Woodbridge Holdings Corporation
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2008
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-31931
WOODBRIDGE HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
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Florida
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11-3675068 |
(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.) |
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2100 W. Cypress Creek Road, |
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Fort Lauderdale, FL
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33309 |
(Address of principal executive offices)
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(Zip Code) |
(954) 940-4950
(Registrants telephone number, including area code)
Levitt Corporation
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a smaller reporting company or a non-accelerated filer. See the
definitions of large accelerated filer, accelerated filer and smaller reporting company
in Rule 12b-2 of the Exchange Act.
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes o No x
Indicate the number of shares outstanding of each of the registrants classes of common
stock, as of the latest practicable date.
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Class |
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Outstanding at August 5, 2008 |
Class A common stock, $0.01 par value
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95,197,445 |
Class B common stock, $0.01 par value
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1,219,031 |
Woodbridge Holdings Corporation
Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2008
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Woodbridge Holdings Corporation
Consolidated Statements of Financial Condition Unaudited
(In thousands, except share data)
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June 30, |
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December 31, |
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2008 |
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2007 |
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Assets |
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Cash and cash equivalents |
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$ |
125,307 |
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195,181 |
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Restricted cash |
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729 |
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2,207 |
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Current income tax receivable |
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27,375 |
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27,407 |
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Inventory of real estate |
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242,185 |
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227,290 |
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Assets held for sale |
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95,827 |
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96,214 |
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Investments: |
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Bluegreen Corporation |
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117,365 |
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116,014 |
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Other equity securities |
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15,699 |
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Other |
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2,564 |
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2,565 |
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Property and equipment, net |
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33,005 |
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33,566 |
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Other assets |
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13,655 |
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12,407 |
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Total assets |
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$ |
673,711 |
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712,851 |
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Liabilities and Shareholders Equity |
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Accounts payable, accrued liabilities and other |
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$ |
37,454 |
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41,618 |
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Liabilities related to assets held for sale |
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82,311 |
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80,093 |
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Notes and mortgage notes payable |
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172,820 |
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189,768 |
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Junior subordinated debentures |
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85,052 |
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85,052 |
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Loss in excess of investment in subsidiary |
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55,214 |
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55,214 |
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Total liabilities |
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432,851 |
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451,745 |
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Shareholders equity: |
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Preferred stock, $0.01 par value |
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Authorized: 5,000,000 shares |
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Issued and outstanding: no shares |
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Class A Common Stock, $0.01 par value |
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Authorized: 150,000,000 shares |
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Issued and outstanding: 95,197,445 and 95,040,731 shares, respectively |
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952 |
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950 |
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Class B Common Stock, $0.01 par value |
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Authorized: 10,000,000 shares |
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Issued and outstanding: 1,219,031 shares |
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12 |
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12 |
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Additional paid-in capital |
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337,358 |
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336,795 |
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Accumulated deficit |
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(97,910 |
) |
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(78,537 |
) |
Accumulated other comprehensive income |
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448 |
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1,886 |
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Total shareholders equity |
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240,860 |
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261,106 |
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Total liabilities and shareholders equity |
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$ |
673,711 |
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712,851 |
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See accompanying notes to unaudited consolidated financial statements.
1
Woodbridge Holdings Corporation
Consolidated Statements of Operations Unaudited
(In thousands, except per share data)
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Three Months |
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Six Months |
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Ended June 30, |
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Ended June 30, |
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2008 |
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2007 |
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2008 |
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2007 |
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Revenues: |
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Sales of real estate |
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$ |
2,395 |
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125,364 |
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2,549 |
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266,662 |
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Other revenues |
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810 |
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1,702 |
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1,556 |
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3,614 |
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Total revenues |
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3,205 |
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127,066 |
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4,105 |
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270,276 |
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Costs and expenses: |
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Cost of sales of real estate |
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1,758 |
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171,594 |
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1,786 |
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284,502 |
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Selling, general and administrative expenses |
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12,439 |
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33,017 |
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24,514 |
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65,331 |
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Interest expense |
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2,146 |
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4,865 |
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Other expenses |
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413 |
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895 |
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Total costs and expenses |
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16,343 |
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205,024 |
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31,165 |
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350,728 |
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Earnings from Bluegreen Corporation |
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1,211 |
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1,357 |
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1,737 |
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3,101 |
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Interest and other income |
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1,946 |
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3,294 |
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3,545 |
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5,634 |
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Loss from continuing operations before
income taxes |
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(9,981 |
) |
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(73,307 |
) |
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(21,778 |
) |
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(71,717 |
) |
Benefit for income taxes |
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15,112 |
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14,501 |
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Loss from continuing operations |
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(9,981 |
) |
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(58,195 |
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(21,778 |
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(57,216 |
) |
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Discontinued operations: |
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Income from discontinued operations, net of
tax |
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1,039 |
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108 |
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2,405 |
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105 |
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Net loss |
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$ |
(8,942 |
) |
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(58,087 |
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(19,373 |
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(57,111 |
) |
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Basic loss per common share: |
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Continuing operations |
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$ |
(0.10 |
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(2.88 |
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(0.23 |
) |
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(2.83 |
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Discontinued operations |
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0.01 |
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0.01 |
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0.03 |
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0.01 |
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Total basic loss per common share |
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$ |
(0.09 |
) |
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(2.87 |
) |
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(0.20 |
) |
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(2.82 |
) |
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Diluted loss per common share: |
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Continuing operations |
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$ |
(0.10 |
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(2.88 |
) |
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(0.23 |
) |
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(2.83 |
) |
Discontinued operations |
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0.01 |
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0.01 |
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0.03 |
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0.01 |
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Total diluted loss per common share |
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$ |
(0.09 |
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(2.87 |
) |
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(0.20 |
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(2.82 |
) |
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Weighted average common shares outstanding: |
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Basic |
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96,264 |
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20,218 |
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96,261 |
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20,217 |
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Diluted |
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96,264 |
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20,218 |
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96,261 |
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20,217 |
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Dividends declared per common share: |
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Class A common stock |
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$ |
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0.02 |
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Class B common stock |
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$ |
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0.02 |
|
See accompanying notes to unaudited consolidated financial statements.
2
Woodbridge Holdings Corporation
Consolidated Statements of Comprehensive Loss Unaudited
(In thousands)
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Three Months |
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Six Months |
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Ended June 30, |
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Ended June 30, |
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2008 |
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2007 |
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2008 |
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2007 |
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Net loss |
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$ |
(8,942 |
) |
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|
(58,087 |
) |
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(19,373 |
) |
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(57,111 |
) |
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Other comprehensive loss: |
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Pro-rata share of unrealized loss
recognized by Bluegreen Corporation on
retained interests in notes receivable sold |
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(458 |
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(475 |
) |
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(885 |
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(539 |
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Unrealized
gain (loss) on other equity securities, net of reclassification adjustment (See Note 6) |
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273 |
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(553 |
) |
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Benefit for income taxes |
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183 |
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208 |
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Total unrealized loss, net of taxes |
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(185 |
) |
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|
(292 |
) |
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|
(1,438 |
) |
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|
(331 |
) |
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Total comprehensive loss |
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$ |
(9,127 |
) |
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|
(58,379 |
) |
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|
(20,811 |
) |
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(57,442 |
) |
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See accompanying notes to unaudited consolidated financial statements.
3
Woodbridge Holdings Corporation
Consolidated Statement of Shareholders Equity - Unaudited
Six Months Ended June 30, 2008
(In thousands)
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Accumulated |
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Class A |
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Class B |
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Additional |
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Compre- |
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Class A |
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Class B |
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Common |
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Common |
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Paid-In |
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Accumulated |
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|
hensive |
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|
|
Shares |
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|
Shares |
|
|
Stock |
|
|
Stock |
|
|
Capital |
|
|
Deficit |
|
|
Income |
|
|
Total |
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|
Balance at December 31, 2007 |
|
|
95,041 |
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|
|
1,219 |
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|
$ |
950 |
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|
|
12 |
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|
336,795 |
|
|
|
(78,537 |
) |
|
|
1,886 |
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|
261,106 |
|
Issuance of restricted common
stock |
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|
156 |
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|
2 |
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|
2 |
|
Net loss |
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(19,373 |
) |
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|
|
|
|
(19,373 |
) |
Pro-rata share of unrealized
loss
recognized by Bluegreen on
sale of retained interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(885 |
) |
|
|
(885 |
) |
Issuance of Bluegreen common
stock |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
497 |
|
|
|
|
|
|
|
|
|
|
|
497 |
|
Unrealized loss on other equity
securities, net of
reclassification adjustment
(See Note 6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(553 |
) |
|
|
(553 |
) |
Share based compensation
related to stock options and
restricted stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66 |
|
|
|
|
|
|
|
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|
|
|
66 |
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2008 |
|
|
95,197 |
|
|
|
1,219 |
|
|
$ |
952 |
|
|
|
12 |
|
|
|
337,358 |
|
|
|
(97,910 |
) |
|
|
448 |
|
|
|
240,860 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited consolidated financial statements.
4
Woodbridge Holdings Corporation
Consolidated Statements of Cash Flows Unaudited
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(19,373 |
) |
|
|
(57,111 |
) |
Adjustments to reconcile net loss to net cash
used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
1,939 |
|
|
|
2,803 |
|
Change in deferred income taxes |
|
|
|
|
|
|
(15,244 |
) |
Earnings from Bluegreen Corporation |
|
|
(1,737 |
) |
|
|
(3,101 |
) |
Gain on sale of other equity securities |
|
|
(1,178 |
) |
|
|
|
|
Earnings from unconsolidated trust |
|
|
(109 |
) |
|
|
(109 |
) |
Loss from real estate joint ventures |
|
|
|
|
|
|
48 |
|
Share-based compensation expense related to
stock options and restricted stock, net of reversal
of expense related to forfeited stock options |
|
|
66 |
|
|
|
1,660 |
|
Impairment of inventory and long lived assets |
|
|
114 |
|
|
|
63,258 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Inventory of real estate |
|
|
(14,704 |
) |
|
|
(18,589 |
) |
Notes receivable |
|
|
|
|
|
|
4,076 |
|
Other assets |
|
|
(958 |
) |
|
|
2,642 |
|
Customer deposits |
|
|
173 |
|
|
|
(16,255 |
) |
Accounts payable, accrued expenses and other liabilities |
|
|
(4,001 |
) |
|
|
(7,927 |
) |
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(39,768 |
) |
|
|
(43,849 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
Investment in and advances to real estate joint ventures |
|
|
|
|
|
|
(199 |
) |
Purchases of other equity securities |
|
|
(33,978 |
) |
|
|
|
|
Proceeds from sale of other equity securities |
|
|
18,904 |
|
|
|
|
|
Decrease in restricted cash |
|
|
1,478 |
|
|
|
852 |
|
Distributions of capital from real estate joint ventures |
|
|
|
|
|
|
37 |
|
Distributions from unconsolidated trusts |
|
|
110 |
|
|
|
74 |
|
Proceeds from sales of property and equipment |
|
|
|
|
|
|
12 |
|
Capital expenditures |
|
|
(1,123 |
) |
|
|
(27,973 |
) |
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(14,609 |
) |
|
|
(27,197 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
Proceeds from notes and mortgage notes payable |
|
|
7,283 |
|
|
|
166,212 |
|
Repayment of notes and mortgage notes payable |
|
|
(22,656 |
) |
|
|
(80,214 |
) |
Payments for debt issuance costs |
|
|
(124 |
) |
|
|
(1,329 |
) |
Cash dividends paid |
|
|
|
|
|
|
(396 |
) |
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
(15,497 |
) |
|
|
84,273 |
|
|
|
|
|
|
|
|
(Decrease) increase in cash and cash equivalents |
|
|
(69,874 |
) |
|
|
13,227 |
|
Cash and cash equivalents at the beginning of period |
|
|
195,181 |
|
|
|
48,391 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of period |
|
$ |
125,307 |
|
|
|
61,618 |
|
|
|
|
|
|
|
|
5
Woodbridge Holdings Corporation
Consolidated Statements of Cash Flows Unaudited
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
Six Months |
|
|
|
Ended June 30, |
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information |
|
|
|
|
|
|
|
|
Interest paid on borrowings, net of amounts capitalized |
|
$ |
5,793 |
|
|
|
(1,343 |
) |
Income taxes paid |
|
|
|
|
|
|
4,556 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash operating,
investing and financing activities: |
|
|
|
|
|
|
|
|
Change in shareholders equity resulting from
unrealized loss recognized from equity
securities, net of tax |
|
$ |
(1,438 |
) |
|
|
(331 |
) |
|
|
|
|
|
|
|
|
|
Change in shareholders equity resulting from the
issuance of Bluegreen common stock, net of tax |
|
$ |
497 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
Decrease in inventory from reclassification to property
and equipment |
|
$ |
|
|
|
|
1,148 |
|
|
|
|
|
|
|
|
|
|
Increase in deferred tax liability due to cumulative
impact
of change in accounting for uncertainties in income
taxes |
|
$ |
|
|
|
|
260 |
|
See accompanying notes to unaudited consolidated financial statements.
6
Woodbridge Holdings Corporation
Notes to Unaudited Consolidated Financial Statements
1. |
|
Presentation of Interim Financial Statements |
Woodbridge Holdings Corporation (Woodbridge or the Company) (formerly Levitt Corporation)
and its wholly-owned subsidiaries engage in business activities through its Land Division and Other
Operations segment. Historically, the Companys operations were primarily within the real estate
industry, however, the Companys current business strategy includes the pursuit of opportunistic
investments and acquisitions within or outside of the real estate industry, as well as the
continued development of master-planned communities. Under
this business strategy, the Company may not generate a constant earnings stream and the composition of the Companys revenues may vary widely due to factors inherent in a particular investment, including the maturity of the business, market conditions and cyclicality. Net investment
gains and other income that may occur are to be driven by the Companys strategic initiatives as well as overall market conditions.
The Land Division consists of the operations of Core Communities, LLC (Core Communities or
Core), which develops master-planned communities. The Other Operations segment includes the
parent company operations of Woodbridge (the Parent Company), an investment in Bluegreen
Corporation (Bluegreen), equity investments, currently primarily in Office Depot, Inc. (Office
Depot), the operations of Carolina Oak Homes, LLC (Carolina Oak), which engages in homebuilding
activities and is developing a community in South Carolina, and other investments through
subsidiaries and joint ventures.
Prior to November 9, 2007, the Company also conducted homebuilding operations through Levitt
and Sons, LLC (Levitt and Sons), which comprised the Companys Homebuilding Division. The
Homebuilding Division consisted of two reportable operating segments, the Primary Homebuilding
segment and the Tennessee Homebuilding segment. As previously reported, on November 9, 2007, Levitt
and Sons and substantially all of its subsidiaries (the Debtors) filed voluntary petitions for
relief under Chapter 11 of Title 11 of the United States Code (the Chapter 11 Cases) in the
United States Bankruptcy Court for the Southern District of Florida (the Bankruptcy Court). In
connection with the filing of the Chapter 11 Cases, Woodbridge deconsolidated Levitt and Sons as of
November 9, 2007, eliminating all future operations of Levitt and Sons from Woodbridges financial
results of operations. Since Levitt and Sons results are no longer consolidated and Woodbridge
believes that it is not probable that it will be obligated to fund future operating losses at
Levitt and Sons, any adjustments reflected in Levitt and Sons financial statements subsequent to
November 9, 2007 are not expected to affect the results of operations of Woodbridge. As a result of
the deconsolidation of Levitt and Sons, in accordance with Accounting Research Bulletin (ARB) No.
51, the Company follows the cost method of accounting to record its interest in Levitt and Sons.
Under cost method accounting, income will only be recognized to the extent of cash received in the
future or when Levitt and Sons is legally released from its bankruptcy obligations through the
approval of the Bankruptcy Court, at which time, the recorded loss in excess of the investment in
Levitt and Sons can be recognized into income. The Company will continue to evaluate the cost
method investment in Levitt and Sons on a quarterly basis to review the reasonableness of the
liability balance. (See Note 19 for further information regarding Levitt and Sons and the Chapter
11 Cases).
The accompanying unaudited consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant inter-segment transactions have been
eliminated in consolidation. The financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America for interim financial
information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and disclosures required by accounting
principles generally accepted in the United States of America for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair statement have been included. Operating results for the three and six month
periods ended June 30, 2008 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2008. The year end balance sheet data for 2007 was derived from the
December
7
31, 2007 audited consolidated financial statements but does not include all disclosures
required by accounting principles generally accepted in the United States of America. The
accompanying financial statements should be read in conjunction with the Companys consolidated
financial statements and footnotes thereto included in the Companys Annual Report on Form 10-K for
the year ended December 31, 2007. Certain reclassifications have been made to prior periods
consolidated financial statements to be consistent with the current periods presentation.
Investments
Held-to-maturity investments are carried at amortized cost, reflecting the ability and intent
to hold the securities to maturity. Trading investments are carried at fair value and include
securities acquired with the intent to sell in the near term. All other securities are classified
as available-for-sale and are carried at fair value with net unrealized gains or losses recorded as
a component of accumulated other comprehensive income (loss), but do not impact the Companys
results of operations. Woodbridges investment in equity securities were classified as
available-for-sale as of June 30, 2008.
Investment gains and losses in earnings associated with investments classified as available
for sale arise when investments are sold (as determined on a specific identification basis) or are
other-than-temporarily impaired. If, in managements judgment, a decline in the value of an
investment below cost is other than temporary, the cost of the investment is written down to fair
value with a corresponding charge to earnings. Factors considered in judging whether an impairment
is other than temporary include: the financial condition and business prospects of the issuer, the
length of time that fair value has been less than cost, the relative amount of the decline in the
value of the investment and the Companys ability and intent to hold the investment until the fair
value recovers.
2. |
|
Sale of Two Core Communities Commercial Leasing Projects Discontinued Operations |
In June 2007, Core Communities began soliciting bids from several potential buyers to purchase
assets associated with two of Cores commercial leasing projects. Management has determined that
it is probable that Core will sell these projects and, while Core may retain an equity interest in
the properties and provide ongoing management services, the anticipated level of Cores continuing
involvement is not expected to be significant. Statement of Financial Accounting Standards
(SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144)
provides that assets recorded as available for sale should be sold within a one year period.
However, as a result of, among other things, market conditions over the past twelve months, the
assets were not sold by the end of June 2008. Core continues to actively market the assets and the
assets are available for immediate sale in their present condition. While management believes the
assets will be sold by June 2009, there is no assurance that these sales will be completed in the
timeframe expected by management or at all. In accordance with SFAS No. 144, the results of
operations for the projects and assets that are for sale have been accounted for as discontinued
operations for all periods presented.
The assets were previously reclassified to assets held for sale and the liabilities related to
these assets were also reclassified to liabilities related to assets held for sale in the
consolidated statements of financial condition. Additionally, the results of operations for the
projects were reclassified to income from discontinued operations. Prior period amounts have been
reclassified to conform to the current year presentation. Depreciation related to these assets
held for sale ceased in June 2007. The Company has elected not to separate these assets in the
consolidated statements of cash flows for the periods presented. Management has reviewed the net
asset value and estimated the fair market value of the assets based on the bids received related to
these assets and determined that these assets were appropriately recorded at the lower of cost or
fair value less the costs to sell at June 30, 2008.
8
The following table summarizes the assets held for sale and liabilities related to the assets
held for sale for the two commercial leasing projects as of June 30, 2008 and December 31, 2007 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
$ |
83,504 |
|
|
|
84,677 |
|
Other assets |
|
|
12,323 |
|
|
|
11,537 |
|
|
|
|
|
|
|
|
Assets held for sale |
|
$ |
95,827 |
|
|
|
96,214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable, accrued liabilities and other |
|
$ |
1,618 |
|
|
|
1,123 |
|
Notes and mortgage payable |
|
|
80,693 |
|
|
|
78,970 |
|
|
|
|
|
|
|
|
Liabilities related to assets held for sale |
|
$ |
82,311 |
|
|
|
80,093 |
|
|
|
|
|
|
|
|
The following table summarizes the results of operations for the two commercial leasing
projects for the three and six months ended June 30, 2008 and 2007 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
1,934 |
|
|
|
774 |
|
|
|
4,152 |
|
|
|
1,359 |
|
Costs and expenses |
|
|
899 |
|
|
|
592 |
|
|
|
1,756 |
|
|
|
1,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,035 |
|
|
|
182 |
|
|
|
2,396 |
|
|
|
175 |
|
Other income |
|
|
4 |
|
|
|
5 |
|
|
|
9 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
1,039 |
|
|
|
187 |
|
|
|
2,405 |
|
|
|
182 |
|
Provision for income taxes |
|
|
|
|
|
|
(79 |
) |
|
|
|
|
|
|
(77 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,039 |
|
|
|
108 |
|
|
|
2,405 |
|
|
|
105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3. |
|
Stock Based Compensation |
The Company recognizes stock based compensation expense under the provisions of SFAS No. 123
(revised 2004), Share-Based Payment (SFAS No. 123R), using the modified prospective transition
method. SFAS No. 123R requires a public entity to measure compensation cost associated with awards
of equity instruments based on the grant-date fair value of the awards over the requisite service
period. SFAS No. 123R requires public entities to initially measure compensation cost associated
with awards of liability instruments based on their current fair value. The fair value of that
award is to be remeasured subsequently at each reporting date through the settlement date. Changes
in fair value during the requisite service period will be recognized as compensation cost over that
period.
