LEVITT CORP
None.
Our principal and executive offices are located at the Corporate Headquarters of our affiliate, BankAtlantic, 2100 West Cypress Creek Road, Fort Lauderdale, Florida 33309. Levitt Corporation utilizes space pursuant to an agreement with BankAtlantic. We purchased an office building located at 2200 West Cypress Creek Road in Fort Lauderdale, Florida in 2004. The premises are fully occupied pursuant to the terms of a five year lease. We entered into a modification of the lease agreement and certain space will be ready for us to occupy in late 2006. We anticipate that this space will house our corporate headquarters. Our subsidiaries occupy premises in various locations in Florida, Georgia, South Carolina and Tennessee under leases that expire at various dates through 2010. In addition to our properties used for offices, we additionally own commercial space in Florida that is leased to third parties.
On May 26, 2005 a suit was filed in the 9th Judicial Circuit in and for Orange County, Florida against the Company in Frank Albert, Dorothy Albert, et al. v. Levitt and Sons, LLC, a Florida limited liability company, Levitt Homes, LLC, a Florida limited liability company, Levitt Corporation, a Florida corporation, Levitt Construction Corp. East, a Florida corporation and Levitt and Sons, Inc., a Florida corporation. The suit purports to be a class action on behalf of 105 named plaintiffs residing in approximately 65 homes located in one of the Company’s communities in Central Florida. The complaint alleges: breach of contract, breach of implied covenant of good faith and fair dealing; failure to disclose latent defects; breach of express warranty; breach of implied warranty; violation of building code; deceptive and unfair trade practices; negligent construction; and negligent design. Plaintiffs seek certification as a class, or in the alternative to divide into sub-classes, unspecified damages alleged to range from $50,000 to $400,000 per house, costs and attorneys’ fees. Plaintiffs seek a trial by jury. On February 15, 2006, the parties filed a Joint Stipulation for Abatement of Lawsuit Pending Compliance with Chapter 558, Florida Statutes and Order Approving Same (“Joint Stipulation”). Court approval of the Joint Stipulation is pending. While there is no assurance that the Company will be successful, the Company believes it has valid defenses and is engaged in a vigorous defense of the action.
None.  14    Table of Contents    PART II
Market Information       Our Class A common stock is listed on the New York Stock Exchange under the symbol “LEV.” BFC Financial Corporation (“BFC”) is the sole holder of the Company’s Class B common stock and there is no trading market for the Company’s Class B common stock. The Class B common stock may only be owned by BFC Financial Corporation or its affiliates and is convertible into Class A common stock at the discretion of the holder on a one-for-one basis.       The quarterly high and low sale prices of our Class A common stock on the New York Stock Exchange (“NYSE”) for the years ended December 31, 2005 and 2004 are presented in the following table. Our Class A common stock commenced two-way trading on the NYSE on January 2, 2004.                                              2004     2005         High     Low     High     Low       First Quarter   $ 26.80     $ 16.25     $ 33.85     $ 24.67     Second Quarter   $ 26.35     $ 18.62     $ 30.66     $ 24.60     Third Quarter   $ 26.10     $ 19.10     $ 33.20     $ 22.00     Fourth Quarter   $ 31.48     $ 22.45     $ 23.69     $ 18.86            The stock prices do not include retail mark-ups, mark-downs or commissions. On March 24, 2006, the closing sale price of our Class A common stock as reported on the NYSE was $21.48 per share.       On May 31, 2005, the Company submitted its Annual Section 303A.12(a) Certification to the NYSE. Pursuant to this filing, the Chief Executive Officer provided an unqualified certification that, as of the date of the certification, he was not aware of any violation by the Company of the Corporate Governance Listing Standards of the NYSE.  Holders       On March 6, 2006, there were approximately 11,233 record holders and 18,604,053 shares of the Class A common stock issued and outstanding. Our controlling shareholder, BFC Financial Corporation, holds all 1,219,031 shares of our Class B common stock.  Dividends       On each of July 26, 2004 and October 25, 2004 our Board of Directors declared cash dividends of $0.02 per share on our Class A common stock and Class B common stock. These dividends were paid in August 2004 and November 2004, respectively.       On each of January, 24, 2005, April 25, 2005, July 25, 2004, November 7, 2005 and January 23, 2006 our Board of Directors declared cash dividends of $0.02 per share on our Class A common stock and Class B common stock. These dividends were paid in February 2005, May 2005, August 2005, November 2005 and February 2006, respectively. The Board has not adopted a policy of regular dividend payments. The payment of dividends in the future is subject to approval by our Board of Directors and will depend upon, among other factors, our results of operations and financial condition. We cannot assure you that we will declare additional cash dividends in the future.  15    Table of Contents  Securities Authorized for Issuance under Equity Compensation Plans       The following table contains information, as of December 31, 2005, concerning our equity compensation plans:                                      Number of securities to be issued   Weighted average   Number of securities       upon exercise of outstanding   exercise price of outstanding   remaining available   Plan Category   options, warrants or rights   options, warrants and rights   for future issuance     Equity compensation plans approved by security holders     1,305,176     $ 25.59       187,937     Equity compensation plans not approved by security holders     —       —       —                                 Total     1,305,176     $ 25.59       187,937
The following table sets forth selected consolidated financial data as of and for the years ended December 31, 2005 through 2001. Certain selected financial data presented below as of December 31, 2005, 2004, 2003, 2002 and 2001 and for each of the years in the five-year period ended December 31, 2005, are derived from our audited consolidated financial statements. This table is a summary and should be read in conjunction with the consolidated financial statements and related notes thereto which are included elsewhere in this report.                                                      As of or for the Year Ended December 31,         2005     2004     2003     2002     2001         (Dollars in thousands, except per share, unit and average price data)       Consolidated Operations:                                           Revenues from sales of real estate   $ 558,112       549,652       283,058       207,808       143,140     Cost of sales of real estate     408,082       406,274       209,431       159,675       111,685                                       Margin (a)     150,030       143,378       73,627       48,133       31,455     Earnings from Bluegreen Corporation     12,714       13,068       7,433       4,570       —     Selling, general & administrative expenses     87,639       71,001       42,027       30,549       26,130     Net income     54,911       57,415       26,820       19,512       7,522                                                 Basic earnings per share   $ 2.77       3.10       1.81       1.32       0.51     Diluted earnings per share (b)   $ 2.74       3.04       1.77       1.30       0.51     Average shares outstanding (thousands)     19,817       18,518       14,816       14,816       14,816     Diluted shares outstanding (thousands)     19,929       18,600       14,816       14,816       14,816     Dividends declared per common share   $ 0.08       0.04       —       —       —                                                 Key Performance Ratios:                                           Margin percentage (c)     26.9 %     26.1 %     26.0 %     23.2 %     22.0 %   S, G & A expense as a percentage of total revenues     15.6 %     12.8 %     14.7 %     14.6 %     18.1 %   Return on average shareholders’ equity, annualized (d)     17.0 %     27.3 %     23.0 %     22.0 %     11.4 %   Ratio of debt to shareholders’ equity     116.6 %     91.0 %     138.8 %     137.1 %     131.6 %   Ratio of debt to total capitalization (e)     53.8 %     47.6 %     58.1 %     57.8 %     56.8 %   Ratio of net debt to total capitalization (e)(f)     38.9 %     25.3 %     46.1 %     51.5 %     42.3 %                                               Consolidated Balance Sheet Data:                                           Cash   $ 113,562       125,522       35,965       16,014       23,591     Inventory of real estate     611,260       413,471       254,992       198,126       142,433     Investment in Bluegreen Corporation     95,828       80,572       70,852       57,332       —     Total assets     895,673       678,467       393,505       295,461       196,193     Total debt     407,970       268,226       174,093       147,445       92,130     Total liabilities     545,887       383,678       268,053       187,928       126,165     Shareholders’ equity     349,786       294,789       125,452       107,533       70,028       16    Table of Contents                                                      As of or for the Year Ended December 31,         2005     2004     2003     2002     2001         (Dollars in thousands, except per share, unit and average price data)       Homebuilding Division (g):                                           Revenues from sales of real estate   $ 438,367       472,296       222,257       162,359       117,663     Cost of sales of real estate     347,008       371,097       173,072       131,281       95,553                                       Margin (a)   $ 91,359       101,199       49,185       31,078       22,110     Margin percentage (c)     20.8 %     21.4 %     22.1 %     19.1 %     18.8 %   Construction starts     1,662       2,294       1,593       796       584     Homes delivered     1,789       2,126       1,011       740       597     Average selling price of homes delivered   $ 245,000       222,000       220,000       219,000       195,000     New orders (units)     1,767       1,679       2,240       980       694     New orders (sales value)   $ 547,045       427,916       513,436       204,730       146,869     Backlog of homes (units)     1,792       1,814       2,053       824       584     Backlog of homes (sales value)   $ 557,325       448,647       458,771       167,526       125,041                                                 Land Division (h):                                           Revenues from sales of real estate   $ 105,658       96,200       55,037       53,919       21,555     Cost of sales of real estate     50,706       42,838       31,362       28,722       10,570                                       Margin (a)   $ 54,952       53,362       23,675       25,197       10,985     Margin percentage (c)     52.0 %     55.5 %     43.0 %     46.7 %     51.0 %   Acres sold     1,647       1,212       1,337       1,715       253     Inventory owned (acres)     12,092       8,349       5,116       4,490       4,131     Inventory owned (book value)   $ 150,686       122,056       43,906       59,520       50,048     Backlog of land (acres)     238       1,833       1,433       1,845       469     Backlog of land (sales value)   $ 34,802       121,095       103,174       72,767       27,234                  (a)   Margin is calculated as sales of real estate minus cost of sales of real estate.     (b)   Diluted earnings per share takes into account the dilution in earnings we recognize as a result of outstanding Bluegreen securities that entitles the holders thereof to acquire shares of Bluegreen’s common stock.     (c)   Margin percentage is calculated by dividing margin by sales of real estate.     (d)   Calculated by dividing net income by average shareholders’ equity. Average shareholders’ equity is calculated by averaging beginning and end of period shareholders’ equity balances.     (e)   Total capitalization is calculated as total debt plus total shareholders’ equity.     (f)   Net debt is calculated as total debt minus cash.     (g)   Excludes joint ventures. Backlog includes all homes subject to sales contracts.     (h)   Includes land sales to Homebuilding Division, if any. These inter-segment transactions are eliminated in consolidation.   17    Table of Contents
Executive Overview       Management evaluates the performance and prospects of the Company and its subsidiaries using a variety of financial and non-financial measures. The key financial measures utilized to evaluate historical operating performance include revenues from sales of real estate, cost of 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), income before taxes and net income. Non-financial measures used to evaluate both historical performance and our future prospects include number of homes delivered, the number and value of new orders executed, the number of housing starts, the average selling price of our homes and the number of homes delivered, the number of homes and acres in backlog (which we measure as homes or land subject to executed sales contracts) 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 construction trends. The Company’s ratio of debt to shareholders’ equity and cash requirements are also considered when evaluating the Company’s future prospects as are general economic factors and interest rate trends. Some of the above measures are discussed in the following sections as they relate to our operating results, financial position and liquidity. The list of measures above is not an exhaustive list, and we may from time to time utilize additional financial and non-financial information or may not use each of the measures listed above.  Outlook       2005 was a transitional year. After posting record earnings in 2004 following several sequential years of strong growth, we identified certain organizational and infrastructure issues which needed to be addressed in order to support continued growth. We concluded that additional investment would be required to strengthen the management team, increase field construction capacity and competency and standardize policies and procedures to enhance operational consistency. While total revenue grew marginally in 2005, profitability declined reflecting our increased expenditures on infrastructure and a 16% decline in home deliveries in 2005. Higher average selling prices in 2005 enabled us to enter 2006 with a record backlog in dollar terms. We also enter 2006 with a stronger and more diversified inventory position as a result of the opening of several new communities and expansion into regions outside of the State of Florida.       The competitive environment for homebuilding varies by region and also among our various communities, but market conditions in 2006 generally appear to have softened and homebuyers appear to be more cautious in their home purchases. We are increasing our investment in advertising and other promotional incentives, expanding third party broker programs and retraining our sales force with a view toward increasing traffic and improving conversion rates. We instituted improved quality control programs and customer satisfaction initiatives to improve the Company’s reputation, referral rate and competitive position. While historically we have been able to raise the prices of our new homes due to strong consumer demand, such strong pricing power appears to be weaker although opportunities to increase prices exist in certain regions and at some of our projects. We anticipate that the combination of relatively stable prices, higher marketing costs and rising construction costs could exert downward pressure on homebuilding margins in the future. In addition, we believe continued infrastructure investments will be necessary to fund projects launched in 2005 and to realize growth goals.  Impact of Historical Growth on Operations and Future Prospects       Due in large part to stronger than expected sales of new homes in prior periods, we experienced production challenges in some of our homebuilding communities and our inventory of homes available for sale was greatly diminished. Those increased sales led to extended delivery cycles in 2004 and 2005 beyond our 12-month target. As a result of the extended delivery cycles and our depleted inventory levels, we slowed the pace of sales throughout our Florida communities beginning in late 2004. Current results of operations reflect the slower pace of sales. We engaged outside consultants to assist the Company in reviewing our organizational structure, production and operational practices. We expect that results of operations will benefit from the revised policies and practices starting in 2006. We continue to replenish our lot inventory in Florida, Georgia, Tennessee and South Carolina and new communities have recently opened in each of those locations. In addition, we have entered into contracts to acquire approximately 5,345 additional lots to support growth in 2006 and beyond. While the value of our backlog, reflecting higher average selling prices, has grown in comparison to December 31, 2004, the backlog of units decreased slightly as of December 31, 2005 from the 2004 level. The backlog is expected to grow in the future as our organizational and infrastructure improvements permit us to increase the pace of sales in association with the opening of additional communities. The average selling price of our homes  18    Table of Contents  continues to increase and our overall margin percentages have thus far resisted compression due primarily to the favorable selling conditions in the Florida markets where the majority of our operations are currently located; however, as noted above, there is no assurance that these conditions will continue in 2006.  Critical Accounting Policies and Estimates       Management views critical accounting policies as accounting policies that are important to the understanding of our financial statements and also involve estimates and judgments about inherently uncertain matters. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated statements of financial condition and assumptions that affect the recognition of revenues and expenses on the statements of income for the periods presented. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in subsequent periods relate to the determination of the valuation of real estate and estimated costs to complete construction, the valuation of carrying values of investments in joint ventures, the valuation of the fair market value of assets and liabilities in the application of the purchase method of accounting and the amount of the deferred tax asset valuation allowance. We have identified the following accounting policies that management views as critical to the accurate portrayal of our financial condition and results of operations.  Inventory of Real Estate       Inventory of real estate includes land, land development costs, interest and other construction costs and is stated at accumulated cost or, when circumstances indicate that the inventory is impaired, at estimated fair value. Estimated fair value is based on disposition of real estate in the normal course of business under existing and anticipated market conditions. The valuation takes into consideration the current status of the property, various restrictions, carrying costs, costs of disposition and any other circumstances which may affect fair value, including management’s plans for the property. Due to the large acreage of certain land holdings and the nature of our project development life cycles, disposition in the normal course of business is expected to extend over a number of years.       Land and indirect land development costs are accumulated by specific area and allocated to various parcels or housing units using either specific identification or apportioned based upon the relative sales value, unit or area methods. Direct construction costs are assigned to housing units based on specific identification. Construction costs primarily include direct construction costs and capitalized field overhead. Other costs are comprised of tangible selling costs, prepaid local government fees and capitalized real estate taxes. Tangible selling costs are capitalized by communities and represent costs incurred throughout the selling period to aid in the sale of housing units, such as model furnishings and decorations, sales office furnishings and facilities, exhibits, displays and signage. These tangible selling costs are capitalized and expensed to cost of sales of the benefited home sales. Start-up costs and other selling costs are expensed as incurred.       The expected future costs of development are analyzed at least annually to determine the appropriate allocation factors to charge to the remaining inventory as cost of sales when such inventory is sold. During the long term project development cycles in our Land Division, such development costs are subject to more relative volatility than similar costs in homebuilding. Costs to complete infrastructure will be influenced by changes in direct costs associated with labor and materials, as well as changes in development orders and regulatory compliance.  Investments in Unconsolidated Subsidiaries       We follow the equity method of accounting to record our interests in subsidiaries in which we do not own the majority of the voting stock and to record our investment in variable interest entities in which we are not the primary beneficiary. These entities consist of Bluegreen Corporation, joint ventures and statutory business trusts. The statutory business trusts are variable interest entities in which the Company is not the primary beneficiary. Under the equity method, the initial investment in a joint venture is recorded at cost and is subsequently adjusted to recognize our share of the joint venture’s earnings or losses. Distributions received reduce the carrying amount of the investment. These investments are evaluated annually or as events or circumstances warrant for other than temporary declines in value. Evidence of other than temporary declines includes the inability of the joint venture or investee to sustain an earnings capacity that would justify the carrying amount of the investment and consistent joint venture operating losses. The evaluation is based on available information including condition of the property and current and anticipated real estate market conditions.  19    Table of Contents  Homesite Contracts and Consolidation of Variable Interest Entities       In the ordinary course of business we enter into contracts to purchase homesites and land held for development. Option contracts allow us to control significant homesite positions with minimal capital investment and substantially reduce the risks associated with land ownership and development. Our liability for nonperformance under such contracts is typically only the required deposits, and typically our deposits or letters of credit are less than 20% of the underlying purchase price. We do not have legal title to these assets. However, if certain conditions are met under the requirements of FASB Interpretation No. 46(R), the Company’s land contracts may create a variable interest for the Company, with the Company being identified as the primary beneficiary. If these conditions are met, interpretation no. 46 requires us to consolidate the assets (homesites) at their fair value. At December 31, 2005 there were no assets under these contracts consolidated in our financial statements.  Revenue Recognition       Revenue and all related costs and expenses from house and land sales are recognized at the time that closing has occurred, when title and possession of the property and the risks and rewards of ownership transfer to the buyer, and when other sale and profit recognition criteria are satisfied as required under accounting principles generally accepted in the United States of America for real estate transactions. In order to properly match revenues with expenses, we estimate construction and land development costs incurred but not paid at the time of closing. Estimated costs to complete are determined for each closed home and land sale based upon historical data with respect to similar product types and geographical areas. We monitor the accuracy of estimates by comparing actual costs incurred subsequent to closing to the estimate made at the time of closing and make modifications to the estimates based on these comparisons. We do not expect the estimation process to change in the future.  Capitalized Interest       Interest incurred relating to land under development and construction is capitalized to real estate inventories during the active development period. Interest is capitalized as a component of inventory at the effective rates paid on borrowings during the pre-construction and planning stage and during the periods that projects are under development. Capitalization of interest is discontinued if development ceases at a project. Interest is amortized to cost of sales on the relative sales value method as related homes, and land are sold.  Income Taxes       The Company utilizes the asset and liability method to account for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period that includes the statutory enactment date. A deferred tax asset valuation allowance is recorded when it is more likely than not that all or a portion of the deferred tax asset will not be realized.  20    Table of Contents  Consolidated Results of Operations                                                      Year Ended December 31,     2005     2004                                 vs. 2004     vs. 2003         2005     2004     2003     Change     Change         (In thousands, except per share data)                       Revenues                                           Sales of real estate   $ 558,112       549,652       283,058       8,460       266,594     Title and mortgage operations     3,750       4,798       2,466       (1,048 )     2,332                                       Total revenues     561,862       554,450       285,524       7,412       268,926                                                                                   Costs and expenses                                           Cost of sales of real estate     408,082       406,274       209,431       1,808       196,843     Selling, general and administrative expenses     87,639       71,001       42,027       16,638       28,974     Other expenses     4,855       7,600       1,924       (2,745 )     5,676                                       Total costs and expenses     500,576       484,875       253,382       15,701       231,493                                                                                   Earnings from Bluegreen Corporation     12,714       13,068       7,433       (354 )     5,635     Earnings from joint ventures     69       6,050       483       (5,981 )     5,567     Interest and other income     13,278       4,619       3,162       8,659       1,457                                       Income before income taxes     87,347       93,312       43,220       (5,965 )     50,092     Provision for income taxes     32,436       35,897       16,400       (3,461 )     19,497                                         Net income   $ 54,911       57,415       26,820       (2,504 )     30,595                                                                                   Basic earnings per share   $ 2.77     $ 3.10     $ 1.81     $ (0.33 )   $ 1.29     Diluted earnings per share (a)   $ 2.74     $ 3.04     $ 1.77     $ (0.30 )   $ 1.27                                                 Weighted average shares outstanding     19,817       18,518       14,816       1,299       3,702     Diluted shares outstanding     19,929       18,600       14,816       1,329       3,784                  (a)   Diluted earnings per share takes into account the dilution in earnings we recognize from Bluegreen as a result of outstanding securities issued by Bluegreen that enable the holders thereof to acquire shares of Bluegreen’s common stock.   For the Year Ended December 31, 2005 Compared to the Same 2004 Period       Consolidated net income decreased $2.5 million, or 4.4%, for the year ended December 31, 2005 as compared to 2004. The decrease in net income primarily resulted from a decrease in sales of real estate by our Homebuilding Division, coupled with an increase in overall selling, general and administrative expenses associated with our expansion into new markets, increased headcount, and our efforts to improve our organizational structure, production and operational practices. The impact of lower homebuilding revenue, higher spending on overhead, technology, training and infrastructure and lower earnings from joint ventures was partially mitigated by increases in sales by our Land Division and Levitt Commercial, as well as an increase in interest and other income.       Our consolidated revenues from sales of real estate increased 1.5% to $558.1 million for the year ended December 31, 2005 from $549.7 million for the same 2004 period. This increase is attributable primarily to an increase in consolidated revenue from the Land Division which increased to $105.7 million in 2005 and an increase at Levitt Commercial from $5.6 million in 2004 to $14.7 million in 2005. These increases were partially offset by a decrease of $33.9 million in Homebuilding Division revenues as a result of fewer deliveries. The Land Division’s segment revenues of $96.2 million in 2004 include $24.4 million of sales to the Homebuilding Division which are eliminated in consolidation because they represent inter-company sales. The increase in the Land Division revenue is attributable primarily to the first quarter 2005 bulk sale for $64.7 million of five non-contiguous parcels of land consisting of 1,294 acres adjacent to our Tradition, Florida master-planned community.       Selling, general and administrative expenses increased 23.4% to $87.6 million during 2005 compared to $71.0 million for the same 2004 period primarily as a result of higher employee compensation and benefits expenses and an increase in professional fees. As a percentage of total revenues, our selling, general and administrative expenses increased to 15.6% for 2005 from 12.8% for the year ended December 31, 2004. The increase in compensation expense was  21    Table of Contents  attributable to an increase in employee headcount associated with new hires in Central and South Florida (including the Company’s headquarters) and the continued expansion of homebuilding activities into North Florida, Georgia and South Carolina. Further, we incurred start-up costs such as advertising and administrative expenses associated with launching new communities in Atlanta, Georgia, Myrtle Beach, South Carolina and Nashville, Tennessee. The number of our full time employees increased to 640 at December 31, 2005, from 527 as of December 31, 2004. In addition, expenses incurred during the year ended December 31, 2005 reflect the full inclusion of Bowden’s operations, which operations were included commencing with its acquisition in May 2004. In connection with our initiatives to improve infrastructure, we incurred expenses associated with technology upgrades, training and human resource development and communications.       We engaged consultants in 2005 to assist us in a detailed operational and organizational review. Following that detailed evaluation, we concluded that additional infrastructure investment and organizational change would be necessary in order to support growth objectives of the Homebuilding Division. As a result, the Company was organizationally restructured into regional teams with matrixed, multi-functional relationships. At the same time, we implemented numerous initiatives to support the new regional structure and increased infrastructure investment, which included recruiting additional managers, particularly in field operations; the evaluation, documentation, and implementation of industry best practices; the selection and implementation of a common technology platform; the development of curriculum and training programs; and formalized management communications relating to strategies and priorities. Overhead expense associated with this broad range of organizational and operational initiatives has increased, reflecting our higher employee headcount, retention of outside consultants and other direct program costs. We anticipate these higher levels of overhead expenses will continue into 2006 as the various programs are implemented and completed, and as a consequence selling, general and administrative expenses are expected to grow both in absolute dollar levels and as a percentage of total revenues throughout 2006.       Interest incurred totaled $19.3 million and $11.1 million for 2005 and 2004, respectively. Interest incurred was higher due to higher outstanding balances of notes and mortgage notes payable related to increases in our inventory of real estate and to an increase in interest rates associated with rising interest rate indices which impacted our variable rate indebtedness. Interest capitalized was $19.3 million for 2005 and $10.8 million for 2004. Cost of sales of real estate for the year ended December 31, 2005 and 2004 included previously capitalized interest of approximately $9.0 million and $9.9 million, respectively.       The decrease in other expenses was primarily attributable to a decrease in hurricane expense, net of insurance recoveries. The expenses recorded to account for the estimated costs of remediating hurricane-related damage in our Florida Homebuilding and Land Divisions was $572,000 in 2005 compared with $4.4 million in 2004. This decrease in expense was partially offset by a one time additional reserve recorded to account for our share of costs associated with a litigation settlement, and a debt prepayment penalty incurred during the first quarter of 2005 at our Land Division.       We recorded $12.7 million of earnings relating to our ownership interest in Bluegreen during the year ended December 31, 2005 as compared to $13.1 million for the year ended December 31, 2004. Before giving effect to the restatement discussed below, our earnings from Bluegreen were $15.0 million, net of purchase accounting adjustments.       Bluegreen restated its financial statements for the first three quarters of fiscal 2005 and the fiscal years ended December 31, 2004 and 2003 due to certain misapplications of GAAP in the accounting for sales of the Company’s vacation ownership notes receivable and other related matters. The restatement accounts for the sales of notes receivable as on-balance sheet financing transactions as opposed to off-balance sheet sales transactions as Bluegreen had originally accounted for these transactions. We recorded the cumulative effect of the restatement in the year ended December 31, 2005. This cumulative adjustment was recorded as a $2.4 million reduction of our earnings from Bluegreen and a $1.1 million increase in our pro-rata share of unrealized gains recognized by Bluegreen. These adjustments resulted in a $1.3 million reduction to our investment in Bluegreen.       Earnings from real estate joint ventures were $69,000 during 2005 compared to earnings of $6.0 million for 2004. In 2004, earnings from real estate joint ventures included the sale of an apartment complex and deliveries of homes and condominium units. During the year ended December 31, 2005, there were no unit deliveries by the Company’s joint ventures which were winding down operations.       