Market Overview

Bluegreen Corporation Reports 2012 Third Quarter Financial Results

BOCA RATON, Fla.--(BUSINESS WIRE)--

Bluegreen Corporation (NYSE: BXG), a leading timeshare sales, marketing and resort management company, today announced financial results for the quarter and nine months ended September 30, 2012.

John M. Maloney Jr., President and Chief Executive Officer of Bluegreen, commented, “We performed well in the third quarter of 2012, as evidenced by growth at both our traditional VOI and fee-based services businesses, as well as increases in sales tours and sale-to-tour conversion ratios. Our fee-based services business represented approximately 39% and 37% of total system-wide VOI sales for the three and nine months ended September 30, 2012, respectively, up from approximately 37% and 34% in the same respective periods last year. In September, we completed the sale of $100 million of investment-grade timeshare loan-backed notes in a term securitization transaction. This transaction allowed us to refinance at a 2.94% fixed interest rate receivables that were previously pledged under certain of our variable-rate credit facilities, and create approximately $60 million of additional availability under existing receivable-backed credit facilities. Through the first nine months of 2012, we generated free cash flow (defined as cash flow from operating and investing activities) of $138.7 million (including $27.8 million of proceeds from the sale of Bluegreen Communities, prior to the payment of $22.7 million of Bluegreen Communities' debt and related fees) and reduced outstanding debt by approximately $107.3 million.”

Additional Q3 2012 operating highlights included:

  • In connection with its fee-based services business, Resorts sold $41.7 million of third-party VOIs in Q3 2012, generating sales and marketing commissions of approximately $27.8 million. This compares to sales of $34.0 million of third-party VOIs in Q3 2011, which generated sales and marketing commissions of $23.5 million.
  • Total revenues from fee-based services rose 11.6% to $47.2 million in Q3 2012 from $42.3 million in Q3 2011. Fee-based services contributed an estimated $16.5 million to Resorts operating profit in Q3 2012, compared to an estimated $14.5 million in Q3 2011. As of September 30, 2012, Bluegreen managed 46 timeshare resort properties compared to 45 as of September 30, 2011.

BLUEGREEN RESORTS

       
Supplemental Financial Data and Reconciliation of System-Wide Sales of VOIs to GAAP Gross Sales of VOIs
Three and Nine Months Ended September 30, 2012 and 2011
(In 000's, except percentages) (Unaudited)
 

Three Months Ended September 30, 2012

Three Months Ended September 30, 2011

           

% of

           

% of

Traditional Fee-Based

System-wide

Traditional Fee-Based

System-wide

Timeshare Services

sales of VOIs,

Timeshare Services

sales of VOIs,

Business Business Total

net (6)

Business Business Total

net (6)

System-wide sales of VOI's (1) $ 67,421 $ 41,698 $ 109,119 56,993 $ 33,983 $ 90,976

 

Change in sales deferred under timeshare

 

accounting rules   (2,095 )   -     (2,095 )   (335 )   -     (335 )

 

System-wide sales of VOIs, net (1) 65,326 41,698 107,024 100 % 56,658 33,983 90,641 100 %

 

Less: Sales of third-party VOIs   -     (41,698 )   (41,698 ) (39 )   -     (33,983 )   (33,983 ) (37 )

 

Gross sales of VOIs 65,326 - 65,326 61 56,658 - 56,658 63

 

Estimated uncollectible VOI

notes receivable (2)

  (8,354 )   -     (8,354 ) (13 )   (10,770 )   -     (10,770 ) (19 )

 

Sales of VOIs 56,972 - 56,972 53 45,888 - 45,888 51

 

Cost of VOIs sold (3)   (12,590 )   -     (12,590 ) (22 )   (11,349 )   -     (11,349 ) (25 )

 

Gross profit (3) 44,382 - 44,382 78 34,539 - 34,539 75

 