In accordance with SFAS No. 123R, the Company estimates the grant-date fair value of its stock
options using the Black-Scholes option-pricing model, which takes into account assumptions
regarding the dividend yield, the risk-free interest rate, the expected stock-price volatility and
the expected term of the stock options. The fair value of the Companys stock option awards, which
are primarily subject to five year cliff vesting, is expensed over the vesting life of the stock
options using the straight-line method.
9
The following table summarizes the stock options outstanding as of June 30, 2008 as well as
activity during the six months then ended:
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Weighted |
|
|
|
Stock |
|
|
Average Exercise |
|
|
|
Options |
|
|
Price |
|
|
|
|
|
|
|
|
|
|
Options outstanding at December 31, 2007 |
|
|
1,862,390 |
|
|
$ |
17.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
181,985 |
|
|
$ |
1.34 |
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
440,725 |
|
|
$ |
16.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at June 30, 2008 |
|
|
1,603,650 |
|
|
$ |
15.81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at June 30, 2008 |
|
|
349,075 |
|
|
$ |
8.04 |
|
|
|
|
|
|
|
|
As of June 30, 2008, the weighted average remaining contractual lives of stock options
outstanding and stock options exercisable were 7.7 years and 8.9 years, respectively.
Non-cash stock compensation expense related to stock options for the three months ended June
30, 2008 and 2007 amounted to $568,000 and $823,000, respectively. Non-cash stock compensation
expense related to stock options for the six months ended June 30, 2008 and 2007 amounted to $1.2
million and $1.6 million, respectively.
The Company also grants shares of restricted Class A Common Stock, valued at the closing price
of such stock on the New York Stock Exchange on the date of grant. Restricted stock is issued
primarily to the Companys directors and these grants typically vest over a one-year period.
Compensation expense arising from restricted stock grants is recognized using the straight-line
method over the vesting period. Unearned compensation for restricted stock is a component of
additional paid-in capital in shareholders equity in the unaudited consolidated statements of
financial condition. Non-cash stock compensation expense related to restricted stock for the
three months ended June 30, 2008 and 2007 amounted to $29,000 and $26,000, respectively. Non-cash
stock compensation expense related to restricted stock for the six months ended June 30, 2008 and
2007 amounted to $46,000 and $46,000, respectively.
Historically, forfeiture rates were estimated based on historical employee turnover rates. In
accordance with SFAS No. 123R, companies are required to adjust forfeiture estimates for all awards
with performance and service conditions through the vesting date so that compensation cost is
recognized only for awards that vest. During the six months ended
June 30, 2008, there were substantial
pre-vesting forfeitures as a result of the reductions in force related to the Companys
restructurings and the bankruptcy of Levitt and Sons. In accordance with SFAS No. 123R,
pre-vesting forfeitures result in a reversal of compensation cost whereas a post-vesting
cancellation would not. As a result, for the six months ended June 30, 2008, the Company adjusted
its stock compensation expense to reflect actual forfeitures by a reversal of approximately $1.2
million in compensation expense related to pre-vesting option forfeitures.
10
4. |
|
Inventory of Real Estate |
Inventory of real estate is summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Land and land development costs |
|
$ |
203,930 |
|
|
|
196,577 |
|
Construction costs |
|
|
2,447 |
|
|
|
1,062 |
|
Capitalized interest |
|
|
35,170 |
|
|
|
29,012 |
|
Other costs |
|
|
638 |
|
|
|
639 |
|
|
|
|
|
|
|
|
|
|
$ |
242,185 |
|
|
|
227,290 |
|
|
|
|
|
|
|
|
As of June 30, 2008, inventory of real estate includes inventory related to the operations of
the Land Division and Carolina Oak.
The Company reviews real estate inventory for impairment on a project-by-project basis in
accordance with SFAS No. 144. In accordance with SFAS No. 144, long-lived assets are reviewed for
impairment whenever events or changes in circumstances indicate the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is measured by a comparison of
the carrying amount of an asset to estimated undiscounted future cash flows expected to be
generated by the asset, or by using appraisals of the related assets. If the carrying amount of an
asset exceeds its estimated future cash flows, an impairment charge is recognized in an amount by
which the carrying amount of the asset exceeds the fair value, defined as the discounted cash flows
of the projects.
Interest incurred relating to land under development and construction is capitalized to real
estate inventory during the active development period. For inventory, interest is capitalized at
the effective rates paid on borrowings during the pre-construction and planning stages and the
periods that projects are under development. Capitalization of interest is discontinued if
development ceases at a project. Capitalized interest is expensed as a component of cost of sales
as related homes, land and units are sold. For property and equipment under construction, interest
associated with these assets is capitalized as incurred to property and equipment and is expensed
through depreciation once the asset is put into use. The following table is a summary of interest
incurred, capitalized and expensed relating to inventory under development and construction
exclusive of impairment adjustments (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest incurred |
|
$ |
4,606 |
|
|
|
12,893 |
|
|
|
9,645 |
|
|
|
25,219 |
|
Interest capitalized |
|
|
(2,460 |
) |
|
|
(12,893 |
) |
|
|
(4,780 |
) |
|
|
(25,219 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
$ |
2,146 |
|
|
|
|
|
|
|
4,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expensed in
cost of sales |
|
$ |
44 |
|
|
|
5,562 |
|
|
|
44 |
|
|
|
9,987 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As described in Note 2 above, certain amounts for the three and six months ended June 30, 2008
associated with two of Cores commercial leasing projects have been reclassified to income from
discontinued operations. Presentations for prior periods have been reclassified to conform to the
current periods presentation.
11
Bluegreen Corporation
At June 30, 2008, the Company owned approximately 9.5 million shares of the common stock of
Bluegreen, representing approximately 31% of Bluegreens outstanding common stock. The Company
accounts for its investment in Bluegreen under the equity method of accounting. The cost of the
Bluegreen investment is adjusted to recognize the Companys interest in Bluegreens earnings or
losses. The difference between a) the Companys ownership percentage in Bluegreen multiplied by
its earnings and b) the amount of the Companys equity in earnings of Bluegreen as reflected in the
Companys financial statements relates to the amortization or accretion of purchase accounting
adjustments made at the time of the acquisition of Bluegreens common stock.
The Company evaluated its investment in Bluegreen at June 30, 2008 and noted that the current
$117.4 million book value of the investment was greater than the $57.6 million trading value of the
shares of Bluegreens common stock owned by the Company (calculated based upon the $6.05 closing
price of Bluegreens common stock on the New York Stock Exchange on June 30, 2008). The Company
valued Bluegreens common stock using a market approach valuation technique and inputs categorized
as Level 1 inputs under SFAS No. 157, Fair Value Measurements (SFAS No. 157).
During the quarter ended March 31, 2008, the Company performed an impairment review of its
investment in Bluegreen in accordance with Emerging Issues Task Force (EITF) No. 03-1, Accounting
Principles Board Opinion No. 18 and Securities and Exchange Commission Staff Accounting Bulletin
No. 59 to analyze various quantitative and qualitative factors and determine if an impairment
adjustment was needed. Based on the evaluation and the review of various qualitative and
quantitative factors relating to the performance of Bluegreen, Bluegreens then-current stock
price, and managements intention with regard to this investment, the Company determined that the
impairment associated with the investment in Bluegreen was not an other than temporary decline and,
accordingly, no adjustment to the carrying value was recorded.
On July 21, 2008, Bluegreen announced that it had entered into a non-binding letter of intent
for the sale of 100% of its outstanding common stock for $15 per share. The letter of intent
provides for a due diligence and exclusivity period through September 15, 2008. There can be no
assurance that the transaction will be consummated on the proposed terms, if at all; however, the
proposed terms indicate that the value of the shares of Bluegreens common stock owned by the
Company exceeds the current book value of such shares. Accordingly, the Company has determined that
there is currently no impairment associated with its investment in Bluegreen.
Bluegreens unaudited condensed consolidated balance sheets and unaudited condensed
consolidated statements of income are as follows (in thousands):
Unaudited Condensed Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,128,644 |
|
|
|
1,039,578 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
715,195 |
|
|
|
632,047 |
|
Minority interest |
|
|
24,581 |
|
|
|
22,423 |
|
Total shareholders equity |
|
|
388,868 |
|
|
|
385,108 |
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
1,128,644 |
|
|
|
1,039,578 |
|
|
|
|
|
|
|
|
12
Unaudited Condensed Consolidated Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues and other income |
|
$ |
151,603 |
|
|
|
170,972 |
|
|
|
290,955 |
|
|
|
317,630 |
|
Cost and other expenses |
|
|
144,726 |
|
|
|
162,739 |
|
|
|
280,989 |
|
|
|
299,161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest and
provision for income taxes |
|
|
6,877 |
|
|
|
8,233 |
|
|
|
9,966 |
|
|
|
18,469 |
|
Minority interest |
|
|
1,320 |
|
|
|
1,633 |
|
|
|
2,158 |
|
|
|
3,267 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income
taxes |
|
|
5,557 |
|
|
|
6,600 |
|
|
|
7,808 |
|
|
|
15,202 |
|
Provision for income taxes |
|
|
(2,112 |
) |
|
|
(2,508 |
) |
|
|
(2,967 |
) |
|
|
(5,777 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
3,445 |
|
|
|
4,092 |
|
|
|
4,841 |
|
|
|
9,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other equity securities
During March 2008, the Company purchased 3,000,200 shares of Office Depot common stock, which
represented approximately one percent of Office Depots outstanding common stock, at a cost of
approximately $34.0 million.
Data with respect to this investment is shown in the table below (in thousands):
|
|
|
|
|
|
|
June 30, |
|
|
|
2008 |
|
|
|
|
|
|
Total cost |
|
$ |
33,978 |
|
Sale of other equity securities (Office Depot) |
|
|
(17,726 |
) |
Gross unrealized losses |
|
|
(553 |
) |
|
|
|
|
Total fair value |
|
$ |
15,699 |
|
|
|
|
|
During June 2008, the Company sold 1,565,200 shares of Office Depot common stock at an average
price of $12.08 per share for an aggregate sales price of approximately $18.9 million. The Company
realized a gain of approximately $1.2 million as a result of the sale.
The table below shows the amount of gains reclassified out of other comprehensive loss into
net loss for the period (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Six Months |
|
|
|
Ended |
|
|
Ended |
|
|
|
June 30, 2008 |
|
|
June 30, 2008 |
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains arising during
the period |
|
$ |
1,451 |
|
|
|
625 |
|
Less: Reclassification adjustment for
gains included in net loss |
|
|
(1,178 |
) |
|
|
(1,178 |
) |
|
|
|
|
|
|
|
Net unrealized gain (loss) on securities |
|
$ |
273 |
|
|
|
(553 |
) |
|
|
|
|
|
|
|
Unrealized losses at June 30, 2008 were attributable to the fact that the securities cost
exceeded their fair value.
13
The Company valued Office Depots common stock using a market approach valuation technique
and Level 1 valuation inputs under SFAS No. 157. The Company uses quoted market prices to value
equity securities. The fair value of the Office Depot common stock in the Companys consolidated
statements of financial condition at June 30, 2008 was calculated based upon the $10.94 closing
price of Office Depots common stock on the New York Stock Exchange on June 30, 2008. On August
4, 2008, the closing price of Office Depot common stock was $6.60.
The Companys notes and mortgage notes payable outstanding amounts as of June 30, 2008 and
December 31, 2007 amounted to $257.9 million and $274.8 million, respectively.
In March 2008, Core agreed to the termination of a $20 million line of credit. No amounts were
outstanding under this line of credit at the date of termination. The lender agreed to continue to
honor two construction loans to a subsidiary of Core totaling $9.0 million as of June 30, 2008. In
July 2008, Core refinanced these construction loans for $9.1 million. The terms of the new loan
agreement call for a maturity date of July 2010 with a one year extension.
Cores loan agreements generally require repayment of specified amounts upon a sale of a
portion of the property collateralizing the debt. Core is subject to provisions in one of its loan
agreements collateralized by land in Tradition Hilton Head that require additional principal
payments, known as curtailment payments, in the event that actual sales are below the contractual
requirements. A curtailment payment of $14.9 million relating to Tradition Hilton Head was paid
in January 2008. On June 27, 2008, Core modified this loan agreement. The loan modification
agreement terminated the revolving feature of the loan and reduced a $19.3 million curtailment
payment due in June 2008 to $17.0 million, $5.0 million of which was paid in June 2008 with the
remaining $12.0 million due in November 2008. Additionally, the loan modification agreement reduced
the extension term from an extension period of one year to an extension period of up to two 3-month
periods upon compliance with the conditions set forth in the loan modification agreement, including
a minimum $5 million principal reduction with each extension. The February 28, 2009 maturity date
of the loan was not modified in the loan modification agreement.
8. |
|
Commitments and Contingencies |
At June 30, 2008, the Company had outstanding surety bonds and letters of credit of
approximately $7.7 million related primarily to its obligations to various governmental entities to
construct improvements in its various communities. The Company estimates that approximately $4.8
million of work remains to complete these improvements and does not believe that any outstanding
bonds or letters of credit will likely be drawn upon.
On November 9, 2007, Woodbridge put in place an employee fund and offered up to $5 million of
severance benefits to terminated Levitt and Sons employees to supplement the limited termination
benefits paid by Levitt and Sons to those employees. Levitt and Sons was restricted in the payment
of termination benefits to its former employees by virtue of the Chapter 11 Cases.
14
The following table summarizes the restructuring related accruals activity recorded for the
six months ended June 30, 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance |
|
|
|
|
|
|
Independent |
|
|
Surety |
|
|
|
|
|
|
Related and |
|
|
|
|
|
|
Contractor |
|
|
Bond |
|
|
|
|
|
|
Benefits |
|
|
Facilities |
|
|
Agreements |
|
|
Accrual |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007 |
|
$ |
1,954 |
|
|
|
1,010 |
|
|
|
1,421 |
|
|
|
1,826 |
|
|
|
6,211 |
|
Restructuring charges (credits) |
|
|
2,023 |
|
|
|
140 |
|
|
|
(25 |
) |
|
|
(150 |
) |
|
|
1,988 |
|
Cash payments |
|
|
(2,681 |
) |
|
|
(259 |
) |
|
|
(412 |
) |
|
|
(532 |
) |
|
|
(3,884 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2008 |
|
$ |
1,296 |
|
|
|
891 |
|
|
|
984 |
|
|
|
1,144 |
|
|
|
4,315 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The severance related and benefits amount includes severance payments made to Levitt and Sons
employees, payroll taxes and other benefits related to the terminations that occurred in 2007 in
connection with the Chapter 11 Cases. The Company incurred severance and benefits related
restructuring charges of $816,000 and approximately $2.0 million during the three and six months
ended June 30, 2008, respectively. For the three and six months ended June 30, 2008, the Company
paid approximately $1.2 million and $2.7 million, respectively, in severance and termination
charges related to the above described employee fund as well as severance for employees other than
Levitt and Sons employees, all of which are reflected in the Other Operations segment. Employees
entitled to participate in the fund either receive a payment stream, which in certain cases extends
over two years, or a lump sum payment, dependent on a variety of factors. Former Levitt and Sons
employees who received these payments were required to assign to the Company their unsecured claims
against Levitt and Sons. At June 30, 2008, $1.3 million was accrued to be paid from this fund and
the severance accrual for other employees of the Company. In addition to these amounts, the Company
expects additional severance related obligations of approximately $202,000 to be incurred during
the remainder of 2008.
The facilities accrual as of June 30, 2008 represents expense associated with property and
equipment leases that are no longer providing a benefit to the Company, as well as termination fees
related to the cancellation of certain contractual lease obligations. Included in this amount are
future minimum lease payments, fees and expenses for which the provisions of SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal Activities were satisfied. Total cash
payments related to the facilities accrual were $173,000 and $259,000 for the three and six months
ended June 30, 2008, respectively.
The independent contractor agreements amount relates to consulting agreements entered into by
Woodbridge with former Levitt and Sons employees. The total commitment related to these agreements
as of June 30, 2008 was $1.1 million and is payable monthly through 2009. During the three and six
months ended June 30, 2008, the Company paid $206,000 and $412,000, respectively, under these
agreements.
Levitt and Sons had $33.3 million in surety bonds related to its ongoing projects at the time
of the filing of the Chapter 11 Cases. In the event that these obligations are drawn and paid by
the surety, Woodbridge could be responsible for up to $12.0 million plus costs and expenses in
accordance with the surety indemnity agreements. As of June 30, 2008, the Company had a $1.1
million surety bonds accrual at Woodbridge related to certain bonds which management considers to
be probable that the Company will be required to reimburse the surety under applicable indemnity
agreements. During the three and six months ended June 30, 2008, the Company reimbursed the
surety $367,000 and $532,000, respectively, in accordance with the indemnity agreement for bond
claims paid during the period. It is unclear given the uncertainty involved in the Chapter 11 Cases
whether and to what extent the remaining outstanding surety bonds of Levitt and Sons will be drawn
and the extent to which Woodbridge may be responsible for additional amounts beyond this accrual.
It is unlikely that Woodbridge would have the ability to receive any repayment, assets or other
consideration as recovery of any amounts it is required to pay.
At June 30, 2008, the Company had $2.4 million in unrecognized tax benefits related to
Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in
Income Taxes an interpretation of FASB No. 109 (FIN No. 48). FIN No. 48 provides guidance for
how a company should recognize, measure, present and disclose in its financial statements
uncertain tax positions that a company has taken or expects to take on a tax return.
15
9. |
|
Development Bonds Payable |
In connection with the development of certain projects, community development, special
assessment or improvement districts have been established and may utilize tax-exempt bond financing
to fund construction or acquisition of certain on-site and off-site infrastructure improvements
near or at these communities. The obligation to pay principal and interest on the bonds issued by
the districts is assigned to each parcel within the district, and a priority assessment lien may be
placed on benefited parcels to provide security for the debt service. The bonds, including interest
and redemption premiums, if any, and the associated priority lien on the property are typically
payable, secured and satisfied by revenues, fees, or assessments levied on the property benefited.
Core is required to pay the revenues, fees, and assessments levied by the districts on the
properties it still owns that are benefited by the improvements. Core may also be required to pay
down a specified portion of the bonds at the time each unit or parcel is sold. The costs of these
obligations are capitalized to inventory during the development period and recognized as cost of
sales when the properties are sold.
Cores bond financing at June 30, 2008 consisted of district bonds totaling $218.7 million
with outstanding amounts of approximately $102.4 million. Further, at June 30, 2008, there was
approximately $110.4 million available under these bonds to fund future development expenditures.
Bond obligations at June 30, 2008 mature in 2035 and 2040. As of June 30, 2008, Core owned
approximately 16% of the property subject to assessments within the community development district
and approximately 91% of the property subject to assessments within the special assessment
district. During the three and six months ended June 30, 2008, Core recorded approximately
$163,000 and $268,000, respectively, in assessments on property owned by it in the districts.
Core is responsible for any assessed amounts until the underlying property is sold and will
continue to be responsible for the annual assessments if the property is never sold. In addition,
Core has guaranteed payments for assessments under the district bonds in Tradition, Florida which
would require funding if future assessments to be allocated to property owners are insufficient to
repay the bonds. Management has evaluated this exposure based upon the criteria in SFAS No. 5,
Accounting for Contingencies, and has determined that there have been no substantive changes to
the projected density or land use in the development subject to the bond which would make it
probable that Core would have to fund future shortfalls in assessments.
In accordance with EITF Issue No. 91-10, Accounting for Special Assessments and Tax Increment
Financing, the Company records a liability for the estimated developer obligations that are fixed
and determinable and user fees that are required to be paid or transferred at the time the parcel
or unit is sold to an end user. At June 30, 2008, the liability related to developer obligations
was $3.5 million. This liability is included in the liabilities related to assets held for sale in
the accompanying consolidated statements of financial condition as of June 30, 2008, and includes
amounts associated with Cores ownership of the property.
Basic loss per common share is computed by dividing loss attributable to common shareholders
by the weighted average number of common shares outstanding for the period. Diluted loss per common
share is computed in the same manner as basic loss per common share, taking into consideration (a)
the dilutive effect of the Companys stock options and restricted stock using the treasury stock
method and (b) the pro rata impact of Bluegreens dilutive securities (stock options and
convertible securities) on the amount of Bluegreens earnings recognized by the Company. For the
three months ended June 30, 2008 and 2007, common stock equivalents related to the Companys stock
options and unvested restricted stock amounted to 18,777 and 11,656 shares, respectively, and
16
were not considered in computing diluted loss per common share because their effect would have
been antidilutive since the Company recorded a net loss for the three months ended June 30, 2008
and 2007. For the six months ended June 30, 2008 and 2007, common stock equivalents related to the
Companys stock options and unvested restricted stock amounted to 16,646 and 11,193 shares,
respectively, and were not considered in computing diluted loss per common share because their
effect would have been antidilutive since the Company recorded a net loss for the six months ended
June 30, 2008 and 2007. In addition, for the three months ended June 30, 2008 and 2007, 1,422,387
and 2,486,833 shares of common stock equivalents, respectively, at various prices were not included
in the computation of diluted loss per common share because the exercise prices were greater than
the average market price of the common shares and, therefore, their effect would be antidilutive.
