Bluegreen Corporation Reports 2006 Second Quarter Financial Results

Business Wire,  July 31, 2006  

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BOCA RATON, Fla. -- Bluegreen Corporation (NYSE: BXG), a leading provider of Colorful Places to Live and Play(R), 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.