Fee-based sales commission revenue - 27,798 27,798 26 - 23,460 23,460 26

 

Other resort fee-based services revenues - 19,401 19,401 18 - 18,838 18,838 21

 

Cost of other resort fee-based services - (9,083 ) (9,083 ) (8 ) - (10,550 ) (10,550 ) (12 )

 

Net carrying cost of VOI inventory (1,333 ) (1,333 ) (1 ) (2,362 ) - (2,362 ) (3 )

 

Selling and marketing expense (4) (30,375 ) (19,388 ) (49,763 ) (46 ) (25,462 ) (15,272 ) (40,734 ) (45 )

 

Resorts G & A expense (4)   (3,441 )   (2,196 )   (5,637 ) (5 )   (3,334 )   (2,000 )   (5,334 ) (6 )

 

Bluegreen Resorts operating profit (5) $ 9,234   $ 16,531   $ 25,765   24 % $ 3,381   $ 14,476   $ 17,857   20

 

 
 
 

Nine Months Ended September 30, 2012

Nine Months Ended September 30, 2011

% of

% of

Traditional Fee-Based

System-wide

Traditional Fee-Based

System-wide

Timeshare Services

sales of VOIs,

Timeshare Services

sales of VOIs,

Business Business Total

net (6)

Business Business Total

net (6)

System-wide sales of VOI's (1) $ 179,236 $ 100,813 $ 280,049 150,755 $ 77,844 $ 228,599

 

Change in sales deferred under timeshare

 

accounting rules   (6,249 )   -     (6,249 )   (1,639 )   -     (1,639 )

 

System-wide sales of VOIs, net (1) 172,987 100,813 273,800 100 % 149,116 77,844 226,960 100 %

 

Less: Sales of third-party VOIs   -     (100,813 )   (100,813 ) (37 )   -     (77,844 )   (77,844 ) (34 )

 

Gross sales of VOIs 172,987 - 172,987 63 149,116 - 149,116 66

 

Estimated uncollectible VOI

notes receivable (2)

  (21,448 )   -     (21,448 ) (12 )   (21,521 )   -     (21,521 ) (14 )

 

Sales of VOIs 151,539 - 151,539 55 127,595 - 127,595 56

 

Cost of VOIs sold (3)   (31,355 )   -     (31,355 ) (21 )   (32,003 )   -     (32,003 ) (25 )

 

Gross profit (3) 120,184 - 120,184 79 95,592 - 95,592 75

 

Fee-based sales commission revenue - 66,279 66,279 24 - 52,532 52,532 23

 

Other resort fee-based services revenues - 57,091 57,091 21 - 53,325 53,325 23

 

Cost of other resort fee-based services - (28,918 ) (28,918 ) (11 ) - (28,286 ) (28,286 ) (12 )

 

Net carrying cost of VOI inventory (6,435 ) - (6,435 ) (2 ) (9,863 ) - (9,863 ) (4 )

 

Selling and marketing expense (4) (77,937 ) (45,420 ) (123,357 ) (45 ) (68,514 ) (35,767 ) (104,281 ) (46 )

 

Resorts G & A expense (4)   (9,670 )   (5,635 )   (15,305 ) (6 )   (9,372 )   (4,893 )   (14,265 ) (6 )

 

Bluegreen Resorts operating profit (5) $ 26,142   $ 43,397   $ 69,539   25 % $ 7,843   $ 36,911   $ 44,754   20 %

 

 
(1)   Amounts for “Fee-Based Services Business” represent sales of VOIs made on behalf of third parties, which are transacted as sales of timeshare interests in the Bluegreen Vacation Club and through the same sales and marketing process as the sale of the Company's VOI inventory included under “Traditional Timeshare Business.”
 
(2) Percentages for estimated uncollectible VOI notes receivable are calculated as a percentage of gross sales of VOIs.
 
(3) Percentages for cost of VOIs sold and the associated gross profit are calculated as a percentage of sales of VOIs.
 
