152 as of end of period $ 39,000 $ 37,800 Field operating profit deferred under SFAS No. 152 as of end of period $ 23,300 $ 21,000 The increase in contract sales of real estate was due primarily to a 16% increase in sales to existing Bluegreen Vacation Club members, as well as increased same-resort sales at many existing sales offices, partially offset by the impact of the closure of an off-site sales office in Dallas, Texas. Higher sales were also attributable to a system-wide price increase that went into effect during January 2008. Thousands of qualified prospects visit Bluegreen’s sales offices, and the Company believes that its increased sales reflect the continued desire of consumers to vacation, and the flexibility, attractiveness and affordability of the Bluegreen Vacation Club. Other resort operations revenue – much of which constitutes a recurring stream of revenue -- rose 23.1% to $15.1 million, reflecting higher resorts management and service fees, and an increased contribution from Bluegreen’s title company due primarily to a 10% rise in VOI sales transactions during the second quarter. Lower Field Operating Profit was primarily due to higher selling and marketing expenses which, as a percentage of gross sales, increased from 55% during the three months ended June 30, 2007 to 62% during the three months ended June 30, 2008. The increase in selling and marketing expenses as a percentage of sales was driven by higher costs per tour in certain marketing programs and the deferral of additional sales under both SFAS No. 152 and percentage of completion accounting, which require the Company to recognize the majority of selling and marketing costs, notwithstanding the deferred recognition of sales. The Company’s timeshare receivables portfolio continued to perform well, as demonstrated by delinquencies over 30 days on the entire serviced portfolio at June 30, 2008 of 3.6% as compared to 4.5% at December 31, 2007 and 3.2% at June 30, 2007. The average annual default rate increased to 8.2% for the twelve months ended June 30, 2008 as compared to 7.2% for the twelve months ended June 30, 2007. However, it should be noted that default rates in 2007 represented recent historical lows. Bluegreen believes the comparatively small monthly payments in its financing programs, the use of direct debit payment processing by over 80% of the Company’s obligors, and customer satisfaction are all factors that contribute to the performance of its receivable portfolio. Mr. Maloney commented, "We are excited about the continued growth of the Bluegreen Vacation Club and the expansion of our sales distribution network to new markets. We expect to begin accepting guests at our newest resorts in Las Vegas and Williamsburg this summer, and look forward to expanding our sales presence in both markets through larger sales offices. We have recently commenced sales in Atlantic City, NJ, and are encouraged by our initial results. We expect to commence sales at LaPension in New Orleans during the third quarter of 2008. We also recently completed the expansion of our relationship with Cedar Fair Theme Parks, one of the largest regional amusement park operators in the world. As of Memorial Day, Bluegreen had established an on-site sales presence at all 11 Cedar Fair Parks across the United States and Canada, as well as four adjacent hotel properties.” BLUEGREEN COMMUNITIES Supplemental Segment Financial Data Three-Month Periods Ended June 30, 2008 and June 30, 2007 (In 000’s, except percentages)   Three Months Ended Three Months Ended   June 30,   % of June 30,   % of 2008 Gross Sales 2007 Gross Sales (unaudited) (unaudited) Sales of real estate $ 12,966 100 % $ 38,027 100 % Cost of real estate sales   (7,582 ) (58 )%   (19,671 ) (52 )% Gross profit 5,384 42 % 18,356 48 %   Other operations revenue 2,739 21 % 3,355 9 % Cost of other operations   (2,500 ) (19 )%   (2,955 ) (8 )% 239 400   Selling and marketing expenses (3,212 ) (25 )% (9,404 ) (25 )% Field G & A expense   (1,376 ) (11 )%   (2,825 ) (7 )% Total field operating expenses (4,588 ) (36 )% (12,229 ) (32 )%   Field operating profit $ 1,035   8 % $ 6,527   17 %   Other data: Average sales price per homesite $ 74.5 $ 83.6 Sales deferred under percentage-of-completion accounting as of end of period(1) $ 6,900 $ 20,700 Field operating profit deferred under percentage-of-completion accounting as of end of period(1) $ 2,600 $ 8,900 (1) Deferred under 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. Although, to date, Bluegreen Communities has not experienced a significant deterioration of sales prices, this segment has been impacted by lower sales, especially of higher priced homesites. As a result, average