The increase in interest and other income of $8.7 million is primarily related to an increase in rental income, higher balances of interest-earning deposits at various financial institutions, a non-recurring contingent termination payment received from a previously dissolved partnership, and the reversal of accrued construction obligations associated with certain future infrastructure development requirements in our land division. The total increase in these items of approximately $10.1 million was offset by the absence of a one time $1.4 million reduction of a litigation reserve which  22    Table of Contents  was recorded in 2004. The $1.4 million reduction of a litigation reserve was the result of our successful appeal of a 2002 judgment which reversed the damages awarded by the trial jury and ordered a new trial to determine damages. The litigation reserve was reduced based on our assessment of the potential liability.  For the Year Ended December 31, 2004 Compared to the Same 2003 Period       Consolidated net income increased $30.6 million, or 114%, for the year ended December 31, 2004 as compared to 2003. The increase in net income primarily resulted from an increase in sales of real estate by our Homebuilding and Land Divisions, from higher earnings from Bluegreen Corporation and from an increase in our earnings from our real estate joint venture activities.       Our revenues from sales of real estate increased 94% to $549.7 million for the year ended December 31, 2004 from $283.1 million for the same 2003 period. This increase is attributable primarily to an increase in home deliveries from 1,011 homes delivered in 2003 to 2,126 homes delivered in 2004. Land sale revenues in 2004 included sales to the Homebuilding Division of $24.4 million. These inter-segment transactions were eliminated in consolidation and the profit recognized by the Land Division from these sales will be deferred until the Homebuilding Division delivers homes on these properties to third parties. At that time, consolidated cost of sales will be reduced by amount of Land Division profits that were deferred. Consolidated cost of sales was reduced by approximately $3.9 million in 2004 as a result of the recognition of previously deferred profits related to sales of land by our Land Division to our Homebuilding Division. Approximately $1.0 million of similarly deferred profits were recognized during 2003.       Selling, general and administrative expenses increased during 2004 compared to the same 2003 period primarily as a result of higher employee compensation and benefits (including sales commissions and incentive bonuses), and increased insurance and professional service expenses. The increase in employee compensation and benefits expense was directly related to our new development projects in Central and South Florida, the expansion of homebuilding activities into North Florida and Georgia, the addition of Bowden and the increase in our home deliveries. The number of our full time employees increased to 527 at December 31, 2004 from 353 at December 31, 2003, and the number of part time employees declined slightly to 32 at December 31, 2004 from 34 at December 31, 2003. The increase in insurance and professional service expenses related primarily to costs associated with operating as an independent public company since the spin-off from BankAtlantic Bancorp. As a percentage of total revenues, selling, general and administrative expenses declined to 13% for 2004 from 15% in 2003.       Interest incurred on notes and development bonds payable totaled $11.1 million and $7.9 million for 2004 and 2003, respectively. Interest incurred was higher due to higher outstanding balances of notes and mortgage notes payable related to increases in our inventory of real estate. Interest capitalized was $10.8 million for 2004 and $7.7 million for 2003. Cost of sales of real estate for the year ended December 31, 2004 and 2003 included previously capitalized interest of approximately $9.9 million and $6.4 million, respectively.       The increase in other expenses was primarily attributable to a $4.4 million charge, net of insurance recoveries, recorded to account for the estimated costs of remediating hurricane-related damage in our Florida Homebuilding and Land operations, as previously discussed.       We recorded $13.1 million of earnings relating to our ownership interest in Bluegreen during the year ended December 31, 2004 as compared to $7.4 million for the year ended December 31, 2003. Our investment in Bluegreen was also reduced by $2.9 million during 2004 primarily to reflect the dilutive effect on our ownership interest of Bluegreen’s issuance of approximately 5.3 million shares of common stock in connection with the call for redemption of its 8.25% Convertible Subordinated Debentures and the exercise of stock options. At December 31, 2004 and 2003, our ownership interest in Bluegreen was 31% and 38%, respectively.       Earnings from real estate joint ventures was $6.0 million during 2004 as compared to $483,000 for 2003. This increase in earnings in our real estate joint venture activities primarily resulted from gains recognized upon the sale of a joint venture’s property in Vero Beach, Florida, earnings associated with the delivery of condominium units by a joint venture project in Boca Raton, Florida and earnings associated with the delivery of homes by a joint venture project in West Palm Beach, Florida. All three joint venture projects are sold out and their operations are essentially completed.       The increase in interest and other income is primarily related to a $1.4 million reduction of a litigation reserve as a result of the Company’s successful appeal of a 2002 judgment  23    Table of Contents  The provision for income taxes increased $19.6 million, or 120%, to $36.0 million for 2004, due to increased earnings before taxes. The provision for income taxes for the year ended December 31, 2003 was net of a reduction in the deferred tax asset valuation allowance of approximately $418,000. Reductions in the deferred tax asset valuation allowance reduce the provision for income taxes for the year, thereby reducing the effective tax rate.  Homebuilding Division Results of Operations                                                      Year Ended December 31,     2005     2004                                 vs. 2004     vs. 2003         2005     2004     2003     Change     Change         (Dollars in thousands, except average price data)               Revenues                                           Sales of real estate   $ 438,367       472,296       222,257       (33,929 )     250,039     Title and mortgage operations     3,750       4,798       2,466       (1,048 )     2,332                                       Total revenues     442,117       477,094       224,723       (34,977 )     252,371                                                                                   Costs and expenses                                           Cost of sales of real estate     347,008       371,097       173,072       (24,089 )     198,025     Selling, general and administrative expenses     57,403       50,806       29,478       6,597       21,328     Other expenses     3,606       7,015       1,493       (3,409 )     5,522                                       Total costs and expenses     408,017       428,918       204,043       (20,901 )     224,875                                                                                   Earnings from joint ventures     104       3,518       480       (3,414 )     3,038     Interest and other income     723       1,944       560       (1,221 )     1,384                                       Income before income taxes     34,927       53,638       21,720       (18,711 )     31,918     Provision for income taxes     12,691       20,658       7,964       (7,967 )     12,694                                       Net income   $ 22,236       32,980       13,756       (10,744 )     19,224                                                                                   Operational data:                                           Homes delivered     1,789       2,126       1,011       (337 )     1,115     Construction starts     1,662       2,294       1,593       (632 )     701     Average selling price of homes delivered   $ 245,000       222,000       220,000       23,000       2,000     Margin percentage on homes delivered (a)     20.8 %     21.4 %     22.1 %     -0.6 %     -0.7 %   New orders (units)     1,767       1,679       2,240       88       (561 )   New orders (value)   $ 547,045       427,916       513,436       119,129       (85,520 )   Backlog of homes (units)     1,792       1,814       2,053       (22 )     (239 )   Backlog of homes (value)   $ 557,325       448,647       458,771       108,678       (10,124 )                                               Joint Ventures (excluded from above):                                           Homes delivered     —       146       18       (146 )     128     Construction starts     —       —       43       —       (43 )   New orders (units)     —       42       61       (42 )     (19 )   New orders (value)   $ —       13,967       15,957       (13,967 )     (1,990 )   Backlog of homes (units)     —       —       104       —       (104 )   Backlog of homes (value)   $ —       —       27,478       —       (27,478 )                (a)   Margin percentage is calculated by dividing margin (sales of real estate minus cost of sales of real estate) by sales of real estate.        Homebuilding Division revenues declined by 7.3% in 2005 compared to the same period in 2004, reflecting fewer homes delivered in 2005 offset slightly by higher average selling prices. The Company’s sales performance in Florida in 2003 and 2004 exceeded our projections and production capacity. As a result, our delivery cycle in 2004 and 2005 extended beyond our 12-month target, and the number of homes we closed in 2005 declined 16% as compared to 2004. We have implemented changes to our organizational structure, production and operational practices in an attempt to shorten cycle times to enable us to deliver homes within 12 months. We believe that shorter delivery cycles will increase customer satisfaction, reduce the amount of time contracted homes are in backlog, and thereby reduce our exposure to rising costs.  24    Table of Contents       At December 31, 2005, our Homebuilding Division had a delivery backlog of 1,792 homes representing $557.3 million of future sales. The average sales price of the homes in backlog at December 31, 2005 of $311,000 is approximately 26% higher than the average sales price of the homes in backlog at December 31, 2004. This increase is attributable to rising prices based on the demand for homes, as well as the particular markets generating the backlog. While the backlog value is encouraging for our 2006 results, adverse economic trends such as rising interest rates, continued inflationary pressures and labor shortages could impact our Homebuilding Division in future periods. In 2005, the costs of lumber, steel, concrete and other building materials rose significantly. Additionally, labor costs rose during the year reflecting a shortage of sub-contractors in some of the markets in which we build. The redeployment of labor in Florida following two years of active hurricane seasons exacerbated the labor shortage in these markets. While we may be able to increase our future selling prices to absorb the increased costs, the sales prices of homes in our backlog cannot be increased and the margins on the delivery of homes in backlog may be adversely affected by this trend.       We are also continuing to seek to expand our homebuilding activities in the Jacksonville, Florida, Atlanta, Georgia, Nashville, Tennessee and Myrtle Beach, South Carolina markets. Our first sales in Jacksonville, Nashville and Atlanta, aggregating 282 units in total, occurred in 2005. We anticipate revenues from deliveries in these markets will be recognized during the second half of 2006. Costs associated with expansion in new markets will remain at elevated levels during 2006.  For the Year Ended December 31, 2005 Compared to the Same 2004 Period       The value of new orders increased to $547.0 million for 2005 from $427.9 million in 2004 as a result of higher average sales prices and increased number of orders. Higher selling prices were primarily a reflection of the continued strength of the Florida market and the shift in our Tennessee operations away from the first-time entry level buyer to a higher end customer. New unit orders modestly increased to 1,767 units in 2005, from 1,679 units during 2004 as additional inventory became available for sale. Further, our expanded presence in Tennessee and Georgia contributed to new order flow. Construction starts declined in 2005 primarily due to the delayed sales and delayed scheduled construction cycles.       Revenues from home sales decreased 7.2% to $438.4 million in 2005 from $472.3 million in 2004, due primarily to decreased home deliveries. While home deliveries in Tennessee increased to 451 units delivered from 343 units delivered during 2004, reflecting a full year of operations, home deliveries in Florida decreased to 1,338 units delivered from 1,783 units delivered during the same 2004 period. The decrease in Florida deliveries was attributable to the lower backlog at December 31, 2004, an increased emphasis on quality and customer service which delayed closings, as well as a reduction in construction starts during the year as discussed above. Construction cycle times generally improved, although some projects continued to experience subcontractor delays and project-related management issues.       Cost of sales decreased by approximately 6.5% to $347.0 million in 2005 from $371.1 million in 2004. The decrease in cost of sales was attributable to fewer deliveries. Cost of sales as a percentage of related revenue was approximately 79.2% for the year ended December 31, 2005, as compared to approximately 78.6% for the year ended December 31, 2004. This slight increase was due primarily to increases in labor and raw material costs in 2005 and a higher percentage of homes sold in the Tennessee region, which produces lower margins than other regions and accounted for the higher cost of sales percentage. Deliveries in the Tennessee region represented 25% of 2005 total deliveries, compared with 16% in 2004. We are integrating the region onto the same technology platform as our other regions and are standardizing operating policies and procedures in an effort to improve margins and profitability in our Tennessee region. In addition, we are shifting our strategy in Tennessee from acquiring finished lots for smaller subdivisions to acquiring and developing raw land for “signature communities” which resemble our communities in other regions, and eventually introducing active adult communities to the Tennessee market.       Selling, general and administrative expenses increased 13.0% to $57.4 million in 2005 from $50.8 million for 2004. In connection with our detailed operational and organizational review, we made significant expenditures for infrastructure investment we believe is necessary to support our growth objectives. Further, there were higher expenses as a result of the inclusion of Bowden expenses for the full year of 2005 compared with only eight months in 2004, and the higher costs associated with increasing headcount and market expansion. As a percentage of total revenues, our selling, general and administrative expense was approximately 13.0% during the twelve months ended December 31, 2005, compared to 10.6% during the same 2004 period. The increase was specifically attributable to increased employee compensation and benefits costs associated with new hires in Central and South Florida, and the continued expansion of homebuilding activities into the Jacksonville, Atlanta, Myrtle Beach and Nashville markets, incurring administrative start-up costs, including advertising.  25    Table of Contents       Interest incurred and capitalized on notes and mortgages payable totaled $12.1 million during 2005, compared to $6.5 million incurred and $6.3 million capitalized during the same 2004 period. Interest incurred increased as a result of an increase in the average interest rate on our variable-rate borrowings and an increase in borrowings in 2005 associated with the Company’s purchases of land to replenish its inventory of homesites. At the time of a home sale, the related capitalized interest is charged to cost of sales. Cost of sales of real estate during 2005 and 2004 included previously capitalized interest of $6.3 million and $8.0 million, respectively.       The decrease in other expenses of $3.4 million was primarily attributable to certain non-recurring expenses recorded in 2004, including a charge of $3.9 million, net of insurance recoveries, to account for the costs of remediating hurricane related damage in the Company’s Florida operations. In 2005, the Homebuilding Division did not incur any hurricane related expense. For 2005, other expenses were comprised of mortgage operations expense and an additional reserve recorded for our share of costs associated with a litigation settlement reached in a matter in which we were a joint venture partner.       The decrease in interest and other income in 2005 is primarily related to a $1.4 million reduction of a litigation reserve recorded in 2004 as a result of our successful appeal of a 2002 judgment. The appellate court reversed the damages awarded by the trial jury and ordered a new trial to determine damages. The litigation reserve was reduced based on our assessment of the potential liability.       We did not enter into any new joint venture development or other joint venture agreements in 2005. The decrease in earnings in joint ventures resulted primarily from the completion of unit deliveries in 2004 by a joint venture developing a condominium complex in Boca Raton, Florida. That joint venture delivered the final 146 condominium units during 2004. The final 4,100 square feet of commercial space in the project was delivered during the year ended December 31, 2005.  For the Year Ended December 31, 2004 Compared to the Same 2003 Period       The value of new orders declined to $427.9 million for 2004, from $513.4 million in 2003. The decline in new orders was primarily the result of the absence of new community openings to offset stronger than expected order growth in prior periods and our intentional slowing of the pace of new home orders to help assure higher levels of customer satisfaction by meeting delivery schedules acceptable to our customers. Some of our Florida communities sold out faster than originally anticipated and new communities were not yet ready for sales. While this strengthened our backlog, we experienced a short-term decline in saleable inventory. New orders were also impacted by the adverse impact of four hurricanes in Florida during August and September. These factors led to a slowdown in sales in our Florida homebuilding operations in the third and fourth quarters of 2004, when new orders were placed for 489 homes, as compared with the record 1,212 new orders placed in the third and fourth quarters of 2003.       Revenues from home sales increased 112% to $472.3 million in 2004 from $222.3 million in 2003, due primarily to an increase in home deliveries in communities that commenced deliveries in 2003 and from Bowden’s operations. During 2004, 2,126 homes were delivered at an average selling price of approximately $222,000, as compared to 1,011 homes delivered in 2003 at an average selling price of approximately $220,000. The modest increase in the average selling price of our homes was due primarily to a change in our product mix resulting from the inclusion of Bowden in 2004. The average selling price of the homes in our Florida communities increased by $15,000 over 2003 to $235,000. The average selling price of Bowden’s homes was $157,000.       Cost of sales increased by approximately 114% to $371.1 million in 2004 from $173.1 million in 2003 due primarily to an increase in the number of home deliveries. Cost of sales as a percentage of related revenue was approximately 79% for the year ended December 31, 2004, as compared to approximately 78% for the year ended December 31, 2003. Increases in labor and raw material costs in 2004 were largely offset by increases in the selling prices of our homes. Cost of sales for 2004 also includes approximately $1.8 million of purchase accounting adjustments relating to the acquisition of Bowden.       Selling, general and administrative expenses increased 72% to $50.8 million in 2004 from $29.5 million for 2003. The increase in selling, general and administrative expenses primarily resulted from the increase in home deliveries and the addition of Bowden, as well as an increase in compensation and benefits resulting from the continued expansion of our homebuilding operations. As a percentage of revenues, selling general and administrative expense was approximately 11% and 13% of total revenues in 2004 and 2003, respectively.  26    Table of Contents       Interest incurred totaled $6.5 million and $5.0 million for 2004 and 2003, respectively. The increase in interest incurred was primarily due to increases in borrowings associated with the assumption of debt in the Bowden acquisition and financing associated with new development projects. Interest capitalized for 2004 and 2003 totaled $6.3 million and $5.0 million, respectively. At the time of a home sale, the related capitalized interest is charged to cost of sales. Cost of sales of real estate for 2004 and 2003 included previously capitalized interest of approximately $8.0 million and $4.3 million, respectively.  Land Division Results of Operations                                                      Year Ended December 31,     2005     2004                                 vs. 2004     vs. 2003         2005     2004     2003     Change     Change         (Dollars in thousands)       Revenues                                           Sales of real estate   $ 105,658       96,200       55,038       9,458       41,162                                       Total revenues     105,658       96,200       55,038       9,458       41,162                                                                                   Costs and expenses                                           Cost of sales of real estate     50,706       42,838       31,362       7,868       11,476     Selling, general and administrative expenses     12,395       10,373       7,549       2,022       2,824     Other expenses     1,177       561       224       616       337                                       Total costs and expenses     64,278       53,772       39,135       10,506       14,637                                         Interest and other income     9,008       1,671       2,261       7,337       (590 )                                     Income before income taxes     50,388       44,099       18,164       6,289       25,935     Provision for income taxes     18,992       17,031       7,149       1,961       9,882                                       Net income   $ 31,396       27,068       11,015       4,328       16,053                                                                                   Operational data:                                           Acres sold     1,647       1,212       1,337       435       (125 )   Margin percentage (a)     52.0 %     55.5 %     43.0 %     -3.5 %     12.5 %   Unsold acres     12,092       8,349       5,116       3,743       3,233     Backlog of land (acres)     238       1,833       1,433       (1,596 )     400     Backlog of land (sales value)   $ 34,802       121,095       103,174       (86,293 )     17,921                  (a)   Margin percentage is calculated by dividing margin (sales of real estate minus cost of sales of real estate) by sales of real estate.        Land Division revenues have historically been generated primarily from two master-planned communities located in St. Lucie County, Florida — St. Lucie West and Tradition™, Florida. Development activity in St. Lucie West is substantially complete, with 4 acres of inventory remaining at December 31, 2005, which are subject to firm sales contracts. The master-planned community, Tradition, Florida encompasses more than 8,200 total acres, including approximately 5,858 net saleable acres. Approximately 1,548 acres had been sold and 234 were subject to firm sales contracts with various homebuilders as of December 31, 2005.       During 2005, our Land Division purchased two parcels of land in Jasper County, South Carolina to develop a master-planned community for a combined purchase price of approximately $42.4 million. The master-planned community, Tradition™, South Carolina, now encompasses more than 5,300 total acres, including approximately 3,000 net saleable acres and is currently entitled to include up to 9,500 residential units and up to 1.5 million feet of commercial space, in addition to recreational areas, educational facilities and emergency services. Development activity began in the fourth quarter of 2005.       In addition to sales to third party homebuilders, the Land Division periodically sells residential land to the Homebuilding Division on a priority basis at intercompany prices that we believe approximate arms length pricing. The Land Division will also continue to sell undeveloped commercial property to commercial developers, but will be more active in internally developing certain projects.  27    Table of Contents       We calculate margin as sales of real estate minus cost of sales of real estate, and have historically realized between 40% and 60% margin on Land Division sales. Margins fluctuate based upon changing sales prices and costs attributable to the land sold. The sales price of land sold varies depending upon: the location; the parcel 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 ultimate 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, and the amount of development and carrying costs capitalized to the particular land parcel. Allocations to costs of sales involve management judgment and 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 for elements often beyond management control. Future margins will continue to vary in response to these and other market factors.  For the Year Ended December 31, 2005 Compared to the Same 2004 Period       Revenues from land sales increased 9.8% to $105.7 million in 2005 from $96.2 million in 2004. Margin on land sales in 2005 was approximately $55.0 million as compared to $53.4 million in 2004. During 2005, 1,647 acres were sold with an average margin of 52%, as compared to 1,212 acres sold with an average margin of 55.5% in 2004. The decline in average selling price per acre is attributable to the stage of entitlements of the parcels sold. We sold a greater percentage of undeveloped and unentitled land in 2005 relative to 2004. The decrease in margin is also attributable to the mix of acreage sold, with a decrease in commercial property sales at St. Lucie West. The margin percentage on the Tradition, Florida acreage tends to be lower due to the stage of the development and the higher proportion of residential sales (which generally have a lower margin) to commercial sales in the same period. While yielding a slightly lower margin percentage, the Land division generated more margin dollars which enhanced overall profitability. The most notable transaction during 2005 was the bulk sale for $64.7 million in the first quarter of five non-contiguous parcels of land adjacent to Tradition, Florida consisting of a total of 1,294 acres. During 2004, the Company sold 448 acres in Tradition, Florida to the Homebuilding Division which generated revenue of $23.4 million and margin of $14.4 million. This transaction, which is included in the above table for 2004, was eliminated in consolidation, and the associated profit was deferred. There were no land sales to the Homebuilding Division in 2005.       Selling, general and administrative expenses increased 19.5% to $12.4 million during the year ended December 31, 2005 compared to $10.4 million for the same 2004 period. As a percentage of total revenues, selling, general and administrative expenses remained relatively flat increasing to 11.7% in 2005 from 10.8% in 2004. The slight increase was due to increased headcount as the number of Land Division employees increased to 48 in 2005 from 35 as of December 31, 2004 largely associated with our expansion at both Tradition, Florida and Tradition, South Carolina.       Interest incurred for 2005 and 2004 was approximately $2.8 million and $2.0 million, respectively. The increase in interest incurred was primarily due to an increase in outstanding borrowings related to acquisition of land for Tradition, South Carolina. During 2005, interest capitalized was approximately $2.8 million, as compared with $1.9 for 2004. At the time of land sales, the related capitalized interest is charged to cost of sales. Cost of sales of real estate for 2005 and 2004 included previously capitalized interest of approximately $742,587 and $87,000, respectively.       The increase in other expenses was primarily attributable to a $677,000 pre-payment penalty on debt repayment incurred during the first quarter of 2005. We repaid indebtedness under a line of credit using a portion of the proceeds of the bulk sale described above.       The increase in interest and other income of $7.3 million is primarily related to the reversal of certain accrued construction obligations. During the fourth quarter of 2005, we reversed approximately $6.7 million in accrued construction obligations. These accrued construction obligations were recorded as property was sold to recognize our obligations to comply with future infrastructure development requirements of governmental entities. The reversal of these construction obligations was the result of changes made to the infrastructure development requirements by such governmental entities for certain projects. All payments and obligations related to the infrastructure development requirements for these projects were fulfilled as of December 31, 2005.  For the Year Ended December 31, 2004 Compared to the Same 2003 Period       Revenues from land sales increased 75% to $96.2 million in 2004 from $55.0 million in 2003. Margin on land sales in 2004 was approximately $53.4 million as compared to $23.7 million in 2003. During 2004, 1,212 acres were sold with an average margin of 55%, as compared to 1,337 acres sold with an average margin of 43% in 2003. The lower margin percentage in 2003 was primarily the result of the bulk sale in July of approximately 1,000 acres of undeveloped land adjacent to Tradition, Florida in a single transaction to a developer that has been developed as golf courses. During  28    Table of Contents  2004, the Land Division sold approximately 448 acres in Tradition, Florida to the Homebuilding Division which, for segment reporting purposes, generated revenue of $23.4 million and margin of $14.4 million. However, this transaction, which is included in the above table, is eliminated in consolidation. There were no sales by the Land Division to the Homebuilding Division in 2003.      Selling, general and administrative expenses increased 37% to $10.4 million during the year ended December 31, 2004 as compared to $7.5 million for the same 2003 period. As a percentage of total revenues, selling, general and administrative expenses declined to 11% in 2004 from 14% in 2003.       Interest incurred for 2004 and 2003 was approximately $2.0 million and $1.2 million, respectively. The increase in interest incurred was primarily due to an increase in outstanding borrowings related to acquisition of land for Tradition, Florida. During 2004, interest capitalized was approximately $1.9 million, as compared with $927,000 for 2003. At the time of land sales, the related capitalized interest is charged to cost of sales. Cost of sales of real estate for 2004 and 2003 included previously capitalized interest of approximately $87,000 and $318,000, respectively.       The increase in other expenses was primarily attributable to a $500,000 charge, net of insurance recoveries, recorded to account for the estimated costs of remediating hurricane-related damage, as previously discussed.  Other Operations Results of Operations                                                      Year Ended December 31,     2005     2004                                 vs. 2004     vs. 2003         2005     2004     2003     Change     Change         (Dollars in thousands)       Revenues                                           Sales of real estate   $ 14,709       5,555       5,763       9,154       (208 )                                     Total revenues     14,709       5,555       5,763       9,154       (208 )                                                                                 Costs and expenses                                           Cost of sales of real estate     12,520       6,255       6,021       6,265       234     Selling, general and administrative expenses     17,841       9,822       5,000       8,019       4,822     Other expenses     72       24       207       48       (183 )                                     Total costs and expenses     30,433       16,101       11,228       14,332       4,873                                         Earnings from Bluegreen Corporation     12,714       13,068       7,433       (354 )     5,635     (Loss) earnings from joint ventures     (35 )     2,532       3       (2,567 )     2,529     Interest and other income     4,106       1,004       341       3,102       663                                       Income before income taxes     1,061       6,058       2,312       (4,997 )     3,746     Provision for income taxes     378       2,198       891       (1,820 )     1,307                                       Net income   $ 683       3,860       1,421       (3,177 )     2,439                                              Other Operations include all other activities, including Levitt Commercial, Levitt Corporation general and administrative expenses, earnings from our investment in Bluegreen and earnings from investments in various real estate projects. We currently own approximately 9.5 million shares of the common stock of Bluegreen, which represented approximately 31% of Bluegreen’s outstanding shares as of December 31, 2005. Under equity method accounting, we recognize our pro-rata share of Bluegreen’s net income or loss (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 Bluegreen’s earnings. Accordingly, we record a tax liability on our portion of Bluegreen’s net income. Should Bluegreen’s financial performance deteriorate, our earnings in Bluegreen would deteriorate concurrently and our results of operations would be adversely affected. Furthermore, a significant reduction in Bluegreen’s financial position might require that we test our investment in Bluegreen for impairment, which could result in charges against our future results of operations. For a complete discussion of Bluegreen’s results of operations and financial position, we refer you to Bluegreen’s Annual Report on Form 10-K for the year ended December 31, 2005, as filed with the SEC.  29    Table of Contents  For the Year Ended December 31, 2005 Compared to the Same 2004 Period       During the year ended 2005, Levitt Commercial delivered 44 flex warehouse units at two of its projects, generating revenues of $14.7 million as compared to 18 flex warehouse units in 2004, generating revenues of $5.6 million.       