(4) Selling and marketing expenses and Resorts G&A expenses are allocated pro rata based on system-wide sales of VOIs, net.
 
(5) General and administrative expenses attributable to corporate overhead have been excluded from the table. Corporate general and administrative expenses totaled $13.5 million and $9.3 million for the three months ended September 30, 2012 and 2011, respectively, and $38.2 million and $28.5 million for the nine months ended September 30, 2012 and 2011, respectively.
 
(6) Unless otherwise indicated.

System-wide sales of VOIs rose to $109.1 million in Q3 2012 from $91.0 million in Q3 2011. This reflects an increase in the number of total prospect tours (55,825 in Q3 2012 from 48,773 in Q3 2011) along with an improved total sale-to-tour conversion ratio (16.6% in Q3 2012, up from 15.7% in Q3 2011) . Bluegreen also realized a higher average sales price per transaction ($11,976 for Q3 2012 as compared to $11,851 for Q3 2011). New prospect tours, included in total prospect tours above, rose to 33,714 in Q3 2012 from 29,125 in Q3 2011.

System-wide sales also include Bluegreen's sales of VOI inventory in connection with a new category of sales, which we commenced during January 2012, requiring low levels of capital deployment whereby we acquire VOI inventory from our resorts' property owner associations (“POAs”) on a non-committed basis, in close proximity to the timing of our selling of such VOIs (“POA Sales”). These VOIs are typically obtained by the POAs through foreclosure in connection with maintenance fee defaults and are generally acquired by us at a discount. In the three and nine months ended September 30, 2012, POA Sales, which are included within the results of Bluegreen's Traditional Timeshare Business in the tables above, were $5.1 million and $13.0 million, respectively.

Cost of VOIs sold represented 22% and 25% of sales of VOIs in Q3 2012 and Q3 2011, respectively. Cost of VOIs sold as a percentage of sales of VOIs varies between periods based on the relative costs of the specific VOIs sold in each period. Additionally, changes in assumptions, including estimated project sales, future defaults, upgrades and estimated incremental revenue from the resale of repossessed VOI inventory and the size of the point packages of the VOIs sold (due to offered volume discounts, including consideration of cumulative sales to existing owners) are reflected on a prospective basis in the period the change occurs.

As a percentage of system-wide sales of VOIs, net, selling and marketing expenses increased to 46% in Q3 2012 from 45% in Q3 2011. Sales to existing Bluegreen owners as a percentage of system-wide sales of VOIs was 56% in Q3 2012 as compared to 55% Q3 2011. If Bluegreen shifts its marketing efforts more to selling to new customers as opposed to existing owners, its marketing expenses will increase as a percentage of sales.

Operating profit at Resorts rose to $25.8 million, or 24% of system-wide sales of VOI's, net, for Q3 2012 from operating profit of $17.9 million, or 20% of system-wide sales of VOI's, net, for Q3 2011.

INTEREST INCOME AND INTEREST EXPENSE

Net interest spread is the excess of interest income over interest expense. Pre-tax income from net interest spread in Q3 2012 rose to $10.8 million from $10.3 million in Q3 2011, due to a decrease in interest expense as Bluegreen continues to reduce the level of debt on its balance sheet, partially offset by lower interest income resulting from the continued decline in Bluegreen's VOI notes receivable portfolio due to both the maturing of the portfolio as well as our efforts to increase cash sales and collect higher down payments on those VOI sales that we do finance.

DISCONTINUED OPERATIONS

Bluegreen Communities, which is reported as discontinued operations in all periods presented, marketed residential homesites, the majority of which were sold directly to retail customers seeking to build a home generally in the future, and operated daily-fee golf courses. As previously announced, on May 4, 2012, substantially all of the assets which comprised Bluegreen Communities were sold to Southstar for a purchase price of $29.0 million in cash, the majority of which was used to pay outstanding debt which was collateralized by the Bluegreen Communities assets sold in the transaction. Bluegreen may also receive certain contingent consideration based on Southstar's sale, if any, of two properties sold to Southstar as part of the transaction. Certain assets relating to Bluegreen Communities, including primarily Bluegreen Communities' notes receivable portfolio, were excluded from the sale.

