UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Sectionx QUARTERLY REPORT PURSUANT TO SECTION 13 orOR 15(d) of the Securities Exchange Act ofOF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 2017quarter ended March 31, 2022
[ ] Transition Report PursuantOR
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to Section 13 or 15(d) of the Securities Exchange Act of 1934_________
Commission File Numberfile number 001-09071
001-09071
BLUEGREEN VACATIONS HOLDING CORPORATION
BBX Capital Corporation
(Exact name of registrant as specified in its charter)
| Florida |
| 59-2022148 | |
(State or other jurisdiction of | (I.R.S. Employer | |||
incorporation or organization) |
|
4960 Conference Way North, Suite 100, Boca Raton, Florida33431
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (561) 912-8000
Securities registered pursuant to Section 12(b) of the Act:
Ding | ||
| Trading Symbol(s) | Name of each exchange on which registered |
| BVH |
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Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to bebe filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
YES [X]NO [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
YES [X]NO [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | Accelerated | |||
Non-accelerated filer ¨ |
| Smaller reporting company | ||
Emerging growth company | ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨No x
YES [ ]NO [ X ]
The number of shares outstanding of each of the registrant’s classes of common stock as of November 2, 2017May 1, 2022 is as follows:follow:
Class A Common Stock of $.01 par value, 85,962,19816,517,261 shares outstanding.outstanding
Class B Common Stock of $.01 par value, 16,565,7283,664,331 shares outstanding.outstanding
BLUEGREEN VACATIONS HOLDING CORPORATION
FORM 10-Q TABLE OF CONTENTS
Page | ||||
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Item 1. | 3 | |||
| Consolidated Balance Sheets (Unaudited) | 3 | ||
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(Unaudited) | 4 | |||
(Unaudited) | 5 | |||
(Unaudited) | 6 | |||
Notes to Condensed Consolidated Financial Statements | ||||
(Unaudited) | 7 | |||
Item 2. |
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27 | ||||
Item |
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48 | ||||
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| 48 | ||
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Item | ||||
49 | ||||
Item 1A. | 49 | |||
Item 2. | 49 | |||
Item 6. | 50 | |||
51 |
PART I – I—FINANCIAL INFORMATION
Item 1. Financial StatementsStatements.
BLUEGREEN VACATIONS HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share and per share data)
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BBX Capital Corporation | ||||
Condensed Consolidated Statements of Financial Condition - Unaudited | ||||
(In thousands, except share data) | ||||
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| September 30, |
| December 31, |
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| 2017 |
| 2016 |
ASSETS |
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Cash and cash equivalents | $ | 264,380 |
| 299,861 |
Restricted cash ($28,099 in 2017 and $21,894 in 2016 in variable |
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interest entities ("VIEs")) |
| 61,479 |
| 46,456 |
Loans receivable, net |
| 21,042 |
| 25,521 |
Notes receivable, net ($304,313 in 2017 and $287,111 in 2016 in VIEs) |
| 429,356 |
| 430,480 |
Construction funds receivable |
| 12,485 |
| 20,744 |
Inventory |
| 320,453 |
| 268,514 |
Real estate held-for-sale, net |
| 30,029 |
| 33,345 |
Real estate held-for-investment |
| 13,399 |
| 12,029 |
Investments in unconsolidated real estate joint ventures |
| 43,286 |
| 43,374 |
Property and equipment, net |
| 111,502 |
| 95,998 |
Goodwill |
| 41,016 |
| 6,731 |
Intangible assets, net |
| 72,145 |
| 68,455 |
Other assets |
| 104,670 |
| 84,560 |
Total assets | $ | 1,525,242 |
| 1,436,068 |
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LIABILITIES AND EQUITY |
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Liabilities: |
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Accounts payable | $ | 27,882 |
| 28,855 |
Deferred income |
| 40,498 |
| 37,015 |
Escrow deposits |
| 28,488 |
| 20,152 |
Other liabilities |
| 108,121 |
| 95,611 |
Receivable-backed notes payable - recourse |
| 72,028 |
| 87,631 |
Receivable-backed notes payable - non-recourse (in VIEs) |