In the six months ended June 30, 2008 and 2007, 1,424,518 and 2,487,296 shares, respectively, were
not considered in the computation of diluted loss per common share because the exercise prices were
greater than the average average market price of the common shares and therefore, their effect
would have been antidilutive.
The following table presents the computation of basic and diluted loss per common share (in
thousands, except for per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
$ |
(9,981 |
) |
|
|
(58,195 |
) |
|
|
(21,778 |
) |
|
|
(57,216 |
) |
Income from discontinued operations |
|
|
1,039 |
|
|
|
108 |
|
|
|
2,405 |
|
|
|
105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss basic |
|
$ |
(8,942 |
) |
|
|
(58,087 |
) |
|
|
(19,373 |
) |
|
|
(57,111 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations basic |
|
$ |
(9,981 |
) |
|
|
(58,195 |
) |
|
|
(21,778 |
) |
|
|
(57,216 |
) |
Pro rata share of the net effect of Bluegreen
dilutive securities |
|
|
(5 |
) |
|
|
(7 |
) |
|
|
(7 |
) |
|
|
(21 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
$ |
(9,986 |
) |
|
|
(58,202 |
) |
|
|
(21,785 |
) |
|
|
(57,237 |
) |
Income from discontinued operations |
|
|
1,039 |
|
|
|
108 |
|
|
|
2,405 |
|
|
|
105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss diluted |
|
$ |
(8,947 |
) |
|
|
(58,094 |
) |
|
|
(19,380 |
) |
|
|
(57,132 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic average shares outstanding |
|
|
96,264 |
|
|
|
19,828 |
|
|
|
96,261 |
|
|
|
19,827 |
|
Bonus adjustment factor from registration rights
offering |
|
|
|
|
|
|
1.0197 |
|
|
|
|
|
|
|
1.0197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic average shares outstanding |
|
|
96,264 |
|
|
|
20,218 |
|
|
|
96,261 |
|
|
|
20,217 |
|
Net effect of stock options assumed to be exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted average shares outstanding |
|
|
96,264 |
|
|
|
20,218 |
|
|
|
96,261 |
|
|
|
20,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
(0.10 |
) |
|
|
(2.88 |
) |
|
|
(0.23 |
) |
|
|
(2.83 |
) |
Discontinued operations |
|
$ |
0.01 |
|
|
|
0.01 |
|
|
|
0.03 |
|
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total basic loss per share |
|
$ |
(0.09 |
) |
|
|
(2.87 |
) |
|
|
(0.20 |
) |
|
|
(2.82 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
(0.10 |
) |
|
|
(2.88 |
) |
|
|
(0.23 |
) |
|
|
(2.83 |
) |
Discontinued operations |
|
$ |
0.01 |
|
|
|
0.01 |
|
|
|
0.03 |
|
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total diluted loss per share |
|
$ |
(0.09 |
) |
|
|
(2.87 |
) |
|
|
(0.20 |
) |
|
|
(2.82 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
17
The following table summarizes other revenues (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage & title operations |
|
$ |
|
|
|
|
877 |
|
|
|
|
|
|
|
1,599 |
|
Lease/rental income |
|
|
285 |
|
|
|
171 |
|
|
|
567 |
|
|
|
480 |
|
Marketing fees |
|
|
246 |
|
|
|
464 |
|
|
|
339 |
|
|
|
1,095 |
|
Impact fees |
|
|
32 |
|
|
|
|
|
|
|
178 |
|
|
|
|
|
Irrigation revenue |
|
|
247 |
|
|
|
190 |
|
|
|
472 |
|
|
|
440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other revenues |
|
$ |
810 |
|
|
|
1,702 |
|
|
|
1,556 |
|
|
|
3,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As described in Note 2 above, certain amounts for the three and six months ended June 30, 2008
associated with two of Cores commercial leasing projects have been reclassified to income from
discontinued operations. Presentations for prior periods have been reclassified to conform to the
current periods presentation.
The Companys provision for income taxes is estimated to result in an effective tax rate of
0.0% in 2008. The effective tax rate used for the three and six months ended June 30, 2007 was
20.6% and 20.2%, respectively, in 2007. The decrease in the effective tax rate is a result of the
Company recording a valuation allowance for those deferred tax assets that are not expected to be
recovered in the future. Due to large losses in 2007 and expected taxable losses in the foreseeable
future, at this time, the Company does not believe it will have sufficient taxable income of the
appropriate character in the future and prior carryback years to realize any portion of the net
deferred tax asset.
The Company and its subsidiaries are subject to U.S. federal income tax as well as to income
tax in Florida and South Carolina. The Company has effectively settled all U.S. federal income tax
matters for years through 2004. All years subsequent to these closed periods remain open and
subject to examination.
As described in Note 2 above, certain amounts, including the provision for income taxes, for
the three and six months ended June 30, 2008 and 2007 associated with two of Cores commercial
leasing projects have been reclassified to income from discontinued operations.
13. |
|
Other Expenses and Interest and Other Income |
Other expenses and interest and other income are summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Title and mortgage operations |
|
$ |
|
|
|
|
413 |
|
|
|
|
|
|
|
895 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses |
|
$ |
|
|
|
|
413 |
|
|
|
|
|
|
|
895 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
625 |
|
|
|
694 |
|
|
|
2,101 |
|
|
|
1,411 |
|
Gain on sale
of other equity securities |
|
|
1,178 |
|
|
|
|
|
|
|
1,178 |
|
|
|
|
|
Gain on sale of fixed assets |
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
12 |
|
Forfeited deposits |
|
|
|
|
|
|
2,469 |
|
|
|
|
|
|
|
3,898 |
|
Other income |
|
|
143 |
|
|
|
119 |
|
|
|
266 |
|
|
|
313 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest and other income |
|
$ |
1,946 |
|
|
|
3,294 |
|
|
|
3,545 |
|
|
|
5,634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
The gain on sale of other equity securities of approximately $1.2 million for the three and
six months ended June 30, 2008 relates to the June 2008 sale of 1,565,200 shares of Office Depot
common stock. The Company recorded $2.5 million and $3.9 million, respectively, in forfeited
deposits in the three and six months ended June 30, 2007 resulting from increased cancellations of
home sale contracts. No forfeited deposits were recorded for the three or six months ended June 30,
2008.
Operating segments are components of an enterprise about which separate financial information
is available that is regularly reviewed by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. During the three and six months ended June 30,
2008, the Company operated through two reportable business segments, the Land Division and Other
Operations segments. During the three and six months ended June 30, 2007, the Company also operated
through two additional reportable business segments, the Primary Homebuilding and Tennessee
Homebuilding segments, both of which were eliminated as a result of the Companys deconsolidation
of Levitt and Sons as of November 9, 2007. The Company evaluates segment performance primarily
based on pre-tax income. The information provided for segment reporting is based on managements
internal reports. Except as otherwise indicated in this report, the accounting policies of the
segments are the same as those of the Company. Eliminations in periods prior to the three and six
months ended June 30, 2008 consisted of the elimination of sales and profits on real estate
transactions between the Land Division and Primary Homebuilding segments, and eliminations for the
three and six months ended June 30, 2008 consist of the elimination of transactions between the
Land Division and Other Operations segments. All of the eliminated transactions were recorded based
upon terms that management believed would be attained in an arms-length transaction. The
presentation and allocation of assets, liabilities and results of operations may not reflect the
actual economic costs of the segments as stand-alone businesses. If a different basis of allocation
were utilized, the relative contributions of the segments might differ, but management believes
that the relative trends in segments would likely not be impacted.
The Companys Land Division segment consists of the operations of Core Communities, and the
Other Operations segment consists of the operations of Carolina Oak, the Companys parent company
operations, earnings from investments in Bluegreen, equity investments, currently primarily in Office Depot, and other investments
through subsidiaries and joint ventures. In 2007, the Other Operations segment also consisted of
Levitt Commercial, LLC, which specialized in the development of industrial properties. Levitt
Commercial, LLC ceased development activities in 2007. The Companys Homebuilding Division
consisted of the Primary Homebuilding segment and the Tennessee Homebuilding segment. The results
of operations for the three and six months ended June 30, 2008 do not include the results of
operations for the Homebuilding Division. The results of operations and financial condition of
Carolina Oak as of and for the three and six months ended June 30, 2007 are included in the Primary
Homebuilding segment, whereas the results of operations and financial condition of Carolina Oak as
of and for the three and six months ended June 30, 2008 are included in the Other Operations
segment.
19
The following tables present segment information as of and for the three and six months ended
June 30, 2008 and 2007 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
Other |
|
|
|
|
|
|
|
June 30, 2008 |
|
Land |
|
|
Operations |
|
|
Eliminations |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of real estate |
|
$ |
1,711 |
|
|
|
635 |
|
|
|
49 |
|
|
|
2,395 |
|
Other revenues |
|
|
559 |
|
|
|
251 |
|
|
|
|
|
|
|
810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
2,270 |
|
|
|
886 |
|
|
|
49 |
|
|
|
3,205 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales of real estate |
|
|
1,145 |
|
|
|
587 |
|
|
|
26 |
|
|
|
1,758 |
|
Selling, general and administrative expenses |
|
|
4,807 |
|
|
|
7,651 |
|
|
|
(19 |
) |
|
|
12,439 |
|
Interest expense |
|
|
485 |
|
|
|
2,104 |
|
|
|
(443 |
) |
|
|
2,146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
6,437 |
|
|
|
10,342 |
|
|
|
(436 |
) |
|
|
16,343 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from Bluegreen Corporation |
|
|
|
|
|
|
1,211 |
|
|
|
|
|
|
|
1,211 |
|
Interest and other income |
|
|
657 |
|
|
|
1,732 |
|
|
|
(443 |
) |
|
|
1,946 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
before income taxes |
|
|
(3,510 |
) |
|
|
(6,513 |
) |
|
|
42 |
|
|
|
(9,981 |
) |
Benefit for income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
|
(3,510 |
) |
|
|
(6,513 |
) |
|
|
42 |
|
|
|
(9,981 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations |
|
|
1,039 |
|
|
|
|
|
|
|
|
|
|
|
1,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(2,471 |
) |
|
|
(6,513 |
) |
|
|
42 |
|
|
|
(8,942 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory of real estate |
|
$ |
200,976 |
|
|
|
48,620 |
|
|
|
(7,411 |
) |
|
|
242,185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
362,709 |
|
|
|
316,389 |
|
|
|
(5,387 |
) |
|
|
673,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt |
|
$ |
121,472 |
|
|
|
136,400 |
|
|
|
|
|
|
|
257,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
239,666 |
|
|
|
181,958 |
|
|
|
11,227 |
|
|
|
432,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
$ |
123,043 |
|
|
|
134,431 |
|
|
|
(16,614 |
) |
|
|
240,860 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Primary |
|
|
Tennessee |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
June 30, 2007 |
|
Homebuilding |
|
|
Homebuilding |
|
|
Land |
|
|
Operations |
|
|
Eliminations |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of real estate |
|
$ |
114,805 |
|
|
|
8,848 |
|
|
|
1,917 |
|
|
|
|
|
|
|
(206 |
) |
|
|
125,364 |
|
Other revenues |
|
|
877 |
|
|
|
|
|
|
|
866 |
|
|
|
142 |
|
|
|
(183 |
) |
|
|
1,702 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
115,682 |
|
|
|
8,848 |
|
|
|
2,783 |
|
|
|
142 |
|
|
|
(389 |
) |
|
|
127,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales of real estate |
|
|
162,323 |
|
|
|
8,683 |
|
|
|
483 |
|
|
|
1,018 |
|
|
|
(913 |
) |
|
|
171,594 |
|
Selling, general and
administrative expenses |
|
|
20,675 |
|
|
|
1,980 |
|
|
|
3,496 |
|
|
|
6,928 |
|
|
|
(62 |
) |
|
|
33,017 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
807 |
|
|
|
|
|
|
|
(807 |
) |
|
|
|
|
Other expenses |
|
|
413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
183,411 |
|
|
|
10,663 |
|
|
|
4,786 |
|
|
|
7,946 |
|
|
|
(1,782 |
) |
|
|
205,024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from Bluegreen Corporation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,357 |
|
|
|
|
|
|
|
1,357 |
|
Interest and other income |
|
|
2,560 |
|
|
|
23 |
|
|
|
1,115 |
|
|
|
403 |
|
|
|
(807 |
) |
|
|
3,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from
continuing operations
before income taxes |
|
|
(65,169 |
) |
|
|
(1,792 |
) |
|
|
(888 |
) |
|
|
(6,044 |
) |
|
|
586 |
|
|
|
(73,307 |
) |
Benefit (provision) for
income taxes |
|
|
13,353 |
|
|
|
596 |
|
|
|
407 |
|
|
|
1,042 |
|
|
|
(286 |
) |
|
|
15,112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from
continuing operations |
|
|
(51,816 |
) |
|
|
(1,196 |
) |
|
|
(481 |
) |
|
|
(5,002 |
) |
|
|
300 |
|
|
|
(58,195 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued
operations |
|
|
|
|
|
|
|
|
|
|
108 |
|
|
|
|
|
|
|
|
|
|
|
108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(51,816 |
) |
|
|
(1,196 |
) |
|
|
(373 |
) |
|
|
(5,002 |
) |
|
|
300 |
|
|
|
(58,087 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory of real estate |
|
$ |
543,697 |
|
|
|
43,166 |
|
|
|
204,611 |
|
|
|
11,894 |
|
|
|
(27,157 |
) |
|
|
776,211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
592,918 |
|
|
|
48,049 |
|
|
|
313,126 |
|
|
|
161,906 |
|
|
|
(19,414 |
) |
|
|
1,096,585 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt |
|
$ |
402,670 |
|
|
|
27,955 |
|
|
|
124,535 |
|
|
|
98,933 |
|
|
|
|
|
|
|
654,093 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
523,358 |
|
|
|
44,149 |
|
|
|
179,631 |
|
|
|
68,526 |
|
|
|
(6,420 |
) |
|
|
809,244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
$ |
69,560 |
|
|
|
3,900 |
|
|
|
133,495 |
|
|
|
93,380 |
|
|
|
(12,994 |
) |
|
|
287,341 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
Other |
|
|
|
|
|
|
|
June 30, 2008 |
|
Land |
|
|
Operations |
|
|
Eliminations |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of real estate |
|
$ |
1,865 |
|
|
|
635 |
|
|
|
49 |
|
|
|
2,549 |
|
Other revenues |
|
|
1,046 |
|
|
|
510 |
|
|
|
|
|
|
|
1,556 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
2,911 |
|
|
|
1,145 |
|
|
|
49 |
|
|
|
4,105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales of real estate |
|
|
1,173 |
|
|
|
587 |
|
|
|
26 |
|
|
|
1,786 |
|
Selling, general and administrative expenses |
|
|
9,786 |
|
|
|
14,747 |
|
|
|
(19 |
) |
|
|
24,514 |
|
Interest expense |
|
|
1,173 |
|
|
|
4,777 |
|
|
|
(1,085 |
) |
|
|
4,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
12,132 |
|
|
|
20,111 |
|
|
|
(1,078 |
) |
|
|
31,165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from Bluegreen Corporation |
|
|
|
|
|
|
1,737 |
|
|
|
|
|
|
|
1,737 |
|
Interest and other income |
|
|
1,556 |
|
|
|
3,074 |
|
|
|
(1,085 |
) |
|
|
3,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
before income taxes |
|
|
(7,665 |
) |
|
|
(14,155 |
) |
|
|
42 |
|
|
|
(21,778 |
) |
Benefit for income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
|
(7,665 |
) |
|
|
(14,155 |
) |
|
|
42 |
|
|
|
(21,778 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations |
|
|
2,405 |
|
|
|
|
|
|
|
|
|
|
|
2,405 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(5,260 |
) |
|
|
(14,155 |
) |
|
|
42 |
|
|
|
(19,373 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory of real estate |
|
$ |
200,976 |
|
|
|
48,620 |
|
|
|
(7,411 |
) |
|
|
242,185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
362,709 |
|
|
|
316,389 |
|
|
|
(5,387 |
) |
|
|
673,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt |
|
$ |
121,472 |
|
|
|
136,400 |
|
|
|
|
|
|
|
257,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
239,666 |
|
|
|
181,958 |
|
|
|
11,227 |
|
|
|
432,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
$ |
123,043 |
|
|
|
134,431 |
|
|
|
(16,614 |
) |
|
|
240,860 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
Primary |
|
|
Tennessee |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
June 30, 2007 |
|
Homebuilding |
|
|
Homebuilding |
|
|
Land |
|
|
Operations |
|
|
Eliminations |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of real estate |
|
$ |
227,317 |
|
|
|
30,505 |
|
|
|
2,694 |
|
|
|
6,574 |
|
|
|
(428 |
) |
|
|
266,662 |
|
Other revenues |
|
|
1,599 |
|
|
|
|
|
|
|
1,783 |
|
|
|
435 |
|
|
|
(203 |
) |
|
|
3,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
228,916 |
|
|
|
30,505 |
|
|
|
4,477 |
|
|
|
7,009 |
|
|
|
(631 |
) |
|
|
270,276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales of real estate |
|
|
249,275 |
|
|
|
29,334 |
|
|
|
555 |
|
|
|
6,519 |
|
|
|
(1,181 |
) |
|
|
284,502 |
|
Selling, general and
administrative expenses |
|
|
39,096 |
|
|
|
3,864 |
|
|
|
7,269 |
|
|
|
15,164 |
|
|
|
(62 |
) |
|
|
65,331 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
1,022 |
|
|
|
|
|
|
|
(1,022 |
) |
|
|
|
|
Other expenses |
|
|
895 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
895 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
289,266 |
|
|
|
33,198 |
|
|
|
8,846 |
|
|
|
21,683 |
|
|
|
(2,265 |
) |
|
|
350,728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from Bluegreen Corporation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,101 |
|
|
|
|
|
|
|
3,101 |
|
Interest and other income |
|
|
4,201 |
|
|
|
52 |
|
|
|
2,060 |
|
|
|
648 |
|
|
|
(1,327 |
) |
|
|
5,634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from
continuing operations
before income taxes |
|
|
(56,149 |
) |
|
|
(2,641 |
) |
|
|
(2,309 |
) |
|
|
(10,925 |
) |
|
|
307 |
|
|
|
(71,717 |
) |
Benefit (provision) for income taxes |
|
|
9,814 |
|
|
|
924 |
|
|
|
973 |
|
|
|
2,906 |
|
|
|
(116 |
) |
|
|
14,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from
continuing operations |
|
|
(46,335 |
) |
|
|
(1,717 |
) |
|
|
(1,336 |
) |
|
|
(8,019 |
) |
|
|
191 |
|
|
|
(57,216 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued
operations |
|
|
|
|
|
|
|
|
|
|
105 |
|
|
|
|
|
|
|
|
|
|
|
105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(46,335 |
) |
|
|
(1,717 |
) |
|
|
(1,231 |
) |
|
|
(8,019 |
) |
|
|
191 |
|
|
|
(57,111 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory of real estate |
|
$ |
543,697 |
|
|
|
43,166 |
|
|
|
204,611 |
|
|
|
11,894 |
|
|
|
(27,157 |
) |
|
|
776,211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
592,918 |
|
|
|
48,049 |
|
|
|
313,126 |
|
|
|
161,906 |
|
|
|
(19,414 |
) |
|
|
1,096,585 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt |
|
$ |
402,670 |
|
|
|
27,955 |
|
|
|
124,535 |
|
|
|
98,933 |
|
|
|
|
|
|
|
654,093 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
523,358 |
|
|
|
44,149 |
|
|
|
179,631 |
|
|
|
68,526 |
|
|
|
(6,420 |
) |
|
|
809,244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
$ |
69,560 |
|
|
|
3,900 |
|
|
|
133,495 |
|
|
|
93,380 |
|
|
|
(12,994 |
) |
|
|
287,341 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the ordinary course of business, certain intersegment loans are entered into and interest
is recorded at current borrowing rates. All interest expense and interest income associated with
these intersegment loans are eliminated in consolidation.
15. |
|
Parent Company Financial Statements |
The Companys subordinated investment notes (the Investment Notes) and junior subordinated
debentures (the Junior Subordinated Debentures) are direct unsecured obligations of the Parent
Company, are not guaranteed by the Companys subsidiaries and are not secured by any assets of the
Company or its subsidiaries. The Parent Company has historically relied on dividends or management
fees from its subsidiaries and earnings on its cash investments to fund its operations, including
debt service obligations relating to the Investment Notes and Junior Subordinated Debentures.
