Bluegreen Corporation Reports 2006 Second Quarter Financial Results
biz.yahoo.com
Monday July 31, 8:00 am ET
BOCA RATON, Fla.--(BUSINESS WIRE)--July 31, 2006--Bluegreen Corporation (NYSE: BXG - News), a leading provider of Colorful Places to Live and Play®, today announced financial results for the second quarter ended June 30, 2006 (see attached tables).
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. As expected, and as previously announced, the adoption of the new accounting regulations adversely impacted results for the second quarter of 2006, primarily as a result of deferring revenues until subsequent periods. Bluegreen has provided in this press release pro forma, non-GAAP income statements (see tables entitled: "Pro Forma Income Statement Before SOP 04-2 Adjustment") for the three- and six-month periods ended June 30, 2006 that reflect the impact of adjustments required by the adoption of the SOP.
Net income for the second quarter of 2006 was $6.6 million, or $0.21 per diluted share, as compared to net income of $14.9 million, or $0.48 per diluted share, in the same period last year.
Total sales in the second quarter of 2006 were $141.9 million as compared to $159.3 million in the second quarter of 2005. Bluegreen Resorts sales were $91.4 million as compared to $97.0 million, reflecting the impact of the SOP. Bluegreen Communities sales were $50.6 million as compared to $62.3 million in the same period one year ago. As expected and as previously announced, these lower sales at Bluegreen Communities reflected the sell out or near sell out of several communities prior to the end of the second quarter of 2006.
On a pro forma, non-GAAP basis, excluding the impact of the adoption of the SOP, total sales in the second quarter of 2006 were $163.9 million as compared to $159.3 million in the second quarter of 2005. On the same basis, Resorts sales increased 16.8% to $113.4 from $97.0 million.
As indicated in the attached tables, on a pro forma, non-GAAP basis, excluding the impact of the adoption of the SOP, net income for the second quarter of 2006 was $12.7 million, or $0.41 per diluted share, as compared to net income of $14.9 million, or $0.48 per diluted share, in the same period last year.
During the second quarter of 2006, the SOP impacted Bluegreen Resorts' results of operations, and Bluegreen's consolidated income statement as follows:
Reduced Resorts sales by $22.0 million, as a consequence of:
The net deferral of $12.3 million of sales based on certain purchase incentives provided to buyers and the accounting treatment for the Company's Sampler Program
The netting of $12.0 million of the provision for loan losses directly against Resort sales. In addition, the SOP does not allow the Company to take a credit in the provision for loan losses for the cost of timeshare inventory that Bluegreen expects to recoup in connection with loan defaults
The classification of $337,000 of Resorts sales to Other Resort Revenue, based on certain purchase incentives provided to buyers
The classification of $2.6 million of the total $2.7 million of gain on sales of notes receivable in Resort sales
Increased Resorts cost of sales as a percentage of Resorts sales to 24.0% from 21.1% on a pro forma basis.
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. Selling, general and administrative expenses as a percentage of sales increased to 61.7% under the SOP, but would have only been 54.8% before the adoption of the SOP.
As of June 30, 2006, $37.0 million and $20.8 million of Resorts sales and profits, respectively, were deferred under the SOP. These amounts are expected to be recognized in future periods.
BLUEGREEN RESORTS
George F. Donovan, President and Chief Executive Officer of Bluegreen, commented, "The adoption of the SOP has masked the success of Bluegreen Resorts' business operations. We believe that this business and the markets in which it operates remain strong with significant potential for growth. In that regard, we enjoyed continued same-'store' sales growth, led by our sales offices at The Bluegreen Wilderness Club at Big Cedar (Ridgedale, Mo.), The Fountains resort (Orlando, Fla.), The Falls Village resort (Branson, Mo.) and Mountain Run at Boyne (Boyne Falls, Mich.). Our new sales office at Carolina Grande (Myrtle Beach, S.C.) and our new offsite sales offices in the Atlanta and Chicago markets also contributed to the increase in Bluegreen Resorts' sales. In addition, sales to Bluegreen's existing and growing owner base increased by 45.9%, and comprised 32.2% of Resorts sales for the three months ended June 30, 2006 as compared to 25.4% of Resorts sales during the comparable prior year period.
"We also continued to strengthen our portfolio of properties in order to address the vacation and lifestyle choices of our owners. We recently announced our intention to enter the mega-market of Las Vegas with a new resort, preview center and retail complex. Construction is set to commence in August on a seven-story resort featuring approximately 240 two-bedroom timeshare units, expected to be completed in the first quarter of 2008. We have also negotiated an option to purchase 4 acres of adjacent land, which has been entitled for the development of an additional 240 timeshare units. On July 1, 2006, we opened a preview center sales office on the Las Vegas Strip, and are currently introducing the Bluegreen Vacation Club to some of the city's estimated 38.5 million annual visitors.