| 347,308 |
| 327,358 |
Notes payable and other borrowings |
| 137,783 |
| 133,790 |
Junior subordinated debentures |
| 135,112 |
| 152,367 |
Deferred income taxes |
| 71,560 |
| 44,318 |
Redeemable 5% cumulative preferred stock of $.01 par value; authorized 15,000 shares; |
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issued and outstanding 15,000 shares with a stated value of $1,000 per share |
| 13,856 |
| 13,517 |
Total liabilities |
| 982,636 |
| 940,614 |
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Commitments and contingencies (See Note 10) |
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Redeemable noncontrolling interest (See Note 2) |
| 2,739 |
| - |
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Equity: |
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Preferred stock of $.01 par value; authorized 10,000,000 shares |
| - |
| - |
Class A Common Stock of $.01 par value, authorized 150,000,000 shares; |
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issued and outstanding 84,040,952 in 2017 and 84,844,439 in 2016 |
| 840 |
| 848 |
Class B Common Stock of $.01 par value, authorized 20,000,000 shares; |
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issued and outstanding 13,127,505 in 2017 and 13,184,789 in 2016 |
| 131 |
| 132 |
Additional paid-in capital |
| 193,296 |
| 193,347 |
Accumulated earnings |
| 297,922 |
| 259,110 |
Accumulated other comprehensive income |
| 1,530 |
| 1,167 |
Total shareholders' equity |
| 493,719 |
| 454,604 |
Noncontrolling interests |
| 46,148 |
| 40,850 |
Total equity |
| 539,867 |
| 495,454 |
Total liabilities and equity | $ | 1,525,242 |
| 1,436,068 |
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See Notes to Condensed Consolidated Financial Statements - Unaudited |
March 31, | December 31, | |||||
2022 | 2021 | |||||
ASSETS | ||||||
Cash and cash equivalents | $ | 179,274 | $ | 140,225 | ||
Restricted cash ($16,238 and $15,956 in VIEs at March 31, 2022 | ||||||
and December 31, 2021, respectively) | 46,430 | 42,854 | ||||
Notes receivable | 621,020 | 609,429 | ||||
Less: Allowance for loan losses | (167,403) | (163,107) | ||||
Notes receivable, net ($241,460 and $248,873 in VIEs | ||||||
at March 31, 2022 and December 31, 2021, respectively) | 453,617 | 446,322 | ||||
Vacation ownership interest ("VOI") inventory | 326,707 | 334,605 | ||||
Property and equipment, net | 88,841 | 87,852 | ||||
Intangible assets, net | 61,327 | 61,348 | ||||
Operating lease assets | 31,927 | 33,467 | ||||
Prepaid expenses | 33,546 | 25,855 | ||||
Other assets | 37,459 | 37,984 | ||||
Total assets | $ | 1,259,128 | $ | 1,210,512 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
Liabilities | ||||||
Accounts payable | $ | 15,560 | $ | 14,614 | ||
Deferred income | 12,772 | 13,690 | ||||
Accrued liabilities and other | 105,894 | 100,131 | ||||
Receivable-backed notes payable - recourse | 22,500 | 22,500 | ||||
Receivable-backed notes payable - non-recourse (in VIEs) | 323,043 | 340,154 | ||||
Note payable to BBX Capital, Inc. | 50,000 | 50,000 | ||||
Note payable and other borrowing | 137,787 | 97,125 | ||||
Junior subordinated debentures | 135,197 | 134,940 | ||||
Operating lease liabilities | 36,363 | 37,870 | ||||
Deferred income taxes | 100,961 | 95,688 | ||||
Total liabilities | 940,077 | 906,712 | ||||
Commitments and Contingencies - See Note 9 |
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Shareholders' Equity | ||||||
Preferred stock of $0.01 par value; authorized 10,000,000 shares | — | — | ||||
Class A Common Stock of $0.01 par value; authorized 30,000,000 shares; | ||||||
issued and outstanding 16,967,261 in 2022 and 17,118,392 in 2021 | 169 | 171 | ||||
Class B Common Stock of $0.01 par value; authorized 4,000,000 shares; | ||||||
issued and outstanding 3,664,311 in 2022 and 3,664,412 in 2021 | 37 | 37 | ||||
Additional paid-in capital | 169,954 | 173,909 | ||||
Accumulated earnings | 85,304 | 69,316 | ||||
Total Bluegreen Vacations Holding Corporation shareholders' equity | 255,464 | 243,433 | ||||
Non-controlling interest | 63,587 | 60,367 | ||||
Total shareholders' equity | 319,051 | 303,800 | ||||
Total liabilities and shareholders' equity | $ | 1,259,128 | $ | 1,210,512 |
1
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BBX Capital Corporation | ||||||||
Condensed Consolidated Statements of Operations and Comprehensive Income - Unaudited | ||||||||