However, due to the funds raised in the Companys 2007 rights offering, the Parent Companys
dependence on payments from subsidiaries is currently substantially reduced. The Company would be
restricted from paying dividends to its common shareholders if an event of default exists under the
terms of either the Investment Notes or the Junior Subordinated Debentures.
23
Some of the Companys subsidiaries incur indebtedness on terms that, among other things,
require the subsidiary to maintain certain financial ratios and a minimum net worth. These
covenants may have the effect of limiting the amount of debt that the subsidiaries can incur in the
future and
restricting payments to the Parent Company. At June 30, 2008, the Company was in compliance
with all loan agreement financial covenants.
As of June 30, 2008, the Parent Company had outstanding advances to its subsidiaries related
to the funding of the subsidiaries operations in the amount of $32.9 million.
The accounting policies for the Parent Company are generally the same as those policies
described in the summary of significant accounting policies outlined in the Companys Annual Report
on Form 10-K for the year ended December 31, 2007. The Parent Companys interest in its
consolidated subsidiaries is reported under the equity method of accounting for purposes of this
presentation.
The Parent Company unaudited condensed statements of financial condition at June 30, 2008 and
December 31, 2007 and unaudited condensed statements of operations for the three and six months
ended June 30, 2008 and 2007 are shown below (in thousands):
Unaudited Condensed Statements of Financial Condition
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
371,955 |
|
|
|
429,532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
131,095 |
|
|
|
168,426 |
|
Total shareholders equity |
|
|
240,860 |
|
|
|
261,106 |
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
371,955 |
|
|
|
429,532 |
|
|
|
|
|
|
|
|
Unaudited Condensed Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from Bluegreen Corporation |
|
$ |
1,211 |
|
|
|
1,357 |
|
|
|
1,737 |
|
|
|
3,101 |
|
Other revenues |
|
|
544 |
|
|
|
398 |
|
|
|
1,883 |
|
|
|
644 |
|
Costs and expenses |
|
|
7,318 |
|
|
|
7,483 |
|
|
|
14,724 |
|
|
|
15,748 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(5,563 |
) |
|
|
(5,728 |
) |
|
|
(11,104 |
) |
|
|
(12,003 |
) |
Benefit for income taxes |
|
|
|
|
|
|
927 |
|
|
|
|
|
|
|
3,274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before undistributed
loss from consolidated
subsidiaries |
|
|
(5,563 |
) |
|
|
(4,801 |
) |
|
|
(11,104 |
) |
|
|
(8,729 |
) |
Deficit from consolidated
subsidiaries, net of income taxes |
|
|
(3,379 |
) |
|
|
(53,286 |
) |
|
|
(8,269 |
) |
|
|
(48,382 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(8,942 |
) |
|
|
(58,087 |
) |
|
|
(19,373 |
) |
|
|
(57,111 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends recorded from subsidiaries were $13.1 million for the six months ended June 30,
2007 while no dividends were recorded in the same period in 2008.
24
16. |
|
Certain Relationships and Related Party Transactions |
The Company and BankAtlantic Bancorp, Inc. (Bancorp) are under common control. The
controlling shareholder of the Company and Bancorp is BFC Financial Corporation (BFC). Bancorp
is the parent company of BankAtlantic. Collectively, the Companys Chairman and Chief Executive
Officer, Alan B. Levan, and the Companys Vice Chairman, John E. Abdo, own or control shares
representing a majority of BFCs total voting power. Mr. Levan and Mr. Abdo are also directors of
the Company, and executive officers and directors of BFC, Bancorp and BankAtlantic, and Mr. Levan
and Mr. Abdo are the Chairman and Vice Chairman, respectively, of Bluegreen.
Pursuant to the terms of a shared services agreement between the Company and BFC, certain
administrative services, including human resources, risk management, and investor and public
relations, are provided to the Company by BFC on a percentage of cost basis. The total amounts
paid for these services in the three and six months ended June 30, 2008 were $206,000 and $412,000,
respectively, and for the three and six months ended June 30, 2007 were $306,000 and $525,000,
respectively.
The Company entered into an agreement with BankAtlantic, effective March 2008, pursuant to
which BankAtlantic agreed to house the Companys information technology servers and provide
hosting, security and managed services to the Company relating to its information technology
operations. Pursuant to the agreement, the Company agreed to pay BankAtlantic a one-time set-up
charge and monthly hosting fees of $10,000 for these services. During the three and six months
ended June 30, 2008, the Company paid BankAtlantic approximately $17,000 related to the one-time
set-up charge and approximately $13,000 related to the monthly hosting fees.
The Company also entered into a sublease agreement with BFC, effective May 2008, to lease
space located at the BankAtlantic corporate office for the Companys corporate staff at an annual
rate of approximately $152,000. During the three and six months ended June 30, 2008, the Company
paid BFC $25,000 under this sublease agreement.
The Company maintains money market accounts and securities sold under repurchase agreements at
BankAtlantic. The balances in its accounts at June 30, 2008 and June 30, 2007 were $55.7 million
and $5.3 million, respectively. BankAtlantic paid interest to the Company on its accounts for the
three and six months ended June 30, 2008 of $9,000 and $30,000, respectively, and for the three and
six months ended June 30, 2007 of $29,000 and $69,000, respectively. As of August 11, 2008, the balance in money market accounts and securities
sold under repurchase agreements at Bank Atlantic is approximately $4 million.
17. |
|
New Accounting Pronouncements |
In September 2006, the FASB issued SFAS No. 157. This Statement clarifies the definition of
fair value and establishes a fair value hierarchy. SFAS No. 157, as originally issued, was
effective for the Company on January 1, 2008. SFAS No. 157 defines fair value as the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The Statement also defines valuation
techniques and a fair value hierarchy to prioritize the inputs used in valuation techniques. As
allowed by FASB Staff Position (FSP) FAS 157-b, the Company partially adopted SFAS No. 157 on
January 1, 2008. The Company did not adopt the SFAS No. 157 fair value framework for non-financial
assets and non-financial liabilities, except for items that are recognized or disclosed at fair
value in the financial statements at least annually. The FASB in FSP FAS 157-2 deferred the
effective date for SFAS No. 157 for non-financial assets and non-financial liabilities until
January 1, 2009. The Company also did not adopt the SFAS No. 157 fair value framework for leasing
transactions as FSP FAS 157-1 excluded leasing transactions from the scope of SFAS No. 157. Other
than the Companys investment in other equity securities as of June 30, 2008, there are no
recurring assets at December 31, 2007 or June 30, 2008 which are measured at fair value.
25
In February 2007, the FASB issued SFAS No. 159 The Fair Value Option for Financial Assets and
Financial Liabilities (SFAS No. 159) which allows the Company an irrevocable option to measure
financial assets or liabilities at fair value on a contract-by-contract basis. SFAS No. 159 became
effective for the Company on January 1, 2008. The Company did not elect the fair value option for
any of its financial assets or liabilities as of the date of adoption or as of June 30, 2008.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statementsan amendment of ARB No. 51 (SFAS No. 160). SFAS No. 160 requires that a
noncontrolling interest in a subsidiary be reported as equity and the amount of consolidated net
income specifically attributable to the noncontrolling interest be identified in the consolidated
financial statements. It also calls for consistency in the manner of reporting changes in the
parents ownership interest and requires fair value measurement of any noncontrolling equity
investment retained in a deconsolidation. SFAS No. 160 is effective for the Companys fiscal year
beginning January 1, 2009. Management has not yet evaluated the impact that the adoption of SFAS
No. 160 will have on the Companys consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS
No. 141R). SFAS No. 141R broadens the guidance of SFAS No. 141, extending its applicability to all
transactions and other events in which one entity obtains control over one or more other
businesses. It broadens the fair value measurement and recognition of assets acquired, liabilities
assumed, and interests transferred as a result of business combinations. SFAS No. 141R expands on
required disclosures to improve the statement users abilities to evaluate the nature and financial
effects of business combinations. SFAS No. 141R is effective for the Companys fiscal year
beginning January 1, 2009. The adoption of SFAS No. 141R could have a material effect on the
Companys consolidated financial statements if management decides to pursue business combinations
due to the requirement to write-off transaction costs to the consolidated statements of operations.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities an amendment of FASB Statement No. 133 (SFAS No. 161). SFAS No. 161
expands the disclosure requirements in SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, regarding an entitys derivative instruments and hedging activities. SFAS No.
161 is effective for the Companys fiscal year beginning January 1, 2009. The Company has not yet
determined the impact, if any, that the adoption of SFAS No. 161 will have on its consolidated
financial statements.
In April 2008, the FASB issued FSP FAS No. 142-3, Determination of the Useful Life of
Intangible Assets (FSP FAS No. 142-3). FSP FAS No. 142-3 amends paragraph 11(d) of FASB
Statement No. 142 Goodwill and Other Intangible Assets (SFAS No. 142) which sets forth the
factors that should be considered in developing renewal or extension assumptions used to determine
the useful life of a recognized intangible asset under SFAS No. 142. FSP FAS No. 142-3 intends to
improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142
and the period of expected cash flows used to measure the fair value of the asset under SFAS No.
141R. FSP FAS No. 142-3 is effective for financial statements issued for fiscal years beginning
after December 15, 2008 and must be applied prospectively to intangible assets acquired after the
effective date. The Company has not yet determined the impact, if any, that the adoption of FSP
FAS No. 142-3 will have on its consolidated financial statements.
26
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting
Principles (SFAS No. 162). SFAS No. 162 is intended to improve financial reporting by
identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in
preparing financial statements for nongovernmental entities that are presented in conformity
with generally accepted accounting principles in the United States of America. SFAS No. 162 will be
effective 60 days following the Securities and Exchange Commissions approval of the Public Company
Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity with Generally Accepted Accounting Principles. The Company has not yet determined the
impact, if any, that the adoption of SFAS No. 162 will have on its consolidated financial
statements.
Class Action litigation
On January 25, 2008, plaintiff Robert D. Dance filed a purported class action complaint as a
putative purchaser of the Companys securities against the Company and certain of its officers and
directors, asserting claims under the federal securities laws and seeking damages. This action was
filed in the United States District Court for the Southern District of Florida and is captioned
Dance v. Levitt Corp. et al., No. 08-CV-60111-DLG. The securities litigation purports to be
brought on behalf of all purchasers of the Companys securities during the period beginning on
January 31, 2007 and ending on August 14, 2007. The complaint alleges that the defendants violated
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder by issuing a series of false and/or misleading statements concerning the Companys
financial results, prospects and condition. The Company intends to vigorously defend this action.
General litigation
The Company is a party to additional various claims and lawsuits which arise in the ordinary
course of business. The Company does not believe that the ultimate resolution of these claims or
lawsuits will have a material adverse effect on its business, financial position, results of
operations or cash flows.
19. |
|
Financial Information of Levitt and Sons |
As described in Note 1 above, on November 9, 2007, the Debtors filed the Chapter 11 Cases. The
Debtors commenced the Chapter 11 Cases in order to preserve the value of their assets and to
facilitate an orderly wind-down of their businesses and disposition of their assets in a manner
intended to maximize the recoveries of all constituents. In connection with the filing of the
Chapter 11 Cases, Woodbridge deconsolidated Levitt and Sons as of November 9, 2007. As a result of
the deconsolidation, Woodbridge had a negative basis in its investment in Levitt and Sons because
Levitt and Sons generated significant losses and intercompany liabilities in excess of its asset
balances. This negative investment, Loss in excess of investment in subsidiary, is reflected as
a single amount on the Companys consolidated statements of financial condition as a $55.2 million
liability as of June 30, 2008 and December 31, 2007. This balance was comprised of a negative
investment in Levitt and Sons of $123.0 million, and outstanding advances due to Woodbridge from
Levitt and Sons of $67.8 million. Included in the negative investment was approximately $15.8
million associated with deferred revenue related to intra-segment sales between Levitt and Sons and
Core Communities.
27
On November 27, 2007, the Bankruptcy Court granted the Debtors Motion for Authority to Incur
Chapter 11 Administrative Expense Claim (the Chapter 11 Admin. Expense Motion), thereby
authorizing the Debtors to incur a post petition administrative expense claim in favor of
Woodbridge for administrative costs relating to certain services and benefits provided by
Woodbridge in favor of the Debtors (the Post Petition Services). While the Bankruptcy Court
approved the incurrence of the amounts as unsecured post petition administrative expense claims,
the payment of such claims is
subject to additional court approval. In addition to the unsecured administrative expense
claims, Woodbridge has pre-petition secured and unsecured claims against the Debtors. The Debtors
have scheduled the amounts due to Woodbridge in the Chapter 11 Cases. The unsecured pre-petition
claims of Woodbridge scheduled by the Debtors are approximately $67.3 million and the secured
pre-petition claim scheduled by the Debtors is approximately $460,000. Since the Chapter 11 Cases
were filed, Woodbridge has also incurred certain administrative costs related to the Post Petition
Services, these costs amounted to $591,000 and $1.6 million in the three and six months ended June
30, 2008. Additionally, as disclosed in Note 8, in the six months ended June 30, 2008, Woodbridge
reimbursed a Levitt and Sons surety for $532,000 of bond claims paid by the surety. The payment by
the Debtors of its outstanding advances and the Post Petition Services expenses are subject to the
risks inherent to recovery by creditors in the Chapter 11 Cases. Woodbridge has also filed
contingent claims with respect to any liability it may have arising out of disputed indemnification
obligations under certain surety bonds. Lastly, Woodbridge implemented an employee severance fund
in favor of certain employees of the Debtors. Employees who received funds as part of this program
as of June 30, 2008, which totaled approximately $3.0 million as of that date, have assigned their
unsecured claims to the Company. It is highly unlikely that Woodbridge will recover these or any
other amounts associated with its unsecured claims against the Debtors. Further, the Debtors have
asserted certain claims against Woodbridge, including an entitlement to a portion of any federal
tax refund which the Company may receive as a consequence of losses experienced at Levitt and Sons
in prior periods.
On June 27, 2008, Woodbridge entered into a settlement agreement (the Settlement Agreement)
with the Debtors and the Joint Committee of Unsecured Creditors appointed in the Chapter 11 Cases.
Pursuant to the Settlement Agreement, among other things, (i) Woodbridge has agreed to pay to the
Debtors bankruptcy estates the sum of $12.5 million plus accrued interest from May 22, 2008
through the date of payment, (ii) Woodbridge has agreed to waive and release substantially all of
the claims it has against the Debtors, including its administrative expense claims through July
2008, and (iii) the Debtors (joined by the Joint Committee of Unsecured Creditors) have agreed to
waive and release any claims they may have against Woodbridge and its affiliates. The Settlement
Agreement is subject to a number of conditions, including the approval of the Bankruptcy Court.
There is no assurance that the Settlement Agreement will be approved or the transactions
contemplated by it completed. Upon such approval, if any, Woodbridge will make payments in
accordance with the terms and conditions of the Settlement Agreement, recognize the cost of
settlement and reverse the related liability into income.
Since Levitt and Sons results are no longer consolidated with the Companys results, and the
Company believes it is not probable that it will be obligated to fund further losses related to its
investment in Levitt and Sons, any material uncertainties related to Levitt and Sons ongoing
operations are not expected to impact the Companys future financial results other than in
connection with the Companys contractual obligations to third parties and payment of the
settlement amount.
Certain of the Debtor subsidiaries of Levitt and Sons have been provided with post-petition
financing (DIP Loans) from a third-party lender (the DIP Lender) which had financed such
Debtors projects. Under the agreements for the DIP Loans, the DIP Loans are to be used for (i) the
reimbursement of the DIP Lenders costs and fees, (ii) the costs of managing and safeguarding the
projects, (iii) the costs of making the projects ready for sale, (iv) the costs to complete the
projects, (v) the general working capital needs of the Debtors related to the projects and (vi)
such other costs and expenses related to the DIP Loans or the projects as the DIP Lender may elect.
The Bankruptcy Courts order approving the DIP Loans also approved the sales of homes in the
projects with the net proceeds from such sales being applied towards the DIP Loans. The order also
appointed a Chief Administrator to manage and supervise all administrative functions of these
Debtors related to the projects in accordance with the scope of authority set forth in the DIP Loan
agreements. These projects represent 87.5% of total assets, 66.1% of total liabilities and 35.1% of
the shareholders deficit of Levitt and Sons at June 30, 2008.
28
During the three and six months ended June 30, 2008, the DIP Loans financed construction and
development activities and selling, general and administrative expenses related to the projects, as
well as the costs, fees and other expenses of the DIP Lender, including interest expense.
Additionally, during the three and six months ended June 30, 2008, homes in the projects have been
sold and closed, resulting in the receipt by the Debtors of sales proceeds. The Chief Administrator
is maintaining the accounting records for these transactions in accordance with the DIP Loan
agreements and, as a result, financial information is not available to the Company which could be
used to record these transactions in accordance with generally accepted accounting principles in
the United States on a basis consistent with the Companys accounting for similar transactions.
Accordingly, these transactions have not been reflected in the financial information for Levitt and
Sons included in this footnote. However, as described herein, due to the deconsolidation of Levitt
and Sons from Woodbridges statements of financial condition and results of operations as of
November 9, 2007, these transactions, and the omission of the results of these transactions, will
not have an impact on the Companys financial condition or operating results.
The following table summarizes Levitt and Sons consolidated statements of financial condition
as of June 30, 2008 and December 31, 2007:
Levitt and Sons
Condensed Consolidated Statements of Financial Condition Unaudited
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Cash |
|
$ |
6,558 |
|
|
|
5,365 |
|
Inventory |
|
|
168,051 |
|
|
|
208,686 |
|
Property and equipment |
|
|
50 |
|
|
|
55 |
|
Other assets |
|
|
21,758 |
|
|
|
23,810 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
196,417 |
|
|
|
237,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity |
|
|
|
|
|
|
|
|
Accounts payable and other accrued liabilities |
|
$ |
1,116 |
|
|
|
469 |
|
Due to Woodbridge |
|
|
2,858 |
|
|
|
748 |
|
Liabilities subject to compromise (A) |
|
|
327,944 |
|
|
|
354,748 |
|
Shareholders deficit |
|
$ |
(135,501 |
) |
|
|
(118,049 |
) |
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
196,417 |
|
|
|
237,916 |
|
|
|
|
|
|
|
|
(A) Liabilities Subject to Compromise
Liabilities subject to compromise in Levitt and Sons condensed consolidated statements of
financial condition as of June 30, 2008 and December 31, 2007 refer to both secured and unsecured
obligations, including claims incurred prior to November 9, 2007. They represent the Debtors
current estimate of the amount of known or potential pre-petition claims that are subject to
restructuring in the Chapter 11 Cases. Such claims remain subject to future adjustments.
29
Liabilities subject to compromise at June 30, 2008 were as follows, (in thousands):
|
|
|
|
|
Accounts payable and other accrued liabilities |
|
$ |
57,884 |
|
Customer deposits |
|
|
15,825 |
|
Due to Woodbridge |
|
|
87,182 |
|
Deficiency claim associated with secured debt |
|
|
36,800 |
|
Notes and mortgage payable |
|
|
130,253 |
|
|
|
|
|
Total liabilities subject to compromise |
|
$ |
327,944 |
|
|
|
|
|
The following table summarizes Levitt and Sons consolidated statements of operations for the
three and six months ended June 30, 2008 and June 30, 2007:
Levitt and Sons
Condensed Consolidated Statements of Operations Unaudited
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Six Months |
|
|
|
Ended June 30, |
|
|
Ended June 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of real estate |
|
$ |
28,991 |
|
|
|
123,653 |
|
|
|
31,275 |
|
|
|
257,822 |
|
Other revenues |
|
|
|
|
|
|
877 |
|
|
|
2 |
|
|
|
1,599 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
28,991 |
|
|
|
124,530 |
|
|
|
31,277 |
|
|
|
259,421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales of real estate |
|
|
39,048 |
|
|
|
171,006 |
|
|
|
40,973 |
|
|
|
278,609 |
|
Selling, general and
administrative expenses |
|
|
2,089 |
|
|
|
22,655 |
|
|
|
4,022 |
|
|
|
42,960 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
41,137 |
|
|
|
193,661 |
|
|
|
44,995 |
|
|
|
321,569 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reorganization items, net |
|
|
(2,875 |
) |
|
|
|
|
|
|
(4,860 |
) |
|
|
|
|
Other income, net of other expense |
|
|
340 |
|
|
|
2,170 |
|
|
|
1,126 |
|
|
|
3,358 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(14,681 |
) |
|
|
(66,961 |
) |
|
|
(17,452 |
) |
|
|
(58,790 |
) |
Benefit for income taxes |
|
|
|
|
|
|
13,949 |
|
|
|
|
|
|
|
10,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(14,681 |
) |
|
|
(53,012 |
) |
|
|
(17,452 |
) |
|
|
(48,052 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
20. Subsequent Event
On August 11, 2008, the Company was notified by the New York Stock Exchange that the Company
did not have an average closing price per share of its Class A Common Stock in excess of $1.00 for
a consecutive 30 trading-day period, as required for continued listing. The Company intends to
provide notification to the New York Stock Exchange of its intent to seek to cure the deficiency
and the steps it will take to attempt to do so, which may include, among other actions, the
contemplated reverse stock split described elsewhere in this report. If the Company is unable to
satisfy the requirement within time frame specified by the rules and regulations of the New York
Stock Exchange, the Companys Class A Common Stock will be delisted from the exchange.
