Bluegreen Turns A Deeper Shade Of Green

Community and resort builder Bluegreen Corporation (BXG) filed a non-reliance 8-K last week on its 2006 10-K and first quarter 2007 10-Q. Reason? It needs to rework its cash flow statements.

The company had accounted for “borrowings collateralized by notes receivable as operating activities in the Consolidated Statements of Cash Flows because the majority of Bluegreen Resorts’ sales result in the origination of notes receivable from its customers and accelerating the conversion of such notes receivable into cash on a regular basis, either through the pledge or sale of our notes receivable, is an integral function of our operations.” That sounds like a pretty good rationale - especially because the activity is “an integral function of our operations.”

The company notes, however, that such treatment is not provided for in either Statement 95 or Statement 140. So, they’re taking those activities and putting them into the financing section of the cash flow statements. While it doesn’t change cash in total, cash from operating activities will be 75% higher for 2004; 72% higher for 2005; turn positive for 2006; and the negative cash flow in the first three months of 2007 will be 10% lower. The offset, of course, is higher amounts reported for cash used by financing activities.

It seems like opportune timing: after all, when cash from operations was a positive figure, nobody questioned the fact that these activities were “an integral function of operations.” Now that the cash from operations has changed color from black to red, there’s a change in policy. It’s not inconsistent, however, with other cash flow statement reclassifications prompted by the SEC. A while ago, there were similar reclassifications in the auto dealer industry, where floor plan financing activities were moved out of the operating section and put into financing activity.

See these posts on Group 1 Automotive, AutoNation, and Asbury Automotive Group.

BXG 1-yr chart: