Bluegreen Corporation Reports 2006 Third Quarter Financial Results
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Thursday November 2, 7:20 pm ET
Net Income Up 19.5% to $21.9 Million, or $0.71 Per Diluted Share
BOCA RATON, Fla.--(BUSINESS WIRE)--Bluegreen Corporation (NYSE: BXG), a leading provider of Colorful Places to Live and Play®, today announced financial results for the third quarter and nine months ended September 30, 2006 (see attached tables).
Total sales in the third quarter of 2006 rose 3.5% to $172.5 million from $166.7 million in the third quarter of 2005. Bluegreen Resorts sales increased 13.9% to $130.3 million from $114.4 million, due to the contribution of sales offices opened since September 30, 2005, continued same-resort sales growth, and the positive impact in the quarter of the adoption of the American Institute of Certified Public Accountants' Statement of Position 04-2, "Accounting for Real Estate Time-sharing Transactions" (the "SOP"). Bluegreen Communities sales were $42.2 million as compared to $52.3 million in the same period one year ago. As expected and as previously announced, the lower sales reflected the sell out or near sell out of several communities prior to the beginning of the third quarter of 2006.
Net income for the third quarter of 2006 increased 19.5% to $21.9 million, or $0.71 per diluted share, from net income of $18.3 million, or $0.59 per diluted share, in the same period last year. Net income for the third quarter of 2006 was impacted positively by approximately $0.03 per diluted share primarily as a result of cumulative adjustments to correct errors in the methodology and valuation assumptions used in the original recording of Bluegreen's retained interest in notes receivable sold in connection with the 2005A Term Securitization transaction. Bluegreen does not believe the adjustments arising from the changes in methodology and assumptions were material individually or in the aggregate to its results of operations for the years ended December 31, 2005 or the quarters ended March 31, 2006, June 30, 2006 or September 30, 2006, and accordingly information for prior periods has not been adjusted. Net income for the third quarter of 2006 also included a pre-tax charge of $1.8 million, or $0.04 per diluted share, associated with the adoption of a shareholder rights plan and related litigation.
As previously announced, effective January 1, 2006 Bluegreen was required to adopt the SOP, which changed many aspects of timeshare accounting, including revenue recognition, inventory costing, and accounting for incidental operations. Bluegreen has provided in this press release pro forma, non-GAAP income statements (see tables entitled: "Pro Forma Income Statements Before SOP 04-2 Adjustment") for the three- and nine-month periods ended September 30, 2006 that reflect the impact of the adjustments required by the adoption of the SOP to provide a basis for comparison with periods prior to the adoption of the SOP.
BLUEGREEN RESORTS
George F. Donovan, President and Chief Executive Officer of Bluegreen, commented, "As previously announced, the adoption of the SOP altered the complexion of our financial results for the first half of 2006 by shifting the recognition of a portion of our Resorts sales and profits from the first half of the year to the second half of the year. Our results for the third quarter reflect the impact of this anticipated shift. We continue to believe that Bluegreen's business and markets remain fundamentally strong and are demonstrating solid growth."
As of September 30, 2006, $33.9 million and $19.2 million of Resorts sales and profits, respectively, were deferred under the SOP. These amounts are expected to be recognized in future periods.
Higher Resorts sales were primarily attributable to contributions from a new sales office at Carolina Grande (Myrtle Beach, S.C.), new offsite sales offices in the Las Vegas, Atlanta and Chicago markets, and a sales office opened pursuant to a strategic marketing agreement with a popular regional theme park in Wisconsin Dells, Wisconsin. Resorts sales in the third quarter of 2006 also benefited from same-resort sales growth led by offices at The Falls Village resort (Branson, Mo.), The Bluegreen Wilderness Club at Big Cedar (Ridgedale, Mo.), Grande Villas at World Golf Village (St. Augustine, Fla.), The Fountains resort (Orlando, Fla.), and Mountain Run at Boyne (Boyne Falls, Mich.). In addition, sales to Bluegreen's existing and growing owner base increased by 39%, and comprised 34% of Resorts sales for the three months ended September 30, 2006 as compared to 29% of Resorts sales during the comparable prior year period.
Mr. Donovan continued, "During the third quarter, we commenced construction of a new seven-story, 240-unit resort property in Las Vegas. This project is expected to be completed in the first quarter of 2008. We also broke ground on a new resort property located in Williamsburg, Virginia, less than one block from the historic district of Colonial Williamsburg. Occupancy of this new resort is expected in the fourth quarter of 2007. We are also nearing the completion of renovations of a new preview center in the Great Smoky Mountains of Tennessee, the site of our first vacation ownership resort in 1994, and expect to open this new facility during the current fourth quarter. We believe this new 26,208 square foot sales office will provide us with the necessary infrastructure to increase sales in a market where we have enjoyed great success over the past 12 years."