30
|
|
|
ITEM 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The objective of the following discussion is to provide an understanding of the financial
condition and results of operations of Woodbridge Holdings Corporation (Woodbridge, we, us,
our or the Company) (formerly Levitt Corporation) and its wholly-owned subsidiaries as of and
for the three and six months ended June 30, 2008 and 2007. We currently engage in business
activities through our Land Division, which consists of the operations of Core Communities, LLC
(Core Communities or Core), and through our Other Operations segment, which includes the parent
company operations of Woodbridge (Parent Company), an investment in Bluegreen Corporation
(Bluegreen NYSE:BXG), equity investments, currently primarily in Office Depot, Inc. (Office
Depot), the operations of Carolina Oak Homes, LLC (Carolina Oak), which engages in homebuilding
activities and is developing a community in South Carolina, and other investments through
subsidiaries and joint ventures. During the three and six months ended June 30, 2007, we also
engaged in homebuilding activities through our wholly-owned subsidiary, Levitt and Sons, LLC
(Levitt and Sons). As previously described, Levitt and Sons and substantially all of its
subsidiaries filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States
Code (the Chapter 11 Cases) on November 9, 2007. In connection with the Chapter 11 Cases, the
operations of Levitt and Sons were deconsolidated from our results of operations as of November 9,
2007.
Core Communities develops master-planned communities and is currently developing Tradition,
Florida, which is located in Port St. Lucie, Florida, and Tradition Hilton Head, which is located
in Hardeeville, South Carolina. Tradition, Florida encompasses approximately 8,200 total acres,
including approximately five miles of frontage on Interstate 95, and Tradition Hilton Head
encompasses approximately 5,400 acres. We are also engaged in limited homebuilding activities in
Tradition Hilton Head through our wholly-owned subsidiary, Carolina Oak.
Bluegreen, a New York Stock Exchange-listed company in which we own approximately 9.5 million
shares of common stock, representing 31% of the outstanding common stock, is engaged in the
acquisition, development, marketing and sale of vacation ownership interests in primarily
drive-to vacation resorts, and the development and sale of golf communities and residential land.
Some of the statements contained or incorporated by reference herein include forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the
Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the
Exchange Act ), that involve substantial risks and uncertainties. Some of the forward-looking
statements can be identified by the use of words such as anticipate, believe, estimate,
may, intend, expect, will, should, seek or other similar expressions. Forward-looking
statements are based largely on managements expectations and involve inherent risks and
uncertainties. In addition to the risks identified in the Companys Annual Report on Form 10-K
for the year ended December 31, 2007, you should refer to the other risks and uncertainties
discussed throughout this document for specific risks which could cause actual results to be
significantly different from those expressed or implied by those forward-looking statements.
Some factors which may affect the accuracy of the forward-looking statements apply generally to
the industries in which we operate, while other factors apply directly to us. Any number of
important factors could cause actual results to differ materially from those in the
forward-looking statements including: the impact of economic, competitive and other factors
affecting the Company and its operations; the market for real estate in the areas where the
Company has developments, including the impact of market conditions on the Companys margins; the
risk that the value of the property held by Core Communities may decline, including as a result of
a sustained downturn in the residential real estate and homebuilding industries; the impact of
market conditions for commercial property and the extent to which the factors negatively impacting
the homebuilding and residential real estate industries will impact the market for commercial
property; the risk that the development of parcels and master-planned communities will not be
completed as anticipated; continued declines in the estimated fair value of our real estate
inventory and the potential for write-downs or impairment charges; the effects of increases in
interest
31
rates on us and the availability and cost of credit to buyers of our inventory; accelerated
principal payments on our debt obligations due to re-margining or curtailment payment
requirements; the ability to obtain financing and to renew existing credit facilities on
acceptable terms, if at all; the risk that Woodbridge may be required to adjust the carrying value
of its investment in Bluegreen and incur an impairment charge in a future period if the trading
price of Bluegreens common stock does not increase from current levels; the Companys ability to
access additional capital on acceptable terms, if at all; the risks and uncertainties inherent in
bankruptcy proceedings and the inability to predict the effect of Levitt and Sons liquidation
process on Woodbridge, as well as the potential impact of the assertion of claims against
Woodbridge in connection with these proceedings, its results of
operations and financial condition;
equity risks associated with a decline in the trading prices of the equity securities owned by
Woodbridge; the risk that creditors of Levitt and Sons may be successful in asserting claims
against Woodbridge; the risks relating to the Settlement Agreement, including, without limitation,
that the conditions to consummation of the Settlement Agreement will not be met, that several
creditors have indicated that they intend to object to the terms of the Settlement Agreement, that
the Settlement Agreement will not be approved by the Bankruptcy Court when expected, or at all and
that, in the event the Settlement Agreement is approved by the Bankruptcy Court, such approval
will be appealed; the risk that the proposed acquisition of 100% of Bluegreens common stock will
not be consummated on the terms proposed, or at all; and the Companys success at managing the
risks involved in the foregoing. Many of these factors are beyond the Companys control. The
Company cautions that the foregoing factors are not exclusive.
Executive Overview
We continue to focus on managing our real estate holdings during this challenging period for
the real estate industry and on our efforts to bring costs in line with our strategic objectives.
We have taken steps to align our staffing levels with these objectives. We intend to pursue
opportunistic acquisitions and investments in diverse industries, using a combination of our cash
and third party equity and debt financing. Our business strategy may result in acquisitions and
investments both within or outside of the real estate industry. We also intend to explore a
variety of funding structures which might leverage and capitalize on our available cash and other
assets currently owned by us. We may acquire entire businesses or majority or minority,
non-controlling interests in companies. Under this business model,
we may not generate a constant earnings stream and the composition of
our revenues may vary widely due to factors inherent in a particular
investment, including the maturity of the business, market conditions
and cyclicality. Net investment gains and other income that may
occur are to be driven by our strategic initiatives as well as overall
market conditions.
Our operations have historically been concentrated in the real estate industry which is
cyclical in nature, and our largest subsidiary is Core Communities, a developer of master-planned
communities, which sells land to residential builders as well as to commercial developers, and
internally develops and leases commercial real estate. In addition, our Other Operations segment
consists of an investment in Bluegreen, a NYSE-listed company in which we own approximately 31% of
its outstanding common stock and equity investments, currently
primarily in Office Depot, a NYSE-listed company in which we own less than 1% of its outstanding common stock. Bluegreen is engaged in
the acquisition, development, marketing and sale of ownership interests in primarily drive-to
vacation resorts, and the development and sale of golf communities and residential land. Our Other
Operations segment also includes limited homebuilding activities in Tradition Hilton Head through
our subsidiary, Carolina Oak, which is developing a community known as Magnolia Walk. The results
of operations and financial condition of Carolina Oak as of and for the three and six month periods
ended June 30, 2008 are included in the Other Operations segment.
We are also exploring strategic initiatives that have the potential
of enhancing liquidity and shareholders equity. These
initiatives include the consideration of alternatives to monetize a
portion of our interests in Core assets, including through possible
joint ventures or other strategic relationships.
32
Financial and Non-Financial Metrics
We evaluate our performance and prospects using a variety of financial and non-financial
metrics. The key financial metrics utilized to evaluate historical operating performance included
revenues from sales of real estate, margin (which we measure as revenues from sales of real estate
minus cost of sales of real estate), margin percentage (which we measure as margin divided by
revenues from sales of real estate), loss from continuing operations, net loss and return on
equity. We also continue to evaluate and monitor selling, general and administrative expenses as
a percentage of revenue. In evaluating our future prospects, management considers non-financial
information, such as acres in backlog (which we measure as land subject to an executed sales
contract) and the aggregate value of those contracts. Additionally, we monitor the number of
properties remaining in inventory and under contract to be purchased relative to our sales and
development trends. Our ratio of debt to shareholders equity and cash requirements are also
considered when evaluating our future prospects, as are general economic factors and interest rate
trends. Each of the above metrics is discussed in the following sections as it relates to our
operating results, financial position and liquidity. These metrics are not an exhaustive list, and
management may from time to time utilize different financial and non-financial information or may
not use all of the metrics mentioned above.
Land Division Overview
Our Land Division entered 2008 with two active projects, Tradition, Florida and Tradition
Hilton Head. We are continuing our development and sales activities in both of these projects.
Tradition, Florida encompasses approximately 8,200 total acres. Core has sold approximately 1,800
acres to date and has approximately 3,900 net saleable acres remaining in inventory with 293 acres
subject to sales contracts with various purchasers as of June 30, 2008. Tradition Hilton Head
encompasses approximately 5,400 total acres, of which 165 acres have been sold to date.
Approximately 2,800 net saleable acres are remaining at Tradition Hilton Head, with 33 acres
subject to sales contracts with various purchasers as of June 30, 2008. Acres sold to date in
Tradition Hilton Head include the intercompany sale of 150 acres owned and being developed by
Carolina Oak.
The Land
Division plans to continue to expand its commercial operations through sales to developers and the
internal development of certain projects for leasing to third parties. The Land Division is
currently pursuing the sale of two of its commercial leasing projects. While the commercial real
estate market has not to date been as negatively impacted as the residential real estate market,
interest in commercial property is weakening, and financing is not as readily available in the
current market, which may adversely impact both our ability to complete sales and the profitability
of any sales. Core continues to actively market these two commercial projects which are available
for immediate sale in their present condition. While management believes these projects will be
sold by June 2009, there is no assurance that these sales will be completed in the timeframe
expected by management or at all.
In addition, the overall slowdown in the homebuilding market continues to have a negative
effect on demand for residential land in our Land Division which was partially mitigated by
increased commercial leasing revenue. While traffic at the Tradition, Florida information center
slowed from prior years reflecting the overall slowdown in the Florida homebuilding market, it has
improved since the fourth quarter of 2007. As a result of our continued Hilton Head expansion, as
well as our continued expansion into the commercial leasing business, we incurred higher general
and administrative expenses in the Land Division in the first six months of 2008.
33
Other Operations Overview
Bluegreen, a New York Stock Exchange-listed company in which we own approximately 9.5 million
shares of common stock, representing 31% of the outstanding common stock, is engaged in the
acquisition, development, marketing and sale of vacation ownership interests in primarily
drive-to vacation resorts, and the development and sale of golf communities and residential land.
On July 21, 2008, Bluegreen announced that it had entered into a non-binding letter of intent for
the sale of 100% of Bluegreens outstanding common stock for $15 per share. The letter of intent
provides for a due diligence and exclusivity period through September 15, 2008. There can be no
assurance that the transaction will be consummated on the proposed terms, if at all.
During March 2008, the Company, together with Woodbridge Equity Fund LLLP, a newly formed
limited liability limited partnership wholly-owned by the Company, purchased 3,000,200 shares of
Office Depot common stock, which represented approximately one percent of Office Depots
outstanding stock. These Office Depot shares were acquired at a cost of approximately $34.0
million. During June 2008, the Company sold 1,565,200 shares of Office Depot common stock for
approximately $18.9 million. As of June 30, 2008, the Company owned 1,435,000 shares of Office
Depot common stock with a fair market value at that date of $15.7 million. On August 4, 2008, the
closing price of Office Depot common stock on the New York Stock Exchange was $6.60.
In 2007, Woodbridge acquired from Levitt and Sons all of the outstanding membership interests
in Carolina Oak, a South Carolina limited liability company (formerly known as Levitt and Sons of
Jasper County, LLC), for the following consideration: (i) assumption of the outstanding principal
balance of a loan in the amount of $34.1 million which is collateralized by a 150 acre parcel of
land owned by Carolina Oak located in Tradition Hilton Head, (ii) execution of a promissory note in
the amount of $400,000 to serve as a deposit under a purchase agreement between Carolina Oak and
Core Communities of South Carolina, LLC and (iii) the assumption of specified payables in the
amount of approximately $5.3 million. The principal asset of Carolina Oak is a 150 acre parcel of
partially developed land currently under development and located in Tradition Hilton Head. As of
June 30, 2008, Carolina Oak had 13 units under construction with 8 units in backlog.
Carolina Oak has an additional 90 lots that are available for home construction. Based on the
success of sales of existing units, we will make a determination as to whether to continue to build
the remainder of the community, which is planned to consist of approximately 403 additional units.
In 2007, our Other Operations segment also consisted of Levitt Commercial, LLC (Levitt
Commercial), which specialized in the development of industrial properties. Levitt Commercial
ceased development activities in 2007.
34
Critical Accounting Policies and Estimates
Critical accounting policies are those policies that are important to the understanding of our
financial statements and may also involve estimates and judgments about inherently uncertain
matters. In preparing our financial statements, management makes estimates and assumptions that
affect the amounts reported in the financial statements. These estimates require the exercise of
judgment, as future events cannot be determined with certainty. Accordingly, actual results could
differ significantly from those estimates. Material estimates that are particularly susceptible to
significant change in subsequent periods relate to revenue and cost recognition on percent complete
projects, reserves and accruals, impairment reserves of assets, valuation of real estate, estimated
costs to complete construction, reserves for litigation and contingencies and deferred tax
valuation allowances. The accounting policies that we have identified as critical to the
portrayal of our financial condition and results of operations are: (a) real estate inventories;
(b) investments in unconsolidated subsidiaries equity method; (c) homesite contracts and
consolidation of variable interest entities; (d) revenue recognition; (e) capitalized interest; (f)
income taxes; (g) impairment of long-lived assets; and (h) accounting for stock-based compensation.
For a more detailed discussion of these critical accounting policies see Critical Accounting
Policies and Estimates appearing in the Managements Discussion and Analysis of Financial
Condition and Results of Operations section of our Annual Report on Form 10-K for the year ended
December 31, 2007.
Investments in Unconsolidated Subsidiaries Cost Method
The Companys management determines the appropriate classifications of investments in equity
securities at the acquisition date and re-evaluates the classifications at each balance sheet date.
The Company follows either the equity or cost method of accounting to record its interests in
entities in which it does not own the majority of the voting stock and to record its investment in
variable interest entities in which it is not the primary beneficiary. Typically, the cost method
should be used if the investor owns less than 20% of the investees stock and the equity method
should be used if the investor owns more than 20% of the investees stock. However, the Financial
Accounting Standards Board (FASB) has concluded that the percentage ownership of stock is not the
sole determinant in applying the equity or the cost method, but the significant factor is whether
the investor has the ability to significantly influence the operating and financial policies of the
investee. The Company uses the cost method for investments where the Company owns less than a 20%
interest and does not have the ability to significantly influence the operating and financial
policies of the investee in accordance with relative accounting guidance.
35
CONSOLIDATED RESULTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
|
Change |
|
|
2008 |
|
|
2007 |
|
|
Change |
|
(In thousands) |
|
( U n a u d i t e d ) |
|
|
( U n a u d i t e d ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of real estate |
|
$ |
2,395 |
|
|
|
125,364 |
|
|
|
(122,969 |
) |
|
|
2,549 |
|
|
|
266,662 |
|
|
|
(264,113 |
) |
Other revenues |
|
|
810 |
|
|
|
1,702 |
|
|
|
(892 |
) |
|
|
1,556 |
|
|
|
3,614 |
|
|
|
(2,058 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
3,205 |
|
|
|
127,066 |
|
|
|
(123,861 |
) |
|
|
4,105 |
|
|
|
270,276 |
|
|
|
(266,171 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales of real estate |
|
|
1,758 |
|
|
|
171,594 |
|
|
|
(169,836 |
) |
|
|
1,786 |
|
|
|
284,502 |
|
|
|
(282,716 |
) |
Selling, general and
administrative expenses |
|
|
12,439 |
|
|
|
33,017 |
|
|
|
(20,578 |
) |
|
|
24,514 |
|
|
|
65,331 |
|
|
|
(40,817 |
) |
Interest expense |
|
|
2,146 |
|
|
|
|
|
|
|
2,146 |
|
|
|
4,865 |
|
|
|
|
|
|
|
4,865 |
|
Other expenses |
|
|
|
|
|
|
413 |
|
|
|
(413 |
) |
|
|
|
|
|
|
895 |
|
|
|
(895 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
16,343 |
|
|
|
205,024 |
|
|
|
(188,681 |
) |
|
|
31,165 |
|
|
|
350,728 |
|
|
|
(319,563 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from Bluegreen Corporation |
|
|
1,211 |
|
|
|
1,357 |
|
|
|
(146 |
) |
|
|
1,737 |
|
|
|
3,101 |
|
|
|
(1,364 |
) |
Interest and other income |
|
|
1,946 |
|
|
|
3,294 |
|
|
|
(1,348 |
) |
|
|
3,545 |
|
|
|
5,634 |
|
|
|
(2,089 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing
operations before income taxes |
|
|
(9,981 |
) |
|
|
(73,307 |
) |
|
|
63,326 |
|
|
|
(21,778 |
) |
|
|
(71,717 |
) |
|
|
49,939 |
|
Benefit for income taxes |
|
|
|
|
|
|
15,112 |
|
|
|
(15,112 |
) |
|
|
|
|
|
|
14,501 |
|
|
|
(14,501 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
|
(9,981 |
) |
|
|
(58,195 |
) |
|
|
48,214 |
|
|
|
(21,778 |
) |
|
|
(57,216 |
) |
|
|
35,438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued
operations, net of tax |
|
|
1,039 |
|
|
|
108 |
|
|
|
931 |
|
|
|
2,405 |
|
|
|
105 |
|
|
|
2,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(8,942 |
) |
|
|
(58,087 |
) |
|
|
49,145 |
|
|
|
(19,373 |
) |
|
|
(57,111 |
) |
|
|
37,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2008 Compared to the Same 2007 Period:
Consolidated net loss decreased by $49.1 million, or 84.6%, to $8.9 million in the three
months ended June 30, 2008 from $58.1 million in the same period in 2007. The decrease in net loss
primarily reflected the fact that no impairment charges were recorded during the three months ended
June 30, 2008, whereas $63.0 million of impairment charges were recorded at Levitt and Sons during
the same period in 2007. Levitt and Sons incurred a net loss of $53.0 million in the three months
ended June 30, 2007. As previously disclosed, Woodbridge deconsolidated Levitt and Sons from its
statements of financial condition and results of operations as of November 9, 2007. Excluding the
results of Levitt and Sons, the net loss increased by $3.9 million, or 76.2%, mainly due to higher
selling, general and administrative expenses, higher interest expense and decreased benefit for
income taxes in the three months ended June 30, 2008 compared to the same period in 2007.
Our revenues from sales of real estate decreased by $123.0 million, or 98.1%, to $2.4 million
for the quarter ended June 30, 2008 from $125.4 million for the same 2007 period. This decrease
was primarily attributable to the deconsolidation of Levitt and Sons at November 9, 2007. Revenues
from sales of real estate for the three months ended June 30, 2008 and 2007 in the Land Division
were $1.7 million and $1.9 million, respectively. In Other Operations, revenues from sales of real
estate for the three months ended June 30, 2008 were $635,000 as a result of the delivery of 2
units in Carolina Oak. There were no comparable sales in Other Operations in the three months ended
June 30, 2007.
36
Other revenues decreased by $892,000, or 52.4%, to $810,000 for the three months ended June
30, 2008 from $1.7 million for the same period in 2007. Other revenues decreased as title and
mortgage operations revenues associated with Levitt and Sons were not included in the
consolidated results of operations for the three months ended June 30, 2008. In addition, there was
decreased marketing income associated with Tradition, Florida.
Cost of sales excluding Levitt and Sons increased to $1.8 million during the three months
ended June 30, 2008, as compared to $588,000 in the same 2007 period as we sold 8 lots in the Land
Division and delivered 2 homes in Carolina Oak during the quarter ended June 30, 2008 period as
compared to 3 lots sold in the Land Division and no homes delivered in Carolina Oak during the 2007
period.
Selling, general and administrative expenses decreased by $20.6 million, or 62.3%, to $12.4
million during the three months ended June 30, 2008 from $33.0 million during the same period in
2007 primarily as a result of the deconsolidation of Levitt and Sons at November 9, 2007. Selling,
general and administrative expenses attributable to Levitt and Sons for the three months ended June
30, 2007 were $22.7 million. Consolidated selling, general and administrative expenses, excluding
those attributable to Levitt and Sons, increased by $2.1 million, or 20.0%, to $12.4 million for
the three months ended June 30, 2008 from $10.4 million in the same 2007 period. The increase was
due to higher professional fees associated with our interest and position taken in connection with
our investment in equity securities as well as higher expenses in the Land Division related to the
support of the community and commercial associations in our master-planned communities and
increased other administrative expenses associated with marketing and development activities in
South Carolina. Additionally, we incurred severance expenses related to the reductions in force
associated with the Chapter 11 Cases and higher insurance costs due to the absorption of certain of
Levitt and Sons insurance costs. The above increases were offset in part by decreased employee
compensation, benefits and incentives expense.