sales price per homesite in the second quarter of 2008 declined compared to the second quarter of 2007 primarily because a lower percentage of higher priced premium lots were sold compared to the same period last year. SELECTED OTHER FINANCIAL INFORMATION             As of   June 30,   December 31,     2008   2007 Unrestricted cash(2) $ 59.6 million $ 125.5 million Book value per share $ 12.46 $ 12.34 Debt-to-equity ratio 1.21:1 1.03:1 (2) Reflects repayment, in full, of $55 million, 10.5% Senior Secured Notes plus all accrued interest on March 31, 2008. Net interest spread (interest income minus interest expense) increased $5.3 million for the second quarter of 2008 to $11.5 million from $6.2 million in the same period last year. Interest income increased 11.5% to $13.5 million for the second quarter of 2008 compared to $12.1 million for the comparable prior year period, largely as a result of the Company’s growing timeshare receivables portfolio and its retained interests in notes receivable sold. These assets have been sources of recurring revenue for the Company. Interest expense declined to $2.0 million during the second quarter of 2008 from $5.9 million in the same period last year, due to lower average interest rates on debt outstanding, increased capitalized interest associated with current development activity and lower accrued interest related to the Internal Revenue Code ("IRC”) Section 453. IRC Section 453 requires that timeshare companies accrue and pay interest on income deferred under the installment method of profit recognition. During the three months ended June 30, 2008, Bluegreen made operational changes that had the effect of, among other things, reducing its future obligation under IRC Section 453 by $2.4 million. Total interest expense capitalized to construction in progress was $3.9 million and $3.7 million for the three months ended June 30, 2007 and 2008, respectively. During the second quarter, Bluegreen renewed its $30 million revolving line of credit with Wells Fargo Foothill, part of Wells Fargo & Company. The Financial Accounting Standards Board is currently reviewing the accounting principles relative to the transfer of financial assets, including the sale of notes receivable. In advance of possible new accounting rules, which could be effective as early as 2009, Bluegreen intends to structure all future sales of notes receivable so they are treated as on-balance sheet borrowings. This will impact the comparability to prior periods as future transactions will not result in the recording of a gain on sale of notes receivable. Results for the third quarter and fourth quarters of 2007 included gains on the sale of notes receivable totaling $19.9 million and $11.3 million, respectively. CONSOLIDATED RESULTS Total sales for the second quarter of 2008 were $120.1 million as compared to $143.3 million in the same period last year. Net income for the 2008 second quarter was $3.4 million, or $0.11 per share, as compared to net income of $4.1 million, or $0.13 per share, in the second quarter of 2007. MANAGEMENT REMARKS Management’s pre-recorded remarks regarding the 2008 second quarter financial results will be available beginning Tuesday, July 29, 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 95038589. The telephonic recording will be available until August 5, 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 190,000 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 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; sales and marketing strategies related to new Resorts and Communities properties will not be successful; new Resort and Communities properties and sales offices 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 successful; retail prices and homesite yields for Communities properties will 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; 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 and Form 10-Q filed on May 9, 2008. BLUEGREEN CORPORATION Condensed Consolidated Statements of Income (In 000’s, Except Per Share Data)     Three Months Ended Six Months Ended June 30,   June 30, June 30,   June 30,   2008 2007 2008   2007 (Unaudited) (Unaudited) REVENUES:   Vacation ownership sales $ 107,120 $ 105,247 $ 197,467 $ 192,171 Homesite sales   12,966   38,027 33,875   72,901 Total sales 120,086 143,274 231,342 265,072   Other resort and communities operations revenue 17,806 15,590 35,676 30,608 Interest income 13,503 12,108 23,464 21,950 Other income, net   208   - 473   - Total operating revenues   151,603   170,972 290,955   317,630   EXPENSES: Cost of sales: Vacation ownership cost of sales 23,390 26,634 44,104 45,511 Homesite cost of sales   7,582   19,671 17,826   