BLUEGREEN CORPORATION
4960 Conference Way North
Suite 100
Boca Raton, Florida 33431
January 19, 2006
Robert F. Telewicz, Jr.
Staff Accountant
Securities and Exchange Commission
Division of Corporation Finance
Mail Stop 4561
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Form 8-K Filed December 19, 2005
File Number: 001-09292
Dear Mr. Telewicz:
This letter is in response to comments of the Staff regarding the
above-referenced filing, which were provided in your letter to me dated December
22, 2005.
Set forth below are responses to the comments in your letter. The
numbering of the comments below corresponds to the numbering set forth in your
letter.
Form 8-K
1. Please tell us if your certifying officers have considered the effect on
the adequacy of your disclosure controls and procedures as of the end of
the periods covered by your Forms 10-Q for the periods ended March 31,
2005, June 30, 2005 and September 30, 2005 as well as your Form 10-K for
the year ended December 31, 2004 in light of the material error you have
disclosed. Additionally, tell us what effect the error had on your current
evaluation of disclosure controls and procedures as of your fiscal year
end December 31, 2005
In light of the issues disclosed in the Form 8-K dated December 19, 2005
(the "Form 8-K"), the Registrant's certifying officers have reconsidered the
adequacy of Registrant's controls and procedures as of the end of the periods
indicated.
The Registrant has preliminarily concluded that it had a material weakness
in its internal controls in 2004 relating to the errors in the computation of
gains in connection with the term securitization transactions, but not related
to the determination of the proper accounting treatment for the transfer of its
receivables under its receivables purchase facilities, with the basis for such
preliminary conclusion being discussed further below. As a result of the above
preliminary conclusions regarding a material weakness in the Registrant's
internal controls in 2004, the certifying officers intend to amend their
conclusions relative to the
Securities and Exchange Commission
January 19, 2006
Page 2
adequacy of the Registrant's disclosure control procedures in 2004 in the
certifying officers' Section 302 certifications filed with the Registrants'
December 31, 2004 Form 10-K/A.
Due to the remediation discussed below of its internal control procedures
relating to the computation of gains in connection with term securitization
transactions prior to the occurrence of any relevant transaction in 2005, the
Registrant has preliminarily concluded that there was not a material weakness in
its internal controls over financial reporting or its disclosure controls during
2005, subject to the completion of the Registrant's documentation and testing in
connection with its compliance procedures relative to Section 404 of the
Sarbanes-Oxley Act of 2002. As indicated in comment 2. below, the impact of the
matters which gave rise to the restatement discussed in the Form 8-K (the
"Restatement") on the results of operations and financial position of the
Registrant during the 2005 quarterly periods ended March 31, June 30 and
September 30 was immaterial. Accordingly, and since Registrant did not
consummate a term securitization transaction until the fourth quarter of 2005,
Registrant does not believe that there was a material weakness of internal
controls during the 2005 quarterly periods. The remediation of controls in the
fourth quarter of 2005 will be disclosed in the Registrant's Form 10-K for the
year ending December 31, 2005.
The Registrant is in the process of discussing these preliminary
conclusions with its independent auditors, who will also have to re-evaluate
their report on internal controls over financial reporting.
The certifying officers considered the following facts and circumstances
relating to the matters giving rise to the Restatement in reaching their
preliminary conclusions discussed above with respect to the adequacy of
Registrant's disclosure controls and procedures.
As noted in the Registrant's Form 8-K, the Purchase Facility (as defined
in the Form 8-K) which was the subject of the Restatement was entered into in
June 2001 and again in April 2002 (when the Purchase Facility documents were
amended and restated) and individual transfers of notes receivable under the
Purchase Facility occurred from June 2001 through September 2004 (the
"Transactions"). As described more fully in the Form 8-K, the recharacterization
of the Transactions as on-balance sheet transactions in 2005 was the result of
an analysis in 2005 of an ambiguous provision in the Purchase Facility
agreements regarding the ability of the Registrant to substitute receivables
transferred under the Purchase Facility. As the June 2001 substitution provision
was deemed to be inconsistent with the provisions of Statement of Financial
Accounting Standards No. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" ("SFAS 140") and therefore
the Transactions would be required to be accounted for as on balance sheet
financing transactions from June 2001 through December 28, 2005.