(In thousands, except per share data) | ||||||||
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| For the Three Months Ended |
| For the Nine Months Ended | ||||
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| September 30, |
| September 30, | ||||
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| 2017 |
| 2016 |
| 2017 |
| 2016 |
Revenues |
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Sales of vacation ownership interests ("VOIs") | $ | 61,687 |
| 71,741 |
| 172,839 |
| 196,654 |
Fee-based sales commission revenue |
| 69,977 |
| 59,383 |
| 179,046 |
| 153,718 |
Other fee-based services revenue |
| 27,386 |
| 26,810 |
| 83,442 |
| 78,421 |
Trade sales |
| 44,880 |
| 22,078 |
| 96,835 |
| 64,290 |
Interest income |
| 21,035 |
| 22,096 |
| 63,065 |
| 64,464 |
Net (losses) gains on sales of assets |
| (18) |
| 5,035 |
| 2,161 |
| 5,326 |
Other revenue |
| 1,332 |
| 2,021 |
| 3,584 |
| 5,158 |
Total revenues |
| 226,279 |
| 209,164 |
| 600,972 |
| 568,031 |
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Costs and Expenses |
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Cost of sales of VOIs |
| 6,284 |
| 5,827 |
| 10,737 |
| 19,410 |
Cost of other fee-based services |
| 18,176 |
| 17,057 |
| 51,550 |
| 48,644 |
Cost of trade sales |
| 28,988 |
| 16,674 |
| 67,453 |
| 50,680 |
Interest expense |
| 9,480 |
| 9,517 |
| 27,577 |
| 28,322 |
Recoveries from loan losses, net |
| (2,005) |
| (10,944) |
| (6,098) |
| (18,979) |
Asset impairments (recoveries), net |
| 1,506 |
| (30) |
| 1,551 |
| 1,692 |
Net gains on cancellation of |
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junior subordinated debentures |
| - |
| - |
| (6,929) |
| - |
Litigation costs and penalty reimbursements |
| (2,113) |
| - |
| (11,719) |
| - |
Selling, general and administrative expenses |
| 148,536 |
| 133,584 |
| 398,535 |
| 387,843 |
Total costs and expenses |
| 208,852 |
| 171,685 |
| 532,657 |
| 517,612 |
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Equity in net earnings of unconsolidated |
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real estate joint ventures |
| 2,451 |
| 4,480 |
| 9,620 |
| 5,793 |
Foreign exchange (loss) gain |
| (105) |
| 5 |
| (312) |
| 325 |
Other (loss) income, net |
| (87) |
| 531 |
| 64 |
| 721 |
Income before income taxes |
| 19,686 |
| 42,495 |
| 77,687 |
| 57,258 |
Provision for income taxes (See Note 9) |
| (8,195) |
| (19,118) |
| (30,028) |
| (23,857) |
Net income |
| 11,491 |
| 23,377 |
| 47,659 |
| 33,401 |
Less: Net income attributable to noncontrolling interests |
| 3,256 |
| 5,602 |
| 9,467 |
| 9,900 |
Net income attributable to shareholders | $ | 8,235 |
| 17,775 |
| 38,192 |
| 23,501 |
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Basic earnings per share | $ | 0.08 |
| 0.21 |
| 0.39 |
| 0.27 |
Diluted earnings per share | $ | 0.08 |
| 0.21 |
| 0.36 |
| 0.27 |
Basic weighted average number of common |
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shares outstanding |
| 98,073 |
| 85,864 |
| 98,408 |
| 86,215 |
Diluted weighted average number of common and |
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common equivalent shares outstanding |
| 106,021 |
| 86,573 |
| 105,802 |
| 86,632 |
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Cash dividends declared per Class A common share | $ | 0.0075 |
| 0.005 |
| 0.0225 |
| 0.010 |
Cash dividends declared per Class B common share | $ | 0.0075 |
| 0.005 |
| 0.0225 |
| 0.010 |
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Net income | $ | 11,491 |
| 23,377 |
| 47,659 |
| 33,401 |
Other comprehensive income, net of tax: |
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Unrealized gains(losses) on securities available for sale |
| 16 |
| (9) |
| 62 |
| 57 |
Foreign currency translation adjustments |
| 418 |
| 568 |
| 301 |
| 378 |
Other comprehensive income, net |
| 434 |
| 559 |
| 363 |
| 435 |
Comprehensive income, net of tax |
| 11,925 |
| 23,936 |
| 48,022 |
| 33,836 |
Less: Comprehensive income attributable |
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to noncontrolling interests |
| 3,256 |
| 5,686 |
| 9,467 |
| 9,966 |
Total comprehensive income attributable to shareholders | $ | 8,669 |
| 18,250 |
| 38,555 |
| 23,870 |
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See Notes to Condensed Consolidated Financial Statements - Unaudited |
2
3
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BBX Capital Corporation | |||||
