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Bluegreen Corp. (BXG)

Q3 2008 Earnings Call

November 10, 2008 10:00 am ET

Executives

Adam Prior – Vice President of The Equity Group Inc.

John M. Maloney, Jr. – President and Chief Executive Officer

Anthony M. Puleo – Senior Vice President and Chief Financial Officer

Presentation

Operator

Good day ladies and gentlemen and welcome to the Third Quarter 2008 Bluegreen Earnings Conference Call. (Operator Instructions) I would now like to turn the presentation over to Mr. Adam Prior of The Equity Group.

Adam Prior

Our speakers on this pre-recorded call will be John Maloney, President and Chief Executive Officer of Bluegreen and Tony Puleo, Bluegreen’s Senior Vice President and Chief Financial Officer.

Before we get started I would like to remind everyone that statements made during today’s call may constitute forward-looking statements and are made pursuant to the Safe Harbor Provision of the Private Securities and Litigation Reform Act of 1995.

Forward-looking statements are based largely on expectations and are subject to a number of risks and uncertainties including but not limited to the risks and uncertainties associated with economic, competitive and other factors affecting the company and its operations, markets; products and services as well as the risk that the company’s strategic initiatives do not accomplish the company’s goals; do not have the expected impact on the company’s financial position, results of operations, liquidity and affects the performance of the company’s vacation ownership notes receivables may deteriorate in the future; the company may not be in a position to draw down on its existing credit lines or may be unable to renew or replace such lines of credit; real estate inventories, notes receivable, retained interest in notes receivables sold and other assets will be determined to be impaired; risks relating to pending our future litigation, claims and assessments; sales and marketing strategies related to resorts and communities properties may not be successful; retail prices and home site yields for community properties will below the company’s estimates; marketing costs will increase and not result in increased sales; sales to existing owners will not continue at current levels; deferred sales will not be recognized to the extent or at the time anticipated; risks relating to pursuing alternatives for the sale of all or part of the company; and the risks and other factors detailed in the company's SEC filings, including its most recent Annual Report on Form 10-K filed on March 3, 2008 and Form 10-Q to be filed on November 10, 2008.

I would now like to turn the call over to John Maloney, President and Chief Executive Officer of Bluegreen.

John Maloney

Good morning and thank you for joining us today. I’d like to begin my stating that we are pleased with the results of our reward business during the third quarter, especially when you consider that we are operating in one of the most challenging periods in history.

For the three to nine months ended September 30, 2008 our contract sales have increased compared to the comparable periods last year. Our segment selling, marketing, general and administrative expenses are consistent with the prior year and our time share and notes receivable portfolio has performed within historical norms. However, this really doesn’t tell the story.

Significant stresses in the commercial credit market have made the availability of credit uncertain and has increased borrowing costs. In a normalized environment our intention would be to continue to grow. We believe there continue to be strong industry trends, our brand remains strong, we offer a flexible point system and we enjoy what we believe is an unparalleled reputation for customer service.

However, given the challenges of this credit market we decided that it was only prudent to be proactive and to implement the strategic initiatives we announced early this morning. As I will describe in more detail, we believe these initiatives will refocus our business on the generation of operating cash flow and to lesson our dependency on the credit markets in the near term.

As many of you may know, Bluegreen Resorts Operations consists of sales operations, resort management services and finance operations. While each of these areas of focus has been profitable, each is very different when it comes to cash generation and dependency on the credit market.

Sales operations require the upfront acquisition, development and carry costs required to have adequate timeshare info for it to sell. In addition, as we have provided financing on 95% of our timeshare sales historically, few of our sales generate significant cash when consummated. When combined with the direct marketing nature of our industry, our commissions and other selling and marketing costs that are paid up front, it well exceeds the cash received from the customer at the time of sale. Timeshare sales result in net cash outflows by the company. Like most others in our industry we have historically relied on the credit market to sell or pledge our timeshare notes receivables in order to make up for this cash deficit.

On the other hands, our resort management operations and our finance operations generate both profits and cash for the company, while not requiring much if any support from the credit markets. Resort management earns cash on a fee for service basis from the property and club owners associations that service our over 194,000 timeshare owners.

Our finance operations include the ongoing excess interest spread earned on over $359 million of on balance sheet notes receivables, as well as continued earnings on over $572 million of off balance sheet notes receivables through our retained interest in those notes. In addition, finance operations include providing mortgage servicing on the off balance sheet notes receivables and title services all on a cash fee for service basis.

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