At the time that the Purchase Facility documents (and their subsequent
amendment and restatement) were originally drafted, the Registrant's procedure
was to engage its independent auditors to review the draft Purchase Facility
documents and provide advice to the Registrant regarding the appropriateness of
the Registrant's conclusions, pursuant to GAAP, regarding the Registrant's
desired, off-balance sheet accounting treatment for transfers under the Purchase
Facility due to the complexity of the provisions of SFAS 140. The Purchase
Facility documents
Securities and Exchange Commission
January 19, 2006
Page 3
were executed only after this procedure had been completed. Registrant believes
that its internal control procedure for the accounting related to the Purchase
Facility was designed effectively.
In connection with preparing to report on its internal controls over
financial reporting in accordance with the provisions of the Sarbanes-Oxley Act
of 2002, in 2004 the Registrant engaged an outside international public
accounting firm (the "Accounting Consultants") to provide consulting advice
regarding the structure of the proposed receivable purchase facilities and term
securitization transactions and review the related draft agreements. This
internal control procedure was in place prior to December 31, 2004 and has
continually been in place since adoption. Based on the credentials of the
Accounting Consultants which were engaged in this capacity, specifically in the
complex area of SFAS 140, the Registrant believes that this internal control
procedure is effective.
As indicated above, the other issue which requires the Restatement relates
to a misapplication of SFAS 140 relative to the computation of the Registrant's
retained interests and related gains upon the consummation of two term
securitization transactions, one in 2002 and one in 2004. In 2005, after
identifying the issue but prior to the consummation of the Registrant's 2005
term securitization transaction, the Registrant remediated its internal control
procedures in the fourth quarter of 2005 relating to the recording of such
transactions to include the review by the Accounting Consultants of the related
journal entries and computations. The Registrant believes that this internal
control procedure is effective.
2. We note your disclosure in your Item 4.02(a) Form 8-K that you intend to
amend your Form 10-K for the year ended December 31, 2004. Tell us what
consideration you have given to amending your Forms 10-Q for the quarterly
periods ended March 31, 2005, June 30, 2005 and September 30, 2005 as a
result of the material error that you have disclosed.
The Registrant has considered the materiality of the impact of the items
resulting in the Restatement on the financial statements included in its Forms
10-Q for the quarterly periods ended March 31, 2005 ("Q1"), June 30, 2005 ("Q2")
and September 30, 2005 ("Q3"). Subject to further review by the Registrant's
independent auditors, the Registrant believes that the impact of the items
giving rise to the Restatement on the Registrant's net income and earnings per
share during each quarter is as follows (dollars in thousands, except per share
amounts):
Securities and Exchange Commission
January 19, 2006
Page 4
Q1 Q2 Q3 Total
Net income as previously
disclosed $ 6,457 $14,325 $18,665 $39,447
======= ======= ======= =======
Earnings per share as
previously disclosed $ 0.21 $ 0.46 $ 0.60 $ 1.26
======= ======= ======= =======
Net income as restated $ 6,406 $15,232 $18,334 $39,972
======= ======= ======= =======
Earnings per share as
restated $ 0.20 $ 0.49 $ 0.59 $ 1.28
======= ======= ======= =======
Change in net income for
the quarter (0.7)% 6.3% (1.8)%
======= ======= =======
Change in net income for
the year-to-date period (0.7)% 4.1% 1.3% 1.3%
======= ======= ======= =======
The Registrant believes that the impact of these adjustments on the 2005
quarterly periods is not material, based on the amounts in the above table and
the other materiality considerations as discussed in Staff Accounting Bulletin
99. The Registrant also believes that the adjustments to the 2005 quarterly
balance sheets will also be immaterial. Accordingly, the Registrant does not
intend to amend its quarterly reports for Q1, Q2 and Q3, but rather reflect the
restated amounts in the December 31, 2005 10-K which is due to be filed by March
15, 2006.
The Registrant acknowledges that:
o The Registrant is responsible for the adequacy and accuracy of the
disclosure in its filings;
o Staff comments or changes to disclosure in response to Staff
comments in the filings reviewed by the Staff do not foreclose the
Securities and Exchange Commission (the "Commission") from taking
any action with respect to the filing; and
o The Registrant may not assert Staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
Securities and Exchange Commission
January 19, 2006
Page 5
We have attempted to address each of the comments raised in your letter
and any concerns that the Staff may have. If you have any questions or if we can
provide any additional information, please feel free to contact me at (561)
912-8270.
Thank you for your assistance.
Sincerely,
/S/ ANTHONY M. PULEO
Anthony M. Puleo
Senior Vice President, Chief Financial
Officer and Treasurer
cc: Alison Miller, Partner - Stearns, Weaver, Miller, et al
James Miller, Partner - Ernst & Young LLP