Condensed Consolidated Statements of Cash Flows - Unaudited | |||||
(In thousands) | |||||
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| For the Nine Months Ended | |||
|
| September 30, |
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| 2017 |
| 2016 |
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Operating activities: |
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Net income | $ | 47,659 |
| 33,401 |
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Adjustment to reconcile net income to net cash |
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provided by operating activities: |
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Recoveries from loan losses and asset impairments, net |
| (5,097) |
| (15,939) |
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Provision for notes receivable allowances |
| 32,066 |
| 36,897 |
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Depreciation, amortization and accretion, net |
| 15,528 |
| 13,995 |
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Share-based compensation expense |
| 10,119 |
| 4,936 |
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Share-based compensation expense of subsidiaries |
| - |
| 4,921 |
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Net gains on sales of real estate, loans held-for-sale, |
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and properties and equipment |
| (1,732) |
| (5,326) |
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Equity in earnings of unconsolidated real estate |
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joint ventures |
| (9,620) |
| (5,793) |
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Return on investment in unconsolidated real estate joint ventures |
| 11,465 |
| 3,402 |
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Increase in deferred income tax |
| 30,272 |
| 29,749 |
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Impairment of goodwill |
| - |
| 457 |
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Net gains realized on cancellation of junior subordinated debentures |
| (6,929) |
| - |
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Interest accretion on shares subject to mandatory redemption |
| 901 |
| 874 |
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Increase in restricted cash |
| (15,023) |
| (966) |
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Increase in notes receivable |
| (30,942) |
| (45,695) |
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Increase in inventory |
| (36,320) |
| (10,902) |
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Increase in other assets |
| (18,003) |
| (8,980) |
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Increase in other liabilities |
| 13,813 |
| 26,077 |
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Net cash provided by operating activities |
| 38,157 |
| 61,108 |
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Investing activities: |
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Decrease in restricted cash |
| - |
| 1,306 |
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Return of investment in unconsolidated real estate joint ventures |
| 888 |
| 4,388 |
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Investments in unconsolidated real estate joint ventures |
| (2,645) |
| (2,353) |
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Repayment of loans receivable, net |
| 9,522 |
| 42,025 |
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Proceeds from sales of real estate held-for-sale |
| 10,601 |
| 20,788 |
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Additions to real estate held-for-sale |
| (809) |
| - |
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Additions to real estate held-for-investment |
| (124) |
| (2,319) |
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Purchases of property and equipment, net |
| (14,158) |
| (8,928) |
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Cash paid for acquisition, net of cash received |
| (58,418) |
| - |
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Increase in intangible assets |
| (31) |
| (540) |
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Increase from other investing activities |
| (342) |
| (224) |
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Net cash (used in) provided by investing activities |
| (55,516) |
