Bluegreen Corporation Reports 2006 First Quarter Financial Results
biz.yahoo.com
Wednesday May 3, 5:05 pm ET
BOCA RATON, Fla.--(BUSINESS WIRE)--May 3, 2006--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, 2006 (see attached tables).
Total sales in the first quarter of 2006 rose 14.8% to $119.4 million from $104.0 million in the same period last year. Resorts sales rose 9.3% to $71.7 million from $65.6 million, while Communities sales increased 24.1% to $47.6 million from $38.4 million in the first quarter of 2005. Income before cumulative effect of change in accounting principle was $4.0 million, or $0.13 per diluted share, as compared to $6.4 million, or $0.20 per diluted share, in the same period last year.
As previously announced, effective January 1, 2006 Bluegreen was required to adopt the American Institute of Certified Public Accountants' Statement of Position 04-2, "Accounting for Real Estate Time-sharing Transactions" (the "SOP"), which changes the rules for many aspects of timeshare accounting, including revenue recognition, inventory costing, and incidental operations. During the first quarter of 2006, the adoption of the SOP:
Reduced Resort sales recognized by a net $6.4 million, which reflected:
- The net deferral of $3.2 million of sales due to providing buyers with certain purchase incentives and the treatment of the Company's Sampler Program
- The classification of $2.6 million of Resorts sales to Other Resort Revenue, due to providing buyers with certain purchase incentives
- The classification of $6.5 million of the total $7.0 million of gain on sales of notes receivable in Resort sales
- The netting of the $7.1 million provision for loan losses against Resort sales, which did not allow the Company to take credit in the provision for loan losses for the cost of timeshare inventory that Bluegreen expects to recoup upon loan default
Contributed to higher selling, general, and administrative expenses as a percentage of sales. While the SOP requires certain Resorts sales be deferred, it does not allow the deferral of certain marketing expenses associated with those sales;
Decreased income before cumulative effect of change in accounting principle by $1.5 million, or $0.05 per diluted share;
Resulted in a one-time, non-cash charge reflected as the cumulative effect of change in accounting principle of $4.5 million, or $0.14 per diluted share net of income taxes and minority interest, consisting primarily of deferred Resorts sales, which are the result of providing buyers with certain purchase incentives and the treatment of the Company's Sampler Program.
As of March 31, 2006, $24.7 million and $14.2 million of Resorts sales and profits, respectively, were deferred under the SOP. These amounts are expected to be recognized in future periods.
In addition, first quarter 2006 results included after-tax charges of $267,000, or $0.01 per diluted share, attributable to the adoption of SFAS 123® in connection with Bluegreen's employee stock incentive plans.
Please see table titled: Pro Forma Income Before Cumulative Effect of Change in Accounting Principle, which is included in this press release.
The impact of the SOP adoption and SFAS 123® charge resulted in a net loss for the first quarter of 2006 of $463,000, or $0.01 per diluted share, as compared to net income of $6.4 million, or $0.20 per diluted share, for the same period in 2005.
George F. Donovan, President and Chief Executive Officer of Bluegreen, commented, "We are pleased with the continued sales growth in our Resorts and Communities businesses. While as expected and as previously announced, the adoption of the new accounting regulations impacted our results for the first quarter, we continue to believe that Bluegreen's business and markets remain fundamentally strong and are demonstrating solid growth.
"On the Resorts side, we enjoyed continued same-"store" sales growth, led by our sales offices at The Fountains resort (Orlando, Fla.), The Falls Village(TM) resort (Branson, Mo.), the MountainLoft(TM) resort (Gatlinburg, Tenn.) and the Bluegreen Wilderness Club(TM) at Big Cedar® (Ridgedale, Mo.). In addition, we expanded our sales and marketing capabilities in new markets with the November 2005 opening of our off-site Preview Center in Atlanta, Georgia and the February 2006 opening of our off-site Preview Center in Schaumburg, Ill., just outside of Chicago.