ABOUT BLUEGREEN CORPORATION

Founded in 1966 and headquartered in Boca Raton, FL, Bluegreen Corporation (NYSE: BXG) is a leading timeshare sales, marketing and resort management company. Bluegreen manages, markets and sells the Bluegreen Vacation Club, a flexible, points-based, deeded vacation ownership plan with more than 160,000 owners, over 59 owned or managed resorts, and access to more than 4,000 resorts worldwide. Bluegreen also offers a portfolio of comprehensive, turnkey, fee-based service resort management, financial services, and sales and marketing on behalf of third parties. For more information, visit 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, credit market, competitive and other factors affecting the Company and its operations, markets, products and services; the Company's efforts to improve its liquidity through cash sales and larger down payments on financed sales may not be successful; the performance of the Company's VOI notes receivable may deteriorate, and the FICO® score-based credit underwriting standards may not have the expected effects on the performance of the receivables; the Company may not be in a position to draw down on its existing credit lines or may be unable to renew, extend, or replace such lines of credit; the Company may require new credit lines to provide liquidity for its operations, including facilities to sell or finance its notes receivable; the Company may not be able to successfully securitize additional timeshare loans and/or obtain adequate receivable credit facilities in the future; risks relating to pending or future litigation, regulatory proceedings, claims and assessments; sales and marketing strategies may not be successful; marketing costs may increase and not result in increased sales; system-wide sales, including sales on behalf of third parties and sales to existing owners, may not continue at current levels or they may decrease; fee-based service initiatives may not be successful and may not grow or generate profits as anticipated; POA Sales may not continue at current levels or may decrease, and we may not be successful in our efforts to enter into similar arrangements with third-party developers in connection with our fee-based services business; risks related to other financial trends discussed in this press release, including that the volume of tours and the sale-to-tour conversion ratio may not continue at current levels or decrease, the Company may be required to further increase its allowance for loan losses in the future and record additional impairment charges as a result of any such increase; selling and marketing expenses as a percentage of system-wide sales of VOIs, net may not remain at current levels or they may increase; and the Company's indebtedness may increase in the future; and the risks and other factors detailed in the Company's SEC filings, including those contained in the “Risk Factors” sections of such filings.

                       

Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

(In 000's, except per share data)

(Unaudited)

 

For the Three Months Ended

For the Nine Months Ended
September 30, September 30,
 
  2012     2011     2012     2011  
 
Revenues:
Gross sales of VOI $ 65,326 $ 56,658 $ 172,987 $ 149,116
Estimated uncollectible VOI notes receivable   (8,354 )   (10,770 )   (21,448 )   (21,521 )
Sales of VOIs 56,972 45,888 151,539 127,595
 
Fee-based sales commission revenue 27,798 23,460 66,279 52,532
Other fee-based services revenue 19,401 18,838 57,091 53,325
Interest income 21,485 23,533 65,051 71,986
Other income, net   377     -     759     -  
  126,033     111,719     340,719     305,438  
 
Costs and expenses:
Cost of VOIs sold 12,590 11,349 31,355 32,003
Cost of other resort fee-based services 10,416 12,912 35,353 38,149
Selling, general and administrative expenses 69,482 56,098 178,845 149,448
Interest expense 10,651 13,225 33,074 41,746
Other expense, net   -     -     -     910  
  103,139     93,584     278,627     262,256  
 