Resorts cost of sales in the third quarter of 2006 declined to 19.8% of sales from 21.9% of sales in the same period last year, due to a system-wide price increase that went into effect on January 1, 2006 and the impact of the SOP.
BLUEGREEN COMMUNITIES
Bluegreen Communities sales in the third quarter of 2006 were $42.2 million as compared to $52.3 million in the third quarter of 2005. As previously announced, the high level of sales achieved in the Bluegreen Communities segment during 2004 and 2005 resulted in certain of the Company's properties substantially selling out earlier than previously expected; two Bluegreen Communities that made contributions to sales in the third quarter of 2005 substantially sold out during or prior to the third quarter of 2006. Other sales decreases occurred at Chapel Ridge in North Carolina and SugarTree on the Brazos in Texas. Higher than average sales at Chapel Ridge during the third quarter of 2005, related primarily to the opening of new sections of the community for sale at that time, resulted in an unfavorable sales comparison in the third quarter of 2006. Bluegreen's remaining inventory at SugarTree on the Brazos is currently being converted from 1/2 acre homesites to 3-acre homesites in response to market expectations.
Mr. Donovan commented, "Despite lower total sales, we are very pleased with the higher sales generated during the third quarter of 2006 (as compared to the third quarter of 2005) at several of our Texas communities open more than one year, including Mystic Shores, Mountain Springs Ranch, and The Settlement at Patriot Ranch, as well as Catawba Falls Preserve in North Carolina.
"We also benefited from approximately $1.9 million of incremental revenue due to the sale of a large, non-subdivided parcel at our Traditions of Braselton community in Georgia, which previously sold out of retail homesites. We are also pleased with the rate of sales at properties open for less than one year, including Havenwood at Hunter's Crossing, which commenced sales in January 2006, Saddle Creek Ranch, which commenced sales in the third quarter of 2006, and The Bridges of Preston Crossings, a Bluegreen Golf Community which commenced sales earlier than anticipated in September 2006."
Mr. Donovan also noted that during the fourth quarter of 2006, Bluegreen Communities commenced sales at Vintage Oaks at the Vineyards, a 3,300- acre Bluegreen Community located outside of San Antonio, and expects to commence sales at King Oaks, a 953-acre Bluegreen Community in Grimes County, Texas, near College Station. Both of these properties were acquired in the second quarter of 2006.
As of September 30, 2006, approximately $17.2 million and $6.6 million of Bluegreen Communities sales and profits, respectively, were deferred under the percentage-of-completion method of accounting, and it is expected that these amounts will be recognized in future periods ratably with the development of the communities.
Bluegreen Communities cost of sales in the third quarter of 2006 was 49.7% as compared to 53.4% in the same period one year ago, primarily due to price increases at certain communities, most notably Mystic Shores located in the Texas Hill Country, which has generated a very positive market response.
OTHER FINANCIAL INFORMATION
Total positive net interest spread (interest income less interest expense) rose to $6.5 million in the third quarter of 2006 from $6.3 million in the third quarter of 2005. Interest income increased due to the cumulative adjustment to Bluegreen's retained interest in notes receivable sold for the 2005A Term Securitization transaction and as a result of a higher average vacation ownership notes receivable balance during the 2006 quarter as compared to the 2005 quarter.
Interest expense increased primarily as a result of the on-balance sheet treatment of Bluegreen's vacation ownership receivables purchase facility with Branch Banking and Trust, the interest associated with approximately $30 million of additional junior subordinated debentures issued earlier in 2006, and the cost of increased borrowings associated with acquisition and development loans incurred to fund the growth of Bluegreen Resorts and Bluegreen Communities.
As previously announced, on September 21, 2006 BB&T Capital Markets, a division of Scott & Stringfellow, Inc., served as initial purchaser and placement agent for a private offering and sale of $139.2 million of Bluegreen Corporation vacation ownership receivable-backed securities (the "2006 Term Securitization"). Approximately $153.0 million in aggregate principal of vacation ownership receivables were securitized in this transaction. As a result of the transaction, Bluegreen recognized a $2.6 million gain on sale of notes receivable.
Bluegreen's balance sheet at September 30, 2006 reflected unrestricted cash of $35.5 million, a book value of $11.35 per share, and a debt-to-equity ratio of 0.81:1. |