"We are also continuing to broaden our portfolio of Communities properties. In that regard, I am very pleased to announce that Bluegreen has acquired two new communities in Texas, a 3,300- acre parcel outside of San Antonio, and a 130-acre tract of land in Waller (Houston) that is within six miles of Bluegreen's very successful Saddle Creek Forest community. We currently believe that, based on the Company's assessment of current estimated retail prices and the expected number of homesites to be offered, these new properties will, in the aggregate, generate total estimated life-of-project sales of approximately $150.0 million over an anticipated eight-year period."
BLUEGREEN RESORTS
Resorts sales in the first quarter of 2006 increased 9.3% to a first quarter record $71.7 million from $65.6 million in the same period last year. The adoption of the SOP reduced the recognition of Resorts sales in the first quarter of 2006 by approximately $6.4 million, and reduced the rate of growth in recognized Resorts sales from 19.0% to 9.3% when comparing the first quarter of 2006 to the comparable prior year quarter. Higher sales during the period were due primarily to same-"store" sales growth, driven by an increased number of sales tours at a consistent overall 14% tour-to-sale conversion ratio. In addition, sales to Bluegreen's growing owner base increased by 59% and comprised 33% of Resorts sales for the three months ended March 31, 2006 as compared to 25% of Resorts sales during the comparable prior year period.
Resorts cost of sales in the first quarter of 2006 rose to 23.8% of sales from 20.1% in the same period last year. Resorts cost of sales in the first quarter of 2006 remained stable from the fourth quarter of 2005 and fell within the previously announced anticipated range of 23% to 25%. The increase in cost of Resorts sales was due to the sale of timeshare interests in higher cost resorts as a result of rising construction costs, partially offset by increased sales of vacation ownership interests in The Fountains resort, which has a relatively low associated product cost, and a system-wide price increase that went into effect January 1, 2006. Due to its product pricing strategy, Bluegreen continues to believe that Resorts cost of sales will remain within the 23-25% range in 2006.
BLUEGREEN COMMUNITIES
Communities sales in the first quarter of 2006 increased 24.1% to $47.6 million from $38.4 million in the first quarter of 2005. Higher sales were due to the recognition of approximately $4.5 million of sales previously deferred under the percentage-of-completion method of accounting during the three months ended March 31, 2006, compared to a $9.9 million deferral of sales under percentage-of-completion during the comparable prior year period. Increased sales during the first quarter of 2006 compared to the first quarter of 2005 at several communities, including Mystic Shores (Canyon Lake, Texas), Mountain Springs Ranch (Smithson Valley, Texas) and Catawba Falls Preserve (Black Mountain, N.C.) as well as sales at new communities such as Saddle Creek Forest (Magnolia, Texas), Havenwood at Hunter's Crossing (Cedar Hill, Texas) and the Settlement at Patriot Ranch (Gonzales County, Texas), helped offset sales decreases at substantially sold-out communities. In addition, Communities consummated the bulk sale of a property near San Diego, California, which contributed to the increase of sales in the first quarter of 2006 as compared to the first quarter of 2005. As of March 31, 2006, approximately $26.2 million and $10.9 million of 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 the communities.
Communities cost of sales in the first quarter of 2006 rose to 58.8% from 51.3% in the same period one year ago, due substantially to the impact of the bulk sale of land in California on a non-retail basis. Communities cost of sales are expected to return to historical levels beginning in the second quarter of 2006.
OTHER FINANCIAL INFORMATION
Total positive net interest spread (interest income less interest expense) rose to $4.9 million in the first quarter of 2006 as compared to $4.3 million in the first quarter of 2005. Interest income increased primarily as a result of a higher average vacation ownership notes receivable balance during the 2006 quarter as compared to the 2005 quarter, while interest expense declined primarily as a result of lower average debt outstanding.
Gain on sales of notes receivable declined to $505,000 from $4.7 million in the first quarter of 2005. This decline was due to the impact of the SOP, which required the classification of $6.5 million of the gain on sales of notes receivable as Resorts sales.
Bluegreen's balance sheet at March 31, 2006 reflected unrestricted cash of $48.1 million, a book value of $10.31 per share, and a debt-to-equity ratio of 0.74:1. |