| 54,143 |
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Financing activities: |
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Repayments of notes, mortgage notes payable and other borrowings |
| (197,581) |
| (225,657) |
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Proceeds from notes, mortgage notes payable and other borrowings |
| 206,884 |
| 205,950 |
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Redemption of junior subordinated debentures |
| (11,438) |
| - |
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Payments for debt issuance costs |
| (3,217) |
| (2,462) |
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Payments of interest on shares subject to mandatory redemption |
| (563) |
| (563) |
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Proceeds from the exercise of stock options |
| 62 |
| 10 |
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Dividends paid on common stock |
| (2,136) |
| (418) |
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Repurchase and retirement of common stock |
| (6,213) |
| (3,029) |
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Distributions to noncontrolling interest |
| (3,920) |
| (7,350) |
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Net cash used in financing activities |
| (18,122) |
| (33,519) |
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(Decrease) increase in cash and cash equivalents |
| (35,481) |
| 81,732 |
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Cash and cash equivalents at beginning of period |
| 299,861 |
| 198,905 |
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Cash and cash equivalents at end of period | $ | 264,380 |
| 280,637 |
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| Continued |
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4
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BBX Capital Corporation | |||||
Condensed Consolidated Statements of Cash Flows - Unaudited | |||||
(In thousands) | |||||
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| For the Nine Months Ended | |||
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| September 30, |
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| 2017 |
| 2016 |
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Supplemental cash flow information: |
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Interest paid on borrowings | $ | 21,392 |
| 24,786 |
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Income taxes paid |
| 2,570 |
| 987 |
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Supplementary disclosure of non-cash investing and financing activities: |
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Construction funds receivable transferred to inventory | $ | 8,259 |
| - |
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Mortgage payable assumed upon foreclosure |
| 164 |
| - |
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Loans receivable transferred to real estate held-for-sale |
| 1,055 |
| 4,612 |
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Loans held-for-sale transferred to loans receivable |
| - |
| 16,078 |
|
Real estate held-for-investment transferred to real estate held-for-sale |
| - |
| 11,582 |
|
Real estate held-for-sale transferred to property and equipment |
| - |
| 6,557 |
|
Real estate held-for-sale transferred to real estate held-for-investment |
| 1,276 |
| - |
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Property and equipment transferred to real estate held-for-sale |
| 6,181 |
| - |
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Repayment of note payable with restricted time deposit |
| - |
| 995 |
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Decrease in deferred tax liabilities due to cumulative effect of excess |
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tax benefits |
| 3,054 |
| - |
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Increase in the investment in subsidiary from the issuance of BBX |
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Capital's common stock |
| - |
| 898 |
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Increase in shareholders' accumulated other comprehensive income, |
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net of taxes |
| 363 |
| 369 |
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Net increase in shareholders' equity from the effect of subsidiaries' |