We recorded $12.7 million of earnings relating to our ownership interest in Bluegreen during the year ended December 31, 2005 as compared to $13.1 million for the year ended December 31, 2004. Before giving effect to the restatement discussed below, our earnings from Bluegreen were $15.0 million, net of purchase accounting adjustments.       Bluegreen restated its financial statements for the first three quarters of fiscal 2005 and the fiscal years ended December 31, 2004 and 2003 due to certain misapplications of GAAP in the accounting for sales of the Company’s vacation ownership notes receivable and other related matters. The restatement accounts for the sales of notes receivable as on-balance sheet financing transactions as opposed to off-balance sheet sales transactions as Bluegreen had originally accounted for these transactions. We recorded the cumulative effect of the restatement in the year ended December 31, 2005. This cumulative adjustment was recorded as a $2.4 million reduction of our earnings from Bluegreen and a $1.1 million increase in our pro-rata share of unrealized gains recognized by Bluegreen. These adjustments resulted in a $1.3 million reduction to our investment in Bluegreen.       Selling, general and administrative and other expenses increased to $17.8 million during the year ended December 31, 2005 as compared to $9.8 million during the year ended December 31, 2004. In 2005, we incurred professional fees associated with the organizational review of production and operational practices and procedures as previously discussed. We expect we will continue to incur additional expenses associated with professional fees in varying amounts through 2006. Also contributing to the increase in selling, general and administrative expenses during the year ended 2005 were additional audit fees associated with Sarbanes Oxley and increased compensation and benefits expense resulting from in an increase in employees at the parent company. The increase in selling, general and administrative expenses is also attributable to increased compensation expense resulting from an increase from 22 employees in this segment at year end 2004 to 46 employees at year end 2005. The increased headcount was primarily related to parent company staffing in Human Resources, Project Management and administrative functions in preparation for our implementation of the Company’s strategic initiatives. In addition, incentives for all employees associated with achieving identified customer service goals accrued in the fourth quarter. Finally, in the fourth quarter of 2005, we incurred expenses associated with several company-wide information meetings to educate employees regarding the various organizational, information system, and operational changes scheduled to occur in 2005 and 2006.       Losses from real estate joint ventures in 2005 were $35,000 as compared to $2.5 million of earnings in 2004. The earnings during 2004 were primarily related to the gain recognized by the sale of Grand Harbor, a rental apartment property in Vero Beach, Florida and earnings associated with the delivery of homes by a joint venture project in West Palm Beach, Florida. During 2005, the joint ventures in which this operating segment participates had essentially completed their operations and were winding down as discussed above.       Interest incurred in other operations was approximately $4.4 million and $2.6 million for the year ended December 31, 2005 and 2004, respectively. The increase in interest incurred was primarily associated with an increase in notes at the parent company associated with our Trust Preferred Securities offerings and an increase in the average interest rate on our borrowings. Interest capitalized for this business segment totaled $4.4 million and $2.6 million for the year ended December 31, 2005 and 2004, respectively. Those amounts include adjustments to reconcile the amount of interest eligible for capitalization on a consolidated basis with the amounts capitalized in our other business segments.  For the Year Ended December 31, 2004 Compared to the Same 2003 Period       During the year ended December 31, 2004, Levitt Commercial delivered 18 flex warehouse units compared with 13 units delivered during the year ended December 31, 2003. Cost of sales of real estate includes amortization of interest previously capitalized in this business segment. The amount of previously capitalized interest amortized in cost of sales for the year ended December 31, 2004 and 2003 was $1.8 million and $1.5 million, respectively.       We recorded $13.1 million of earnings relating to our ownership interest in Bluegreen during the year ended December 31, 2004 as compared to $7.4 million for the year ended December 31, 2003. Our investment in Bluegreen was also reduced by $2.9 million during 2004 primarily to reflect the dilutive effect on our ownership interest of Bluegreen’s issuance of approximately 5.3 million shares of common stock in connection with the call for redemption of its 8.25% Convertible Subordinated Debentures and the exercise of stock options. At December 31, 2004 and 2003, our ownership interest in Bluegreen was 31% and 38%, respectively.  30    Table of Contents       Selling, general and administrative and other expenses increased to $9.8 million during the year ended December 31, 2004 as compared to $5.0 million during the year ended December 31, 2003. This increase was primarily associated with increases in employee compensation and benefits resulting from higher average headcount, fees paid by the Company for administrative and other services provided pursuant to an agreement with BankAtlantic Bancorp, and other expenses related to being a public company. We did not incur significant costs associated with being a public company in 2003 because we were not subject to SEC reporting requirements at that time, or the requirements of the Sarbanes-Oxley Act of 2002.       Earnings from real estate joint ventures in 2004 were $2.5 million as compared to $3,000 in 2003. The increase in earnings was due primarily to the gain recognized by a joint venture on the sale of a rental apartment project in Vero Beach, Florida and earnings associated with the delivery of homes by a joint venture project in West Palm Beach, Florida. Both joint venture projects are sold out and their operations are essentially completed.       Interest incurred in Other Operations was approximately $2.6 million and $1.7 million for the year ended December 31, 2004 and 2003, respectively. The increase in interest incurred was primarily associated with increases in outstanding borrowings related to Levitt Commercial’s development activities, interest obligations under the $8.0 million note to BankAtlantic Bancorp relating to the spin-off, and the $3.2 million of outstanding Subordinated Investment Notes. Interest capitalized for this business segment totaled $2.6 million and $1.7 million for the year ended December 31, 2004 and 2003, respectively. Those amounts include adjustments to reconcile the amount of interest eligible for capitalization on a consolidated basis with the amounts capitalized in our other business segments.  FINANCIAL CONDITION       We believe that our current financial condition and credit relationships, together with anticipated cash flows from operations, will provide for our current liquidity needs for the foreseeable future.       Our total assets at December 31, 2005 and 2004 were $895.7 million and $678.4 million, respectively. The increase in total assets primarily resulted from:       •   a net increase in inventory of real estate of approximately $197.8 million resulting from land acquisitions in Florida, Georgia, Tennessee and South Carolina by our Land and Homebuilding Divisions, and increases in land development and construction costs. These increases in inventory of real estate were partially offset by sales of homes and land;        •   a net increase of approximately $15.3 million in our investment in Bluegreen Corporation associated primarily with $15.0 million of earnings from Bluegreen (net of purchase accounting adjustments), $1.3 million from our pro rata share of unrealized gains associated with Bluegreen’s other comprehensive income and $121,000 associated with Bluegreen’s capital transactions, offset by the $1.3 million net cumulative effect of the restatement discussed above; and        •   an increase of $13.1 million in property and equipment associated with increased investment in the irrigation facility and commercial properties under construction in Tradition, Florida (including the buildings constructed and utilized by Core Communities as its offices and sales center) and hardware and software acquired for our technology infrastructure upgrade.         The increase in total assets was partially offset by a net decrease in cash and cash equivalents of $12.0 million, which represents $134.7 million provided from financing, $132.5 million used in operations, and $14.1 million used in investing activities.       Total liabilities at December 31, 2005 and 2004 were $545.9 million and $383.7 million, respectively.       The increase in total liabilities primarily resulted from:       •   an increase of $8.7 million in customer deposits associated with our larger backlog at year end        •   a net increase in notes and mortgage notes payable of $85.6 million, primarily related to project debt associated with the 2005 land acquisitions described above, and an increase in junior subordinated debentures of $54.1 million.        •   an increase in the deferred tax liability of approximately $5.2 million which was primarily associated with our investment in Bluegreen.    31    Table of Contents     LIQUIDITY AND CAPITAL RESOURCES       We assess the Company’s liquidity in terms of its ability to generate cash to fund its operating and investment activities. During the year ended December 31, 2005, our primary sources of funds were the proceeds from the sale of real estate inventory, the issuance of trust preferred securities and borrowings from financial institutions. These funds were utilized primarily to acquire, develop and construct real estate, to service and repay borrowings and to pay operating expenses.       In 2005, the Company formed two statutory business trusts, Levitt Capital Trust I (“LCT I”) and Levitt Capital Trust II (“LCT II”), for the purpose of issuing trust preferred securities and investing the proceeds thereof in junior subordinated debentures of the Company. The issuance of trust preferred securities was part of a larger pooled trust securities offering which was not registered under the Securities Act of 1933.       On March 15, 2005, LCT I issued $22.5 million of trust preferred securities. The Trust used the proceeds from issuing trust preferred securities to purchase an identical amount of junior subordinated debentures (the “LCT I Debentures”) from the Company. Interest on the LCT I Debentures and distributions on the trust preferred securities are payable quarterly in arrears at a fixed rate of 8.11% through March 30, 2010 and thereafter at a floating rate of 3.85% over 3-month London Interbank Offered Rate (“LIBOR”) until the scheduled maturity date of March 30, 2035. Distributions on the trust preferred securities will be cumulative and based upon the liquidation value of the trust preferred security. The trust preferred securities are subject to mandatory redemption, in whole or in part, upon repayment of the LCT I Debentures at maturity or their earlier redemption. The LCT I Debentures are redeemable five years from the issue date or sooner following certain specified events. In addition, we contributed $696,000 to the Trust in exchange for all of the Trust’s common securities and those proceeds were also used to purchase an identical amount of LCT I Debentures from the Company. The terms of the Trust’s common securities are nearly identical to the trust preferred securities. We used the proceeds to repay approximately $22.0 million of indebtedness to affiliates.       On May 4, 2005, LCT II issued $30.0 million of trust preferred securities and used the proceeds to purchase an identical amount of junior subordinated debentures (the “LCT II Debentures) from the Company. Interest on the LCT II Debentures and distributions on the trust preferred securities are payable quarterly in arrears at a fixed rate of 8.09% through June 30, 2010 and thereafter at a floating rate of 3.80% over 3-month LIBOR until the scheduled maturity date of June 30, 2035. The trust preferred securities are subject to mandatory redemption, in whole or in part, upon repayment of the LCT II Debentures at maturity or their earlier redemption. The LCT II Debentures are redeemable in whole or in part at our option at any time after five years from the issue date or sooner following certain specified events. In addition, the Company contributed $928,000 to LCT II in exchange for all of its common securities and those proceeds were also used to purchase an identical amount of LCT II Debentures from the Company. The terms of the Trust’s common securities are nearly identical to the trust preferred securities. We used the proceeds from this transaction to repay approximately $16.0 million of indebtedness to affiliates and used the balance for general corporate purposes.       The Company relies on third party financing to fund the acquisition and development of land. As disclosed in Note 10 to the Company’s financial statements, during the year ended December 31, 2005, our principal operating subsidiaries, Levitt and Sons and Core Communities, secured borrowing facilities with third party lenders to fund land acquisitions and development. As of December 31, 2005, these loan agreements provided in the aggregate for advances, subject to available collateral, on a revolving basis of up to $507.7 million, of which $408.0 million was outstanding. The loans are secured by mortgages on properties, including improvements. Principal payments are required as sales of the collateral are consummated. Our principal payment obligations with respect to our debt for the 12 months beginning December 31, 2005 are anticipated to total approximately $59.2 million. Approximately $44.7 million of the debt due in the next twelve months is construction-related financing which will be repaid with the proceeds from the sales of the properties under construction. Some of our borrowing agreements contain provisions that, among other things, require our subsidiaries to maintain certain financial ratios and a minimum net worth. These requirements may limit the amount of debt that we can incur in the future and restrict the payment of dividends to us by our subsidiaries. Certain notes and mortgage notes provide that events of default include a change in ownership, management or executive management. At December 31, 2005, we were in compliance with all loan agreement financial requirements and covenants. The Company believes it has sufficient availability under its existing borrowing facilities and adequate access to additional borrowing facilities to meet its current contractual obligations.       In addition to the liquidity provided by the trust preferred securities and the credit facilities described above, we expect to continue to fund our short-term liquidity requirements through net cash provided by operations and other financing activities and our available cash. We expect to meet our long-term liquidity requirements for items such as acquisitions and debt service and repayment obligations primarily with net cash provided by operations and long-term  32    Table of Contents  secured and unsecured indebtedness. As of December 31, 2005 and December 31, 2004, we had cash and cash equivalents of $115.4 million and $127.5 million, respectively.       On each of January, 24, 2005, April 25, 2005, July 25, 2004, November 7, 2005 and January 23, 2006 our Board of Directors declared cash dividends of $0.02 per share on our Class A common stock and Class B common stock. These dividends were paid in February 2005, May 2005, August 2005, November 2005 and February 2006, respectively. The Board has not adopted a policy of regular dividend payments. The payment of dividends in the future is subject to approval by our Board of Directors and will depend upon, among other factors, our results of operations and financial condition. We cannot give assurance that we will declare additional cash dividends in the future.       We are subject to the usual financial and other obligations associated with entering into contracts for the purchase, development and sale of real estate in the ordinary course of business.  Off Balance Sheet Arrangements and Contractual Obligations       In connection with the development of certain of our communities, we establish community development districts to access bond financing for the funding of infrastructure development and other projects within the community. If we were not able to establish community development districts, we would need to fund community infrastructure development out of operating income or through other sources of financing or capital. The bonds issued are obligations of the community development district and are repaid through assessments on property within the district. To the extent that we own property within a district when assessments are levied, we will be obligated to pay the assessments when they are due. As of December 31, 2005, development districts in Tradition, Florida had $52.4 million of community development district bonds outstanding, and we owned approximately 47% of the property in those districts. During 2005, we recorded approximately $799,000 in assessments on property we owned in the districts. These costs were capitalized to inventory as development costs and will be recognized as cost of sales when the assessed properties are sold to third parties.       We entered into an indemnity agreement in April 2004 with a joint venture partner at Altman Longleaf, relating to, among other obligations, that partner’s guarantee of the joint venture’s indebtedness. Our liability under the indemnity agreement is limited to the amount of any distributions from the joint venture which exceeds our original capital and other contributions. Our original capital contributions were approximately $585,000. In 2004, we received an additional distribution that totaled approximately $1.1 million. In January 2006, we received a distribution of approximately $138,000. Accordingly, our potential obligation of indemnity after the January 2006 distribution is approximately $664,000. Based on the joint venture assets that secure the indebtedness, we do not believe it is likely that any payment will be required under the indemnity agreement.       The following table summarizes our contractual obligations as of December 31, 2005 (in thousands):                                                              Payments due by period                 Less than     13 - 36     37 - 60     More than     Category   Total     12 Months     Months     Months     60 Months       Long-term debt obligations   $ 407,970       59,188       212,402       34,577       101,803     Interest payable on long-term debt     199,185       25,487       41,949       17,606       114,143     Operating lease obligations     8,065       1,965       2,920       1,454       1,726     Purchase obligations     154,000       142,683       11,317       —       —                                       Total obligations   $ 769,220       229,323       268,588       53,637       217,672                                              Long-term debt obligations consist of notes, mortgage notes and bonds payable. Interest payable on long-term debt includes the estimated future interest payments on our outstanding debt obligations calculated using the interest rates on these obligations as at December 31, 2005. Operating lease obligations consist of rent commitments. Purchase obligations consist of contracts to acquire real estate properties for development and sale; however our liability for not completing a purchase is generally limited to the deposit we made under the contract. At December 31, 2005, we had paid deposits of $4.4 million with respect to these purchase obligations.  33    Table of Contents  Impact of Inflation       The financial statements and related financial data and notes presented herein have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation.       Inflation could have a long-term impact on us by contributing to increased costs of land, materials and labor, the net effect of which could require us to increase the sales prices of homes in order to preserve our profit margins. In addition, inflation is often accompanied by higher interest rates which could have a negative impact on housing demand and the costs of financing land development activities and housing construction. Rising interest rates as well as increased materials and labor costs may reduce margins.  New Accounting Pronouncements       In December 2004, FASB issued Statement No. 152 (“Accounting for Real Estate Time-Sharing Transactions—an amendment of FASB Statements No. 66 and 67.) This Statement amends FASB Statement No. 66, Accounting for Sales of Real Estate, to reference the financial accounting and reporting guidance for real estate time-sharing transactions that is provided in AICPA Statement of Position 04-2 Accounting for Real Estate Time-Sharing Transactions (“SOP 04-02”),. This Statement also amends FASB Statement No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, to state that the guidance for (a) incidental operations and (b) costs incurred to sell real estate projects does not apply to real estate time-sharing transactions. The accounting for those operations and costs is subject to the guidance in SOP 04-2. Effective January 1, 2006, Bluegreen is required to adopt SOP 04-02. Bluegreen has indicated that the adoption of SOP 04-02 will result in a one-time, non-cash, cumulative effect of change in accounting principle charge in the first quarter of 2006, however the adjustment will not be determined until Bluegreen finalizes its first quarter financial results. Accordingly, the Company cannot estimate the effect of Bluegreen’s adoption of SOP 04-02 on the Company’s interest in earnings from Bluegreen.       In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (“SFAS No. 123(R)”). SFAS No. 123(R) establishes accounting standards for transactions in which a company exchanges its equity instruments for goods or services. In particular, the statement will require companies to record compensation expense for all share-based payments, such as employee stock options, at fair market value. The statement’s effective date is the first interim or annual reporting period of the first fiscal year that begins on or after June 15, 2005 (the Company’s first quarter of fiscal year 2006 beginning January 1, 2006) and the Company will adopt the provisions of SFAS No. 123(R) using a modified prospective application. Compensation expense for outstanding awards for which the requisite service has not been rendered as of the effective date will be recognized over the remaining service period using the compensation cost calculated for pro forma disclosure purposes under SFAS No. 123. At December 31, 2005, unamortized compensation expense relating to outstanding unvested options, as determined in accordance with SFAS No. 123(R) that the Company expects to record during 2006 was approximately $2.6 million before income taxes. The Company is expected to incur additional expense in 2006 related to new awards granted during 2006 that cannot yet be quantified.       In March 2005, the SEC released Staff Accounting Bulletin No. 107, Share-Based Payment (“SAB No. 107”). SAB No. 107 provides the SEC staff position regarding the application of SFAS No. 123(R). SAB No. 107 contains interpretive guidance related to the interaction between SFAS No. 123(R) and certain SEC rules and regulations, as well as provides the staff’s views regarding the valuation of share-based payment arrangements for public companies. SAB No. 107 also highlights the importance of disclosures made related to the accounting for share-based payment transactions.       In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections (“SFAS No. 154”), which replaces APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS No. 154 changes the requirements for the accounting and reporting of a change in an accounting principle. The statement requires retrospective application of changes in an accounting principle to prior periods’ financial statements unless it is impracticable to determine the period-specific effects or the cumulative effect of the change. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005 (the Company’s fiscal year beginning January 1, 2006). The adoption of SFAS No. 154 is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.       In June 2005, the Emerging Issues Task Force issued EITF 04-05, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (“EITF 04-05”). The scope of EITF 04-05 is limited to limited partnerships or similar entities that are not variable  34    Table of Contents  interest entities under FIN 46(R). The Task Force reached a consensus that the general partners in a limited partnership (or similar entity) are presumed to control the entity regardless of the level of their ownership and, accordingly, may be required to consolidate the entity. This presumption may be overcome if the agreements provide the limited partners with either (a) the substantive ability to dissolve (liquidate) the limited partnership or otherwise remove the general partners without cause or (b) substantive participating rights. If it is deemed that the limited partners’ rights overcome the presumption of control by a general partner of the limited partnership, the general partner shall account for its investment in the limited partnership using the equity method of accounting. EITF 04-05 was effective immediately for all arrangements created or modified after June 29, 2005. For all other arrangements, application of EITF 04-05 is required effective for the first reporting period in fiscal years beginning after December 15, 2005 (the Company’s fiscal year beginning January 1, 2006) using either a cumulative-effect-type adjustment or using a retrospective application. The adoption of EITF 04-05 is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.       In October 2005, the FASB issued Staff Position No. 13-1 “Accounting for Rental Costs Incurred during a Construction Period” (“FSP FAS 13-1”). FSP FAS 13-1 addresses the accounting for rental costs associated with operating leases that are incurred during the construction period. FSP FAS 13-1 makes no distinction between the right to use a leased asset during the construction period and the right to use that asset after the construction period. Therefore, rental costs associated with ground or building operating leases that are incurred during a construction period shall be recognized as rental expense, allocated over the lease term in accordance with SFAS No. 13 and Technical Bulletin 85-3. FSP FAS 13-1 was effective for the first reporting period beginning after December 15, 2005. Retrospective application in accordance with SFAS 154 is permitted but not required. The application of FSP FAS 13-1 is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
We are subject to interest rate risk on our long-term debt. At December 31, 2005, we had $333.3 million in borrowings with adjustable rates tied to the prime rate and/or LIBOR and $74.6 million in borrowings with fixed rates. Consequently, for debt tied to an indexed rate, changes in interest rates may affect our earnings and cash flows, but generally would not impact the fair value of such debt. For fixed rate debt, changes in interest rates generally affect the fair market value of the debt but not our earnings or cash flow.       The table below sets forth our debt obligations, principal payments by scheduled maturity, weighted-average interest rates and estimated fair market value as of December 31, 2005 (dollars in thousands):                                                                                                                                      Fair Market                                                                 Value at         Twelve months ended December 31,     December 31,         2006     2007     2008     2009     2010     Thereafter     Total     2005       Fixed rate debts:                                                                   Notes and mortgage payable (a)     735       2,091       872       208       219       70,511       74,636       70,591     Average interest rate     7.58 %     7.58 %     7.58 %     7.57 %     7.58 %     7.59 %     7.58 %                                                                               Variable rate debts:                                                                   Notes and mortgage payable (b)     58,453       41,787       167,652       28,334       5,816       31,292       333,334       333,334     Average interest rate     6.80 %     6.68 %     6.63 %     6.90 %     7.27 %     7.30 %     6.77 %                                                                               Total debt obligations     59,188       43,878       168,524       28,542       6,035       101,803       407,970       403,925                  (a)   Fair value calculated based upon recent borrowings in same category of debt.     (b)   At December 31, 2005 our total borrowings from BankAtlantic Bancorp was approximately $223,000.        Based upon the amount of variable rate debt outstanding at December 31, 2005 and holding the variable rate debt balance constant, each one percentage point increase in interest rates would increase the interest incurred by us by approximately $3.3 million per year.  35    Table of Contents
BLUEGREEN CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except per share data)                              December 31,     December 31,         2004     2005         (As Restated)               ASSETS                   Cash and cash equivalents (including restricted cash of approximately $21,423 and $18,321 at December 31, 2004 and 2005, respectively)    $ 100,565     $ 84,704     Contracts receivable, net      28,085       27,473     Notes receivable, net      152,051       127,783     Prepaid expenses      7,810       6,500     Other assets      19,279       17,156     Inventory, net      205,352       240,969     Retained interests in notes receivable sold      66,513       105,696     Property and equipment, net      74,244       79,634     Intangible assets and goodwill      4,512       4,328                     Total assets    $ 658,411     $ 694,243                       LIABILITIES AND SHAREHOLDERS’ EQUITY                   Liabilities                   Accounts payable    $ 11,552     $ 11,071     Accrued liabilities and other      44,323       43,801     Deferred income      24,235       29,354     Deferred income taxes      56,064       75,404     Receivable-backed notes payable      73,213       35,731     Lines-of-credit and notes payable      71,949       61,428     10.50% senior secured notes payable      110,000       55,000     Junior subordinated debentures      —       59,280                     Total liabilities      391,336       371,069     Minority interest      6,009       9,508     Commitments and contingencies                   Shareholders’ Equity                   Preferred stock, $.01 par value, 1,000 shares authorized; none issued      —       —     Common stock, $.01 par value, 90,000 shares authorized; 32,990 and 33,193 shares issued at December 31, 2004 and 2005, respectively      330       333     Additional paid-in capital      167,408       169,684     Treasury stock, 2,756 common shares at both December 31, 2004 and 2005, at cost      (12,885 )     (12,885 )   Accumulated other comprehensive income, net of income taxes      4,805       8,575     Retained earnings      101,408       147,959                     Total shareholders’ equity      261,066       313,666                     Total liabilities and shareholders’ equity    $ 658,411     $ 694,243                       See accompanying notes to consolidated financial statements.  61       BLUEGREEN CORPORATION CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data)                                      Year Ended     Year Ended     Year Ended         December 31,     December 31,     December 31,         2003     2004     2005         (As Restated)     (As Restated)               Revenues:                           Sales of real estate    $ 359,344     $ 502,408     $ 550,335     Other resort and communities operations revenue      55,394       66,409       73,797     Interest income      29,898       35,939       34,798     Gain on sales of notes receivable      —       25,972       25,226     Other income      457       —       —                                 445,093       630,728       684,156     Cost and expenses:                           Cost of real estate sales      109,446       179,728       177,800     Cost of other resort and communities operations      60,772       70,785       77,317     Selling, general and administrative expenses      203,808       262,424       300,239     Interest expense      17,243       18,425       14,474     Provision for loan losses      18,239       24,434       27,587     Other expense      —       1,666       6,207                                 409,508       557,462       603,624                           Income before minority interest and provision for income taxes      35,585       73,266       80,532     Minority interest in income of consolidated subsidiary     3,330       4,065       4,839                           Income before provision for income taxes      32,255       69,201       75,693     Provision for income taxes      12,418       26,642       29,142                           Net income    $ 19,837     $ 42,559     $ 46,551                           Earnings per common share:                           Basic    $ 0.80     $ 1.62     $ 1.53                           Diluted    $ 0.74     $ 1.43     $ 1.49                           Weighted-average number of common and common equivalent shares:                           Basic      24,671       26,251       30,381                           Diluted      29,263       30,677       31,245                             See accompanying notes to consolidated financial statements.  