"In fall 2006, we expect to commence construction 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 planning to open a sales office in Williamsburg in August 2006. Our expansion in Tennessee, one of Bluegreen's most popular vacation destinations, continued with the purchase of a 26,208-square-foot building located at the foot of the Great Smoky Mountains that will be renovated into a new preview center in the third quarter of 2006."
Resorts cost of sales in the second quarter of 2006 rose to 24.0% of sales from 20.5% in the same period last year. This increase was due primarily to the impact of the SOP and 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). Bluegreen continues to believe that Resorts cost of sales will remain within the 23-25% range in 2006.
BLUEGREEN COMMUNITIES
Bluegreen Communities sales in the second quarter of 2006 were $50.6 million as compared to $62.3 million in the second quarter of 2005. As previously announced, the high level of sales achieved in the Bluegreen Communities segment during 2004 and 2005 resulted in some of the Company's properties substantially selling out earlier than previously expected; six of Bluegreen's communities that contributed to the high sales in the second quarter of 2005 substantially sold out during or prior to the second quarter of 2006. Despite the sales decline, as of June 30, 2006, approximately $21.2 million and $8.8 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 has also purchased six new properties since June 30, 2005, although most of these new Bluegreen Communities had not commenced sales as of June 30, 2006.
Mr. Donovan commented, "We are pleased with the sales pace at Bluegreen's two newest Texas communities -- The Settlement at Patriot Ranch and Havenwood at Hunter's Crossing. We also realized increased sales during the second quarter of 2006 (as compared to the second quarter of 2005) at several communities open more than one year, including Mountain Springs Ranch (Canyon Lake, Texas) and Chapel Ridge (Chapel Hill, N.C.). These incremental sales helped to partially offset sales decreases at substantially sold-out communities.
"We are also on track to commence sales during the fourth quarter of 2006 at The Bridges of Preston Crossings, a nearly 1,600-acre Bluegreen Golf Community located outside of Dallas, and at Vintage Oaks at the Vineyards, a 3,300- acre parcel outside San Antonio. Sales recently commenced at Saddle Creek Ranch, a 130-acre tract of land in Waller, Texas, near Houston, which we acquired earlier this year. Saddle Creek Ranch is within six miles of Bluegreen's very successful Saddle Creek Forest community. During the second quarter, we acquired a 953-acre parcel in Grimes County, Texas, which is in close proximity to College Station. We believe that we will begin selling one-plus acre homesites at this new Bluegreen Community in the fourth quarter of 2006."
Bluegreen Communities cost of sales in the second quarter of 2006 of 53.6% represents a return to historical levels. The increase from 50.1% in the same period one year ago was due primarily to the substantial sell out of two higher-margin Bluegreen Golf communities prior to the second quarter of 2006.
OTHER FINANCIAL INFORMATION
Total positive net interest spread (interest income less interest expense) rose to $6.0 million in the second quarter of 2006 from $4.2 million in the second 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 higher amounts of interest expense being capitalized to the Company's various Resorts and Communities properties currently under development, reflecting higher levels of development activity as Bluegreen continues to expand for the future.
Bluegreen entered into a vacation ownership receivables purchase facility with Branch Banking and Trust Company ("BB&T") on June 1, 2006 that allows for transfers of notes receivable pursuant to the terms of the facility and subject to certain conditions precedent for a cumulative purchase price of up to $137.5 million, on a revolving basis through May 2008. In June 2006, the Company transferred ownership of $35.0 million of receivables pursuant to this facility and generated $29.7 million in cash proceeds at an 85% advance rate. Transfers of receivables under this facility are being accounted for as financing transactions for financial accounting purposes, therefore the receivables and associated obligations under the facility appear as assets and liabilities, respectively, on the Company's balance sheet.
Bluegreen's balance sheet at June 30, 2006 reflected unrestricted cash of $43.8 million, a book value of $10.47 per share, and a debt-to-equity ratio of 1.03:1. However, excluding the impact of accounting for the BB&T receivables purchase facility on balance sheet, the debt-to-equity ratio would have been 0.93:1.
As we announced in our June 27, 2006 press release, the Board of Directors of the Company declared a dividend of one preferred share purchase right for each outstanding share of common stock. The rights are intended to enable all shareholders to realize the long-term value of their shares in the Company. The action was taken in response to the acquisition by a competitor of a significant interest in the Company. The Company has also filed litigation based on the unlawful manner in which the interest was acquired. |