Interest expense is interest incurred minus interest capitalized. Interest incurred totaled
$4.6 million for the three months ended June 30, 2008 and $12.9 million for the same period in
2007. While all interest was capitalized during the 2007 period, only $2.5 million was capitalized
in the three months ended June 30, 2008. This resulted in interest expense of $2.1 million for the
three months ended June 30, 2008, compared to no interest expense in the same period in 2007. The
increase in interest expense was due to the completion of certain phases of development associated
with our real estate inventory which resulted in a decreased amount of qualified assets for
interest capitalization. Interest incurred was lower due to decreases in the average interest rates
on our debt and lower outstanding balances of notes and mortgage notes payable primarily due to the
deconsolidation of Levitt and Sons at November 9, 2007. At the time of land or home sales, the
capitalized interest allocated to inventory is charged to cost of sales. Cost of sales of real
estate for the three months ended June 30, 2008 and 2007 included previously capitalized interest
of approximately $44,000 and $5.6 million, respectively.
Other expenses for the three months ended June 30, 2007 were $413,000 and consisted solely of
mortgage operations expenses associated with Levitt and Sons. These expenses were not incurred in
the three months ended June 30, 2008.
Bluegreen reported net income for the three months ended June 30, 2008 of $3.4 million, as
compared to $4.1 million for the same period in 2007. Our interest in Bluegreens earnings was
$1.2 million for the second quarter of 2008 compared to $1.4 million for the same period in 2007.
The 9.5 million shares of Bluegreen that we own represented approximately 31% of the outstanding
shares of Bluegreen at each of June 30, 2008 and 2007.
37
Interest and other income decreased by $1.3 million, or 40.9%, to $1.9 million during the
three months ended June 30, 2008 from $3.3 million during the same period in 2007. This change was
primarily related to a decrease in forfeited deposits of $2.5 million due to the deconsolidation of
Levitt and Sons at November 9, 2007. This decrease was partially offset by a $1.2 million gain on
sale of
equity securities in the three months ended June 30, 2008 and an increase in interest income based
on higher cash balances at the Parent Company in the three months ended June 30, 2008 reflecting
the proceeds from the October 2007 rights offering.
The provision for income taxes is estimated to result in an effective tax rate of 0.0% in
2008. The effective tax rate used for the three months ended June 30, 2007 was 20.6%. The decrease
in the effective tax rate is a result of recording a valuation allowance for those deferred tax
assets that are not expected to be recovered in the future. Due to large taxable losses in 2007 and
expected taxable losses in the foreseeable future, at this time, we do not believe that we will
have sufficient taxable income of the appropriate character in the future and prior carryback years
to realize any portion of the net deferred tax asset.
The income from discontinued operations, which relates to two commercial leasing projects at
Core Communities, increased to $1.0 million in the three months ended June 30, 2008 from $108,000
in the same period in 2007. The increase is due to increased commercial lease activity as a result
of the Landing at Tradition retail power center opening in late 2007.
For the Six Months Ended June 30, 2008 Compared to the Same 2007 Period:
Consolidated net loss decreased by $37.7 million, or 66.1%, to $19.4 million in the six months
ended June 30, 2008 from $57.1 million in the same period in 2007. The decrease in net loss
primarily reflected the fact that no impairment charges were recorded during the six months ended
June 30, 2008, whereas $63.3 million of impairment charges were recorded at Levitt and Sons during
the same period in 2007. Levitt and Sons incurred a net loss of $48.1 million in the six months
ended June 30, 2007. Excluding the results of Levitt and Sons, the net loss increased by $10.3
million, or 113.9%, mainly due to higher selling, general and administrative expenses, higher interest
expense and decreased benefit for income taxes in the six months ended June 30, 2008 compared to
the same period in 2007. Additionally, Bluegreen experienced lower net earnings in the six months
ended June 30, 2008 in comparison to the same period in 2007.
Our revenues from sales of real estate decreased by $264.1 million, or 99.0%, to $2.5 million
for the six months ended June 30, 2008 from $266.7 million for the same 2007 period. This decrease
was primarily attributable to the deconsolidation of Levitt and Sons at November 9, 2007. Revenues
from sales of real estate for the six months ended June 30, 2008 and 2007 in the Land Division were
$1.9 million and $2.7 million, respectively. Sales of real estate in Other Operations for the six
months ended June 30, 2008 were $635,000 as a result of the delivery of 2 units in Carolina Oak and
for the same period of 2007 were $6.6 million relating to Levitt Commercials delivery of its
remaining inventory of 17 warehouse units.
Other revenues decreased by $2.1 million, or 56.9%, to $1.6 million for the six months ended
June 30, 2008 from $3.6 million for the same period in 2007. Other revenues decreased as title and
mortgage operations revenues associated with Levitt and Sons were not included in the consolidated
results for the six months ended June 30, 2008. In addition, there was decreased marketing income
associated with Tradition, Florida.
Cost of sales excluding Levitt and Sons decreased to $1.8 million during the six months ended
June 30, 2008, as compared to $5.9 million in the same 2007 period as we sold 9 lots in the Land
Division and delivered 2 homes in Carolina Oak in the six months ended June 30, 2008, as compared
to 3 lots sold in the Land Division and 17 warehouse units delivered in Levitt Commercial in the
same 2007 period. There were no home deliveries in Carolina Oak in the 2007 period.
38
Selling, general and administrative expenses decreased by $40.8 million, or 62.5%, to $24.5
million during the six months ended June 30, 2008 from $65.3 million during the same period in 2007
primarily as a result of the deconsolidation of Levitt and Sons at November 9, 2007. Selling,
general
and administrative expenses attributable to Levitt and Sons for the six months ended June 30,
2007 were $43.0 million. Consolidated selling, general and administrative expenses, excluding those
attributable to Levitt and Sons, increased by $2.1 million, or 9.6%, to $24.5 million for the six
months ended June 30, 2008 from $22.4 million in the same 2007 period. The increase was due to
higher professional fees associated with our interest and position taken in connection with our
investments in equity securities as well as higher expenses in the Land Division related to the
support of community and commercial associations in our master-planned communities and increased
other administrative expenses associated with marketing and development activities in South
Carolina. Additionally, we incurred severance expenses related to the reductions in force
associated with the Chapter 11 Cases and higher insurance costs due to the absorption of certain of
Levitt and Sons insurance costs. The above increases were offset in part by decreased employee
compensation, benefits and incentives expense.
Interest incurred totaled $9.6 million for the six months ended June 30, 2008 and $25.2
million for the same period in 2007. While all interest was capitalized during the 2007 period,
only $4.8 million was capitalized in the six months ended June 30, 2008. This resulted in interest
expense of $4.9 million for the six months ended June 30, 2008, compared to no interest expense in
the same period in 2007. The increase in interest expense was due to the completion of certain
phases of development associated with our real estate inventory which resulted in a decreased
amount of qualified assets for interest capitalization. Interest incurred was lower due to
decreases in the average interest rates on our debt and lower outstanding balances of notes and
mortgage notes payable primarily due to the deconsolidation of Levitt and Sons at November 9, 2007.
At the time of land or home sales, the capitalized interest allocated to inventory is charged to
cost of sales. Cost of sales of real estate for the six months ended June 30, 2008 and 2007
included previously capitalized interest of approximately $44,000 and $10.0 million, respectively.
Other expenses for the six months ended June 30, 2007 were $895,000 and consisted solely of
mortgage operations expenses associated with Levitt and Sons. These expenses were not incurred in
the six months ended June 30, 2008.
Bluegreen reported net income for the six months ended June 30, 2008 of $4.8 million, as
compared to $9.4 million for the same period in 2007. Our interest in Bluegreens earnings was
$1.7 million for the six months ended June 30, 2008 compared to $3.1 million for the same period in
2007. The 9.5 million shares of Bluegreen that we own represented approximately 31% of the
outstanding shares of Bluegreen at each of June 30, 2008 and 2007.
Interest and other income decreased by $2.1 million, or 37.1%, to $3.5 million during the six
months ended June 30, 2008 from $5.6 million during the same period in 2007. This change was
primarily related to a decrease in forfeited deposits of $3.9 million due to the deconsolidation of
Levitt and Sons at November 9, 2007. This decrease was partially offset by a $1.2 million gain on
sale of equity securities in the six months ended June 30, 2008 and an increase in interest income
based on higher cash balances at the Parent Company in the six months ended June 30, 2008
reflecting the proceeds from the October 2007 rights offering.
The provision for income taxes is estimated to result in an effective tax rate of 0.0% in
2008. The effective tax rate used for the six months ended June 30, 2007 was 20.2%. The decrease in
the effective tax rate is a result of recording a valuation allowance for those deferred tax assets
that are not expected to be recovered in the future. Due to large taxable losses in 2007 and
expected taxable losses in the foreseeable future, at this time, we do not believe that we will
have sufficient taxable income of the appropriate character in the future and prior carryback years
to realize any portion of the net deferred tax asset.
The income from discontinued operations, which relates to two commercial leasing projects at
Core Communities, increased to $2.4 million in the six months ended June 30, 2008 from $105,000 in the same
period in 2007. The increase is due to increased commercial lease activity as a result of the
Landing at Tradition retail power center opening in late 2007.
39
LAND DIVISION RESULTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Six Months |
|
|
|
Ended June 30, |
|
|
Ended June 30, |
|
|
|
2008 |
|
|
2007 |
|
|
Change |
|
|
2008 |
|
|
2007 |
|
|
Change |
|
(Dollars in thousands) |
|
( U n a u d i t e d ) |
|
|
( U n a u d i t e d ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of real estate |
|
$ |
1,711 |
|
|
|
1,917 |
|
|
|
(206 |
) |
|
|
1,865 |
|
|
|
2,694 |
|
|
|
(829 |
) |
Other revenues |
|
|
559 |
|
|
|
866 |
|
|
|
(307 |
) |
|
|
1,046 |
|
|
|
1,783 |
|
|
|
(737 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
2,270 |
|
|
|
2,783 |
|
|
|
(513 |
) |
|
|
2,911 |
|
|
|
4,477 |
|
|
|
(1,566 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales of real estate |
|
|
1,145 |
|
|
|
483 |
|
|
|
662 |
|
|
|
1,173 |
|
|
|
555 |
|
|
|
618 |
|
Selling, general and
administrative expenses |
|
|
4,807 |
|
|
|
3,496 |
|
|
|
1,311 |
|
|
|
9,786 |
|
|
|
7,269 |
|
|
|
2,517 |
|
Interest expense |
|
|
485 |
|
|
|
807 |
|
|
|
(322 |
) |
|
|
1,173 |
|
|
|
1,022 |
|
|
|
151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
6,437 |
|
|
|
4,786 |
|
|
|
1,651 |
|
|
|
12,132 |
|
|
|
8,846 |
|
|
|
3,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income |
|
|
657 |
|
|
|
1,115 |
|
|
|
(458 |
) |
|
|
1,556 |
|
|
|
2,060 |
|
|
|
(504 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing
operations before income
taxes |
|
|
(3,510 |
) |
|
|
(888 |
) |
|
|
(2,622 |
) |
|
|
(7,665 |
) |
|
|
(2,309 |
) |
|
|
(5,356 |
) |
Benefit for income taxes |
|
|
|
|
|
|
407 |
|
|
|
(407 |
) |
|
|
|
|
|
|
973 |
|
|
|
(973 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
|
(3,510 |
) |
|
|
(481 |
) |
|
|
(3,029 |
) |
|
|
(7,665 |
) |
|
|
(1,336 |
) |
|
|
(6,329 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued
operations, net of tax |
|
|
1,039 |
|
|
|
108 |
|
|
|
931 |
|
|
|
2,405 |
|
|
|
105 |
|
|
|
2,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(2,471 |
) |
|
|
(373 |
) |
|
|
(2,098 |
) |
|
|
(5,260 |
) |
|
|
(1,231 |
) |
|
|
(4,029 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acres sold |
|
|
3 |
|
|
|
1 |
|
|
|
2 |
|
|
|
3 |
|
|
|
1 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin percentage (a) |
|
|
33.1 |
% |
|
|
74.8 |
% |
|
|
(41.7 |
)% |
|
|
37.1 |
% |
|
|
79.4 |
% |
|
|
(42.3 |
)% |
Unsold saleable acres (b) |
|
|
6,676 |
|
|
|
6,870 |
|
|
|
(194 |
) |
|
|
6,676 |
|
|
|
6,870 |
|
|
|
(194 |
) |
Acres subject to sales
contracts third parties |
|
|
326 |
|
|
|
98 |
|
|
|
228 |
|
|
|
326 |
|
|
|
98 |
|
|
|
228 |
|
Aggregate sales price of acres
subject to sales contracts to
third parties |
|
$ |
96,164 |
|
|
|
29,013 |
|
|
|
67,151 |
|
|
|
96,164 |
|
|
|
29,013 |
|
|
|
67,151 |
|
|
|
|
(a) |
|
Sales of real estate and margin percentage include lot sales, revenues from look back provisions and recognition of deferred revenue associated with sales in prior
periods. |
|
(b) |
|
Includes approximately 56 acres related to assets held for sale as of June 30, 2008. |
Due to the nature and size of individual land transactions, our Land Division results are
subject to significant volatility. Although we have historically realized margins of between 40.0%
and 60.0% on Land Division sales, margins on land sales are likely to be below that level given the
downturn in the real estate markets and the significant decrease in demand. Margins will
fluctuate based upon changing sales prices and costs attributable to the land sold. In addition to
the impact of economic and market factors, the sales price and margin of land sold varies depending
upon: the parcels location and size; whether the parcel is sold as raw land, partially developed
land or individually developed lots; the degree to which the land is entitled; and whether the
designated use of land is residential or commercial. The cost of sales of real estate is dependent
upon the original cost of the land acquired, the timing of the acquisition of the land, the amount
of land development, and interest and property tax costs capitalized during active development.
Allocations to cost of sales involve significant management judgment and include an estimate of
future costs of development, which can vary over time due to labor and material cost increases,
master plan design changes and regulatory modifications. Accordingly, allocations are subject to
change based on factors which are in many
instances beyond managements control. Future margins will continue to vary based on these
and other market factors. If the real estate markets deteriorate further, there is no assurance
that we will be able to sell land at prices above our carrying cost or even in amounts necessary to
repay our indebtedness.
40
The value of acres subject to third party sales contracts increased from $29.0 million at June
30, 2007 to $96.2 million at June 30, 2008. This backlog consists of executed contracts and may,
to a limited extent, provide an indication of potential future sales activity and value per acre.
However, the backlog is not an exclusive indicator of future sales activity. Some sales involve
contracts executed and closed in the same quarter and therefore will not appear in the backlog. In
addition, executed contracts in the backlog are subject to cancellation.
For the Three Months Ended June 30, 2008 Compared to the Same 2007 Period:
Revenues from sales of real estate decreased to $1.7 million during the three months ended
June 30, 2008, compared to $1.9 million during the same period in 2007. We sold 8 lots in the
three months ended June 30, 2008, recognizing $825,000 in revenue, net of deferred revenue,
compared to 3 lot sales in Tradition Hilton Head generating $428,000 in revenue in the same period
in 2007. Revenues from sales of real estate for the three months ended June 30, 2008 and 2007 also
included look back provisions of $18,000 and $788,000, respectively, as well as recognition of
deferred revenue totaling $758,000 and $701,000, respectively. Look back revenue relates to
incremental revenue received from homebuilders and is based on the final sales price to the
homebuilders customer. Inter-segment revenue of $206,000 was eliminated in consolidation during
the three months ended June 30, 2007. There was no inter-segment revenue in the same 2008 period.
Other revenues decreased by $307,000, or 35.5%, to $559,000 for the three months ended June
30, 2008, as compared to $866,000 during the same quarter in 2007. This decrease was due primarily
to decreased marketing income associated with Tradition, Florida.
Cost of sales increased to $1.1 million during the three months ended June 30, 2008, as
compared to $483,000 for the same 2007 period. Cost of sales for the three months ended June 30,
2008 represents the costs associated with the sale of 8 lots in Tradition Hilton Head as compared
to costs associated with the 3 lots sold in Tradition Hilton Head in the same period in 2007.
Selling, general and administrative expenses increased by $1.3 million, or 37.5%, to $4.8
million during the three months ended June 30, 2008 from $3.5 million for the same period in 2007
primarily due to higher other administrative expenses associated with increased marketing and
development activities in Tradition Hilton Head and higher compensation and benefits expense due to
increased headcount. Additionally, there were increased expenses associated with our support of
the community and commercial associations in our master-planned communities, increased fees for
professional services and higher property tax expense due to less acreage in active development in
the three months ended June 30, 2008 compared to the same period in 2007.
Interest incurred for the three months ended June 30, 2008 and 2007 was $2.0 million and $2.6
million, respectively, while interest capitalized for the same periods in 2008 and 2007 totaled
$1.5 million and $1.8 million, respectively. This resulted in interest expense of $485,000 for the
three months ended June 30, 2008, compared to $807,000 in the same 2007 period. The interest
expense in the three months ended June 30, 2008 of approximately $485,000 was partially associated
with funds borrowed by Core but then loaned to the Parent Company. This intercompany interest
amounted to $443,000 for the quarter ended June 30, 2008 and was eliminated on a consolidated
basis. The remaining portion of interest expense was due to the completion of certain phases of
development of our real estate inventory which resulted in a decreased amount of qualified assets
for interest capitalization. The interest expense in the three months ended June 30, 2007 of
approximately
$807,000 was attributable to funds borrowed by Core but then loaned to the Parent Company. The
capitalization of this interest occurred at the Parent Company level and all intercompany interest
expense and income was eliminated on a consolidated basis. Interest incurred was lower due to
decreases in the average interest rates on our notes and mortgage notes payable. Cost of sales of
real estate for the three months ended June 30, 2008 and June 30, 2007 included an insignificant
amount of previously capitalized interest.
41
Interest and other income decreased to $657,000 in the three months ended June 30, 2008 from
$1.1 million in the three months ended June 30, 2007. The decrease is primarily related to
decreased interest income due to lower average interest rates and lower intercompany interest which
was eliminated in consolidation.
The income from discontinued operations, which relates to the income generated by two of
Cores commercial leasing projects which were held for sale as of June 30, 2008, increased to $1.0
million in the three months ended June 30, 2008 from $108,000 in the same period of 2007. The
increase is due to increased commercial lease activity as a result of the Landing at Tradition
retail power center opening in late 2007.
For the Six Months Ended June 30, 2008 Compared to the Same 2007 Period:
Revenues from sales of real estate decreased to $1.9 million during the six months ended June
30, 2008, compared to $2.7 million during the same period in 2007. This decrease was primarily the
result of higher look back provisions revenue and recognition of deferred revenue during the 2007
period, partially offset by higher revenues from lot sales in the 2008 period. We sold 9 lots in
Tradition Hilton Head in the six months ended June 30, 2008, recognizing $898,000 in revenue, net
of deferred revenue, compared to 3 lot sales in Tradition Hilton Head generating $428,000 in
revenue in the same period in 2007. Revenues from sales of real estate for the six months ended
June 30, 2008 and 2007 also included look back provisions of $90,000 and $1.2 million,
respectively, as well as recognition of deferred revenue totaling $768,000 and $1.1 million,
respectively. Inter-segment revenue of $428,000 was eliminated in consolidation during the six
months ended June 30, 2007. There was no inter-segment revenue in the same 2008 period.
Other revenues decreased by $737,000, or 41.3%, to $1.0 million for the six months ended June
30, 2008, as compared to $1.8 million during the same period in 2007. This decrease was due
primarily to decreased marketing income associated with Tradition, Florida.
Cost of sales increased to $1.2 million during the six months ended June 30, 2008, as compared
to $555,000 for the same 2007 period. Cost of sales for the six months ended June 30, 2008
represents the costs associated with the sale of 9 lots in Tradition Hilton Head as compared to
costs associated with the 3 lots sold in Tradition Hilton Head in the same period in 2007.
Selling, general and administrative expenses increased by $2.5 million, or 34.6%, to $9.8
million during the six months ended June 30, 2008 from $7.3 million for the same period in 2007
primarily due to higher other administrative expenses associated with increased marketing and
development activities in Tradition Hilton Head and higher compensation and benefits expense due to
increased headcount. Additionally, there were increased expenses associated with our support of
the community and commercial associations in our master-planned communities and higher property tax
expense due to less acreage in active development in the six months ended June 30, 2008 compared to
the same period in 2007.
Interest incurred for the six months ended June 30, 2008 and 2007 was $4.3 million and $4.7
million, respectively, while interest capitalized for the same periods in 2008 and 2007 totaled
$3.2 million and $3.7 million, respectively. This resulted in interest expense of $1.2 million for
the six months ended June 30, 2008, compared to $1.0 million in the same 2007 period. The interest
expense
in the six months ended June 30, 2008 of approximately $1.2 million was partially associated with
funds borrowed by Core but then loaned to the Parent Company. This intercompany interest amounted
to $1.1 million for the six months ended June 30, 2008 and was eliminated on a consolidated basis.