62       BLUEGREEN CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (in thousands)                                                                                                      Accumulated                                                     Other                     Common             Additional     Treasury     Comprehensive                     Shares     Common     Paid-in     Stock at     Income, Net of     Retained               Issued     Stock     Capital     Cost     Income Taxes     Earnings     Total                                         (As Restated)     (As Restated)     (As Restated)       Balance at December 31, 2002 (as previously reported)      27,343       273       123,535       (12,885 )     460       46,900       158,283     Restatement Adjustment      —       —       —       —       3,974       (7,888 )     (3,914 )                                                 Restated Balance at December 31, 2002      27,343       273       123,535       (12,885 )     4,434       39,012       154,369                                                   Net income                                              19,837       19,837     Net unrealized gains on retained interests in notes receivable sold, net of income taxes and reclassification adjustments      —       —       —       —       (1,481 )     —       (1,481 )                                                             Comprehensive income                                                      18,356     Shares issued upon exercise of stock options      359       4       1208       —       —       —       1,212     Income tax benefit from stock options exercised      —       —       188       —       —       —       188                                                   Restated Balance at December 31, 2003      27,702       277       124,931       (12,885 )     2,953       58,849       174,125     Net income      —       —       —       —       —       42,559       42,559     Net unrealized gains on retained interests in notes receivable sold, net of income taxes and reclassification adjustments      —       —       —       —       1,852       —       1,852     Comprehensive income                                                      44,411     Shares issued upon exercise of stock options      1,150       12       6,582       —       —       —       6,594     Income tax benefit from stock options exercised      —       —       1,961       —       —       —       1,961     Shares issued in connection with conversion of 8.25% convertible subordinated debentures      4,138       41       33,934       —       —       —       33,975                                                   Restated Balance at December 31, 2004      32,990       330       167,408       (12,885 )     4,805       101,408       261,066     Net income      —       —       —       —       —       46,551       46,551     Net unrealized gains on retained interests in notes receivable sold, net of income taxes and reclassification adjustments      —       —       —       —       3,770       —       3,770                                                               Comprehensive income                                                      50,321     Shares issued upon exercise of stock options      196       3       1,403       —       —       —       1,406     Modification of equity awards and vesting of restricted stock      6       —       327       —       —       —       327     Income tax benefit from stock options exercised      —       —       541       —       —       —       541     Shares issued in connection with conversion of 8.25% convertible subordinated debentures      1       —       5       —       —       —       5                                                   Balance at December 31, 2005      33,193     $ 333     $ 169,684     $ (12,885 )   $ 8,575     $ 147,959     $ 313,666                                                     See accompanying notes to consolidated financial statements.  63       BLUEGREEN CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)                                      Year Ended     Year Ended     Year Ended         December 31,     December 31,     December 31,         2003     2004     2005         (As Restated)     (As Restated)               Operating activities:                           Net income    $ 19,837     $ 42,559     $ 46,551     Adjustments to reconcile net income to net cash provided by operating activities:                           Minority interest in income of consolidated subsidiary      3,330       4,065       4,839     Depreciation      7,811       9,769       12,332     Amortization      5,054       3,849       5,807     Gain on sales of notes receivable      —       (25,972 )     (25,226 )   Loss (gain) on sales of property and equipment      (76 )     455       94     Provision for loan losses      18,239       24,434       27,587     Provision for deferred income taxes      8,894       18,664       16,979     Interest accretion on retained interests in notes receivable sold     (5,519 )     (6,035 )     (9,310 )   Other non-cash charges      —       —       327     Proceeds from sales of notes receivable      —       192,580       198,260     Proceeds from borrowings collateralized by notes receivable      123,897       105,680       24,772     Payments on borrowings collateralized by notes receivable      (37,881 )     (174,514 )     (64,714 )   Changes in operating assets and liabilities:                           Contracts receivable      (9,292 )     (2,563 )     612     Notes receivable      (128,742 )     (170,282 )     (220,491 )   Prepaid expenses      (227 )     (589 )     (30 )   Inventory      12,433       47,032       29,022     Other assets      (3,903 )     1,154       2,150     Accounts payable, accrued liabilities and other      25,172       21,470       6,022                           Net cash provided by operating activities      39,027       91,756       55,583                           Investing activities:                           Cash received from retained interests in notes receivable sold      7,402       8,688       11,016     Principal payments received on investment in note receivable      456       —       —     Business acquisition      (500 )     (825 )     (675 )   Investments in statutory business trusts      —       —       (1,780 )   Purchases of property and equipment      (11,893 )     (18,409 )     (16,724 )   Proceeds from sales of property and equipment      1,084       8       22                           Net cash used provided by investing activities      (3,451 )     (10,538 )     (8,141 )                         Financing activities:                           Proceeds from borrowings under line-of-credit facilities and notes payable      40,125       60,657       26,382     Payments under line-of-credit facilities and notes payable      (49,978 )     (100,479 )     (92,071 )   Payments on 10.50% senior secured notes      —       —       (55,000 )   Payment of 8.25% subordinated convertible debentures      —       (273 )     —     Proceeds from issuance of junior subordinated debentures      —       —       59,280     Payment of debt issuance costs      (2,632 )     (5,731 )     (3,300 )   Proceeds from exercise of employee and director stock options      1,212       6,594       1,406                           Net cash used by financing activities      (11,273 )     (39,232 )     (63,303 )                         Net increase (decrease) in cash and cash equivalents      24,303       41,986       (15,861 )   Cash and cash equivalents at beginning of period      34,276       58,579       100,565                           Cash and cash equivalents at end of period      58,579       100,565       84,704     Restricted cash and cash equivalents at end of period      (19,088 )     (21,423 )     (18,321 )                         Unrestricted cash and cash equivalents at end of period    $ 39,491     $ 79,142     $ 66,383                             64       BLUEGREEN CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued) (in thousands)                                      Year Ended     Year Ended     Year Ended         December 31,     December 31,     December 31,         2003     2004     2005         (As Restated)     (As Restated)               Supplemental schedule of non-cash operating, investing and financing activities:                           Inventory acquired through foreclosure or deedback in lieu of foreclosure   $ 6,570     $ 10,926     $ 10,585                           Inventory acquired through financing    $ 52,399     $ 21,276     $ 54,054                           Property and equipment acquired through financing    $ 8,569     $ 2,637     $ 1.114                           Offset of Joint Venture distribution of operating proceeds to minority interest against the Prepayment (see Note 4)    $ 1,932     $ 2,704     $ 1,340                           Retained interests in notes receivable sold    $ —     $ 32,816     $ 38,913                           Notes receivable acquired through financing    $ 2,334     $ —     $ —                           Change in unrealized gains on retained interests in notes receivable sold, net of income taxes and reclassification adjustments    $ 2,395     $ 2,998     $ 6,130                           Conversion of 8.25% subordinated convertible debentures into common stock   $ 2,334     $ 34,098     $ 5                           Income tax benefit from stock options exercised    $ 362     $ 1,961     $ 541                           Supplemental schedule of operating cash flow information:                           Interest paid, net of amounts capitalized    $ 16,807     $ 19,324     $ 15,955                           Income taxes paid    $ 1,634     $ 6,055     $ 6,646                             See accompanying notes to consolidated financial statements.  65       BLUEGREEN CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  1. Significant Accounting Policies  Organization       We provide leisure products and lifestyle choices through our resorts and residential communities businesses. Our resorts business (“Bluegreen(R) Resorts”) acquires, develops and markets vacation ownership interests (“VOIs”) in resorts generally located in popular, high-volume, “drive-to” vacation destinations. VOIs in any of our resorts entitle the buyer to an annual or biennial allotment of “points” in perpetuity (supported by an underlying deeded vacation ownership interest held in trust for the buyer) in our Bluegreen Vacation Club(R). Members in our Bluegreen Vacation Club may use their points to stay in any of our participating resorts or for other vacation options, including cruises and stays at approximately 3,700 resorts offered by a third-party world-wide vacation ownership exchange networks. We are currently marketing and selling VOIs in 21 resorts located in the United States and Aruba, 19 of which have active sales offices. We also sell VOIs at five off-site sales offices located in the United States. Our residential communities business (“Bluegreen Communities”) acquires, develops and subdivides property and markets residential homesites, the majority of which are sold directly to retail customers who seek to build a home in a high quality residential setting, in some cases on properties featuring a golf course and other related amenities. During the year ended December 31, 2005, sales generated by Bluegreen Resorts comprised approximately 65% of our total sales of real estate while sales generated by Bluegreen Communities comprised approximately 35% of our total sales of real estate. Our other resort and communities operations revenues consist primarily of mini-vacation package sales, vacation ownership tour sales, resort property management services, resort title services, resort amenity operations, rental brokerage services, realty operations and daily-fee golf course operations. We also generate significant interest income by providing financing to individual purchasers of VOIs.  Fiscal Year       On October 14, 2002, our Board of Directors approved a change in our fiscal year from a 52- or 53-week period ending on the Sunday nearest the last day of March in each year to the calendar year ending on December 31, effective for the nine months ended December 31, 2002.  Principles of Consolidation       Our consolidated financial statements include the accounts of all of our wholly-owned subsidiaries and entities in which we hold a controlling financial interest. The only non-wholly owned subsidiary that we consolidate is Bluegreen/Big Cedar Vacations, LLC (the “Joint Venture”), as we hold a 51% equity interest in the Joint Venture, have an active role as the day-to-day manager of the Joint Venture’s activities, and have majority voting control of the Joint Venture’s management committee. Additionally, we do not consolidate our wholly-owned statutory business trusts (see Note 10) formed to issue trust preferred securities as these entities are each variable interest entities in which we are not the primary beneficiary as defined by Financial Accounting Standards Board (“FASB”) Interpretation No. 46R. The statutory business trusts are accounted for under the equity method of accounting. We have eliminated all significant intercompany balances and transactions.       In December 2005, the Company concluded that it was necessary to restate its consolidated financial statements for the years ended December 31, 2003 and 2004, as discussed in Note 20 to the Consolidated Financial Statements.  Use of Estimates       U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Actual results could differ from those estimates.  66       Cash and Cash Equivalents       We invest cash in excess of our immediate operating requirements in short-term time deposits and money market instruments generally with original maturities at the date of purchase of three months or less. We maintain cash and cash equivalents with various financial institutions. These financial institutions are located throughout the United States, Canada and Aruba. Our policy is designed to limit exposure to any one institution. However, a significant portion of our unrestricted cash is maintained with a single bank and, accordingly, we are subject to credit risk. Periodic evaluations of the relative credit standing of financial institutions maintaining our deposits are performed to evaluate and mitigate, if necessary, credit risk.       Restricted cash consists primarily of customer deposits held in escrow accounts and cash pledged to our various lenders in connection with our receivable-backed notes payable credit arrangements.  Revenue Recognition and Contracts Receivable       In accordance with the requirements of Statement of Financial Accounting Standards (“SFAS”) No. 66, Accounting for Sales of Real Estate, we recognize revenue on homesite sales and sales of VOIs when a minimum of 10% of the sales price has been received in cash (buyer’s initial commitment), the legal rescission period has expired, collectibility of the receivable representing the remainder of the sales price is reasonably assured and we have completed substantially all of our obligations with respect to any development related to the real estate sold. In cases where all of the development has not been completed, we recognize revenue in accordance with the percentage-of-completion method of accounting.       Sales, which do not meet the criteria for revenue recognition described above, are deferred using the deposit method. Under the deposit method, cash received from customers is classified as a refundable deposit in the liability section of our consolidated balance sheets and profit recognition is deferred until the requirements of SFAS No. 66 are met. Effective January 1, 2006, the calculation of a buyer’s initial commitment for sales of VOIs will change due to the adoption of a new accounting standard. See Recent Accounting Pronouncements below.       Contracts receivable consists of 1) amounts receivable from customers on recent sales of VOIs pending recording of the customers’ notes receivable in our loan servicing system; 2) receivables related to unclosed retail homesite sales; and 3) receivables from third-party escrow agents on recently closed retail homesite sales. Contracts receivable are reflected net of an allowance for cancellations of unclosed Bluegreen Communities’ sales contracts, which totaled approximately $480,000 and $332,000 at December 31, 2004 and 2005, respectively. Contracts receivable are stated net of a reserve for loan losses of $676,000 and $900,000 at December 31, 2004 and 2005, respectively.       Our other resort and communities operations revenues consist primarily of sales and service fees from the activities listed below. The table provides a brief description of the applicable revenue recognition policy:              Activity   Revenue is recognized as:     Mini-vacation package sales    Mini-vacation packages are fulfilled (i.e., guests use mini- vacation packages to stay at a hotel, take a cruise, etc.)           Vacation ownership tour sales    Vacation ownership tour sales commissions are earned per contract terms with third parties           Resort title fees    Escrow amounts are released and title documents are completed           Management fees   Management services are rendered           Rental commissions    Rental services are provided           Rental income    Guests complete stays at the resorts           Realty commissions   Sales of third-party-owned real estate are completed           Golf course and ski hill daily fees    Services are provided     67            Our cost of other resort and communities operations consists of the costs associated with the various revenues described above as well as developer subsidies and maintenance fees on our unsold VOIs.  Notes Receivable       Our notes receivable are carried at amortized cost. Interest income is suspended and previously accrued but unpaid interest income is reversed on all delinquent notes receivable when principal or interest payments are more than three months contractually past due and not resumed until such loans are less than three months past due. As of December 31, 2004 and 2005, $7.3 million and $8.0 million, respectively, of notes receivable were more than three months contractually past due and, hence, were not accruing interest income.       We estimate credit losses on our notes receivable portfolios in accordance with SFAS No. 5, Accounting for Contingencies, as our notes receivable portfolios consist of a large group of smaller-balance, homogeneous loans. Consistent with Staff Accounting Bulletin No. 102, Selected Loan Loss Allowance Methodology and Documentation Issues, we first segment our notes receivable by identifying risk characteristics that are common to groups of loans and then estimate credit losses based on the risks associated with these segments. We consider many factors when establishing and evaluating the adequacy of our reserve for loan losses. These factors include recent and historical default rates, static pool analyses, current delinquency rates, contractual payment terms, loss severity rates along with present and expected economic conditions. We review these factors and measure loan impairment by applying historical loss rates, adjusted for relevant environmental and collateral values, to the segments’ aggregate loan balances. We adjust our reserve for loan losses on at least a quarterly basis. We generally charge off loans in the month subsequent to when they become four months contractually past due.  Retained Interest in Notes Receivable Sold       When we sell our notes receivable either pursuant to our vacation ownership receivables purchase facilities (more fully described in Note 4) or through term securitizations, we evaluate whether or not such transfers should be accounted for as a sale pursuant to SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities and related interpretations. The evaluation of sale treatment under SFAS No. 140 involves legal assessments of the transactions, which include determining whether the transferred assets have been isolated from us (i.e. put presumptively beyond our reach and our creditors, even in bankruptcy or other receivership), determining whether each transferee has the right to pledge or exchange the assets it received, and ensuring that we do not maintain effective control over the transferred assets through either an agreement that (1) both entitles and obligates us to repurchase or redeem the assets before their maturity or (2) provides us with the ability to unilaterally cause the holder to return the assets (other than through a cleanup call).       In connection with such transactions, we retain subordinated tranches, rights to excess interest spread and servicing rights, all of which are retained interests in the notes receivable sold. Gain or loss on the sale of the receivables depends in part on the allocation of the previous carrying amount of the financial assets involved in the transfer between the assets sold and the retained interests based on their relative fair value at the date of transfer.       We consider our retained interests in notes receivable sold as available-for-sale investments and, accordingly, carry them at fair value in accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. Accordingly, unrealized gains or losses on our retained interests in notes receivable sold are included in our shareholders’ equity, net of income taxes. Declines in fair value that are determined to be other than temporary are charged to operations.       We measure the fair value of the retained interests in the notes receivable sold initially and periodically based on the present value of future expected cash flows estimated using our best estimates of the key assumptions - prepayment rates, loss severity rates, default rates and discount rates commensurate with the risks involved. We revalue our retained interests in notes receivable sold on a quarterly basis.       Interest on the retained interests in notes receivable sold is accreted using the effective yield method.  68       Inventory       Our inventory consists of completed VOIs, VOIs under construction, land held for future vacation ownership development and residential land acquired or developed for sale. We carry our inventory at the lower of cost, including costs of improvements and amenities incurred subsequent to acquisition, capitalized interest, real estate taxes and other costs incurred during construction, or estimated fair value, less costs to dispose. Homesites and VOIs reacquired through foreclosure or deedback in lieu of foreclosure are recorded at the lower of fair value, net of costs to dispose. We periodically evaluate the recovery of the carrying amount of our individual resort and residential communities properties under the guidelines of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, (see Note 6).  Property and Equipment       Our property and equipment are stated at cost. We record depreciation and amortization in a manner that recognizes the cost of our depreciable assets in operations over their estimated useful lives using the straight-line method. Leasehold improvements are amortized over the shorter of the terms of the underlying leases or the estimated useful lives of the improvements. Depreciation expense includes the amortization of assets recorded under capital leases.  Goodwill and Intangible Assets       We account for our goodwill and intangible assets under the provisions of SFAS No. 142, Goodwill and Other Intangible Assets. This statement requires that goodwill and intangible assets deemed to have indefinite lives not be amortized, but rather be tested for impairment on an annual basis. Finite-lived intangible assets are required to be amortized over their useful lives and are subject to impairment evaluation under the provisions SFAS No. 144. Our intangible assets relate to customer lists that were acquired in connection with a business combination whereupon Great Vacation Destinations, Inc. (“GVD”), one of our wholly-owned subsidiaries’ acquired substantially all the assets and assumed certain liabilities of TakeMeOnVacation, LLC, RVM Promotions, LLC, RVM Vacations, LLC (collectively, “TMOV”) in 2002. The customer lists are amortized as the related leads and mini-vacation packages are fulfilled or become expired. See Note 8 for further discussion.  Treasury Stock       We account for repurchases of our common stock using the cost method with common stock in treasury classified in our consolidated balance sheets as a reduction of shareholders’ equity.  Advertising Expense       We expense advertising costs as incurred. Advertising expense was $70.8 million, $89.4 million, and $102.7 million for the years ended December 31, 2003, 2004, and 2005, respectively. Advertising expense is included in selling, general and administrative expenses in our consolidated statements of income.  Stock-Based Compensation       SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure, encourages, but does not require companies to record compensation cost for employee stock options at fair value. We continue to account for our employee stock options using the intrinsic value method pursuant to Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. Accordingly, compensation cost for our employee stock options is measured as the excess, if any, of the quoted market price of our stock at the date of the grant over the exercise price of the option.       Pro forma information regarding net income and earnings per share as if we had accounted for our employee stock options to our employees under the fair value method of SFAS No. 123 is presented below.       There were 40,000 stock options granted to certain of our non-employee directors during the year ended December 31, 2004. Such stock options had a grant date fair value of $4.88 per share. There were 668,000 stock options granted to our employees during the year ended December 31, 2005. There were 141,346 stock options granted to certain of our non-employee directors during the year ended December 31, 2005. All stock options were granted with an exercise price equal to the closing price of our common stock on the date of grant.  69            The fair value for these options was estimated at the date of grant using a Black-Scholes option-pricing model with the following weighted-average assumptions:                                      Year Ended December 31,         2003     2004     2005       Risk free investment rate      3.1 %     2.1 %     3.9 %   Dividend yield      0.0 %     0.0 %     0.0 %   Volatility factor of expected market price     69.7 %     65.0 %     61.0 %   Life of option    5.9 years   3.0 years   5.5 years          For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting period. The effects of applying SFAS No. 123 for the purpose of providing pro forma disclosures are not likely to be representative of the effects on reported pro forma net income for future years, due to the impact of the staggered vesting periods of our stock option grants. Our pro forma information is as follows (in thousands, except per share data).                                      Year Ended December 31,         2003     2004     2005         (As Restated)     (As Restated)               Net income, as reported    $ 19,837     $ 42,559     $ 46,551     Pro forma stock-based employee compensation cost, net of income taxes      (399 )     (308 )     (1,286 )                         Pro forma net income    $ 19,438     $ 42,251     $ 45,265                                                       Earnings per share, as reported:                           Basic    $ 0.80     $ 1.62     $ 1.53     Diluted    $ 0.74     $ 1.43     $ 1.49     Pro forma earnings per share:                           Basic    $ 0.79     $ 1.61     $ 1.49     Diluted    $ 0.72     $ 1.42     $ 1.45            See “Recent Accounting Pronouncements” for a discussion of SFAS No. 123 (revision) which we adopted as of January 1, 2006.  Earnings Per Common Share       We compute basic earnings per common share by dividing net income by the weighted-average number of common shares outstanding. Diluted earnings per common share is computed in the same manner as basic earnings per share, but also gives effect to all dilutive stock options using the treasury stock method and during the years ended December 31, 2003 and 2004 includes an adjustment, if dilutive, to both net income and shares outstanding as if our 8.25% convertible subordinated debentures were converted into common stock at the beginning of the periods presented. There were approximately 1.2 million and 0.8 million stock options not included in diluted earnings per common share during the years ended December 31, 2003 and 2005, respectively, as the effect would be anti-dilutive. There were no anti-dilutive stock options during the year ended December 31, 2004.  70            The following table sets forth our computation of basic and diluted earnings per common share (in thousands, except per share data):                                      Year Ended     Year Ended     Year Ended         December 31,     December 31,     December 31,         2003     2004     2005         (As Restated)     (As Restated)               Basic earnings per common share — numerator:                           Net income    $ 19,837     $ 42,559     $ 46,551                           Diluted earnings per common share — numerator:                           Net income — basic    $ 19,837     $ 42,559     $ 46,551     Effect of dilutive securities (net of income tax effects)      1,749       1,357       —                           Net income — diluted    $ 21,586     $ 43,916     $ 46,551                           Denominator:                           Denominator for basic earnings per common share-weighted-average shares      24,671       26,251       30,381     Effect of dilutive securities:                           Stock options      421       1,098       864     Convertible securities      4,171       3,328       —                           Dilutive potential common shares      4,592       4,426       864                           Denominator for diluted earnings per common share-adjusted weighted-average shares and assumed conversions      29,263       30,677       31,245                           Basic earnings per common share:    $ 0.80     $ 1.62     $ 1.53                           Diluted earnings per common share:    $ 0.74     $ 1.43     $ 1.49                             Comprehensive Income       SFAS No. 130, Reporting Comprehensive Income, requires the change in net unrealized gains or losses on our retained interests in notes receivable sold, which are held as available-for-sale investments, to be included in other comprehensive income. Comprehensive income is shown as a subtotal within our consolidated statements of shareholders’ equity for each period presented.  Recent Accounting Pronouncements       In December 2004, the FASB issued (revised 2004), Share-Based Payment, a revision of SFAS No. 123, Accounting for Stock-Based Compensation. The revised statement supersedes APB No. 25, Accounting for Stock-Based Compensation, and amends SFAS No. 95, Statement of Cash Flows. Generally, the approach in the revised statement is similar to the approach described in SFAS No. 123. However, the revised statement requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure will no longer be an alternative. As permitted by SFAS No. 123, we currently account for share-based payments to employees using APB No. 25’s intrinsic value method and, as such, generally recognize no compensation cost for employee stock options. Accordingly, the adoption of the revised statement’s fair value method will likely have a significant impact on our result of operations, although it will have no impact on our overall financial position. The impact of adoption of the revised statement cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted the revised statement in prior periods, the impact of that standard on our results of operations would have approximated the impact of SFAS No. 123 as described in the disclosure of pro forma net income and earnings per share in Note 1 to our consolidated financial statements. The revised statement also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption. While we cannot estimate what those amounts will be in the future (because they depend on, among other things, when employees exercise stock options), the amount of operating cash flows recognized in prior periods for such excess tax  71       deductions have not been material. On January 1, 2006 the Company adopted SFAS No. 123R using the modified prospective method.       In December 2004, the FASB issued SFAS No. 152, Accounting for Real Estate Time-Sharing Transactions. This statement amends SFAS No. 66, Accounting for Sales of Real Estate, and No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, in association with the issuance of American Institute of Certified Public Accountants (“AICPA”) Statement of Position (“SOP”) 04-2, Accounting for Real Estate Time-Sharing Transactions. SOP 04-2 was issued to address the diversity in practice caused by a lack of guidance specific to real estate time-sharing transactions. Among other things, the new standard addresses the treatment of sales incentives provided by a seller to a buyer to consummate a transaction, the calculation of accounting for uncollectible notes receivable, the recognition of changes in inventory cost estimates, recovery or repossession of VOIs, selling and marketing costs, operations during holding periods, developer subsidies to property owners’ associations and upgrade and reload transactions. The new standard will also require a change in the classification of our provision for loan losses for vacation ownership receivables that are currently recorded as an expense, requiring that such amount be reflected as a reduction of revenue.       The Company currently estimates that the adoption of the SOP will result in one-time, non-cash, cumulative effect of change in accounting principle charge in the first quarter of 2006. This charge will consist primarily of deferred VOI sales, which are the result of providing buyers with certain purchase incentives and the treatment of the Company’s Sampler Program. The Sampler Program provides purchasers with an opportunity to utilize the Company’s vacation ownership product through a one-year allotment of Bluegreen Vacation Club points. In the event the Sampler purchaser subsequently purchases a vacation ownership interest from us, a portion of the amount paid for their Sampler Package is credited toward the down payment on this subsequent purchase. Under the SOP, the credit given will result in the deferral of such sales until the minimum down payment amounts are received from the purchaser, typically through their required mortgage payments. Deferrals under the SOP are expected to be ongoing, with deferred Resorts sales being recognized in subsequent quarters once the required down payment amount is received. This charge had been estimated to be $2.5 million to $4.0 million, or $.08 — $.13 per share; however the actual cumulative effect adjustment will not be determined until the Company finalizes its first quarter financial results. Therefore, this estimate remains subject to change.  Reclassifications       We have made certain reclassifications of prior period amounts to conform to the current period presentation.  2. Restatement of Prior Period Financial Statements       In connection with the securitization of certain of its receivables in December 2005, the Company undertook a review of the prior accounting treatment for certain of its existing and prior notes receivable purchase facilities (together the “Purchase Facilities”). As a result of that review, on December 15, 2005, the Company determined that it would restate its consolidated financial statements for the first three quarters of fiscal 2005 and the fiscal years ended December 31, 2003 and 2004 due to certain misapplications of GAAP in the accounting for sales of the Company’s vacation ownership notes receivable and other related matters. The following sections describe the restatement matters in more detail.  Sales of Vacation Ownership Notes Receivable to Certain Purchase Facilities       The restatement reflects the sales of notes receivable under three separate Purchase Facilities as on-balance sheet financing transactions as opposed to off-balance sheet sales transactions as the Company had originally accounted for these transactions pursuant to Statement of Financial Accounting Standards No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” (“SFAS 140”). Accordingly, the consolidated financial statements have been restated to (1) remove the gain on sale of notes receivable and retained interest in notes receivable sold previously recognized, (2) re-recognize the original notes receivable sold and the related interest income for the periods outstanding, (3) and recognize debt for the cash proceeds received from the Purchase Facilities and the related interest expense for the periods outstanding.       