37,526 Total cost of sales 30,972 46,305 61,930 83,037   Cost of other resort and communities operations 11,074 11,855 23,761 24,274 Selling, general and administrative expenses 100,639 98,452 188,308 179,845 Interest expense 2,041 5,881 6,990 11,032 Other expense   -   246 -   973 Total operating expenses   144,726   162,739 280,989   299,161   Income before minority interest and provision for income taxes 6,877 8,233 9,966 18,469   Minority interest in income of consolidated subsidiary   1,320   1,633 2,158   3,267 Income before provision for income taxes 5,557 6,600 7,808 15,202 Provision for income taxes   2,112   2,508 2,967   5,777   Net Income $ 3,445 $ 4,092 $ 4,841 $ 9,425   Net (loss) income per share Basic: $ 0.11 $ 0.13 $ 0.16 $ 0.30 Diluted: $ 0.11 $ 0.13 $ 0.15 $ 0.30   Weighted average number of common and common equivalent shares: Basic   31,227   30,926 31,220   30,943 Diluted   31,454   31,277 31,459   31,324 BLUEGREEN CORPORATION Supplemental Segment Financial Data Six-Month Periods Ended June 30, 2008 and June 30, 2007 (In 000’s, except percentages)     BLUEGREEN RESORTS   Year-to-Date Year-to-Date June 30,   % of June 30,   % of 2008 Gross Sales 2007 Gross Sales (unaudited) (unaudited) Contract sales $ 239,818 $ 220,376 Deferral of sales under SFAS No. 152 (15,052 ) (10,424 ) Impact of percentage-of-completion accounting   (382 )   846   Gross sales of real estate 224,384 100 % 210,798 100 % Estimated uncollectible VOI notes receivable (35,162 ) (16 )% (26,594 ) (13 )% Gain on sales of notes receivable   8,245   4 %   7,967   4 % Sales of real estate 197,467 88 % 192,171 91 % Cost of real estate sales   (44,104 ) (20 )%   (45,511 ) (22 )% Gross profit 153,363 68 % 146,660 70 %   Other operations revenue 29,029 13 % 25,073 12 % Cost of other operations   (18,325 ) (8 )%   (18,929 ) (9 )% 10,704 6,144   Selling and marketing expenses (139,121 ) (62 )% (121,412 ) (58 )% Field G & A expense   (13,776 ) (6 )%   (15,419 ) (7 )% Total field operating expenses (152,897 ) (68 )% (136,831 ) (65 )%   Field operating profit $ 11,170   5 % $ 15,973   8 % BLUEGREEN COMMUNITIES       Year-to-Date Year-to-Date June 30,   % of June 30,   % of 2008 Gross Sales 2007 Gross Sales (unaudited) (unaudited)   Sales of real estate $ 33,875 100 % $ 72,901 100 % Cost of real estate sales   (17,826 ) (53 )%   (37,526 ) (52 )% Gross profit 16,049 47 % 35,375 48 %   Other operations revenue 6,647 20 % 5,535 8 % Cost of other operations   (5,436 ) (16 )%   (5,345 ) (7 )% 1,211 190   Selling and marketing expenses (8,347 ) (25 )% (14,472 ) (20 )% Field G & A expense   (4,009 ) (12 )%   (5,758 ) (8 )% Total field operating expenses (12,356 ) (37 )% (20,230 ) (28 )%   Field operating profit $ 4,904   14 % $ 15,335   21 % BLUEGREEN CORPORATION Reconciliation of Field Operating Profit to Income Before Minority Interest and Provision for Income Taxes (In 000’s)     Three Months Ended Year-to-Date June 30,   June 30, June 30,   June 30, 2008 2007 2008 2007 (unaudited) (unaudited) (unaudited) (unaudited)   Field operating profit for Bluegreen Resorts $ 5,373 $ 8,225 $ 11,170 $ 15,973 Field operating profit for Bluegreen Communities 1,035 6,527 4,904 15,335 Interest Income 13,503 12,108 23,464 21,950 Other income (expense), net 208 (246 ) 473 (973 ) Corporate general and administrative expenses (11,201 ) (12,500 ) (23,055 ) (22,784 ) Interest expense   (2,041 )   (5,881 )   (6,990 )   (11,032 ) Income before minority interest and provision for income taxes $ 6,877   $ 8,233   $ 9,966   $ 18,469   BLUEGREEN CORPORATION Condensed Consolidated Balance Sheets (In 000’s)     June 30, December 31, 2008 2007 ASSETS (unaudited)   Cash and cash equivalents (unrestricted) $ 59,557 $ 125,513 Cash and cash equivalents (restricted)   23,716   19,460 Total cash and cash equivalents 83,273 144,973 Contracts receivable, net 19,987 20,532 Notes receivable, net 226,803 160,665 Prepaid expenses 18,999 14,824 Other assets 29,277 23,405 Inventory, net 498,787 434,968 Retained interests in notes receivable sold 133,048 141,499 Property and equipment, net 109,968 94,421 Goodwill   8,502   4,291 Total assets $ 1,128,644 $ 1,039,578   LIABILITIES AND SHAREHOLDERS’ EQUITY Accounts payable $ 34,914 $ 38,901 Accrued liabilities and other 68,115 60,421 Deferred income 41,230 36,559 Deferred income taxes 99,552 98,362 Receivable-backed notes payable 119,703 54,999 Lines-of-credit and notes payable 240,854 176,978 10.50% senior secured notes - 55,000 Junior subordinated debentures   110,827   110,827 Total liabilities 715,195 632,047   Minority interest 24,581 22,423   Total shareholders’ equity   388,868   385,108 Total liabilities and shareholders’ equity $ 1,128,644 $ 1,039,578