The remaining portion of interest expense was due to the completion of certain phases of
development of our real estate inventory which resulted in a decreased amount of qualified assets
for interest capitalization. The interest expense in the six months ended June 30, 2007 of
approximately $1.0 million was attributable to funds borrowed by Core but then loaned to the Parent
Company. The capitalization of this interest occurred at the Parent Company level and all
intercompany interest expense and income was eliminated on a consolidated basis. Interest incurred
was lower due to decreases in the average interest rates on our notes and mortgage notes payable.
Cost of sales of real estate for the six months ended June 30, 2008 and June 30, 2007 included an
insignificant amount of previously capitalized interest.
42
Interest and other income decreased to $1.6 million in the six months ended June 30, 2008 from
$2.1 million for the six months ended June 30, 2007. The decrease is primarily related to decreased
interest income due to lower average interest rates and lower intercompany interest that was
eliminated in consolidation.
The income from discontinued operations, which relates to the income generated by two of
Cores commercial leasing projects which were held for sale as of June 30, 2008, increased to $2.4
million in the six months ended June 30, 2008 from $105,000 in the same period of 2007. The
increase is due to increased commercial lease activity as a result of the Landing at Tradition
retail power center opening in late 2007.
OTHER OPERATIONS RESULTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
|
Change |
|
|
2008 |
|
|
2007 |
|
|
Change |
|
(In thousands) |
|
( U n a u d i t e d ) |
|
|
( U n a u d i t e d ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of real estate |
|
$ |
635 |
|
|
|
|
|
|
|
635 |
|
|
|
635 |
|
|
|
6,574 |
|
|
|
(5,939 |
) |
Other revenues |
|
|
251 |
|
|
|
142 |
|
|
|
109 |
|
|
|
510 |
|
|
|
435 |
|
|
|
75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
886 |
|
|
|
142 |
|
|
|
744 |
|
|
|
1,145 |
|
|
|
7,009 |
|
|
|
(5,864 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales of real estate |
|
|
587 |
|
|
|
1,018 |
|
|
|
(431 |
) |
|
|
587 |
|
|
|
6,519 |
|
|
|
(5,932 |
) |
Selling, general and
administrative expenses |
|
|
7,651 |
|
|
|
6,928 |
|
|
|
723 |
|
|
|
14,747 |
|
|
|
15,164 |
|
|
|
(417 |
) |
Interest expense |
|
|
2,104 |
|
|
|
|
|
|
|
2,104 |
|
|
|
4,777 |
|
|
|
|
|
|
|
4,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
10,342 |
|
|
|
7,946 |
|
|
|
2,396 |
|
|
|
20,111 |
|
|
|
21,683 |
|
|
|
(1,572 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from Bluegreen Corporation |
|
|
1,211 |
|
|
|
1,357 |
|
|
|
(146 |
) |
|
|
1,737 |
|
|
|
3,101 |
|
|
|
(1,364 |
) |
Interest and other income |
|
|
1,732 |
|
|
|
403 |
|
|
|
1,329 |
|
|
|
3,074 |
|
|
|
648 |
|
|
|
2,426 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(6,513 |
) |
|
|
(6,044 |
) |
|
|
(469 |
) |
|
|
(14,155 |
) |
|
|
(10,925 |
) |
|
|
(3,230 |
) |
Benefit for income taxes |
|
|
|
|
|
|
1,042 |
|
|
|
(1,042 |
) |
|
|
|
|
|
|
2,906 |
|
|
|
(2,906 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(6,513 |
) |
|
|
(5,002 |
) |
|
|
(1,511 |
) |
|
|
(14,155 |
) |
|
|
(8,019 |
) |
|
|
(6,136 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The results of operations of Carolina Oak are included in the Other Operations segment for the
three and six months ended June 30, 2008, but were included in the Primary Homebuilding segment for
the three and six months ended June 30, 2007.
43
For the Three Months Ended June 30, 2008 Compared to the Same 2007 Period:
Sales of real estate for the three months ended June 30, 2008 were $635,000 resulting from the
delivery of 2 units in Carolina Oak compared to no sales of real estate for the three months ended
June 30, 2007. At June 30, 2008, Carolina Oak had a backlog of 8 units with a value of $2.6 million
compared to no units in backlog at June 30, 2007. Other revenues for the three months ended June
30, 2008 were $251,000 compared to $142,000 for the same period in 2007.
Cost of sales of real estate for the three months ended June 30, 2008 was $587,000 compared to
$1.0 million in the three months ended June 30, 2007. Cost of sales of real estate for the quarter
ended June 30, 2008 related to the delivery of 2 units in Carolina Oak while in the same period in
2007 was comprised of only the expensing of interest previously capitalized as no units were
delivered.
Bluegreen reported net income for the three months ended June 30, 2008 of $3.4 million, as
compared to $4.1 million for the same period in 2007. Our interest in Bluegreens income was $1.2
million for the 2008 period compared to $1.4 million for the 2007 period. We currently own
approximately 9.5 million shares of the common stock of Bluegreen, which represented approximately
31% of Bluegreens outstanding shares at each of of June 30, 2008 and 2007. Under equity method
accounting, we recognize our pro-rata share of Bluegreens net income (net of purchase accounting
adjustments) as pre-tax earnings. Bluegreen has not paid dividends to its shareholders; therefore,
our earnings represent only our claim to the future distributions of Bluegreens earnings. Our
earnings in Bluegreen increase or decrease concurrently with Bluegreens reported results.
Selling, general and administrative expenses increased by $723,000, or 10.4%, to $7.7 million
during the three months ended June 30, 2008 from $6.9 million during the three months ended June
30, 2007. The increase was mainly attributable to severance charges related to the reductions in
force associated with the bankruptcy filing of Levitt and Sons, increased professional fees
associated with our interest and position taken in connection with our investments in equity
securities and increased insurance costs due to the absorption of certain of Levitt and Sons
insurance costs. These increases were partially offset by decreased compensation, benefits and
incentives expenses and decreased office related expenses. The decrease in compensation and office
related expenses is attributable to decreased headcount, as total employees decreased from 65 at
June 30, 2007 to 21 at June 30, 2008.
Interest incurred was approximately $3.1 million and $2.8 million for the three months ended
June 30, 2008 and 2007, respectively. While all interest was capitalized during the 2007 period,
only $972,000 was capitalized in the three months ended June 30, 2008. This resulted in interest
expense of $2.1 million for the three months ended June 30, 2008, compared to no interest expense
in the same period in 2007. The increase in interest expense was due to the completion of certain
phases of development associated with the Land Divisions real estate inventory which resulted in a
decreased amount of qualified assets for interest capitalization at the Parent Company level. The
increase in interest incurred was attributable to higher outstanding balances on our notes and
mortgages notes payable for the three months ended June 30, 2008 compared to the same period in
2007.
Interest and other income increased to $1.7 million during the three months ended June 30,
2008 as compared to $403,000 for the same period of 2007. The increase is due to a $1.2 million
gain on sale of equity securities and increased interest income based on higher cash balances in
the three months ended June 30, 2008 compared to the same period in 2007 reflecting proceeds from
the October 2007 rights offering.
44
For the Six Months Ended June 30, 2008 Compared to the Same 2007 Period:
Sales of real estate for the six months ended June 30, 2008 were $635,000 compared to $6.6
million during the same period in 2007. Sales of real estate for the six months ended June 30, 2008
relate to the delivery of 2 units in Carolina Oak while sales of real estate for the same period in
2007 relate to the delivery of 17 warehouse units in Levitt Commercial. At June 30, 2008, Carolina
Oak had
a backlog of 8 units with a value of $2.6 million compared to no units in backlog at June 30, 2007.
Other revenues for the six months ended June 30, 2008 were $510,000 compared to $435,000 for the
same period in 2007.
Cost of sales of real estate for the six months ended June 30, 2008 was $587,000 compared to
$6.5 million in the six months ended June 30, 2007. Cost of sales of real estate for the first six
months of 2008 related to the delivery of 2 units in Carolina Oak while in the same period in 2007
was comprised of both the cost of sales of the 17 warehouse units delivered in Levitt Commercial as
well as the expensing of interest previously capitalized.
Bluegreen reported net income for the six months ended June 30, 2008 of $4.8 million, as
compared to $9.4 million for the same period in 2007. Our interest in Bluegreens income was $1.7
million for the 2008 period compared to $3.1 million for the 2007 period.
Selling, general and administrative expenses decreased $417,000, or 2.7%, to $14.7 million
during the six months ended June 30, 2008 from $15.2 million during the six months ended June 30,
2007. The decrease was attributable to decreased compensation, benefits and incentives expenses
and decreased office related expenses. The decrease in compensation and office related expenses is
attributable to decreased headcount, as total employees decreased from 65 at June 30, 2007 to 21 at
June 30, 2008. These decreases were offset in part by increases in severance charges related to
the reductions in force associated with the bankruptcy filing of Levitt and Sons, increased
professional fees associated with our interest and position taken in connection with our
investments in equity securities and increased insurance costs due to the absorption of certain of
Levitt and Sons insurance costs.
Interest incurred was approximately $6.4 million and $5.1 million for the six months ended
June 30, 2008 and 2007, respectively. While all interest was capitalized during the 2007 period,
only $1.6 million was capitalized in the six months ended June 30, 2008. This resulted in interest
expense of $4.8 million for the six months ended June 30, 2008, compared to no interest expense in
the same period in 2007. The increase in interest expense was due to the completion of certain
phases of development associated with the Land Divisions real estate inventory which resulted in a
decreased amount of qualified assets for interest capitalization at the Parent Company level. The
increase in interest incurred was attributable to higher outstanding balances on our notes and
mortgages notes payable for the six months ended June 30, 2008 compared to the same period in 2007.
Interest and other income increased to $3.1 million during the six months ended June 30, 2008
as compared to $648,000 for the same period of 2007. The increase is due to a $1.2 million gain on
sale of equity securities and increased interest income based on higher cash balances in the six
months ended June 30, 2008 compared to the same period in 2007 reflecting proceeds from the October
2007 rights offering.
45
PRIMARY HOMEBUILDING SEGMENT RESULTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
|
Change |
|
|
2008 |
|
|
2007 |
|
|
Change |
|
(Dollars in thousands) |
|
( U n a u d i t e d ) |
|
|
( U n a u d i t e d ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of real estate |
|
$ |
|
|
|
|
114,805 |
|
|
|
(114,805 |
) |
|
|
|
|
|
|
227,317 |
|
|
|
(227,317 |
) |
Other revenues |
|
|
|
|
|
|
877 |
|
|
|
(877 |
) |
|
|
|
|
|
|
1,599 |
|
|
|
(1,599 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
|
|
|
|
115,682 |
|
|
|
(115,682 |
) |
|
|
|
|
|
|
228,916 |
|
|
|
(228,916 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales of real estate |
|
|
|
|
|
|
162,323 |
|
|
|
(162,323 |
) |
|
|
|
|
|
|
249,275 |
|
|
|
(249,275 |
) |
Selling, general and
administrative expenses |
|
|
|
|
|
|
20,675 |
|
|
|
(20,675 |
) |
|
|
|
|
|
|
39,096 |
|
|
|
(39,096 |
) |
Other expenses |
|
|
|
|
|
|
413 |
|
|
|
(413 |
) |
|
|
|
|
|
|
895 |
|
|
|
(895 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
|
|
|
|
183,411 |
|
|
|
(183,411 |
) |
|
|
|
|
|
|
289,266 |
|
|
|
(289,266 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income |
|
|
|
|
|
|
2,560 |
|
|
|
(2,560 |
) |
|
|
|
|
|
|
4,201 |
|
|
|
(4,201 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
|
|
|
|
(65,169 |
) |
|
|
65,169 |
|
|
|
|
|
|
|
(56,149 |
) |
|
|
56,149 |
|
Benefit for income taxes |
|
|
|
|
|
|
13,353 |
|
|
|
(13,353 |
) |
|
|
|
|
|
|
9,814 |
|
|
|
(9,814 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
|
|
|
|
(51,816 |
) |
|
|
51,816 |
|
|
|
|
|
|
|
(46,335 |
) |
|
|
46,335 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homes delivered (units) |
|
|
|
|
|
|
335 |
|
|
|
(335 |
) |
|
|
|
|
|
|
650 |
|
|
|
(650 |
) |
Construction starts (units) |
|
|
|
|
|
|
175 |
|
|
|
(175 |
) |
|
|
|
|
|
|
377 |
|
|
|
(377 |
) |
Average selling price of
homes delivered |
|
$ |
|
|
|
|
343 |
|
|
|
(343 |
) |
|
|
|
|
|
|
350 |
|
|
|
(350 |
) |
Margin percentage |
|
|
|
|
|
|
(41.4 |
)% |
|
|
41.4 |
% |
|
|
|
|
|
|
(9.7 |
)% |
|
|
9.7 |
% |
Gross orders (units) |
|
|
|
|
|
|
399 |
|
|
|
(399 |
) |
|
|
|
|
|
|
594 |
|
|
|
(594 |
) |
Gross orders (value) |
|
$ |
|
|
|
|
106,134 |
|
|
|
(106,134 |
) |
|
|
|
|
|
|
172,650 |
|
|
|
(172,650 |
) |
Cancellations (units) |
|
|
|
|
|
|
156 |
|
|
|
(156 |
) |
|
|
|
|
|
|
250 |
|
|
|
(250 |
) |
Net orders (units) |
|
|
|
|
|
|
243 |
|
|
|
(243 |
) |
|
|
|
|
|
|
344 |
|
|
|
(344 |
) |
Backlog of homes (units) |
|
|
|
|
|
|
820 |
|
|
|
(820 |
) |
|
|
|
|
|
|
820 |
|
|
|
(820 |
) |
Backlog of homes (value) |
|
$ |
|
|
|
|
270,907 |
|
|
|
(270,907 |
) |
|
|
|
|
|
|
270,907 |
|
|
|
(270,907 |
) |
There are no results of operations or financial metrics included in the preceding table for
the three and six months ended June 30, 2008 due to the deconsolidation of Levitt and Sons from our
financial statements at November 9, 2007. Therefore, a comparative analysis is not included in this
section. For further information regarding Levitt and Sons results of operations, see Note 19 to
our unaudited consolidated financial statements included under Item 1 of this report.
Historically, the results of operations of Carolina Oak were included as part of the Primary
Homebuilding segment. The results of operations of Carolina Oak after January 1, 2008 are included
in the Other Operations segment as a result of the deconsolidation of Levitt and Sons at November
9, 2007, and the acquisition of Carolina Oak by Woodbridge.
46
TENNESSEE HOMEBUILDING SEGMENT RESULTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
|
Change |
|
|
2008 |
|
|
2007 |
|
|
Change |
|
(Dollars in thousands) |
|
( U n a u d i t e d ) |
|
|
( U n a u d i t e d ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of real estate |
|
$ |
|
|
|
|
8,848 |
|
|
|
(8,848 |
) |
|
|
|
|
|
|
30,505 |
|
|
|
(30,505 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
|
|
|
|
8,848 |
|
|
|
(8,848 |
) |
|
|
|
|
|
|
30,505 |
|
|
|
(30,505 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales of real estate |
|
|
|
|
|
|
8,683 |
|
|
|
(8,683 |
) |
|
|
|
|
|
|
29,334 |
|
|
|
(29,334 |
) |
Selling, general and
administrative expenses |
|
|
|
|
|
|
1,980 |
|
|
|
(1,980 |
) |
|
|
|
|
|
|
3,864 |
|
|
|
(3,864 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
|
|
|
|
10,663 |
|
|
|
(10,663 |
) |
|
|
|
|
|
|
33,198 |
|
|
|
(33,198 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income |
|
|
|
|
|
|
23 |
|
|
|
(23 |
) |
|
|
|
|
|
|
52 |
|
|
|
(52 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
|
|
|
|
(1,792 |
) |
|
|
1,792 |
|
|
|
|
|
|
|
(2,641 |
) |
|
|
2,641 |
|
Benefit for income taxes |
|
|
|
|
|
|
596 |
|
|
|
(596 |
) |
|
|
|
|
|
|
924 |
|
|
|
(924 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
|
|
|
|
(1,196 |
) |
|
|
1,196 |
|
|
|
|
|
|
|
(1,717 |
) |
|
|
1,717 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homes delivered (units) |
|
|
|
|
|
|
44 |
|
|
|
(44 |
) |
|
|
|
|
|
|
91 |
|
|
|
(91 |
) |
Construction starts (units) |
|
|
|
|
|
|
60 |
|
|
|
(60 |
) |
|
|
|
|
|
|
112 |
|
|
|
(112 |
) |
Average selling price of
homes delivered |
|
$ |
|
|
|
|
201 |
|
|
|
(201 |
) |
|
|
|
|
|
|
214 |
|
|
|
(214 |
) |
Margin percentage |
|
|
|
|
|
|
1.9 |
% |
|
|
(1.9 |
)% |
|
|
|
|
|
|
6.0 |
% |
|
|
(6.0 |
)% |
Gross orders (units) |
|
|
|
|
|
|
79 |
|
|
|
(79 |
) |
|
|
|
|
|
|
169 |
|
|
|
(169 |
) |
Gross orders (value) |
|
$ |
|
|
|
|
16,291 |
|
|
|
(16,291 |
) |
|
|
|
|
|
|
36,634 |
|
|
|
(36,634 |
) |
Cancellations (units) |
|
|
|
|
|
|
31 |
|
|
|
(31 |
) |
|
|
|
|
|
|
63 |
|
|
|
(63 |
) |
Net orders (units) |
|
|
|
|
|
|
48 |
|
|
|
(48 |
) |
|
|
|
|
|
|
106 |
|
|
|
(106 |
) |
Backlog of homes (units) |
|
|
|
|
|
|
137 |
|
|
|
(137 |
) |
|
|
|
|
|
|
137 |
|
|
|
(137 |
) |
Backlog of homes (value) |
|
$ |
|
|
|
|
26,925 |
|
|
|
(26,925 |
) |
|
|
|
|
|
|
26,925 |
|
|
|
(26,925 |
) |
There are no results of operations or financial metrics included in the preceding table for
the three and six months ended June 30, 2008 due to the deconsolidation of Levitt and Sons from our
financial statements at November 9, 2007. Therefore, a comparative analysis is not included in this
section. For further information regarding Levitt and Sons results of operations, see Note 19 to
our unaudited consolidated financial statements included under Item 1 of this report.
47
FINANCIAL CONDITION
June 30, 2008 compared to December 31, 2007
Our total assets at June 30, 2008 and December 31, 2007 were $673.7 million and $712.9
million, respectively. The change in total assets primarily resulted from:
|
|
|
a net decrease in cash and cash equivalents of $69.9 million, which resulted from
cash used in operations of $39.8 million, cash used in investing activities of $14.6
million and cash used in financing activities of $15.5 million; |
|
|
|
|
a net increase of the investment in other equity securities of $15.7 million as a
result of the acquisition (net of shares sold) of shares of equity securities; and |
|
|
|
|
a net increase in inventory of real estate of $14.9 million mainly due to the land
development activities of the Land Division. |
Total liabilities at June 30, 2008 and December 31, 2007 were $432.9 million and $451.7
million, respectively. The change in total liabilities primarily resulted from:
|
|
|
a net decrease in notes and mortgage notes payable of $16.9 million, primarily due
to curtailment payments made in connection with a development loan collateralized by
land in Tradition Hilton Head; and |
|
|
|
|
a net decrease in accounts payable and other accrued liabilities of approximately
$4.2 million mainly attributable to decreased severance and construction related
accruals. |
LIQUIDITY AND CAPITAL RESOURCES
Management assesses the Companys liquidity in terms of the Companys cash and cash equivalent
balances and its ability to generate cash to fund its operating and investment activities. We
intend to use available cash and our borrowing capacity to implement our business strategy of
pursuing investment opportunities and continuing the development of our master-planned communities. We are also exploring possible ways to monetize a portion of our investment in certain Core assets through joint ventures or other strategic relationships.
We will also seek to utilize community development districts to fund development costs when
possible. We also will use available cash to repay borrowings and to pay operating expenses. We
believe that our current financial condition and credit relationships, together with anticipated
cash flows from operations and other sources of funds, which may include proceeds from the
disposition of certain properties or investments, will provide for our anticipated liquidity needs.
The Company separately manages its liquidity at the Parent Company level and at the operating
subsidiary level, consisting primarily of Core Communities. Subsidiary operations are generally
financed using proceeds from sales of real estate inventory and debt financing using operating
assets as loan collateral. Many of Cores financing agreements contain covenants at the subsidiary
level. Parent Company guarantees are generally avoided and, when provided, are provided on a
limited basis.
The Company expects to meet its long-term liquidity requirements through the foregoing, as
well as long-term secured and unsecured indebtedness, and future issuances of equity and/or debt
securities.