The Company consummated two term securitization transactions, one in December 2002 and one in July 2004, which included substantially all of the notes receivable that had been previously accounted for as having been sold under  72       the Purchase Facilities. Both of these term securitization transactions have been accounted for as sales pursuant to SFAS 140, and therefore the notes receivable financed under the Purchase Facilities are considered to be sold in the term securitization transactions, with resulting gains on sale recognized at that time.  Valuation of Servicing Assets       In connection with the sales of notes receivable, we retain servicing rights. Receivables servicing includes processing payments from borrowers, accounting for principal and interest on such receivables, making advances when required, performing collections efforts with delinquent borrowers, processing defaults, reporting to investors and lenders on portfolio activity, and performing other administrative duties. During the review of our accounting policies related to the sales of notes receivables, the Company determined that the servicing fees earned for servicing the sold notes receivable reflected fair value (i.e adequate compensation) at the time of the transaction. Pursuant to SFAS 140, a servicing asset exists when the benefits of servicing are more than adequate compensation. Accordingly, the consolidated financial statements have been restated to remove the original values recognized as servicing assets as well as the related servicing asset amortization expense.  Computation of Gain on Sale       Also, as a part of its re-evaluation of these transactions, the Company determined that the computation of the gains on sales of receivables in the December 2002 and July 2004 term securitization transactions did not take into account the fair value allocation of financial components methodology for recording its retained interest as prescribed by SFAS 140. The impact of the fair value allocation of financial components methodology is to reduce the gain on sale, but once the retained interest is marked to market value immediately thereafter, the impact will be to increase other comprehensive income in the balance sheet.       As part of the restatement, the company recorded, as of the beginning of fiscal 2004, a cumulative charge of $7.8 million to retained earnings and a $4.0 million increase to beginning other comprehensive income reflecting the impact of the change in accounting for the above mentioned transactions originating in prior periods. Also, the restatement resulted in a reduction of net income of $6.0 million for fiscal 2003 and an increase of $6.1 million for fiscal 2004.  Other       The adjustments described above had the cumulative net impact of decreasing our deferred tax liabilities as of December 31, 2004.       Additionally, in performing our restatement procedures we identified that certain tax assets were incorrectly determined under SFAS 109 in periods prior to the year ended March 31, 2002. As such, the Company determined that it was necessary to increase the beginning balance of our deferred tax liabilities as of January 1, 2003 by approximately $0.8 million.       The effects of the restatement on the company’s consolidated financial statements for the years ended December 31, 2003 and 2004 are included below:  73                                                   2003             2004               As Previously     2003     As Previously     2004         Reported     As Restated     Reported     As Restated       Revenues:                                   Sales of real estate    $ 358,312     $ 359,344     $ 502,396     $ 502,408     Other resort and communities operations revenue      55,394       55,394       69,032       66,409     Interest income      17,536       29,898       21,583       35,939     Gain on sales of notes receivable      6,563       —       8,612       25,972     Other income      649       457       —       —                                       438,454       445,093       601,623       630,728     Cost and expenses:                                   Cost of real estate sales      109,010       109,446       179,722       179,728     Cost of other resort and communities operations      61,021       60,772       71,728       70,785     Selling, general and administrative expenses      202,968       203,808       263,663       262,424     Interest expense      14,036       17,243       15,046       18,425     Provision for loan losses      6,094       18,239       7,154       24,434     Other expense      —       —       969       1,666                                       393,129       409,508       538,282       557,462                                 Income before minority interest and provision for income taxes      45,325       35,585       63,341       73,266     Minority interest in income of consolidated subsidiary      3,330       3,330       4,065       4,065                                 Income before provision for income taxes      41,995       32,255       59,276       69,201     Provision for income taxes      16,168       12,418       22,821       26,642                                 Net income    $ 25,827     $ 19,837     $ 36,455     $ 42,559                                 Earnings per common share:                                   Basic    $ 1.05     $ 0.80     $ 1.39     $ 1.62                                 Diluted    $ 0.94     $ 0.74     $ 1.23     $ 1.43                                 Weighted-average number of common and common equivalent shares:                                   Basic      24,671       24,671       26,251       26,251                                 Diluted      29,263       29,263       30,677       30,677                                   74                                   2004               As Previously     2004         Reported     As Restated       ASSETS                   Cash and cash equivalents (including restricted cash of approximately $21,423)   $ 98,538     $ 100,565     Contracts receivable, net      28,085       28,085     Notes receivable, net      121,949       152,051     Prepaid expenses      7,810       7,810     Other assets      22,359       19,279     Inventory, net      205,213       205,352     Retained interests in notes receivable sold      72,099       66,513     Property and equipment, net      74,244       74,244     Intangible assets and goodwill      4,512       4,512                     Total assets    $ 634,809     $ 658,411                                         LIABILITIES AND SHAREHOLDERS’ EQUITY                   Liabilities                   Accounts payable    $ 11,552     $ 11,552     Accrued liabilities and other      44,351       44,323     Deferred income      24,235       24,235     Deferred income taxes      58,150       56,064     Receivable-backed notes payable      43,696       73,213     Lines-of-credit and notes payable      71,949       71,949     10.50% senior secured notes payable      110,000       110,000                     Total liabilities      363,933       391,336     Minority interest      6,009       6,009     Commitments and contingencies                   Shareholders’ Equity                   Preferred stock, $.01 par value, 1,000 shares authorized; none issued      —       —     Common stock, $.01 par value, 90,000 shares authorized; 32,990 and 33,193 shares issued at December 31, 2004 and 2005, respectively      330       330     Additional paid-in capital      167,408       167,408     Treasury stock, 2,756 common shares at both December 31, 2004 and 2005, at cost      (12,885 )     (12,885 )   Accumulated other comprehensive income, net of income taxes      832       4,805     Retained earnings      109,182       101,408                     Total shareholders’ equity      264,867       261,066                     Total liabilities and shareholders’ equity    $ 634,809     $ 658,411                       3. Joint Venture       On June 16, 2000, one of our wholly-owned subsidiaries entered into an agreement with Big Cedar L.L.C. (“Big Cedar”), an affiliate of Bass Pro, Inc. (“Bass Pro”), to form the Joint Venture, a vacation ownership development, marketing and sales limited liability company. The Joint Venture is developing, marketing and selling VOIs at The Bluegreen Wilderness Club at Big Cedar, a 312-unit, wilderness-themed resort adjacent to the Big Cedar(R) Lodge, a luxury hotel resort owned by Big Cedar, on the shores of Table Rock Lake in Ridgedale, Missouri. During the year ended April 1, 2001, we made an initial cash capital contribution to the Joint Venture of approximately $3.2 million, in exchange for a 51% ownership interest in the Joint Venture. In exchange for a 49% interest in the Joint Venture, Big Cedar has contributed approximately 46 acres of land with a fair market value of $3.2 million to the Joint Venture. See Note 3 regarding payment of profit distributions to Big Cedar.  75            In addition to its 51% ownership interest, we also receive a quarterly management fee from the Joint Venture equal to 3% of the Joint Venture’s net sales in exchange for our involvement in the day-to-day operations of the Joint Venture. We also service the Joint Venture’s notes receivable in exchange for a servicing fee.       Based on our role as the day-to-day manager of the Joint Venture, its majority control of the Joint Venture’s Management Committee and our controlling financial interest in the Joint Venture, the accounts of the Joint Venture are consolidated in our financial statements.       Because the Joint Venture has a finite life (i.e., the Joint Venture can only exist through the earlier of: i) December 31, 2050; ii) the sale or disposition of all or substantially all of the assets of the Joint Venture; iii) a decision to dissolve the Joint Venture by us and Big Cedar; or iv) certain other events described in the Joint Venture agreement), the minority interest in the Joint Venture meets the definition of a mandatorily redeemable non-controlling interest as specified in SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. The settlement value of this mandatorily redeemable non-controlling interest at December 31, 2004 and 2005 was $6.5 million and $9.8 million respectively, based on the sale or disposition of all or substantially all of the assets of the Joint Venture as of those respective dates.       During the years ended December 31, 2003, 2004, and 2005, the Joint Venture paid approximately $832,000, $493,000, and $565,000 respectively, to Bass Pro(R) and affiliates for construction management services and furniture and fixtures in connection with the development of the Joint Venture’s vacation ownership resort and sales office. In addition, the Joint Venture paid Big Cedar and affiliates approximately $1.0 million, $1.8 million and $2.0 million for gift certificates and hotel lodging during the year ended December 31, 2003, 2004 and 2005, respectively, in connection with the Joint Venture’s marketing activities.  4. Marketing Agreement       On June 16, 2000, we entered into an exclusive, 10-year marketing agreement with Bass Pro, a privately-held retailer of fishing, marine, hunting, camping and sports gear. Bass Pro is an affiliate of Big Cedar (see Note 3). Pursuant to the agreement, we have the right to market our VOIs at each of Bass Pro’s national retail locations (currently consisting of 26 stores), in Bass Pro’s catalogs and on its web site. We also have access to Bass Pro’s customer lists. In exchange for these services, we compensate Bass Pro based on the overall success of their marketing activities through one of the Bass Pro marketing channels described above. The amount of compensation is dependent on the level of additional marketing efforts required by us to convert the prospect into a sale and a defined time frame for such marketing efforts. No compensation paid to Bass Pro on sales made by the Joint Venture.       On June 16, 2000, we prepaid $9.0 million to Bass Pro (the “Prepayment”). The Prepayment was fully amortized from compensation earned by Bass Pro and future distributions otherwise payable to Big Cedar from the earnings of the Joint Venture as a member thereof through December 31, 2005. Additional compensation and member distributions will be paid in cash to Bass Pro or Big Cedar. During the years ended December 31, 2004 and 2005, the Joint Venture made member distributions of $5.5 million and $2.7 million, respectively, of which $2.7 million and $1.3 million, respectively, were payable to Big Cedar and used to pay down the balance of the Prepayment. As of December 31, 2004, the unamortized balance of the Prepayment, included in prepaid expenses on our consolidated balance sheets, was $2.6 million. As of December 31, 2005 the Prepayment was fully amortized.       During the years ended December 31, 2003, 2004, and 2005, we paid an affiliates of Bass Pro, approximately $2,000, $85,000, and $89,000, respectively, for various services.  76       5. Notes Receivable and Note Receivable Purchase Facilities       The table below sets forth additional information relative to our notes receivable (in thousands).                              December 31, 2004     December 31, 2005         (As Restated)               Notes receivable secured by VOIs    $ 154,628     $ 131,058     Notes receivable secured by homesites     10,901       7,408     Other notes receivable      186       186                     Notes receivable, gross      165,715       138,652     Reserve for loan losses      (13,664 )     (10,869 )                   Notes receivable, net    $ 152,051     $ 127,783                            The weighted-average interest rate on our notes receivable was 14.2% and 14.6% at December 31, 2004 and 2005, respectively. All of our vacation ownership loans bear interest at fixed rates. The average interest rate charged on loans secured by VOIs was 14.7% and 14.8% at December 31, 2004 and 2005, respectively. Approximately 59.7% of our notes receivable secured by homesites bear interest at variable rates, while the balance bears interest at fixed rates. The average interest rate charged on loans secured by homesites was 9.2% and 10.7% at December 31, 2004 and 2005, respectively.       Our vacation ownership loans are generally secured by property located in Tennessee, Missouri, Wisconsin, Michigan, Florida, Virginia, Pennsylvania, Aruba, and South Carolina. The majority of Bluegreen(R) Communities’ notes receivable are secured by homesites in Georgia, Virginia, and Texas.       The table below sets forth the activity in our reserve for loan losses as restated for 2003 and 2004 (in thousands).                    Reserve for loan losses at December 31, 2003   $ 22,439     Provision for loan losses      24,434     Reserve for loan losses on sold loans      (21,006 )   Charge-offs      (12,204 )             Reserve for loan losses at December 31, 2004     13,663     Provision for loan losses on sold loans      27,587     Reserve for loan losses      (22,638 )   Charge-offs      (7,744 )             Reserve for loan losses at December 31, 2005   $ 10,868                      Installments due on our notes receivable during each of the five years subsequent to December 31, 2005, and thereafter, are set forth below (in thousands).                    2006   $ 21,231     2007     9,684     2008     10,469     2009      10,997     2010      11,888     Thereafter     74,383               Total   $ 138,652                 Sales of Notes Receivable  Sales of notes receivable during the years ended December 31, 2004 and 2005 were as follows (in millions):  77       Year Ended December 31, 2004 (As Restated)                                               Aggregate Principal                     Initial Fair Value         Balance of Notes     Purchase     Gain     of Retained     Facility   Receivable Sold     Price     Recognized     Interest       2004 Term Securitization   $ 172.1     $ 156.6     $ 21.1     $ 33.3     GE Purchase Facility     43.4       38.6       4.9       6.1                                 Total   $ 215.5     $ 195.2     $ 26.0     $ 39.4       Year Ended December 31, 2005                                               Aggregate Principal                     Initial Fair Value         Balance of Notes     Purchase     Gain     of Retained     Facility   Receivable Sold     Price     Recognized     Interest       BB&T Purchase Facility   $ 211.9     $ 180.1     $ 25.0     $ 42.4 *   2005 Term Securitization     16.7       15.1       0.2       3.0                                 Total   $ 228.6     $ 195.2     $ 25.2     $ 45.4       The following is a description of the facilities that were used to sell notes receivable:  2004 Term Securitization       On July 8, 2004, BB&T Capital Markets, a division of Scott & Stringfellow, Inc. consummated a $156.6 million private offering and sale of vacation ownership receivable-backed securities on our behalf (the “2004 Term Securitization”). The $172.1 million in aggregate principal of vacation ownership receivables offered and sold in the 2004 Term Securitization included $152.8 million in aggregate principal of qualified receivables that secured receivable-backed notes payable and $19.3 million in aggregate principal of qualified vacation ownership receivables that, as permitted in the 2004 Term Securitization, were subsequently sold without recourse (except for breaches of certain representations and warranties at the time of sale) in two separate tranches on August 13, 2004 and August 24, 2004 to an owners’ trust (a qualified special purpose entity) through our wholly-owned, special purpose finance subsidiary, Bluegreen Receivables Finance Corporation VIII. The proceeds from the 2004 Term Securitization were used to pay Resort Finance, LLC all amounts then outstanding under their receivable-backed notes payable facility, pay fees associated with the transaction to third-parties and deposit initial amounts in a required cash reserve account. We received net cash proceeds of $19.1 million. We also recognized an aggregate gain of $21.1 million and recorded a retained interest in the future cash flows of the notes receivable securitized of $33.3 million in connection with the 2004 Term Securitization.  2004 GE Purchase Facility       On August 3, 2004, we executed agreements for a vacation ownership receivables purchase facility (the “2004 GE Purchase Facility”) with General Electric Capital Corporation (“GE”). The 2004 GE Purchase Facility utilized an owners’ trust structure, pursuant to which we sold receivables to Bluegreen Receivables Finance Corporation VII, our wholly-owned, special purpose finance subsidiary (“BRFC VII”), and BRFC VII sold the receivables to an owners’ trust (a qualified special purpose entity) without recourse to us or BRFC VII except for breaches of certain customary representations and warranties at the time of sale. We did not enter into any guarantees in connection with the 2004 GE Purchase Facility. The 2004 GE Purchase Facility has detailed requirements with respect to the eligibility of receivables for purchase, and fundings under the 2004 GE Purchase Facility are subject to certain conditions precedent. Under the 2004 GE Purchase Facility, a variable purchase price of approximately 89.5% of the principal balance of the receivables sold (79.5% in the case of receivables originated in Aruba), subject to adjustment under certain terms and conditions, was paid at closing in cash. The balance of the purchase price is deferred until such time as GE has received a specified return, a specified overcollateralization ratio is achieved, a cash reserve account is fully funded and all servicing, custodial, agent and similar fees and expenses have been paid. GE earns a return equal to the applicable Swap Rate (which is essentially a published interest swap arrangement rate as defined in the 2004 GE Purchase Facility agreements) plus 3.50%, subject to use of alternate return rates in certain circumstances. In addition, we paid GE a structuring fee of approximately $938,000 in October 2004. We act  78       as servicer under the 2004 GE Purchase Facility for a fee. The GE Purchase Facility includes various conditions to purchase, covenants, trigger events and other provisions customary for a transaction of this type. Receivables can be sold under this new 2004 GE Purchase Facility through March 2008, subject to the eligibility requirements and certain conditions precedent.       In March 2006, we executed agreements for a new $125.0 million vacation ownership receivables facility with GE to replace the 2004 GE Purchase Facility. The terms and structure of this new facility are similar to the 2004 GE Purchase Facility, except the variable purchase price is approximately 90.0% and GE’s return will equal the applicable swap rate plus 2.35%.       The following assumptions were used to measure the initial fair value of the retained interests in notes receivable sold or securitized during the year ended December 31, 2004: Prepayment rates ranging from 17% to 13% per annum as the portfolios mature; loss severity rates ranging from 40% to 73%; default rates ranging of 10% to 1% per annum as the portfolios mature; and a discount rate of 9%.       BB&T Purchase Facility       On December 31, 2004, we executed agreements for a vacation ownership receivables purchase facility (the “BB&T Purchase Facility”) with Branch Banking and Trust Company (“BB&T”). The BB&T Purchase Facility utilized an owner’s trust structure, pursuant to which we sold receivables to Bluegreen Receivables Finance Corporation IX, our wholly-owned, special purpose finance subsidiary (“BRFC IX”), and BRFC IX sold the receivables to an owner’s trust (a qualified special purpose entity) without recourse to us or BRFC IX except for breaches of certain customary representations and warranties at the time of sale. We did not enter into any guarantees in connection with the BB&T Purchase Facility. The BB&T Purchase Facility had detailed requirements with respect to the eligibility of receivables for purchase; and, fundings under the BB&T Purchase Facility were subject to certain conditions precedent. Under the BB&T Purchase Facility, a variable purchase price of approximately 85.0% of the principal balance of the receivables sold, subject to certain terms and conditions, was paid at closing in cash. The balance of the purchase price was deferred until such time as BB&T had received a specified return and all servicing, custodial, agent and similar fees and expenses had been paid. The specified return is equal to the commercial paper rate or London Interbank Offered Rate (“LIBOR”), as applicable, plus an additional return of 1.15%, subject to use of alternate return rates in certain circumstances. In addition, we paid BB&T structuring and other fees totaling $1.1 million in December 2004, which was expensed over the funding period of the BB&T Purchase Facility. We acted as servicer under the BB&T Purchase Facility for a fee. The BB&T Purchase Facility expired on December 30, 2005.  2005 Term Securitization       On December 28, 2005, BB&T Capital Markets, a division of Scott & Stringfellow, Inc., consummated a $203.8 million private offering and sale of vacation  ownership  receivable-backed  securities (the “2005 Term Securitization”). The $191.1 million in aggregate principal of vacation ownership receivables offered and sold in the 2005 Term Securitization were previously sold to BRFC IX. The proceeds of the 2005 Term Securitization were used to pay BB&T all amounts outstanding under the BB&T Purchase Facility, pay fees associated with the transaction to third-parties, deposit initial amounts in a required cash reserve account and the escrow accounts for the Pre-funded Receivables (see below) and provide net cash proceeds of $1.1 million to us.       In addition, the 2005 Term Securitization allowed for an additional $35.3 million in aggregate principal of our qualifying vacation ownership receivables (the “Pre-funded Receivables”) that could be sold by us through March 28, 2006 to Bluegreen Receivables Finance Corporation X, our wholly-owned, special purpose finance subsidiary (“BRFC X”), which would then sell the Pre-funded Receivables to BXG Receivables Note Trust 2005-A (“2005-A”), a qualified special purpose entity, without recourse to us or BRFC X, except for breaches of certain representations and warranties at the time of sale. The proceeds of $31.8 million (at an advance rate of 90%) as payment for the Pre-funded Receivables were deposited into an escrow account by the Indenture Trustee of the 2005 Term Securitization until such receivables were actually sold by us to BRFC X. On December 29, 2005, we sold $16.7 million in Pre-funded Receivables to BRFC X and the $15.1 million purchase price was disbursed to us from the escrow account. On March 1, 2006, we sold the remaining $18.6 million in pre-funded receivables to BRFC X and the $16.7 purchase price was disbursed to us from the escrow account.  79            The following assumptions were used to measure the initial fair value of the retained interest in notes receivable sold for each of the 2005 transactions: prepayment rates ranging from 17% to 9% per annum as the portfolios mature; loss severity rate ranging from 45% to 35%; default rates ranging from 10% to 1% per annum as the portfolios mature; and discount rates ranging from 9% to 12%.  Other Notes Receivable       On June 26, 2001, we loaned $1.7 million to the Casa Grande Resort Cooperative Association I (the “Association”), the property owners’ association controlled by the vacation ownership owners at the La Cabana Beach and Racquet Club™ (“La Cabana”) resort in Aruba. During 2004, upon mutual agreement with the Association, we offset the unpaid balance of $1.2 million on this unsecured loan against maintenance fees we were assessed by the Association on our unsold VOIs at the La Cabana resort.  6. Retained Interests in Notes Receivable Sold  Retained Interests in Notes Receivable Sold       Our retained interests in notes receivable sold, which are classified as available-for-sale investments, and their associated unrealized gains and losses are set forth below (in thousands).                                                      Gross     Gross               Amortized     Unrealized     Unrealized           December 31, 2004 (As Restated):   Cost     Gain     Loss     Fair Value       2002 Term Securitization (see Note 5)    $ 23,832     $ 1,527     $ —     $ 25,359     2004 Term Securitization (see Note 5)      29,339       5,756       —       35,095     GE Purchase Facility (see Note 5)      5,529       530       —       6,059                                 Total    $ 58,700     $ 7,813     $ —     $ 66,513                                                                                       Gross     Gross               Amortized     Unrealized     Unrealized           December 31, 2005:   Cost     Gain     Loss     Fair Value       2002 Term Securitization (see Note 5)    $ 18,491     $ —     $ —     $ 18,491     2004 Term Securitization (see Note 5)      33,371       3,373       —       36,744     GE Purchase Facility (see Note 5)      6,284       500       —       6,784     2005 Term Securitization (see Note 5)      33,606       10,071       —       43,677                                 Total    $ 91,752     $ 13,944     $ —     $ 105,696                                        The contractual maturities of our retained interest in notes receivable sold as of December 31, 2005, based on the final maturity dates of the underlying notes receivable , range from five to ten years.                              Amortized               Cost     Fair Value       After one year but within five   $ —     $ —     After five years but within ten     91,752       105,696                     Total    $ 91,752     $ 105,696                            The following assumptions were used to measure the fair value of the above retained interests: prepayment rates ranging from 20% to 9% per annum as the portfolios mature; loss severity rates ranging from 30% to 73%; default rates ranging from 10% to 1% per annum as the portfolios mature; and discount rates ranging from 8% to 9%.       The following table shows the hypothetical fair value of our retained interests in notes receivable sold based on a 10% and a 20% adverse change in each of the assumptions used to measure the fair value of those retained interests (dollars in thousands):  80                                                           Hypothetical Fair Value at December 31, 2005       Adverse                   GE           Change   2002 Term   2004 Term   Purchase   2005 Term       Percentage   Securitization   Securitization   Facility   Securitization     Prepayment rate:     10 %   $ 18,230     $ 36,219     $ 6,679     $ 43,090           20 %     17,978       35,718       6,580       42,526                                                 Loss severity rate:     10 %     18,053       35,817       6,470       42,067           20 %     17,615       34,891       6,156       40,462                                                 Default rate:     10 %     18,010       36,676       6,419       41,657           20 %     17,537       34,628       6,061       39,689                                                 Discount rate:     10 %     18,158       35,246       6,595       41,539           20 %     17,836       35,765       6,415       39,518            The table below summarizes certain cash flows received from and (paid to) our qualifying special purpose finance subsidiaries (in thousands):                                      Year Ended     Year Ended     Year Ended         December 31,     December 31,     December 31,         2003     2004     2005         (As Restated)     (As Restated)               Proceeds from new sales of receivables    $ —     $ 192,580     $ 198,260     Collections on previously sold receivables      (55,182 )     (65,123 )     (104,863 )   Servicing fees received      2,352       2,931       4,969     Purchases of foreclosed assets      —       —       (3,074 )   Resales of foreclosed assets      (12,451 )     (16,886 )     (30,573 )   Remarketing fees received      6,450       8,707       16,793     Cash received on retained interests in notes receivable sold     7,402       8,688       11,016     Cash paid to fund required reserve accounts      (3,939 )     (3,469 )     (6,445 )          Quantitative information about the portfolios of vacation ownership notes receivable previously sold without recourse in which we hold the above retained interests is as follows (in thousands):                                      As of     Year Ended         December 31, 2005     December 31, 2005                 Principal               Total     Amount               Principal     of Loans               Amount of     More than 60     Credit Losses, Net         Loans     Days Past Due     of Recoveries       2002 Term Securitization   $ 70,307     $ 3,070     $ 3,959     2004 Term Securitization     115,997       4,290       6,303     2004 GE Purchase Facility     33,184       1,126       —     2005 Term Securitization     209,915       5,302       —            The net unrealized gain on our retained interests in notes receivable sold, which is presented as a separate component of our shareholders’ equity, is net of income taxes of approximately $1.7 million, $3.0 million and $5.4 million as of December 31, 2003 , 2004 and 2005, respectively.       During the year ended  December 31, 2005, we recorded an other-than-temporary decrease of approximately $539,000 in the fair value of our retained interest associated with the 2002 Term Securitization, based on higher than projected default rates in the portfolio of receivables securitized. This charge has been netted against interest income on our consolidated statements of income.  81       7. Inventory       Our net inventory holdings, summarized by division, are set forth below (in thousands).                              December 31, 2004     December 31, 2005         (As Restated)               Bluegreen Resorts   $ 126,377     $ 173,338     Bluegreen Communities     78,975       67,631                         $ 205,352     $ 240,969                            Bluegreen Resorts inventory as of December 31, 2004, consisted of land inventory of $35.2 million, $32.1 million of construction-in-progress and $59.0 million of completed vacation ownership units. Bluegreen Resorts inventory as of December 31, 2005, consisted of land inventory of $19.2 million, $54.2 million of construction-in-progress and $99.9 million of completed vacation ownership units.       Interest capitalized during the years ended December 31, 2003, 2004, and 2005 totaled $7.2 million, $7.9 million and $10.0 million, respectively. The interest expense reflected in our consolidated statements of income is net of capitalized interest.  8. Property and Equipment       The table below sets forth the property and equipment held by us (in thousands).                                      Useful     December 31,     December 31,         Life     2004     2005       Office equipment, furniture and fixtures    3-14 years   $ 42,229     $ 50,720     Golf course land, land improvements, buildings and equipment    7-39 years     28,295       32,497     Land, buildings and building improvements    3-31 years     25,370       25,902     Leasehold improvements    2-14 years     9,381       12,041     Aircraft    5 years     1,415       1,415     Vehicles and equipment    3-5 years     978       1,129                                           107,668       123,704     Accumulated depreciation and amortization of leasehold improvements              (33,424 )     (44,070 )                           Total            $ 74,244     $ 79,634                               9. Goodwill and Intangible Assets       The table below sets forth our goodwill and intangible asset (in thousands).                              December 31,     December 31,         2004     2005       Intangible asset:                   Customer list acquired in connection with the acquisition of substantially all of the assets of TMOV    $ 13,654     $ 13,654     Accumulated amortization      (13,433 )     (13,617 )                   Net intangible asset      221       37     Goodwill      4,291       4,291                     Total    $ 4,512     $ 4,328                     Annual amortization expense relative to the intangible asset    $ 716     $ 150                            We estimate that the unamortized balance of the customer list intangible asset will be amortized during 2006.  82            All of our goodwill relates to our Bluegreen Resorts division. Our impairment tests during the years ended December 31, 2003, 2004, and 2005 determined that no goodwill impairment existed.  