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capital transactions, net of taxes |
| - |
| 1,386 |
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Repurchase and retirement of shares of common stock in connection |
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with share based compensation withholding tax obligations |
| 4,028 |
| 3,388 |
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See Notes to Condensed Consolidated Financial Statements - Unaudited |
5
BBX Capital Corporation
NotesSee accompanying Notes to Condensed Consolidated Financial Statements - Unaudited
BLUEGREEN VACATIONS HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
1. Presentation of InterimAND COMPREHENSIVE INCOME (UNAUDITED)
(In thousands, except per share data)
Three Months Ended | ||||||
March 31, | ||||||
2022 | 2021 | |||||
Revenue: | ||||||
Gross sales of VOIs | $ | 115,607 | $ | 68,250 | ||
Provision for loan losses | (16,579) | (12,319) | ||||
Sales of VOIs | 99,028 | 55,931 | ||||
Fee-based sales commission revenue | 24,084 | 25,718 | ||||
Other fee-based services revenue | 31,207 | 28,897 | ||||
Cost reimbursements | 18,064 | 16,608 | ||||
Interest income | 22,198 | 19,261 | ||||
Other income, net | 548 | — | ||||
Total revenues | 195,129 | 146,415 | ||||
Costs and Expenses: | ||||||
Cost of VOIs sold | 11,841 | 5,169 | ||||
Cost of other fee-based services | 12,765 | 17,085 | ||||
Cost reimbursements | 18,064 | 16,608 | ||||
Interest expense | 7,759 | 9,735 | ||||
Selling, general and administrative expenses | 119,302 | 90,964 | ||||
Other expense, net | — | 161 | ||||
Total costs and expenses | 169,731 | 139,722 | ||||
Income before income taxes | 25,398 | 6,693 | ||||
Provision for income taxes | (6,190) | (1,189) | ||||
Net income | 19,208 | 5,504 | ||||
Less: Income attributable to noncontrolling interests | 3,220 | 2,530 | ||||
Net income attributable to shareholders | $ | 15,988 | $ | 2,974 | ||
Comprehensive income attributable to shareholders | $ | 15,988 | $ | 2,974 | ||
Basic earnings per share (1) | $ | 0.77 | $ | 0.15 | ||
Diluted earnings per share (1) | $ | 0.76 | $ | 0.15 | ||
Basic weighted average number of common shares outstanding | 20,778 | 19,318 | ||||
Diluted weighted average number of common and common equivalent shares outstanding | 20,971 | 19,318 | ||||
Cash dividends declared per Class A and B common shares | $ | — | $ | — |
(1)Basic and Diluted EPS are calculated the same for both Class A and B common shares.
See accompanying Notes to Consolidated Financial Statements - Unaudited.
BLUEGREEN VACATIONS HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)
(In thousands)
Shares of | |||||||||||||||||||||||||||
Common Stock | Common | ||||||||||||||||||||||||||
Outstanding | Stock | Additional | Total | Non- | |||||||||||||||||||||||
Class | Class | Paid-in | Accumulated | Shareholders' | controlling | Total | |||||||||||||||||||||
A | B | A | B | Capital | Earnings | Equity | Interests | Equity | |||||||||||||||||||
Balance, December 31, 2021 | 17,118 | 3,665 | $ | 171 | $ | 37 | $ | 173,909 | $ | 69,316 | $ | 243,433 | $ | 60,367 | $ | 303,800 | |||||||||||
Conversion of common stock from Class B to Class A | 1 | (1) | — | — | — | — | — | — | — | ||||||||||||||||||
Share-based compensation | — | — | — | — | 745 | — | 745 | — | 745 | ||||||||||||||||||
Purchase and retirement of common stock | (152) | — | (2) | — | (4,700) | — | (4,702) | — | (4,702) | ||||||||||||||||||
Net income | — | — | — | — | — | 15,988 | 15,988 | 3,220 | 19,208 | ||||||||||||||||||
Balance, March 31, 2022 | 16,967 | 3,664 | $ | 169 | $ | 37 | $ | 169,954 | $ | 85,304 | $ | 255,464 | $ | 63,587 | $ | 319,051 |
Shares of | |||||||||||||||||||||||||||
Common Stock | Common | ||||||||||||||||||||||||||
Outstanding | Stock | Additional | Total | Non- | |||||||||||||||||||||||
Class | Class | Paid-in | Accumulated | Shareholders' | controlling | Total | |||||||||||||||||||||
A | B | A | B | Capital | Earnings | Equity | Interests | Equity | |||||||||||||||||||
Balance, December 31, 2020 | 15,624 | 3,694 | $ | 156 | $ | 37 | $ | 177,104 | $ | 10,586 | $ | 187,883 | $ | 74,847 | $ | 262,730 | |||||||||||
Net income | — | — | — | — | — | 2,974 | 2,974 | 2,530 | 5,504 | ||||||||||||||||||
Balance, March 31, 2021 | 15,624 | 3,694 | $ | 156 | $ | 37 | $ | 177,104 | $ | 13,560 | $ | 190,857 | $ | 77,377 | $ | 268,234 |
See accompanying Notes to Consolidated Financial Statements - Unaudited.