48
Woodbridge (Parent Company level)
As of June 30, 2008 and December 31, 2007, Woodbridge had cash of $81.9 million and $162.0
million, respectively. Our cash decreased by $80.1 million during the six months ended June 30,
2008 primarily due to the repayment of a $40.0 million intercompany loan to Core and the
acquisition of 1,435,000 shares of Office Depot common stock for an aggregate cost of $16.3
million.
The remaining balance was used in operations and to pay accrued expenses, including severance
related expenses.
On October 25, 2007, Woodbridge acquired from Levitt and Sons all of the membership interests
in Carolina Oak, which owns a 150 acre parcel in Tradition Hilton Head. In connection with this
acquisition, the credit facility collateralized by the 150 acre parcel (the Carolina Oak Loan)
was modified, and Woodbridge became the obligor under the Carolina Oak Loan. Woodbridge was
previously a guarantor of this loan and as partial consideration for Woodbridge becoming an obligor
of the Carolina Oak Loan, its membership interests in Levitt and Sons, previously pledged by
Woodbridge to the lender, was released. At June 30, 2008, the outstanding balance on the Carolina
Oak Loan was $39.1 million and is collateralized by a first mortgage on the 150 acre parcel in
Tradition Hilton Head and guaranteed by Carolina Oak. The Carolina Oak Loan is due and payable on
March 21, 2011 but may be extended for one additional year at the discretion of the lender.
Interest accrues under the facility at the Prime Rate (5.00% at June 30, 2008) and is payable
monthly. The Carolina Oak Loan is subject to customary terms, conditions and covenants, including
periodic appraisal and re-margining and the lenders right to accelerate the debt upon a material
adverse change with respect to Woodbridge. At June 30, 2008, there was no immediate availability to
draw on this facility based on available collateral and the Company was in compliance with the loan
covenants.
At November 9, 2007, the date of the deconsolidation of Levitt and Sons, Woodbridge had a
negative investment in Levitt and Sons of $123.0 million and there were outstanding advances due to
Woodbridge from Levitt and Sons of $67.8 million, resulting in a net negative investment of $55.2
million. Since the Chapter 11 Cases were filed, Woodbridge has incurred certain administrative
costs relating to services performed for Levitt and Sons and its employees (the Post Petition
Services) in the amounts of $591,000 and $1.6 million in the three and six months ended June 30,
2008, respectively. The payment by Levitt and Sons of its outstanding advances and the Post
Petition Services expenses are subject to the risks inherent to the recovery by creditors in the
Chapter 11 Cases. Levitt and Sons may not have sufficient assets to repay Woodbridge for advances
made to Levitt and Sons or the Post Petition Services and it is likely that these amounts will not
be recovered. In addition, Woodbridge files a consolidated federal income tax return. At June
30, 2008, Woodbridge had a federal income tax receivable of $27.4 million as a result of losses
incurred which is anticipated to be collected upon filing the 2007 consolidated U.S. federal income
tax return. Woodbridge has been advised that the creditors believe they are entitled to share in an
unstated amount of the refund.
On June 27, 2008, Woodbridge entered into the Settlement Agreement with the Debtors and the
Joint Committee of Unsecured Creditors appointed in the Chapter 11 Cases. Pursuant to the
Settlement Agreement, among other things, (i) Woodbridge has agreed to pay to the Debtors
bankruptcy estates the sum of $12.5 million plus accrued interest from May 22, 2008 through the
date of payment, (ii) Woodbridge has agreed to waive and release substantially all of the claims it
has against the Debtors, including its administrative expense claims through July 2008, and (iii)
the Debtors (joined by the Joint Committee of Unsecured Creditors) have agreed to waive and release
any claims they may have against Woodbridge and its affiliates. The Settlement Agreement is subject
to a number of conditions, including the approval of the Bankruptcy Court, and there is no
assurance that the Settlement Agreement will be approved or the transactions contemplated by it
completed. Certain of Levitt and Sons creditors have indicated that they intend to object to the
Settlement Agreement and may pursue claims against Woodbridge. At this time, it is not possible to
predict the impact that the Chapter 11 Cases will have on Woodbridge and its results of operations,
cash flows or financial condition in the event the Settlement Agreement is not approved by the
Bankruptcy Court.
The
Company intends to seek to effect a reverse stock split during the third or fourth quarter of 2008
which, if consummated, would combine a predetermined number of shares of the Companys Class A
Common Stock into one share of Class A Common Stock and the same predetermined number of shares of
the Companys Class B Common Stock into one share of Class B Common Stock. The reverse stock split
would proportionately reduce the number of authorized shares and the number of outstanding shares
of the Companys Class A Common Stock and Class B Common Stock, but would not have any impact on a
shareholders proportionate equity interest or voting rights in
the Company. The Company is pursuing the reverse stock split based on the continued listing requirements of the New
York Stock Exchange. While the reverse stock split would potentially address issues with respect
to the trading price of the Companys Class A Common Stock, the exchange also requires a minimum
market value of publicly held shares and excludes the value of shares held by large shareholders
from that calculation. Given the current composition of the Companys shareholders, it may be
difficult for the Company to meet this requirement for continued listing. There is no assurance
that the reverse stock split will be effected in the timeframe anticipated, or at all.
49
Core Communities
At June 30, 2008 and December 31, 2007, Core had cash and cash equivalents of $43.4 million
and $33.1 million, respectively. Cash increased $10.3 million during the six months ended June 30,
2008 primarily as a result of the repayment of a $40.0 million intercompany loan from the Parent
Company, offset by $19.9 million of curtailment payments mentioned below and cash used to fund the
continued development at Cores projects as well as selling, general and administrative expenses.
At June 30, 2008, Core had immediate availability under its various lines of credit of $19.0
million. Core has incurred and expects to continue to incur significant land development
expenditures in both Tradition, Florida and in Tradition Hilton Head. Tradition Hilton Head is in
the early stage of the master-planned communitys development cycle and significant investments
have been made and will be required in the future to develop the community infrastructure.
In March 2008, Core agreed to the termination of a $20 million line of credit. No amounts
were outstanding under this line of credit at the date of termination. The lender agreed to
continue to honor two construction loans to a subsidiary of Core totaling $9.0 million as of June
30, 2008. In July 2008, Core refinanced these construction loans for $9.1 million. The terms of
the new loan agreement call for a maturity date of July 2010 with a one year extension.
Cores loan agreements generally require repayment of specified amounts upon a sale of a
portion of the property collateralizing the debt. Core is subject to provisions in one of its loan
agreements collateralized by land in Tradition Hilton Head that require additional principal
payments, known as curtailment payments, in the event that actual sales are below the contractual
requirements. A curtailment payment of $14.9 million relating to Tradition Hilton Head was paid in
January 2008. On June 27, 2008, Core modified this loan agreement. The loan modification agreement
terminated the revolving feature of the loan and reduced a $19.3 million curtailment payment due in
June 2008 to $17.0 million, $5.0 million of which was paid in June 2008, with the remaining $12.0
million due in November 2008. Additionally, the loan modification agreement reduced the extension
term from an extension period of one year to an extension period of up to two 3-month periods upon
compliance with the conditions set forth in the loan modification agreement, including a minimum $5
million principal reduction with each extension. The February 28, 2009 maturity date of the loan
was not modified in the loan modification agreement.
The loans which provide the primary financing for Tradition, Florida and Tradition Hilton Head
have annual appraisal and re-margining requirements. These provisions may require Core, in
circumstances where the value of its real estate collateralizing these loans declines, to pay down
a portion of the principal amount of the loan to bring the loan within specified minimum
loan-to-value ratios. Accordingly, should land prices decline, reappraisals could result in
significant future re-margining payments.
All of Cores debt facilities contain financial covenants generally covering net worth,
liquidity and loan to value ratios. Further, Cores debt facilities contain cross-default
provisions under which a default on one loan with a lender could cause a default on other debt
instruments with the same lender. If Core fails to comply with any of these restrictions or
covenants, the lenders under the applicable debt facilities could cause Cores debt to become due
and payable prior to maturity. These accelerations or significant re-margining payments could
require Core to dedicate a substantial portion of cash to payment of its debt and reduce its
ability to use its cash to fund operations or investments. If Core does not have sufficient cash to
satisfy these required payments, then Core would need to seek to refinance the debt or seek other
funds, which may not be available on attractive terms, if at all. Possible liquidity sources
available to Core include the sale of real estate inventory, including commercial properties, debt
or outside equity financing, including secured borrowings using unencumbered land, and funding from
Woodbridge.
50
Off Balance Sheet Arrangements and Contractual Obligations
In connection with the development of certain projects, community development, special
assessment or improvement districts have been established and may utilize tax-exempt bond financing
to fund construction or acquisition of certain on-site and off-site infrastructure improvements
near or at these communities. If these improvement districts were not established, Core would need
to fund
community infrastructure development out of operating cash flow or through sources of
financing or capital, or be forced to delay its development activity. The obligation to pay
principal and interest on the bonds issued by the districts is assigned to each parcel within the
district, and a priority assessment lien may be placed on benefited parcels to provide security for
the debt service. The bonds, including interest and redemption premiums, if any, and the associated
priority lien on the property are typically payable, secured and satisfied by revenues, fees, or
assessments levied on the property benefited. Core pays a portion of the revenues, fees, and
assessments levied by the districts on the properties it still owns that are benefited by the
improvements. Core may also be required to pay down a specified portion of the bonds at the time
each unit or parcel is sold. The costs of these obligations are capitalized to inventory during the
development period and recognized as cost of sales when the properties are sold.
Cores bond financing at June 30, 2008 consisted of district bonds totaling $218.7 million
with outstanding amounts of approximately $102.4 million. Further, at June 30, 2008, there was
approximately $110.4 million available under these bonds to fund future development expenditures.
Bond obligations at June 30, 2008 mature in 2035 and 2040. As of June 30, 2008, Core Communities
owned approximately 16% of the property subject to assessments within the community development
district and approximately 91% of the property subject to assessments within the special assessment
district. During the three and six months months ended June 30, 2008, Core recorded approximately
$163,000 and $268,000, respectively, in assessments on property owned by it in the districts.
Core is responsible for any assessed amounts until the underlying property is sold and will
continue to be responsible for the annual assessments if the property is never sold. Accordingly,
if the current adverse conditions in the homebuilding industry do not improve and Core is forced to
hold its land inventory longer than originally projected, Core would be forced to pay a higher
portion of annual assessments on property which is subject to assessments. In addition, Core has
guaranteed payments for assessments under the district bonds in Tradition, Florida which would
require funding if future assessments to be allocated to property owners are insufficient to repay
the bonds. Management has evaluated this exposure based upon the criteria in Statement of
Financial Accounting Standards No. 5, Accounting for Contingencies, and has determined that there
have been no substantive changes to the projected density or land use in the development subject to
the bond which would make it probable that Core would have to fund future shortfalls in
assessments.
In accordance with Emerging Issues Task Force Issue No. 91-10, Accounting for Special
Assessments and Tax Increment Financing, the Company records a liability for the estimated
developer obligations that are fixed and determinable and user fees that are required to be paid or
transferred at the time the parcel or unit is sold to an end user. At June 30, 2008, the liability
related to developer obligations was $3.5 million. This liability is included in the liabilities
related to assets held for sale in the accompanying consolidated statements of financial condition
as of June 30, 2008, and includes amounts associated with Cores ownership of the property.
51
The following table summarizes our contractual obligations as of June 30, 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by period |
|
|
|
|
|
|
|
Less than |
|
|
2 - 3 |
|
|
4 - 5 |
|
|
More than |
|
Category |
|
Total |
|
|
1 year |
|
|
Years |
|
|
Years |
|
|
5 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt obligations (1) (2) |
|
$ |
257,872 |
|
|
|
26,806 |
|
|
|
117,967 |
|
|
|
3,848 |
|
|
|
109,251 |
|
Long-term debt obligations
associated with assets held for
sale |
|
|
80,693 |
|
|
|
8,886 |
|
|
|
68,645 |
|
|
|
112 |
|
|
|
3,050 |
|
Operating lease obligations |
|
|
4,094 |
|
|
|
1,245 |
|
|
|
1,257 |
|
|
|
424 |
|
|
|
1,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total obligations |
|
$ |
342,659 |
|
|
|
36,937 |
|
|
|
187,869 |
|
|
|
4,384 |
|
|
|
113,469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts exclude interest because terms of repayment are based on construction activity and
sales volume. In addition, a large portion of our debt is based on variable rates. |
|
(2) |
|
These amounts represent scheduled principal payments and some of those borrowings require
the repayment of specified amounts upon a sale of portions of the property collateralizing those
obligations, as well as curtailment repayments prior to scheduled maturity pursuant to
re-margining requirements. |
Long-term debt obligations consist of notes, mortgage notes and bonds payable. Operating
lease obligations consist of lease commitments. In addition to the above contractual obligations,
we have $2.4 million in unrecognized tax benefits related to FASB Interpretation No. 48
Accounting for Uncertainty in Income Taxes an interpretation of FASB No. 109 (FIN No. 48).
FIN No. 48 provides guidance for how a company should recognize, measure, present and disclose in
its financial statements uncertain tax positions that a company has taken or expects to take on a
tax return.
At June 30, 2008, we had outstanding surety bonds and letters of credit of approximately $7.7
million related primarily to obligations to various governmental entities to construct improvements
in our various communities. We estimate that approximately $4.8 million of work remains to complete
these improvements. We do not believe that any outstanding bonds or letters of credit will likely
be drawn upon.
Levitt and Sons had $33.3 million in surety bonds related to its ongoing projects at the time
of the filing of the Chapter 11 Cases. In the event that these obligations are drawn and paid by
the surety, Woodbridge could be responsible for up to $12.0 million plus costs and expenses in
accordance with the surety indemnity agreements executed by Woodbridge. As of June 30, 2008, the
$1.1 million surety bonds accrual at Woodbridge related to certain bonds which management considers
to be probable that Woodbridge will be required to reimburse the surety under applicable indemnity
agreements. During the three and six months ended June 30, 2008, Woodbridge performed under its
indemnity agreements and reimbursed the surety $367,000 and $532,000, respectively. It is unclear
given the uncertainty involved in the Chapter 11 Cases whether and to what extent the remaining
outstanding surety bonds of Levitt and Sons will be drawn and the extent to which Woodbridge may be
responsible for additional amounts beyond this accrual. There is no assurance that Woodbridge will
not be responsible for amounts well in excess of the $1.1 million accrual. It is considered
unlikely that Woodbridge will receive any repayment, assets or other consideration as recovery of
any amounts it may be required to pay.
52
On November 9, 2007, Woodbridge put in place an employee fund and offered up to $5 million of
severance benefits to terminated Levitt and Sons employees to supplement the limited termination
benefits paid by Levitt and Sons to those employees. Levitt and Sons was restricted in the payment
of termination benefits to its former employees by virtue of the Chapter 11 Cases. Woodbridge
incurred severance and benefits related restructuring charges of $816,000 and $2.0 million during
the three and six months ended June 30, 2008, respectively. For the three and six
months ended June 30, 2008, the Company paid approximately $1.2 million and $2.7 million,
respectively, in severance and termination charges related to the above described fund as well as
severance for employees other than Levitt and Sons employees. Employees entitled to participate in
the fund either received a payment stream, which in certain cases extends over two years, or a lump
sum payment, dependent on a variety of factors. Former Levitt and Sons employees who received
these payments were required to assign to Woodbridge their unsecured claims against Levitt and
Sons. At June 30, 2008, $1.3 million was accrued to be paid from this fund and the severance
accrual for other employees of the Company. In addition to these amounts, Woodbridge expects
additional severance related obligations of approximately $202,000 to be incurred during the
remainder of 2008.
NEW ACCOUNTING PRONOUNCEMENTS.
See Note 17 to our unaudited consolidated financial statements included under Part 1. Item 1 of this
report for a discussion of new accounting pronouncements applicable to us.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Market risk is defined as the risk of loss arising from adverse changes in market valuations
that arise from interest rate risk, foreign currency exchange rate risk, commodity price risk and
equity price risk. We have a risk of loss associated with our borrowings as we are subject to
interest rate risk on our long-term debt. At June 30, 2008, including borrowings related to assets
held for sale, we had $232.7 million in borrowings with adjustable rates tied to the Prime Rate
and/or LIBOR rate and $105.9 million in borrowings with fixed or initially-fixed rates.
Consequently, the impact on our variable rate debt from changes in interest rates may affect our
earnings and cash flows but would generally not impact the fair value of such debt. With respect to
fixed rate debt, changes in interest rates generally affect the fair market value of the debt but
not our earnings or cash flow.
Assuming the variable rate debt balance of $232.7 million outstanding at June 30, 2008 (which
does not include initially fixed-rate obligations which will not become floating rate during 2008)
were to remain constant, each one percentage point increase in interest rates would increase the
interest incurred by us by approximately $2.3 million per year.
Included in the Companys consolidated statements of financial condition at June 30, 2008 were
$15.7 million of publicly traded equity securities (comprised of 1,435,000 shares of Office Depot
common stock) which are carried at fair value with net unrealized gains or losses reported as a
component of accumulated other comprehensive income in the consolidated statement of shareholders
equity. These equity securities are subject to equity pricing risks arising in connection with
changes in their relative value due to changing market and economic conditions and the results of
operation and financial condition of Office Depot. A decline in the trading price of these
securities will negatively impact the Companys shareholders equity.
53
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, our management carried out an evaluation, with
the participation of our Chief Executive Officer and our Chief Financial Officer, of the
effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Exchange Act). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that, as of June 30, 2008, our disclosure controls and procedures were effective to
ensure that information required to be disclosed in reports that we file or submit under the
Exchange Act was recorded, processed, summarized and reported within the time periods specified in
the rules and forms of the Securities and Exchange
Commission and that such information was accumulated and communicated to our management, including
our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely
decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the
period covered by this report that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
54
PART II OTHER INFORMATION
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Item 1. |
|
Legal Proceedings |
Other than as described herein with respect to the Chapter 11 Cases, there have been no
material changes in our legal proceedings from those disclosed in our Annual Report on Form 10-K
for the year ended December 31, 2007. See Note 19 to our unaudited consolidated financial
statements included under Part 1. Item 1 of this report for a detailed description of the current status of
the Chapter 11 Cases.
There have been no material changes in our risk factors from those disclosed in our Annual
Report on Form 10-K for the year ended December 31, 2007.
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Item 4. |
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Submission of Matters to a Vote of Security Holders |
Election of Directors
The Company held its Annual Meeting of Shareholders on May 20, 2008. At the meeting, the
holders of the Companys Class A and Class B common stock voting together as a single class elected
the following three directors to serve on the Companys Board of Directors by the following votes:
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Nominee |
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For |
|
Withheld |
John E. Abdo
|
|
|
117,409,509 |
|
|
|
6,485,516 |
|
William Nicholson
|
|
|
117,664,868 |
|
|
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6,230,157 |
|
Alan J. Levy
|
|
|
117,657,857 |
|
|
|
6,237,163 |
|
The other directors continuing in office are Alan B. Levan, James Blosser, Darwin C. Dornbush,
Lawrence Kahn, Joel Levy, and William Scherer.
Approval of the Amendment to the Companys Amended and Restated Articles of Incorporation
The holders of the Companys Class A and Class B common stock voting together as a single
class approved an amendment to the Companys Amended and Restated Articles of Incorporation
changing the name of the Company from Levitt Corporation to Woodbridge Holdings Corporation by the
votes set forth below. The proposal relating to the amendment was presented by the Companys Board
of Directors from the floor of the meeting and, accordingly, the following votes represent only
those votes cast in person at the meeting.
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|
|
|
|
|
|
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For |
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Against |
|
Abstain |
96,812,611
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|
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0 |
|
|
|
0 |
|
55
|
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Item 5. |
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Other Information. |
On August 11, 2008, the Company was notified by the New York Stock Exchange that the Company
did not have an average closing price per share of its Class A Common Stock in excess of $1.00 for
a consecutive 30 trading-day period, as required for continued listing. The Company intends to
provide notification to the New York Stock Exchange of its intent to seek to cure the deficiency
and the steps it will take to attempt to do so, which may include, among other actions, the
contemplated reverse stock split described elsewhere in this report. If the Company is unable to
satisfy the requirement within time frame specified by the rules and regulations of the New York
Stock Exchange, the Companys Class A Common Stock will be delisted from the exchange.
Index to Exhibits
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Exhibit 31.1*
|
|
CEO Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|
|
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Exhibit 31.2*
|
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CFO Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
Exhibit 32.1**
|
|
CEO Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. |
|
|
|
Exhibit 32.2**
|
|
CFO Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. |
|
|
|
* |
|
Exhibits filed with this Form 10-Q |
|
** |
|
Exhibits furnished with this Form 10-Q |
56
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
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WOODBRIDGE HOLDINGS CORPORATION
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|
Date: August 11, 2008 |
By: |
/s/ Alan B. Levan
|
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Alan B. Levan, Chief Executive Officer |
|
|
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|
|
|
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Date: August 11, 2008 |
By: |
/s/ John K. Grelle
|
|
|
|
John K. Grelle, Chief Financial Officer |
|
|
|
|
|
|
57