Income before non-controlling interest, provision for income taxes, and
discontinued operations 22,894 18,135 62,092 43,182
Provision for income taxes   8,149     5,939     21,960     14,650  
Income from continuing operations 14,745 12,196 40,132 28,532
Loss from discontinued operations, net of income taxes   (347 )   (2,626 )   (2,043 )   (40,389 )
Net income (loss) 14,398 9,570 38,089 (11,857 )
Less: Net income attributable to non-controlling interest   2,738     2,520     7,519     5,261  
Net income (loss) attributable to Bluegreen Corporation $ 11,660   $ 7,050   $ 30,570   $ (17,118 )
 
Income (loss) attributable to Bluegreen Corporation per common share - Basic
Earnings per share from continuing operations attributable to
Bluegreen shareholders $ 0.38 $ 0.31 $ 1.04 $ 0.75
Loss per share from discontinued operations   (0.01 )   (0.08 )   (0.07 )   (1.29 )
Earnings (loss) per share attributable to Bluegreen shareholders $ 0.37   $ 0.23   $ 0.98   $ (0.55 )
 
Income (Loss) attributable to Bluegreen Corporation per common share - Diluted
Earnings per share from continuing operations attributable to
Bluegreen shareholders $ 0.38 $ 0.30 $ 1.03 $ 0.71
Loss per share from discontinued operations   (0.01 )   (0.08 )   (0.06 )   (1.26 )
Earnings (loss) per share attributable to Bluegreen shareholders $ 0.37   $ 0.22   $ 0.97   $ (0.53 )
 
Weighted average number of common shares:
Basic   31,347     31,245     31,288     31,211  
Diluted   31,605     32,429     31,554     32,156  
 
Comprehensive income (loss) attributable to Bluegreen Corporation $ 11,660   $ 7,050   $ 30,570   $ (17,118 )
 
           
Condensed Consolidated Balance Sheets
(In 000's, except per share data)
 
September 30, December 31,
2012       2011
ASSETS (Unaudited)
 
Unrestricted cash and cash equivalents $ 100,236 $ 80,931
Restricted cash ($35,876 and $38,913 in VIEs at September 30, 2012
and December 31, 2011, respectively) 60,148 51,125
Notes receivable, net ($370,121 and $375,904 in VIEs
at September 30, 2012 and December 31, 2011, respectively) 489,440 512,517
Inventory 280,569 302,843
Prepaid expenses 8,563 4,120
Other assets 52,901 47,100
Property and equipment, net 69,157 70,112
Assets held for sale           28,625
Total assets

$

1,061,014

      $

1,097,373

 
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable $ 10,908 $ 8,834
Accrued liabilities and other 73,811 62,878
Deferred income 30,304 24,549
Deferred income taxes 35,546 15,776
Receivable-backed notes payable - recourse ($11,511 and $15,826 in
VIEs at September 30, 2012 and December 31, 2011, respectively) 65,063 110,016
Receivable-backed notes payable - non-recourse (in VIEs) 373,385 369,314
Lines-of-credit and notes payable 20,396 86,817
Junior subordinated debentures   110,827         110,827
Total liabilities 720,240 $ 789,011
 
 
 
Shareholders' Equity
Preferred stock, $.01 par value, 1,000 shares authorized; none issued
Common stock, $.01 par value, 140,000 shares authorized;
31,349 and 31,288 shares issued at September 30, 2012 and December 31, 2011, respectively 313 313
Additional paid-in capital 193,672 191,999
Retained earnings   107,588         77,018
Total Bluegreen Corporation shareholders' equity 301,573 269,330
Non-controlling interest   39,201         39,032
Total shareholders' equity   340,774         308,362
Total liabilities and shareholders' equity

$

1,061,014

      $ 1,097,373
 

Bluegreen Corporation
Tony Puleo, 561-912-8270
Chief Financial Officer
tony.puleo@bluegreencorp.com
-OR-
INVESTOR RELATIONS:
The Equity Group Inc.
Devin Sullivan, 212-836-9608
Senior Vice President
dsullivan@equityny.com

 

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