10. Receivable-Backed Notes Payable       The GMAC Receivables Facility. In February 2003, we entered into a revolving vacation ownership receivables credit facility (the “GMAC Receivables Facility”) with Residential Funding Corporation (“RFC”), an affiliate of GMAC. The borrowing limit under the GMAC Receivables Facility, as increased by amendment, is $75.0 million. The borrowing period on the GMAC Receivables Facility, as amended, expires on February 15, 2008, and outstanding borrowings mature no later than February 15, 2015. The GMAC Receivables Facility has detailed requirements with respect to the eligibility of receivables for inclusion and other conditions to funding. The borrowing base under the GMAC Receivables Facility is 90% of the outstanding principal balance of eligible notes arising from the sale of VOIs. The GMAC Receivables Facility includes affirmative, negative and financial covenants and events of default. All principal and interest payments received on pledged receivables are applied to principal and interest due under the GMAC Receivables Facility. Indebtedness under the facility bears interest at the London Interbank Offered Rate (“LIBOR”) plus 4.00% (8.34% at December 31, 2005). During the year ended December 31, 2005, we pledged approximately $18.8 million in aggregate principal balance of vacation ownership receivables under the GMAC Receivables Facility and received $16.9 million in cash borrowings. As of December 31, 2005, $25.4 million was outstanding under the GMAC Receivables Facility.       The Foothill Facility. We have a $30.0 million revolving credit facility with Foothill secured by the pledge of Bluegreen Communities’ receivables, with up to $10.0 million of the total facility available for Bluegreen Communities’ inventory borrowings and up to $10.0 million of the total facility available for the pledge of Bluegreen Resorts’ receivables (the “Foothill Facility”). The Foothill Facility requires principal payments based on agreed-upon release prices as homesites in the encumbered communities are sold and bears interest at the prime lending rate plus 1.25% (8.50% at December 31, 2005), payable monthly. The interest rate charged on outstanding receivable borrowings under the Foothill Facility, as amended, is the prime lending rate plus 0.25% (7.5% at December 31, 2005) when the average monthly outstanding loan balance is greater than or equal to $15.0 million. If the average monthly outstanding loan balance is less than $15.0 million, the interest rate is the greater of 4.00% or the prime lending rate plus 0.50% (7.75% at December 31, 2005). All principal and interest payments received on pledged receivables are applied to principal and interest due under the Foothill Facility. We can borrow under the Foothill Facility through December 31, 2006. There were no borrowings under the Foothill Facility during the year ended December 31, 2005. At December 31, 2005, the outstanding principal balance under this facility was approximately $3.2 million, approximately $2.2 million of which related to Bluegreen Communities’ receivables borrowings and $1.0 million of which related to Bluegreen Resorts’ receivables borrowings. Outstanding indebtedness collateralized by receivables is due December 31, 2008.       The Textron Facility. During December 2003, we signed a combination $30.0 million Acquisition and Development and Timeshare Receivables facility with Textron Financial Corporation (the “Textron Facility”). The borrowing period for acquisition and development loans under the Textron Facility expired on October 1, 2004, The borrowing period for vacation ownership receivables loans under the Textron Facility expired on March 1, 2006, and outstanding vacation ownership receivables borrowings mature no later than March 31, 2009. Receivable-backed borrowings under the Textron Facility bear interest at the prime lending rate plus 1.00% (8.25% at December 31, 2005), subject to a 6.00% minimum interest rate. During the year ended December 31, 2005, we borrowed $10.5 million collateralized by $11.6 million of vacation ownership receivables. As of December 31, 2005, $3.8 million was outstanding under the Textron Facility, all of which was receivable -backed debt.       The Resort Finance Facility. On October 8, 2003, Resort Finance, LLC (“RFL”) acquired and assumed the rights, obligations and commitments of ING Capital, LLC (“ING”) as initial purchaser in an existing vacation ownership receivables purchase facility (the “RFL Facility”) originally executed between ING and us in April 2002. On September 30, 2004, we executed an extension of the RFL Facility to allow for borrowings on notes receivable for a cumulative advance amount of up to $100.0 million on a revolving basis through September 29, 2005. On September 29, 2005, we executed an extension of the RFL Facility to December 29, 2005.       The RFL Facility utilized an owner’s trust structure, pursuant to which we pledged receivables to Bluegreen Receivables Finance Corporation V, one of our wholly-owned, special purpose finance subsidiaries (“BRFC V”), and  83       BRFC V pledged the receivables to an owner’s trust (a qualified special purpose entity) without recourse to us or BRFC V except for breaches of certain representations and warranties at the time of funding. We did not enter into any guarantees in connection with the RFL Facility. Under the RFL Facility, a variable advance rate of 85.00% of the principal balance of the receivables pledged, subject to certain customary terms and conditions, was paid in cash at funding. The balance of advance was deferred until such time as RFL had received a specified return and all servicing, custodial, agent and similar fees and expenses have been paid. RFL earned a return equal to LIBOR plus an additional return ranging from 2.00% to 3.25% (based on the amount outstanding under the RFL Facility) from October 8, 2003 through September 30, 2004, and earned a return equal to LIBOR plus 3.25% through December 29, 2005, subject to the use of alternate return rates in certain circumstances. In addition, RFL received a 0.25% annual facility fee. Notes receivable financed under the RFL Facility qualify as legal sales but were are treated as borrowings in our consolidated financial statements in compliance with SFAS No. 140.       On December 28, 2005, in connection with the 2005 Term Securitization (See Note 5) we paid off $15.8 million of receivable-backed notes payable and sold $17.5 million of aggregate principal balance of notes receivable previously pledged to RFL. Our ability to borrow under the RFL Facility expired on December 29, 2005.       At December 31, 2005, $41.8 million in notes receivable secured our $35.7 million in receivable-backed notes payable.  11. Lines-of-Credit and Notes Payable       We have outstanding borrowings with various financial institutions and other lenders, which have been used to finance the acquisition and development of our inventory and to fund operations. Financial data related to our borrowing facilities is set forth below (in thousands).                              December 31,     December 31,         2004     2005       Lines-of-credit secured by inventory and golf courses with a carrying value of $130.0 million at December 31, 2005. Interest rates range from 6.25% to 7.15% at December 31, 2004 and 8.13% to 9.09% at December 31, 2005. Maturities range from October 2007 to September 2009    $ 50,024     $ 35,255       Notes and mortgage notes secured by certain inventory, property, equipment and investments with an aggregate carrying value of $51.9 million at December 31, 2005. Interest rates ranging from 3.31% to 7.04% at December 31, 2004 to 4.75% to 8.13% at December 31, 2005. Maturities range from on demand to June 2009      19,354       24,057       Lease obligations secured by the underlying assets with an aggregate carrying value of $2.4 million at December 31, 2005. Imputed interest rates ranging from 2.84% to 10.67% at December 31, 2004 and from 3.29% to 14.20% at December 31, 2005. Maturities range from March 2006 to October 2010      2,571       2,116                       Total   $ 71,949     $ 61,428                            The table below sets forth the contractual minimum principal payments required on our lines-of-credit and notes payable and capital lease obligations for each year subsequent to December 31, 2005. Such minimum contractual payments may differ from actual payments due to the effect of principal payments required on a homesite or VOI release basis for certain of the above obligations (in thousands).                    2006   $ 21,459     2007     20,971     2008     11,210     2009     7,731     2010     57               Total   $ 61,428                 84            The following is a discussion of our significant credit facilities and significant new borrowings during the year ended December 31, 2005:  The GMAC AD&C Facility. In September 2003, RFC provided us with a $75.0 million acquisition, development and construction revolving credit facility for Bluegreen Resorts (the “GMAC AD&C Facility”). In March 2006 RFL expanded the GMAC AD&C Facility to allow for a revolving facility limit of $150.0 million. The borrowing period on the GMAC AD&C Facility, as amended, expires on February 15, 2008, and outstanding borrowings mature no later than August 15, 2013, although specific draws typically are due four years from the borrowing date. Principal will be repaid through agreed-upon release prices as VOIs are sold at the financed resorts, subject to minimum required amortization. Through February 15, 2006, indebtedness under the facility beared interest at 30-day LIBOR plus 4.75% (9.09% at December 31, 2005). As amended, the GMAC AD&C Facility will bear interest at LIBOR plus 4.50% after February 15,2006. Interest payments are due monthly. During the year ended December 31, 2005, we borrowed $33.1 million under the GMAC AD&C Facility to fund the development of VOIs at The Fountains and the acquisition of Carolina Grande. As of December 31, 2005, $33.4 million was outstanding under the GMAC AD&C Facility.  The RFL A&D Facility. In January 2005, we entered into a $50.0 million revolving credit facility with RFL (the “RFL A&D Facility”). We use the proceeds from the RFL A&D Facility to finance the acquisition and development of vacation ownership resorts. The RFL A&D Facility is secured by 1) a first mortgage and lien on all assets purchased with the RFL A&D Facility; 2) a first assignment of all construction contracts, related documents, building permits and completion bond; 3) a negative pledge of our interest in any management, marketing, maintenance or service contracts; and 4) a first assignment of all operating agreements, rents and other revenues at the vacation ownership resorts which serve as collateral for the RFL A&D Facility, subject to any requirements of the respective property owners’ associations. Borrowings under the RFL A&D Facility can be made through January 10, 2007. Principal payments will be effected through agreed-upon release prices paid to RFL as vacation ownership interests in the resorts that serve as collateral for the RFL A&D Facility. The outstanding principal balance of any borrowings under the RFL A&D Facility must be repaid by January 10, 2008. Indebtedness under the facility bears interest at 30-day LIBOR plus 3.90%, subject to a 6.90% floor (8.29% at December 31, 2005). Interest payments are due monthly. We are required to pay a commitment fee equal to 1.00% of the $50.0 million facility amount, which is paid at the time of each borrowing under the RFL A&D Facility as 1.00% of each borrowing with the balance being paid on the unutilized facility amount on January 10, 2007. In addition, we are required to pay a program fee equal to 0.125% of the $50.0 million facility amount per annum, payable monthly. The RFL A&D Facility documents include customary conditions to funding, acceleration provisions and certain financial affirmative and negative covenants. In January 2005, we borrowed $9.5 million under the RFL A&D Facility in connection with the acquisition of the Daytona SeaBreeze resort in Daytona Beach Shores. As of December 31, 2005, there were no amounts outstanding under the RFL A&D Facility.  The GMAC Communities Facility. In May 2005 and again in March 2006, we amended our existing $75.0 million revolving credit facility with RFC (the “GMAC Communities Facility”). The GMAC Communities Facility is secured by the real property homesites (and personal property related thereto) at the following Bluegreen Communities projects, as well as any Bluegreen Communities projects acquired by us with funds borrowed under the GMAC Communities Facility (the “Secured Projects”): Brickshire (New Kent County, Virginia); Mountain Lakes Ranch (Bluffdale, Texas); Ridge Lake Shores (Magnolia, Texas); Riverwood Forest (Fulshear, Texas); Waterstone (Boerne, Texas); Catawba Falls Preserve (Black Mountain, North Carolina); Lake Ridge at Joe Pool Lake (Cedar Hill and Grand Prairie, Texas); Mystic Shores at Canyon Lake (Spring Branch, Texas); Yellowstone Creek Ranch (Pueblo, Colorado); and Havenwood at Hunters’ Crossing (New Braunfels, Texas) (the “Texas Property”). In addition, the GMAC Communities Facility is secured by our Carolina National and The Preserve at Jordan Lake golf courses in Southport, North Carolina and Chapel Hill, North Carolina, respectively. Borrowings can be drawn on such projects through September 30, 2007. Principal payments are effected through agreed-upon release prices paid to RFC as homesites in the Secured Projects are sold. The outstanding principal balance of any borrowings under the GMAC Communities Facility must be repaid by September 30, 2009. The interest charged on outstanding borrowings is at the prime lending rate plus 1.00% (8.25% at December 31, 2005). Interest payments are due monthly. The GMAC Communities Facility includes customary conditions to funding, acceleration and event of default provisions and certain financial affirmative and negative covenants. We use the proceeds from the GMAC Communities Facility to repay outstanding indebtedness on Bluegreen Communities projects, finance the acquisition and development of Bluegreen Communities projects and for general corporate purposes. In July 2005, we borrowed an additional $7.5 million under the GMAC Communities Facility in connection with the acquisition of the Texas Property. As of December 31, 2005, $1.8 million was outstanding under the  85       GMAC Communities Facility. In March 2006, we borrowed $27.2 million to fund the acquisition of 1,579 acres in Grayson County, Texas, and for general operating purposes.  The Wachovia Line-of-Credit. We have a $15.0 million unsecured line-of-credit with Wachovia Bank, N.A. Amounts borrowed under the line bear interest at 30-day LIBOR plus 2.00% (6.34% at December 31, 2005). Interest is due monthly and all outstanding amounts are due on June 30, 2006. Borrowings under the line-of-credit are limited to an amount which is less than the remaining availability under our current, active vacation ownership receivables purchase facilities plus availability under certain receivables warehouse facilities, less any outstanding letters of credit. The line-of-credit agreement contains covenants and conditions typical of arrangements of this type. As of December 31, 2005, no borrowings were outstanding under the line; however, an aggregate of $523,000 of irrevocable letters of credit were outstanding under this line-of-credit at December 30, 2005. These letters of credit expire on December 31, 2006. This line-of-credit is an available source of short-term liquidity.  12. Senior Secured Notes Payable  On April 1, 1998, we consummated a private placement offering (the “Offering”) of $110.0 million in aggregate principal amount of 10.50% senior secured notes due April 1, 2008 (the “Notes”). On June 27, 2005, we used the proceeds from our junior subordinated debentures to redeem $55.0 million in aggregate principal amount of the Notes at a redemption price of 101.75% plus accrued and unpaid interest through June 26, 2005 of approximately $1.4 million. Interest on the Notes is payable semiannually on April 1 and October 1 of each year. The Notes became redeemable at our option, in whole or in part, in cash, on April 1, 2003 and annually thereafter, together with accrued and unpaid interest, if any, to the date of redemption at the following redemption prices: 2003 — 105.25%; 2004 — 103.50%; 2005 — 101.75% and 2006 and thereafter — 100.00%. As of December 31, 2005 the Notes totaled $55 million.       The Notes are our senior obligations and rank pari passu in right of payment with all of our existing and future senior indebtedness and rank senior in right of payment to all of our existing and future subordinated obligations. None of the assets of Bluegreen Corporation secures its obligations under the Notes, and the Notes are effectively subordinated to our secured indebtedness to any third party to the extent of assets serving as security thereon. The Notes are unconditionally guaranteed, jointly and severally, by each of our subsidiaries (the “Subsidiary Guarantors”), with the exception of the Joint Venture, Bluegreen Properties N.V., Resort Title Agency, Inc., any special purpose finance subsidiary, any subsidiary which is formed and continues to operate for the limited purpose of holding a real estate license and acting as a broker, and certain other subsidiaries which have individually less than $50,000 of assets (collectively, “Non-Guarantor Subsidiaries”). Each of the note guarantees covers the full amount of the Notes and each of the Subsidiary Guarantors is 100% owned, directly or indirectly, by us. The Note guarantees are senior obligations of each Subsidiary Guarantor and rank pari passu in right of payment with all existing and future senior indebtedness of each such Subsidiary Guarantor and senior in right of payment to all existing and future subordinated indebtedness of each such Subsidiary Guarantor. The Note guarantees of certain Subsidiary Guarantors are secured by a first mortgage (subject to customary exceptions) or similar instrument (each, a “Mortgage”) on certain Bluegreen Communities properties of such Subsidiary Guarantors (the “Pledged Properties”). Absent the occurrence and the continuance of an event of default, the Notes trustee is required to release its lien on the Pledged Properties as property is sold and the Trustee does not have a lien on the proceeds of any such sale. As of December 31, 2005, the Pledged Properties had an aggregate net carrying value of approximately $757,000. The Notes’ indenture includes certain negative covenants including restrictions on the incurrence of debt and liens and on payments of cash dividends.       Supplemental financial information for Bluegreen Corporation, our combined Non-Guarantor Subsidiaries and our combined Subsidiary Guarantors is presented below.  86       CONDENSED CONSOLIDATING BALANCE SHEETS (dollars in thousands)                                                      December 31, 2004 (As Restated)                 Combined     Combined                     Bluegreen     Non-Guarantor     Subsidiary                     Corporation     Subsidiaries     Guarantors     Eliminations     Consolidated       ASSETS                                           Cash and cash equivalents    $ 70,256     $ 18,793     $ 11,516     $ —     $ 100,565     Contracts receivable, net      —       1,365       26,720       —       28,085     Intercompany receivable      69,977       —       —       (69,977 )     —     Notes receivable, net      —       62,060       89,991       —       152,051     Other assets      2,645       6,070       22,886       —       31,601     Inventory, net      —       20,744       184,608       —       205,352     Retained interests in notes receivable sold      —       66,513       —       —       66,513     Investments in subsidiaries      213,011       —       3,230       (216,241 )     —     Property and equipment, net      15,084       2,013       57,147       —       74,244                                       Total assets    $ 370,973     $ 177,558     $ 396,098     $ (286,218 )   $ 658,411                                                                                   LIABILITIES AND SHAREHOLDERS’ EQUITY                                           Liabilities:                                           Accounts payable, accrued liabilities and other   $ 12,353     $ 14,817     $ 52,940     $ —     $ 80,110     Intercompany payable      —       6,557       63,420       (69,977 )     —     Deferred income taxes      (18,683 )     32,124       42,623       —       56,064     Lines-of-credit and notes payable      6,237       55,658       83,267       —       145,162     10.50% senior secured notes payable      110,000       —       —       —       110,000                                       Total liabilities      109,907       109,156       242,250       (69,977 )     391,336     Minority interest      —       —       —       6,009       6,009     Total shareholders’ equity      261,066       68,402       153,848       (222,250 )     261,066                                       Total liabilities and shareholders’ equity   $ 370,973     $ 177,558     $ 396,098     $ (286,218 )   $ 658,411                                         87                                                           December 31, 2005                 Combined     Combined                     Bluegreen     Non-Guarantor     Subsidiary                     Corporation     Subsidiaries     Guarantors     Eliminations     Consolidated       ASSETS                                           Cash and cash equivalents    $ 55,708     $ 15,443     $ 13,553     $ —     $ 84,704     Contracts receivable, net      —       1,801       25,672       —       27,473     Intercompany receivable      92,641       —       —       (92,641 )     —     Notes receivable, net      —       48,294       79,489       —       127,783     Other assets      4,028       4,666       19,290       —       27,984     Inventory, net      —       17,857       223,112       —       240,969     Retained interests in notes receivable sold      —       105,696       —       —       105,696     Investments in subsidiaries      265,023       —       3,230       (268,253 )     —     Property and equipment, net      14,569       1,330       63,735       —       79,634                                       Total assets    $ 431,969     $ 195,087     $ 428,081     $ (360,894 )   $ 694,243                                                                                   LIABILITIES AND SHAREHOLDERS’ EQUITY                                           Liabilities:                                           Accounts payable, accrued liabilities and other   $ 20,214     $ 68,397     $ (4,385 )   $ —     $ 84,226     Intercompany payable      —       (48,757 )     65,447       (92,641 )     —     Deferred income taxes      (21,798 )     41,824       89,364       —       75,404     Lines-of-credit and notes payable      5,607       27,064       64,488       —       97,159     10.50% senior secured notes payable      55,000       —       —       —       55,000     Junior subordinated debentures      59,280       —       —       —       59,280                                       Total liabilities      118,303       88,528       214,914       (92,641 )     371,069     Minority interest      —       —       —       9,508       9,508     Total shareholders’ equity      313,666       106,559       213,167       (277,761 )     313,666                                       Total liabilities and shareholders’ equity   $ 431,969     $ 195,087     $ 428,081     $ (360,894 )   $ 694,243                                         88       CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (dollars in thousands)                                                      Year Ended December 31, 2003 (As Restated)                 Combined     Combined                     Bluegreen     Non-Guarantor     Subsidiary                     Corporation     Subsidiaries     Guarantors     Eliminations     Consolidated       REVENUES                                           Sales of real estate    $ —     $ 39,489     $ 319,855     $ —     $ 359,344     Other resort and communities operations revenue      —       7,394       48,000       —       55,394     Management fees      38,855       —       —       (38,855 )     —     Equity income from subsidiaries      19,979       —       —       (19,979 )     —     Interest income      282       20,065       9,551       —       29,898     Gain on sales of notes receivable      —       —       —       —       —     Other income      40       (191 )     608       —       457                                             59,156       66,757       378,014       (58,834 )     445,093       COSTS AND EXPENSES                                           Cost of real estate sales      —       10,274       99,172       —       109,446     Cost of other resort and communities operations      —       3,963       56,809       —       60,772     Management fees      —       1,114       37,741       (38,855 )     —     Selling, general and administrative expenses      29,589       21,244       152,975       —       203,808     Interest expense      9,819       3,919       3,505       —       17,243     Provision for loan losses      —       13,071       5,168       —       18,239                                             39,408       53,585       355,370       (38,855 )     409,508                                       Income before minority interest and (benefit) provision for income taxes      19,748       13,172       22,644       (19,979 )     35,585     Minority interest in income of consolidated Subsidiary      —       —       —       3,330       3,330                                       Income before provision (benefit) for income taxes      19,748       13,172       22,644       (23,309 )     32,255     Provision (benefit) for income taxes      (89 )     3,789       8,718       —       12,418                                       Net income    $ 19,837     $ 9,383     $ 13,926     $ (23,309 )   $ 19,837                                         89                                                           Year Ended December 31, 2004 (As Restated)                 Combined     Combined                     Bluegreen     Non-Guarantor     Subsidiary                     Corporation     Subsidiaries     Guarantors     Eliminations     Consolidated       REVENUES                                           Sales of real estate    $ —     $ 48,572     $ 453,836     $ —     $ 502,408     Other resort and communities operations revenue      —       6,740       59,669       —       66,409     Management fees      53,664       —       —       (53,664 )     —     Equity income from subsidiaries      39,598       —       —       (39,598 )     —     Interest income      339       23,346       12,254       —       35,939     Gain on sales of notes receivable      —       25,972       —       —       25,972                                             93,601       104,630       525,759       (93,262 )     630,728       COSTS AND EXPENSES                                           Cost of real estate sales      —       13,702       166,026       —       179,728     Cost of other resort and communities operations      —       4,574       66,211       —       70,785     Management fees      —       1,088       52,576       (53,664 )     —     Selling, general and administrative expenses      40,615       22,814       198,995       —       262,424     Interest expense      8,452       4,994       4,979       —       18,425     Provision for loan losses      —       18,474       5,960       —       24,434     Other expense      121       1,068       477       —       1,666                                             49,188       66,714       495,224       (53,664 )     557,462                                       Income before minority interest and provision for income taxes      44,413       37,916       30,535       (39,598 )     73,226     Minority interest in income of consolidated subsidiary      —       —       —       4,065       4,065                                       Income before provision for income taxes      44,413       37,916       30,535       (43,663 )     69,201     Provision for income taxes      1,854       13,032       11,756       —       26,642                                       Net income    $ 42,559     $ 24,884     $ 18,779     $ (43,663 )   $ 42,559                                         90                                                           Year Ended December 31, 2005                 Combined     Combined                     Bluegreen     Non-Guarantor     Subsidiary                     Corporation     Subsidiaries     Guarantors     Eliminations     Consolidated       REVENUES                                           Sales of real estate    $ —     $ 55,007     $ 495,328     $ —     $ 550,335     Other resort and communities operations revenue      —       13,236       60,561       —       73,797     Management fees      58,360       —       —       (58,360 )     —     Equity income from subsidiaries      52,045       —       —       (52,045 )     —     Interest income      1,379       17,294       16,125       —       34,798     Gain on sales of notes receivable      —       25,226       —       —       25,226                                             111,784       110,763       572,014       (110,405 )     684,156       COSTS AND EXPENSES                                           Cost of real estate sales      —       15,955       161,845       —       177,800     Cost of other resort and communities operations      —       5,056       72,261       —       77,317     Management fees      —       1,158       57,202       (58,360 )     —     Selling, general and administrative expenses      61,934       27,297       211,008       —       300,239     Interest expense      4,446       2,875       7,153       —       14,474     Provision for loan losses      —       1,416       26,171       —       27,587     Other expense (income)      1,967       3,117       1,123       —       6,207                                             68,347       56,874       536,763       (58,360 )     603,624                                       Income before minority interest and provision (benefit) for income taxes      43,437       53,889       35,251       (52,045 )     80,532     Minority interest in income of consolidated subsidiary     —       —       —       4,839       4,839                                       Income before provision (benefit) for income taxes      43,437       53,889       35,251       (56,884 )     75,693     Provision (benefit) for income taxes      (3,114 )     19,502       12,754       —       29,142                                       Net income (loss)    $ 46,552     $ 34,387     $ 22,497     $ (56,884 )   $ 46,551                                         91       CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (dollars in thousands)                                              Year Ended December 31, 2003 (As Restated)                 Combined     Combined               Bluegreen     Non-Guarantor     Subsidiary               Corporation     Subsidiaries     Guarantors     Consolidated       Operating activities:                                   Net cash provided (used) by operating activities    $ 9,928     $ (4,266 )   $ 33,365     $ 39,027                                 Investing activities:                                   Cash received from retained interests in notes receivable sold     —       7,402       —       7,402     Principal payments received on investment in note receivable      456       —       —       456     Business acquisition      —       —       (500 )     (500 )   Purchases of property and equipment      (3,310 )     (420 )     (8,163 )     (11,893 )   Proceeds from sales of property and equipment      854       —       230       1,084                                 Net cash provided (used) by investing activities      (2,000 )     6,982       (8,433 )     (3,451 )                               Financing activities:                                   Proceeds from borrowings under line-of-credit facilities and notes payable      7,000       8,125       25,000       40,125     Payments under line-of-credit facilities and notes payable      (7,568 )     (1,384 )     (41,026 )     (49,978 )   Payment of debt issuance costs      (1,073 )     (631 )     (928 )     (2,632 )   Proceeds from exercise of employee and director stock options     1,212       —       —       1,212                                 Net cash (used) provided by financing activities      (429 )     6,110       (16,954 )     (11,273 )                               Net increase in cash and cash equivalents      7,499       8,826       7,978       24,303                                         Cash and cash equivalents at beginning of year      22,373       4,822       7,081       34,276                                                                     Cash and cash equivalents at end of year      29,872       13,648       15,059       58,579                                         Restricted cash and cash equivalents at end of year      (173 )     (7,085 )     (11,830 )     (19,088 )                                                                   Unrestricted cash and cash equivalents at end of year    $ 29,699     $ 6,563     $ 3,229     $ 39,491                                   92                                                   Year Ended December 31, 2004 (As Restated)                 Combined     Combined               Bluegreen     Non-Guarantor     Subsidiary               Corporation     Subsidiaries     Guarantors     Consolidated       Operating activities:                                   Net cash provided by operating activities    $ 41,212     $ 6,366     $ 44,178     $ 91,756                                 Investing activities:                                   Cash received from retained interests in notes receivable sold     —       8,688       —       8,688     Business acquisition      —       —       (825 )     (825 )   Purchases of property and equipment      (5,380 )     (643 )     (12,386 )     (18,409 )   Proceeds from sales of property and equipment      —       —       8       8                                 Net cash provided (used) by investing activities      (5,380 )     8,045       (13,203 )     (10,538 )                                 Financing activities:                                   Proceeds from borrowings under line-of-credit facilities and notes payable      —       3,179       57,478       60,657     Payments under line-of-credit facilities and notes payable      (1,769 )     (8,525 )     (90,185 )     (100,479 )   Payment of 8.25% subordinated convertible debentures      (273 )     —       —       (273 )   Payment of debt issuance costs      —       (3,920 )     (1,811 )     (5,731 )   Proceeds from exercise of employee and director stock options     6,594       —       —       6,594                                 Net cash (used) provided by financing activities      4,552       (9,266 )     (34,518 )     (39,232 )                               Net increase in cash and cash equivalents      40,384       5,145       (3,543 )     41,986     Cash and cash equivalents at beginning of year      29,872       13,648       15,059       58,579                                 Cash and cash equivalents at end of year      70,256       18,793       11,516       100,565     Restricted cash and cash equivalents at end of year      (173 )     (9,509 )     (11,741 )     (21,423 )                               Unrestricted cash and cash equivalents at end of year    $ 70,083     $ 9,284     $ (225 )   $ 79,142                                   93                                                   Year Ended December 31, 2005                 Combined     Combined               Bluegreen     Non-Guarantor     Subsidiary               Corporation     Subsidiaries     Guarantors     Consolidated       Operating activities:                                   Net cash (used) provided by operating activities    $ (3,393 )   $ 27,668     $ 31,308     $ 55,583                                 Investing activities:                                   Cash received from retained interests in notes receivable sold     —       11,016       —       11,016     Investment in statutory business trust      (1,780 )     —       —       (1,780 )   Installment payments on business acquisition      —       —       (675 )     (675 )   Purchases of property and equipment      (5,112 )     (216 )     (11,396 )     (16,724 )   Sales of property and equipment      —       —       22       22                                 Net cash (used) provided by investing activities      (6,892 )     10,800       (12,049 )     (8,141 )                               Financing activities:                                   Proceeds from borrowings under line-of-credit facilities and notes payable      —       —       26,382       26,382     Payments under line-of-credit facilities and notes payable      (1,071 )     (1,113 )     (89,887 )     (92,071 )   Redemption of 10.50% senior secured notes payable      (55,000 )     —       —       (55,000 )   Proceeds from issuance of junior subordinated debentures      59,280       —       —       59,280     Payment of debt issuance costs      (1,862 )     (37 )     (1,401 )     (3,300 )   Proceeds from exercise of employee and director stock options     1,406       —       —       1,406                                 Net cash provided (used) by financing activities      2,753       (1,150 )     (64,906 )     (63,303 )                               Net (decrease) increase in cash and cash equivalents      (7,532 )     37,318       (45,647 )     (15,861 )   Cash and cash equivalents at beginning of period      70,256       18,793       11,516       100,565                                 Cash and cash equivalents at end of period      55,708       15,443       13,553       84,704     Restricted cash and cash equivalents at end of period      (173 )     (6,709 )     (11,439 )     (18,321 )                               Unrestricted cash and cash equivalents at end of period    $ 55,535     $ 8,734     $ 2,114     $ 66,383                                   13. Convertible Subordinated and Junior Subordinated Debentures  Convertible Subordinated Debentures       Through November 18, 2004, $7.0 million of our 8.25% Convertible Subordinated Debentures (the “Debentures”) were voluntarily converted by the holders of the Debentures at a conversion price of $8.24 per share. We called the remaining balance of $27.4 million on November 19, 2004, which resulted in the voluntary conversion of all but $273,000 of the Debentures at a conversion price of $8.24 per share. We redeemed the remaining $273,000 for cash at a price of 100% plus accrued and unpaid interest through the redemption date. The total of such conversions resulted in the issuance of 4.1 million shares of our common stock. In connection with this conversion, we wrote off approximately $414,000 of related debt issuance costs to additional paid-in capital. Accrued interest forfeited by debenture holders upon conversion of approximately $282,000 was credited to additional paid-in capital.  Trust Preferred Securities Offerings       We have formed statutory business trusts (collectively, the “Trusts”) and each issued trust preferred securities and invested the proceeds thereof in our junior subordinated debentures. The Trusts are variable interest entities in which we are not the primary beneficiary as defined by FASB Interpretation No. 46R. Accordingly, we do not consolidate the operations of the Trusts; instead, the Trusts are accounted for under the equity method of accounting. In each of these transactions, the applicable Trust issued trust preferred securities as part of a larger pooled trust securities offering which was not registered under the Securities Act of 1933. The applicable Trust then used the proceeds from issuing the trust preferred securities to purchase an identical amount of junior subordinated debentures from us. Interest on the junior  94       subordinated debentures and distributions on the trust preferred securities are payable quarterly in arrears at the same interest rate. Distributions on the trust preferred securities are cumulative and based upon the liquidation value of the trust preferred security. The trust preferred securities are subject to mandatory redemption, in whole or in part, upon repayment of the junior subordinated debentures at maturity or their earlier redemption. The junior subordinated debentures are redeemable in whole or in part at the Company’s option at any time after five years from the issue date or sooner following certain specified events. In addition, we made an initial equity contribution to each Trust in exchange for its common securities, all of which are owned by us, and those proceeds were also used to purchase an identical amount of junior subordinated debentures from us. The terms of each Trust’s common securities are nearly identical to the trust preferred securities.  We had the following junior subordinated debentures outstanding at December 31, 2005 (dollars in thousands):                                                                      Outstanding                                               Amount of     Initial             Fixed     Variable     Beginning               Junior     Equity             Interest     Interest     Optional               Subordinated     To     Issue     Rate     Rate     Redemption     Maturity     Trust   Debentures     Trust     Date     (1)     (2)     Date     Date           Bluegreen                                                           Statutory Trust I   $ 23,196     $ 696       3/15/05       9.160 %   LIBOR + 4.90     %       3/30/10       3/30/35     Bluegreen                                                           Statutory Trust II     25,774       774       5/4/05       9.158 %   LIBOR + 4.85     %       7/30/10       7/30/35     Bluegreen                                                           Statutory Trust III     10,310       310       5/10/05       9.193 %   LIBOR + 4.85     %       7/30/10       7/30/35                                                         $ 59,280     $ 1,780                                                                                                          (1)   Both the trust preferred securities and junior subordinated debentures bear interest at a fixed interest rate from the issue date through the beginning optional redemption date.     (2)   Both the trust preferred securities and junior subordinated debentures bear interest at a variable interest rate from the beginning optional redemption date through the maturity date.   14. Fair Value of Financial Instruments       In estimating the fair values of our financial instruments, we used the following methods and assumptions:       Cash and cash equivalents: The amounts reported in our consolidated balance sheets for cash and cash equivalents approximate fair value.       Contracts receivable: The amounts reported in our consolidated balance sheets for contracts receivable approximate fair value. Contracts receivable are non-interest bearing and generally convert into cash or an interest-bearing mortgage note receivable within thirty days.       Notes receivable: The amounts reported in our consolidated balance sheets for notes receivable approximate fair value based on discounted future cash flows using current rates at which similar loans with similar maturities would be made to borrowers with similar credit risk.       Retained interests in notes receivable sold: Retained interests in notes receivable sold are carried at fair value based on discounted cash flow analyses.       Lines-of-credit, notes payable, receivable-backed notes payable and junior subordinated debentures: The amounts reported in our consolidated balance sheets approximate their fair value for indebtedness that provides for variable interest rates. The fair value of our fixed-rate indebtedness was estimated using discounted cash flow analyses, based on our current incremental borrowing rates for similar types of borrowing arrangements.       10.50% senior secured notes payable: The fair value of our 10.50% senior secured notes is based on the quoted market price in the over-the-counter bond market.  95                                                   December 31, 2004     December 31, 2005         Carrying     Estimated     Carrying     Estimated     (As Restated)   Amount     Fair Value     Amount     Fair Value       Cash and cash equivalents    $ 100,565     $ 100,565     $ 84,704     $ 84,704     Contracts receivable, net      28,085       28,085       27,473       27,473     Notes receivable, net      152,051       152,051       127,783       127,783     Retained interests in notes receivable sold      66,513       66,513       105,696       105,696     Lines-of-credit, notes payable, and receivable- backed notes payable      145,162       145,162       97,159       97,159     10.50% senior secured notes payable      110,000       112,200       55,000       55,000     Junior subordinated debentures      —       —       59,280       57,309       15. Common Stock and Stock Option Plans  Stock Option Plans       Under our employee stock option plans, options can be granted with various vesting periods. All options granted to employees on or prior to December 31, 2002 vest ratably over a five-year period from the date of grant (20% per year). Options granted to employees subsequent to December 31, 2002 vest 100% on the five-year anniversary of the date of grant. Our options are granted at exercise prices that either equal or exceed the quoted market price of our common stock at the respective dates of grant. All of our options expire ten years from the date of grant.       The stock option plan covering our non-employee directors provided for the grant to our non-employee directors (the “Outside Directors”) of non-qualified stock options prior to the expiration of the ability to grant additional options under this Plan in June 2003. All options granted to Outside Directors on or prior to December 31, 2002 vested ratably over a three-year period while all options granted after December 31, 2002 vested immediately upon grant. All Outside Director stock options expire ten years from the date of grant, subject to alternative expiration dates under certain circumstances. Due to a “change in control” provision in the Outside Directors’ stock option agreements, all outstanding Outside Directors options as of April 10, 2002 immediately vested when Levitt Corporation (“Levitt”) (NYSE: LEV) acquired an aggregate of approximately 8.0 million shares of our outstanding common stock from certain real estate funds associated with Morgan Stanley Dean Witter and Company and Grace Brothers, Ltd. in private transactions. As a result of these purchases and the December 2003 transfer of BankAtlantic Bancorp, Inc.’s ownership interest in our common stock to Levitt in connection with its spin-off, Levitt beneficially owned approximately 31% of our outstanding common stock as of December 31, 2005.       Subsequent to the expiration of the ability to grant options under our Outside Director stock option plan, we granted 55,000 and 141,346 stock options in 2004 and 2005, respectively, to certain Outside Directors from our employee stock option plan, which was consistent with the terms of our employee stock option plan.  96            A summary of our stock option activity related to our Employee and Outside Directors Plans is presented below (in thousands, except per share data).                                              Number of Shares     Outstanding     Exercise Price     Number of Shares         Reserved     Options     Per Share     Exercisable       Employee Stock Option Plans:                                   Balance at December 31, 2003      3,101       2,300     $ 2.26-$9.50       1,416     Granted      —       40     $ 10.98             Forfeited      —       (20 )   $ 2.26             Exercised      (966 )     (966 )   $ 2.26-$9.50                                             Balance at December 31, 2004      2,135       1,354     $ 2.29-$10.98       554     Approval of 2005 Stock Incentive Plan     2,000       —       —              Cancellation of 1995 Plan      (781 )     —       —             Granted      —       809     $ 16.03-$18.36             Forfeited      (78 )     (78 )   $ 3.48-$8.50             Exercised      (131 )     (131 )   $ 3.13-$10.98                                             Balance at December 31, 2005      3,145       1,954     $ 2.29-$18.36       600                                     Outside Directors Plans:                                   Balance at December 31, 2003      492       492     $ 2.11-$9.31       492     Forfeited      (17 )     (17 )   $ 3.50             Exercised      (184 )     (184 )   $ 2.11-$9.31                                             Balance at December 31, 2004      291       291     $ 2.11-$9.31       291     Forfeited      (81 )     (81 )   $ 3.13-$9.31             Exercised      (145 )     (145 )   $ 3.13-$9.31                                             Balance at December 31, 2005      65       65     $ 2.11-9.31       65                                       The weighted-average exercise prices and weighted-average remaining contractual lives of our outstanding stock options at December 31, 2005 (grouped by range of exercise prices) were:                                                                      Weighted-                                       Average             Weighted-         Number     Number of     Remaining     Weighted-     Average         of Options     Vested Options     Contractual Life     Average     Exercise Price         (In 000’s)     (In 000’s)     (in years)     Exercise Price     (vested only)       Employees Stock Option Plans:                                           $2.29-$3.13     47       37       3     $ 2.76     $ 2.89     $3.45-$4.88     658       82       6     $ 3.62     $ 4.65     $5.84-$5.89     115       15       8     $ 5.85     $ 5.89     $8.50-$10.98     325       325       4     $ 9.56     $ 9.56     $16.03-$18.36     809       141       9     $ 18.30     $ 18.04                                                   1,954       600                                                                                                                                           Weighted-                                   Average           Weighted-       Number   Number of   Remaining   Weighted-   Average       of Options   Vested Options   Contractual Life   Average   Exercise Price       (In 000’s)   (In 000’s)   (in years)   Exercise Price   (vested only)     Outside Directors Plans:                                           $2.11     15       15       6     $ 2.11     $ 2.11     $3.48-$3.50     20       20       7     $ 3.49     $ 3.49     $5.94     15       15       4     $ 5.94     $ 5.94     $9.31     15       15       3     $ 9.31     $ 9.31                                                       65       65                                                                           97       Common Stock Reserved For Future Issuance       As of December 31, 2005, common stock reserved for future issuance was comprised of shares issuable (in thousands):                    Upon exercise of employee stock options     3,145     Upon exercise of outside director stock options     64                     3,209                 16. Commitments and Contingencies       At December 31, 2005, the estimated cost to complete development work in subdivisions or resorts from which homesites or VOIs have been sold totaled $73.8 million. Development is estimated to be completed within the next three years and thereafter as follows: 2006 — $35.0 million, 2007 — $23.0 million, 2008 and beyond — $15.8 million.       We lease certain office space and equipment under various noncancelable operating leases. Certain of these leases contain stated escalation clauses while others contain renewal options.       Rent expense for the years ended December 31, 2003, 2004, and 2005 totaled approximately $5.5 million, $6.3 million, and $8.5 million, respectively.       Lease commitments under these noncancelable operating leases for each of the five years subsequent to December 31, 2005, and thereafter are as follows (in thousands):                    2006   $ 8,227     2007     7,339     2008     5,913     2009     4,287     2010     3,224     Thereafter     4,623               Total future minimum lease payments   $ 33,613                      We have approximately $530,000 in outstanding commitments under stand-by letters of credit with banks, primarily related to obtaining governmental approval of plats for one our Bluegreen Communities projects.       In the ordinary course of our business, we become subject to claims or proceedings from time to time relating to the purchase, subdivision, sale or financing of real estate. Additionally, from time to time, we become involved in disputes with existing and former employees. We believe that these claims are routine litigation incidental to our business.       On August 21, 2000, we received a notice of Field Audit Action (the “First Notice”) from the State of Wisconsin Department of Revenue (the “DOR”) alleging that two corporations purchased by us had failed to collect and remit sales and use taxes totaling $1.9 million to the State of Wisconsin prior to the purchase during the period from January 1, 1994 through September 30, 1997. On May 24, 2003, we received a second Notice of Field Audit Action (the “Second Notice”) from DOR alleging that the two subsidiaries failed to collect and remit sales and use taxes to the State of Wisconsin during the period from April 1, 1998 through March 31, 2002 totaling $1.4 million. The majority of the assessment was based on the subsidiaries not charging sales tax to purchasers of VOIs at our Christmas Mountain Village™ resort during the period from January 1, 1994 through December 31, 1999. The statute requiring the assessment of sales tax on sales of certain VOIs in Wisconsin was repealed in December 1999. We acquired the subsidiaries that were the subject of the notices in connection with the acquisition of RDI Group, Inc. (“RDI”) on September 30, 1997. Under the RDI purchase agreement, we had certain rights of offset for amounts owed the sellers based on any breach of representations and warranties.       On August 31, 2004, we settled the sales tax assessments and all interest and penalties for $2.3 million. Of this amount, $750,000 was already accrued in connection with the indemnification by RDI’s former stockholders and  98       approximately $210,000 will be reimbursed to us by certain property owners’ associations that serve the Christmas Mountain Village Resort. We recognized an expense of $1.5 million from this settlement during the year ended December 31, 2004.       On November 8, 2005, we received notice that the Tennessee Department of Revenue is considering imposing an assessment for sales, use and other miscellaneous business taxes for sales of timeshare interests in Bluegreen Vacation Club within the state of Tennessee during the periods from January 2001 through December 2004. We have been advised that the amounts that may be imposed by the State of Tennessee may be as much as $28 million; however, no formal assessment has been approved or made by the Tennessee Department of Revenue. We believe that the assessments under consideration by the Tennessee Department of Revenue are based on a preliminary, but mistaken, interpretation of the tax laws of the state of Tennessee. We will be reviewing this matter further with representatives of the Tennessee Department of Revenue, and we intend to vigorously defend against any such claims or assessments.  17. Income Taxes       Our provision for income taxes consists of the following (in thousands):                                      Year Ended     Year Ended     Year Ended         December 31, 2003     December 31, 2004     December 31, 2005         (As Restated)     (As Restated)               Federal:                           Current    $ 3,524     $ 6,378     $ 9,418     Deferred      8,085       16,967       15,600                                 11,609       23,345       25,018     State and other:                           Current      —       1,600       2,745     Deferred      809       1,697       1,379                                 809       3,297       4,124                           Total    $ 12,418     $ 26,642     $ 29,142                                  The reasons for the difference between our provision for income taxes and the amount that results from applying the federal statutory tax rate to income before provision for income taxes are as follows (in thousands):                                      December 31,     December 31,     December 31,         2003     2004     2005         (As Restated)     (As Restated)               Income tax expense at statutory rate    $ 11,609     $ 23,345     $ 25,019     Effect of state taxes, net of federal tax benefit      809       3,297       4,123                               $ 12,418     $ 26,642     $ 29,142                                  Our deferred income taxes consist of the following components (in thousands):                              December 31,     December 31,         2004     2005         (As Restated)               Deferred federal and state tax liabilities (assets):                   Installment sales treatment of notes    $ 113,989     $ 150,146     Deferred federal and state loss carryforwards/AMT credits      (69,615 )     (89,035 )   Book over tax carrying value of retained interests in notes receivable sold      6,281       9,526     Book reserves for loan losses and inventory      (6,689 )     (7,613 )   Tax over book depreciation      7,335       6,119     Deferred tax liabilities on unrealized gains on retained Interest (see Note 6)      3,008       5,368     Other      1,755       893                     Deferred income taxes    $ 56,064     $ 75,404                     Total deferred federal and state tax liabilities    $ 140,348     $ 174,055     Total deferred federal and state tax assets      (84,284 )     (98,651 )                   Deferred income taxes    $ 56,064     $ 75,404                       99       We have available federal net operating loss carryforwards of $158.9 million, which expire beginning in 2021 through 2025, and alternative minimum tax credit carryforwards of $22.5 million, which never expire. Additionally, we have available state operating loss carryforwards of $307.1 million, which expire beginning in 2008 through 2025. The income tax benefits from our state operating loss carryforwards are net of a valuation allowance of $639,000.  18. Employee Retirement Savings Plan and Other Employee Matters       Our Employee Retirement Plan is a code section 401(k) Retirement Savings Plan (the “Plan”). All employees at least 21 years of age with one year of employment with us are eligible to participate in the Plan. The Plan, as amended, provides an annual discretionary matching contribution and a fixed-rate matching contribution equal to 50% of the first 3% of a participant’s contribution with an annual limit of $1,000 per participant. During the year ended December 31, 2003, we accrued approximately $361,000 for a matching contribution that we paid in February 2004 related to the Plan’s year ended December 31, 2003. During the year ended December 31, 2004, we accrued approximately $554,000 for a matching contribution to be determined and paid in March 2005 related to the Plan’s year ended December 31, 2004. During the year ended December 31, 2005, we accrued approximately $620,000 for a matching contribution to be determined and paid in February 2006 related to the Plan’s year ended December 31, 2005.       Our employees in Aruba, which comprise approximately 2% of our total workforce, are subject to the terms of a collective bargaining agreement.  19. Business Segments       We have two reportable business segments. Bluegreen Resorts develops, markets and sells VOIs in our resorts, primarily through the Bluegreen Vacation Club, and provides resort management services to resort property owners associations. Bluegreen Communities acquires large tracts of real estate, which are subdivided, improved (in some cases to include a golf course on the property) and sold, typically on a retail basis as homesites. Our reportable segments are business units that offer different products. The reportable segments are each managed separately because they sell distinct products with different development, marketing and selling methods.       We evaluate the performance and allocate resources to each business segment based on its respective field operating profit. Field operating profit is operating profit prior to the allocation of corporate overhead, interest income, gain on sales of notes receivable, other income, provision for loan losses, interest expense, income taxes, minority interest and cumulative effect of change in accounting principle. Inventory is the only asset that we evaluate on a segment basis — all other assets are only evaluated on a consolidated basis. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies in Note 1.       Required disclosures for our business segments are as follows (in thousands):                                      Bluegreen   Bluegreen           Resorts   Communities   Totals     As of and for the year ended December 31, 2003 (As Restated):                           Sales of real estate    $ 254,971     $ 104,373     $ 359,344     Other resort and communities operations revenue      48,915       6,479       55,394     Depreciation expense      3,661       1,726       5,387     Field operating profit      50,359       12,580       62,939     Inventory      98,377       121,805       220,182                                 As of and for the year ended December 31, 2004 (As Restated):                           Sales of real estate    $ 310,608     $ 191,800     $ 502,408     Other resort and communities operations revenue      59,007       7,402       66,409     Depreciation expense      5,138       1,788       6,926     Field operating profit      50,876       37,722       88,598     Inventory      126,377       78,975       205,352                                 As of and for the year ended December 31, 2005                           Sales of real estate    $ 358,240     $ 192,095     $ 550,335     Other resort and communities operations revenue      64,276       9,521       73,797     Depreciation expense      7,161       1,684       8,845     Field operating profit      59,578       47,227       106,805     Inventory      173,338       67,631       240,969       100       Reconciliations to Consolidated Amounts       Field operating profit for our reportable segments reconciled to our consolidated income before provision for income taxes and minority interest is as follows (in thousands):                                      Year Ended     Year Ended     Year Ended         December 31,     December 31,     December 31,         2003     2004     2005         (As Restated)     (As Restated)               Field operating profit for reportable segments    $ 62,939     $ 88,598     $ 106,805     Interest income      29,898       35,939       34,798     Gain on sales of notes receivable      —       25,972       25,226     Other income (expense), net      457       (1,666 )     (6,207 )   Corporate general and administrative expenses      (22,227 )     (32,718 )     (38,029 )   Interest expense      (17,243 )     (18,425 )     (14,474 )   Provision for loan losses      (18,239 )     (24,434 )     (27,587 )                         Consolidated income before minority interest and provision for income taxes    $ 35,585     $ 73,266     $ 80,532                                  Depreciation expense for our reportable segments reconciled to our consolidated depreciation expense is as follows (in thousands):                                      Year Ended     Year Ended     Year Ended         December 31,     December 31,     December 31,         2003     2004     2005         (As Restated)     (As Restated)               Depreciation expense for reportable segments    $ 5,387     $ 6,926     $ 8,845     Depreciation expense for corporate fixed assets     2,424       2,843       3,487                           Consolidated depreciation expense    $ 7,811     $ 9,769     $ 12,332                                  Assets for our reportable segments reconciled to our consolidated assets (in thousands):                              December 31,     December 31,         2004     2005         (As Restated)               Inventory for reportable segments    $ 205,352     $ 240,969     Assets not allocated to reportable segments     453,059       453,274                     Total assets    $ 658,411     $ 694,243                       Geographic Information       Sales of real estate by geographic area are as follows (in thousands):  101                                           Year Ended     Year Ended     Year Ended         December 31,     December     December         2003     2004     2005         (As Restated)     (As Restated)               United States    $ 348,382     $ 491,948     $ 539,131     Aruba      10,949       10,460       11,204     Canada      13       —       —                           Consolidated totals    $ 359,344     $ 502,408     $ 550,335                                  Inventory by geographic area is as follows (in thousands):                              December 31,     December 31,         2004     2005         (As Restated)               United States    $ 198,815     $ 235,340     Aruba      6,527       5,619     Canada      10       10                     Consolidated totals    $ 205,352     $ 240,969                       102       20. Quarterly Financial Information (Unaudited)       A summary of the restated quarterly financial information for the years ended December 31, 2004 and 2005 is presented below (in thousands, except for per share information). See Note 2 for additional information about the restatement.                                              Three Months Ended       March 31,   June 30,   September 30,   December 31,       2004   2004   2004   2004     Sales of real estate (as reported)    $ 86,191     $ 128,314     $ 161,898     $ 125,993     Sales of real estate (as restated, see Note 2)      86,191       128,317       161,907       125,993     Gross profit (as reported)      56,951       84,488       103,111       78,124     Gross profit (as restated, see Note 2)      56,951       84,489       103,116       78,124     Net income (as reported)      4,700       9,102       16,307       6,346     Net income (as restated, see Note 2)      1,732       9,742       24,278       6,807                                         Earnings per common share (as previously reported):                                   Basic    $ .19     $ .35     $ .62     $ .23     Diluted    $ .17     $ .31     $ .54     $ .21     Earnings per common share (as restated, see Note 2):                                   Basic    $ .07     $ .38     $ .94     $ .25     Diluted    $ .07     $ .33     $ .80     $ .23                                                   Three Months Ended       March 31,   June 30,   September 30,   December 31,       2005   2005   2005   2005 (1)     Sales of real estate (as reported)    $ 104,021     $ 159,208     $ 166,777     $ —     Sales of real estate (as restated, see Note 2)      104,021       159,208       166,777       120,329     Gross profit (as reported)      71,134       108,099       113,906       —     Gross profit (as restated, see Note 2)      71,134       108,099       113,838       79,464     Net income (as reported)      6,457       14,325       18,665       —     Net income (as restated, see Note 2)      6,400       14,910       18,332       6,910                                         Earnings per common share (as reported):                                   Basic    $ .21     $ .47     $ .61             Diluted    $ .21     $ .46     $ .60             Earnings per common share (as restated, see Note 2):                                   Basic    $ .21     $ .49     $ .60     $ .23     Diluted    $ .20     $ .48     $ .59     $ .22                  (1)   Amounts for the quarter ending December 31, 2005, have not been previously reported and have been included in the “as restated” line to allow agreement with the financial statements included in this report.   103       Report of Independent Registered Public Accounting Firm  The Board of Directors and Shareholders of Bluegreen Corporation:   We have audited the accompanying consolidated balance sheets of Bluegreen Corporation (the Company) as of December 31, 2004 and 2005, and the related consolidated statements of income, shareholders’ equity and cash flows for each of three years in the period ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.  In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Bluegreen Corporation at December 31, 2004 and 2005, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.  As described in Note 2 to the consolidated financial statements, the accompanying consolidated balance sheet as of December 31, 2004, and the related consolidated statements of income, shareholders’ equity and cash flow for each of the two years in the period ended December 31, 2004 have been restated due to certain misapplications of generally accepted accounting principles for sales of the Company’s vacation ownership notes receivable and other related matters. In addition, the accompanying consolidated balance sheet as of December 31, 2004 was restated to increase the amount of deferred income tax liabilities related to certain tax benefits that were incorrectly determined in periods prior to 2003.  We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Bluegreen Corporation’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 15, 2006 expressed an unqualified opinion thereon.  ERNST & YOUNG LLP Certified Public Accountants   March 15, 2006 Miami, Florida   104       Management’s Report on Internal Control Over Financial Reporting  Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control - Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2005.  Our management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2005 has been audited by Ernst & Young LLP, the independent registered public accounting firm that audited our financial statements included in this Annual Report on Form 10-K, as stated in their report which immediately follows this report.  GEORGE F. DONOVAN, President and Chief Executive Officer ANTHONY M. PULEO, Senior Vice President, Chief Financial Officer and Treasurer   105       Report of Independent Registered Public Accounting Firm  The Board of Directors and Shareholders of Bluegreen Corporation   We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Bluegreen Corporation maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Bluegreen Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.  We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.  A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  In our opinion, management’s assessment that Bluegreen Corporation maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Bluegreen Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the COSO criteria.  We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Bluegreen Corporation (the “Company”) as of December 31, 2004, and December 31, 2005, and the related consolidated statements of income, shareholders’ equity and cash flows for the three years in the period ended December 31, 2005 of Bluegreen Corporation and our report dated March 15, 2006 expressed an unqualified opinion thereon.  ERNST & YOUNG LLP Certified Public Accountants   March 15, 2006 Miami, Florida   106       -----END PRIVACY-ENHANCED MESSAGE-----
None.
Evaluation of Disclosure Controls and Procedures       We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.       As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2005 because of the material weakness in internal control over financial reporting discussed below.  Management’s Report on Internal Control over Financial Reporting       Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).       In connection with management’s assessment of the Company’s internal control over financial reporting, the Company identified a control deficiency as of December 31, 2005 relating to controls over the segregation of duties performed by certain senior financial personnel. Specifically, the Company did not properly design controls to ensure adequate segregation of duties over the cash disbursement function, the journal entry process, and access to our financial reporting systems, resulting in the risk that these individuals could misappropriate cash or other Company assets, record unauthorized journal entries or alter our financial reporting systems. Furthermore, management did not have adequate documentation of the oversight and review of these individuals to compensate for the inadequate segregation of duties. This control deficiency existed in varying degrees at different locations, and while the control deficiency did not result in any adjustments to the annual or interim consolidated financial statements, it could result in a material misstatement to annual or interim consolidated financial statements that would not be prevented or detected. Accordingly, management determined that this control deficiency constituted a material weakness and as a consequence our internal control over financial reporting was ineffective as of December 31, 2005. A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.       PricewaterhouseCoopers LLP, our independent registered certified public accounting firm, has audited management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005 as stated in their report which appears in this Annual Report on Form 10-K. See “Financial Statements and Supplementary Data.”  Remediation of Material Weakness       Subsequent to December 31, 2005, the Company has implemented controls to restrict the responsibilities and financial reporting system access of these individuals.       The Company believes that these corrective actions have addressed the material weakness described above. The Company is in the process of developing procedures for the testing of these controls to determine if the material weakness has been remediated and currently expects that testing of these controls will be substantially completed prior to the filing of the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2006.  Changes in Internal Control Over Financial Reporting       There were no changes in our internal control over financial reporting that occurred during our fourth quarter ended December 31, 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.                /s/ Alan B. Levan    /s/ George P. Scanlon            Alan B. Levan    George P. Scanlon   Chief Executive Officer    Chief Financial Officer   March 27, 2006    March 27, 2006     68    Table of Contents    PART III       Items 10 through 14 are incorporated by reference to the Company’s definitive proxy statement to be filed with the Securities and Exchange Commission no later than 120 days after the end of the year covered by this Form 10-K, or, alternatively, by amendment to this Form 10-K under cover of Form 10-K/A not later than the end of such 120 day period.    PART IV
(a)   Documents Filed as Part of this Report:         (1)   Financial Statements            The following consolidated financial statements of Levitt Corporation and its subsidiaries are included herein under Part II, Item 8 of this Report.    Report of Independent Registered Certified Public Accounting Firm dated March 29, 2006  Consolidated Statements of Financial Condition as of December 31, 2005 and 2004.  Consolidated Statements of Income for each of the years in the three year period ended December 31, 2005.  Consolidated Statements of Comprehensive Income for each of the years in the three year period ended December 31, 2005.  Consolidated Statements of Shareholders’ Equity for each of the years in the three year period ended December 31, 2005.  Consolidated Statements of Cash Flows for each of the years in the three year period ended December 31, 2005.  Notes to Consolidated Financial Statements for each of the years in the three year period ended December 31, 2005.       (2)   Financial Statement Schedules            All schedules are omitted as the required information is either not applicable or presented in the financial statements or related notes.    69    Table of Contents          (3)   Exhibits         The following exhibits are either filed as a part of this Report or are incorporated herein by reference to documents previously filed as indicated below:                      Exhibit Number   Description   Reference       3.1     Amended and Restated Articles of Incorporation    Exhibit 2.1 to the Registrant’s Registration Statement on Form 8-A, filed on December 12, 2003.                     3.2     Amended and Restated By-laws    Exhibit 2.2 to the Registrant’s Registration Statement on Form 8-A, filed on December 12, 2003.                     10.1     Levitt Corporation 2004 Performance-Based Annual Incentive Plan    Appendix D to the Registrant’s 2004 Proxy Statement, filed with the SEC on April 20, 2004                     10.2     Amended and Restated Trust Agreement among Levitt Corporation, as Depositor, JP Morgan Chase, as Property Trustee, Chase Bank USA, as Delaware Trustee and Administrative Trustees, dated as of March 15, 2005    Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, filed on May 10, 2005                     10.3     Junior Subordinated Debenture between Levitt Corporation and JP Morgan Chase Bank, as Trustee, dated as of March 15, 2005    Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q, filed on May 10, 2005                     10.4     Revolving Loan Agreement by and among Tradition Development Company, LLC, Horizons St. Lucie Development, LLC, Horizons Acquisition 7, LLC, Tradition Mortgage, LLC and Wachovia Bank National Association, dated April 8, 2005    Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q, filed on May 10, 2005                     10.5     Unconditional Guaranty of Core Communities, LLC, as Guarantor in favor of Wachovia Bank National Association, dated April 8, 2005    Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q, filed on May 10, 2005                     10.6     Amended and Restated Trust Agreement among Levitt Corporation, as Depositor, Wilmington Trust Company, as Property Trustee, Wilmington Trust Company, as Delaware Trustee and Administrative Trustees, dated as of May 4, 2005    Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q, filed on May 10, 2005                     10.7     Junior Subordinated Debenture between Levitt Corporation and Wilmington Trust Company, as Trustee, dated as of May 4, 2005    Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q, filed on May 10, 2005                     10.8     Agreements Concerning Executive Compensation    Filed under Form 8-K, May 6, 2005                     10.9     Agreements Concerning Non-Employee Directors    Filed under Form 8-K, June 29, 2005                     10.10     Amendment to Agreements Concerning Non-Employee Directors    Filed under Form 8-K, July 28, 2005                     12.1     Statement re: computation of ratios — Ratio of earnings to fixed charges    Filed with this Report.                     14.1     Code of Business Conduct and Ethics    Exhibit 14.1 to Registrant’s Annual Report on Form 10-K, filed on March 16, 2005.                     21.1     Subsidiaries of the Registrant    Filed with this Report.                     23.1     Consent of PricewaterhouseCoopers LLP    Filed with this Report.                     23.2     Consent of Ernst & Young LLP    Filed with this Report.                     31.1     Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002    Filed with this Report.                     31.2     Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002    Filed with this Report.                     32.1     Certification pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002    Filed with this Report.                     32.2     Certification pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002    Filed with this Report.                     99.1     Audited financial statements  of Bluegreen Corporation for the three years ended December 31, 2005    Filed with this Report.     70    Table of Contents    SIGNATURES       Pursuant to the requirements of Section 13 or 15(d) 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.                  LEVITT CORPORATION      March 27, 2006  By:   /s/Alan B. Levan          Alan B. Levan         Chairman of the Board of Directors, Chief Executive Officer               Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.                  SIGNATURE   TITLE   DATE       /s/ Alan B. Levan   Alan B. Levan    Chairman of the Board and Chief Executive Officer (Principal Executive Officer)    March 27, 2006   /s/ John E. Abdo   John E. Abdo    Vice-Chairman of the Board    March 27, 2006   /s/Seth M. Wise   Seth M. Wise    President    March 27, 2006   /s/ George P. Scanlon   George P. Scanlon    Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)    March 27, 2006   /s/ James Blosser   James Blosser    Director    March 27, 2006   /s/ Darwin C. Dornbush   Darwin C. Dornbush    Director    March 27, 2006   /s/ S. Lawrence Kahn, III   S. Lawrence Kahn, III    Director    March 27, 2006   /s/ Alan Levy   Alan Levy    Director    March 27, 2006   /s/ Joel Levy   Joel Levy    Director    March 27, 2006   /s/ William R. Nicholson   William R. Nicholson    Director    March 27, 2006   /s/ William F. Scherer   William F. Scherer    Director    March 27, 2006     71       EX-12.1 2 g00291exv12w1.htm STATEMENT RE: COMPUTATION OF RATIO    Statement re: Computation of ratio       Exhibit 12.1  Levitt Corporation Calculation of Ratio of Earnings to Fixed Charges (Dollars in thousands)                                                      Year ended December 31,         2005     2004     2003     2002     2001       Earnings:                                           Pre-tax income from operations before adjustment for income or loss from equity investees     74,469       74,194       35,304       20,347       9,308     Fixed charges     19,264       11,099       7,924       8,057       6,226     Add: Amortization of capitalized interest     8,959       9,872       6,425       6,174       4,820     Distributed income from equity investees     12,877       9,744       1,561       6,214       6,131     Capitalized interest     (19,264 )     (10,840 )     (7,691 )     (7,668 )     (6,046 )                                           96,305       94,069       43,523       33,124       20,439                                                                                   Fixed charges:                                           Interest expense     —       259       233       389       180     Interest capitalized     19,264       10,840       7,691       7,668       6,046                                             19,264       11,099       7,924       8,057       6,226                                                                                   Ratio of earnings to fixed charges     5.00       8.48       5.49       4.11       3.28                                                 EX-21.1 3 g00291exv21w1.htm SUBSIDIARIES OF THE REGISTRANT    Subsidiaries of the Registrant       Exhibit 21.1  LEVITT CORPORATION Subsidiaries                         Subsidiaries of Levitt Corporation      State of Incorporation       BankAtlantic Venture Partners 1, LLC      Florida       BankAtlantic Venture Partners 2, LLC      Florida       BankAtlantic Venture Partners 3, LLC      Florida       BankAtlantic Venture Partners 4, LLC      Florida       BankAtlantic Venture Partners 7, Inc.      Florida       BankAtlantic Venture Partners 8, Inc.      Florida       BankAtlantic Venture Partners 9, Inc.      Florida       BankAtlantic Venture Partners 10, Inc.      Florida       BankAtlantic Venture Partners 14, Inc.      Florida       BankAtlantic Venture Partners 15, Inc.      Florida       Core Communities, LLC      Florida       Cypress Creek Holding, LLC      Delaware       Levitt and Sons, LLC      Florida       Levitt Commercial, LLC      Florida       Levitt Insurance Service, LLC      Florida        Subsidiaries of Levitt Commercial, LLC      State of Incorporation       Levitt Commercial Andrews, LLC      Florida       Levitt Commercial Boynton Commerce Center, LLC      Florida       Levitt Commercial High Ridge II, LLC      Florida       Levitt Commercial High Ridge, LLC      Florida       Levitt Commercial Sawgrass, LLC      Florida       Levitt Commercial Development LLC      Florida       Levitt Village at Victoria Park, LLC      Florida        Subsidiaries of Levitt Commercial Development, LLC      State of Incorporation       Levitt Commercial Construction, LLC      Florida                                          Subsidiaries of Core Communities, LLC      State of Incorporation       Core Commercial Group, LLC      Florida       Core Commercial Realty, LLC      Florida       Core Communities of Georgia, LLC      Florida       Core Communities of South Carolina, LLC      Florida       Core Communities of South Carolina, LLC      So. Carolina       Core Communities S.C. Operations, LLC      So. Carolina       Horizons Acquisition 5, LLC      Florida       Horizons Acquisition 7, LLC      Florida       Horizons St. Lucie Development, LLC      Florida       Lake Charles Development Company, LLC      Florida       Somerset Realty, LLC      Florida       St. Lucie Farms, LLC      Florida       St. Lucie West Development Company, LLC      Florida       St. Lucie West Realty, LLC      Florida       Tradition Brewery, LLC      Florida       Tradition Construction, LLC      Florida       Tradition Development Company, LLC      Florida       Tradition Health & Fitness LLC      Florida       Tradition Irrigation Company, LLC      Florida       Tradition Mortgage, LLC      Florida       Tradition Outfitters, LLC      Florida       Tradition Realty, LLC      Florida       Tradition Title Company, LLC      Florida       Tradition Village Center, LLC      Florida        Subsidiaries of Core Commercial Group, LLC      State of Incorporation       The Landing Holding Company, LLC      Florida                                         Subsidiaries of Core Communities of South Carolina, LLC, a South Carolina LLC      State of Incorporation       Tradition of South Carolina Brewery, LLC      So. Carolina       Tradition of South Carolina Commercial Development, LLC      So. Carolina       Tradition of South Carolina Construction, LLC      So. Carolina       Tradition of South Carolina Development Company, LLC      So. Carolina       Tradition of South Carolina Health & Fitness, LLC      So. Carolina       Tradition of South Carolina Irrigation Company, LLC      So. Carolina       Tradition of South Carolina Marketing, LLC      So. Carolina       Tradition of South Carolina Mortgage, LLC      So. Carolina       Tradition of South Carolina Outfitters, LLC      So. Carolina       Tradition of South Carolina Real Estate, LLC      So. Carolina       Tradition of South Carolina Realty, LLC      So. Carolina       Tradition of South Carolina Title Company, LLC      So. Carolina       Tradition of South Carolina Town Hall, LLC      So. Carolina       Tradition of South Carolina Village Center, LLC      So. Carolina       TSCG Club, LLC      So. Carolina       TSCGR Holding, LLC      So. Carolina       TSCR Club, LLC      So. Carolina       Subsidiaries of Tradition Development Company, LLC      State of Incorporation       The Landing at Tradition Development Company, LLC      Florida       Town Hall at Tradition, LLC      Florida       Subsidiaries of Levitt and Sons, LLC      State of Incorporation       Avalon Park by Levitt and Sons, LLC      Florida       Cascades by Levitt and Sons, LLC      Florida       Levitt and Sons at Hawk’s Haven, LLC      Florida       Levitt and Sons at Hunter’s Creek, LLC      Florida       Levitt and Sons at Tradition, LLC      Florida       Levitt and Sons at World Golf Village, LLC      Florida       Levitt and Sons of Flagler County, LLC      Florida       Levitt and Sons of Georgia, LLC      Georgia                                         Levitt GP, LLC      Florida       Levitt and Sons of Hernando County, LLC      Florida       Levitt and Sons of Lake County, LLC      Florida       Levitt and Sons of Lee County, LLC      Florida       Levitt and Sons of Manatee County, LLC      Florida       Levitt and Sons of Orange County, LLC      Florida       Levitt and Sons of Osceola County, LLC      Florida       Levitt and Sons of Seminole County, LLC      Florida       Levitt and Sons of South Carolina, LLC      So. Carolina       Levitt and Sons of Tennessee, LLC      TN       Levitt and Sons, Inc.      Florida       Levitt and Sons, Incorporated      Delaware       Levitt Construction Corp.-East      Florida       Levitt Construction-East, LLC      Florida       Levitt Homes Bellaggio Partners, LLC      Florida       Levitt Homes, LLC      Florida       Levitt Industries, LLC      Florida       Levitt Realty Services, Inc.      Florida       Levitt Realty Services, LLC      Florida       Magnolia Lakes by Levitt and Sons, LLC      Florida       Regency Hills by Levitt and Sons, LLC      Florida       Subsidiaries of Levitt and Sons of Georgia, LLC      State of Incorporation       Levitt and Sons of Cherokee County, LLC      Georgia       Levitt and Sons of Hall County, LLC      Georgia       Levitt and Sons of Paulding County, LLC      Georgia       Levitt and Sons Realty Georgia, LLC      Georgia       Subsidiaries of Levitt GP, LLC      State of Incorporation       Summerlake-Levitt, LLC      Florida                                         Subsidiaries of Levitt and Sons of South Carolina, LLC      State of Incorporation       Levitt and Sons of Horry County, LLC      So. Carolina       Levitt and Sons Realty South Carolina, LLC      So. Carolina       Levitt Construction-South Carolina, LLC      So. Carolina       Subsidiaries of Levitt and Sons of Tennessee, LLC      State of Incorporation       Bowden Building Corporation      TN       Levitt and Sons of Nashville, LLC      TN       Levitt and Sons of Shelby County, LLC      TN       Subsidiaries of Levitt Homes, LLC      State of Incorporation       BankAtlantic Venture Partners 5, LLC      Florida       Bellaggio by Levitt and Sons, LLC      Florida       Levitt at Amherst, LLC      Florida       Levitt at Huntington Lakes, LLC      Florida       Levitt at Twin Acres, LLC      Florida       Levitt at Westchester West, LLC      Florida       Levitt at Westchester, LLC      Florida       Levitt Hagen Ranch, LLC      Florida       Levitt Homes at Waters Edge, Inc.      New York       LM Mortgage Company, LLC      Florida       The Villages at Emerald Lakes, LLC      Florida       U.F.C. Title Insurance Agency, LLC      Florida       Subsidiaries of Levitt Industries, LLC      State of Incorporation       Lev-Brn, LLC      Florida       Summerport by Levitt and Sons, LLC      Florida       Statutory Business Trusts      State of Formation       Levitt Capital Trust I      Delaware       Levitt Capital Trust II      Delaware                   EX-23.1 4 g00291exv23w1.htm CONSENT OF PRICEWATERHOUSECOOPERS    Consent of PricewaterhouseCoopers       Exhibit 23.1  CONSENT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM  We hereby consent to the incorporation by reference in the Registration Statements on Forms S-8 (No. 333-111728 and No. 333-111729) of Levitt Corporation of our report dated March 29, 2006 relating to the financial statements, management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which appears in this Form 10-K. PricewaterhouseCoopers LLP Fort Lauderdale, Florida March 29, 2006           EX-23.2 5 g00291exv23w2.htm CONSENT OF ERNST & YOUNG    Consent of Ernst & Young       Exhibit 23.2  Consent of Independent Registered Public Accounting Firm       We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-111729) pertaining to the Levitt Corporation 2003 Stock Incentive Plan and the Registration Statement (Form S-8 No. 333-111728) pertaining to the Levitt Corporation Security Plus Plan of our reports dated March 15, 2006, with respect to the consolidated financial statements of Bluegreen Corporation, Bluegreen Corporation management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Bluegreen Corporation, included in Bluegreen Corporation’s Annual Report (Form 10-K) for the year ended December 31, 2005 which are included in the Levitt Corporation Annual Report (Form 10-K) for the year ended December 31, 2005.                  ERNST & YOUNG LLP Certified Public Accountants                                March 23, 2006 Miami, Florida           EX-31.1 6 g00291exv31w1.htm SECTION 302 CHIEF EXECUTIVE OFFICER CERTIFICATION    Section 302 Chief Executive Officer Certification       Exhibit 31.1  I, Alan B. Levan, Chief Executive Officer of Levitt Corporation, certify that:    1.   I have reviewed this annual report on Form 10-K of Levitt Corporation;      2.   Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;      3.   Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;      4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d — 15(f)) for the registrant and have:         a.   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;        b.   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;        c.   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and        d.   Disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and;       5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):         a.   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and        b.   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.    Date: March 27, 2006                     By:   /s/ Alan B. Levan        Alan B. Levan,         Chief Executive Officer              EX-31.2 7 g00291exv31w2.htm SECTION 302 CHIEF FINANCIAL OFFICER CERTIFICATION    Section 302 Chief Financial Officer Certification       Exhibit 31.2  I, George P. Scanlon, Chief Financial Officer of Levitt Corporation, certify that:    1.   I have reviewed this annual report on Form 10-K of Levitt Corporation;      2.   Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;      3.   Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;      4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d — 15(f)) for the registrant and have:         a.   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;        b.   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;        c.   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and        d.   Disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and;       5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):         a.   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and         b.   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.    Date: March 27, 2006                     By:   /s/ George P. Scanlon        George P. Scanlon,       Chief Financial Officer              EX-32.1 8 g00291exv32w1.htm SECTION 906 CHIEF EXECUTIVE OFFICER CERTIFICATION    Section 906 Chief Executive Officer Certification       Exhibit 32.1  Certificate pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  In connection with the Annual Report on Form 10-K of Levitt Corporation (the “Company”) for the year ended December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Alan B. Levan, Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:    1.   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and       2.   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.                                            /s/ Alan B. Levan      Name:   Alan B. Levan      Title:   Chief Executive Officer     Date:   March 27, 2006               A signed original of this statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities Exchange Commission or its staff upon request.          EX-32.2 9 g00291exv32w2.htm SECTION 906 CHIEF FINANCIAL OFFICER CERTIFICATION    Section 906 Chief Financial Officer Certification       Exhibit 32.2  Certificate pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  In connection with the Annual Report on Form 10-K of Levitt Corporation (the “Company”) for the year ended December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, George P. Scanlon, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:    1.   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and       2.   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.                                           /s/ George P. Scanlon      Name:   George P. Scanlon      Title:   Chief Financial Officer     Date:   March 27, 2006               A signed original of this statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities Exchange Commission or its staff upon request.          EX-99.1 10 g00291exv99w1.htm AUDIT FINANCIAL STATEMENTS OF BLUEGREEN CORP.    Audited Financial Statements of Bluegreen Corp.       Exhibit 99.1