BLUEGREEN VACATIONS HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
For the Three Months Ended | ||||||
March 31, | ||||||
2022 | 2021 | |||||
Operating activities: | ||||||
Net income | $ | 19,208 | $ | 5,504 | ||
Adjustment to reconcile net income to net cash | ||||||
provided by operating activities: | ||||||
Provision for loan losses | 16,579 | 12,319 | ||||
Depreciation and amortization | 4,810 | 5,189 | ||||
Share-based compensation expense | 745 | — | ||||
Net losses on sales of real estate and property and equipment | 5 | 11 | ||||
Increase (Decrease) in deferred income tax liability | 5,273 | (4,440) | ||||
Changes in operating assets and liabilities: | ||||||
Notes receivable | (23,874) | (4,534) | ||||
VOI inventory | 7,898 | 2,032 | ||||
Prepaids expense and other assets | (6,976) | (15,192) | ||||
Accounts payable, accrued liabilities and other, and | ||||||
deferred income | 5,824 | 11,080 | ||||
Net cash provided by operating activities | $ | 29,492 | $ | 11,969 | ||
Investing activities: | ||||||
Purchases of property and equipment | (4,895) | (4,049) | ||||
Net cash used in investing activities | $ | (4,895) | $ | (4,049) | ||
Financing activities: | ||||||
Repayments of notes payable and other borrowings | $ | (33,970) | $ | (63,484) | ||
Proceeds from notes payable and other borrowings | 58,397 | 42,350 | ||||
Redemption of junior subordinated debentures | — | (4,004) | ||||
Payments for debt issuance costs | (1,697) | — | ||||
Purchase and retirement of common stock | (4,702) | — | ||||
Net cash provided by (used in) financing activities | $ | 18,028 | $ | (25,138) | ||
Net increase (decrease) in cash and cash equivalents | ||||||
and restricted cash | 42,625 | (17,218) | ||||
Cash, cash equivalents and restricted cash at beginning of period | 183,079 | 257,104 | ||||
Cash, cash equivalents and restricted cash at end of period | $ | 225,704 | $ | 239,886 | ||
Supplemental cash flow information: | ||||||
Interest paid on borrowings, net of amounts capitalized | $ | 5,951 | $ | 1,818 | ||
Income taxes paid | 704 | 228 | ||||
Reconciliation of cash, cash equivalents and restricted cash: | ||||||
Cash and cash equivalents | 179,274 | 199,150 | ||||
Restricted cash | 46,430 | 40,736 | ||||
Total cash, cash equivalents and restricted cash | $ | 225,704 | $ | 239,886 |
BLUEGREEN VACATIONS HOLDING CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
1. Organization and Basis of Financial Statement Presentation
BBX CapitalBluegreen Vacations Holding Corporation is a Florida-based holding company which owns 100% of Bluegreen Vacations Corporation (“Bluegreen”). Bluegreen Vacations Holding Corporation as a standalone entity without its subsidiaries is sometimes referred to herein as “BVH”. Bluegreen Vacations Holding Corporation with its subsidiaries, including Bluegreen, is referred to in this report together with its subsidiariesherein as the “Company”, “we”, ”us” or unless otherwise indicated or“our”. The Company has prepared the context otherwise requires, “we,” “us” or “our” and is referred to in this report without its subsidiaries as “BBX Capital.” The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and disclosuresfootnotes required by GAAP for complete financial statements.
In management’sthe Company’s opinion, the accompanying unaudited condensed consolidated financial statements containinformation furnished herein reflects all adjustments which includeconsisting of normal recurring adjustments, as areitems necessary for a fair statementpresentation of the condensed consolidatedits financial condition of the Company at September 30, 2017; the condensed consolidatedposition, results of operations, and comprehensive income of the Companycash flows for the three and nine months ended September 30, 2017 and 2016; the condensed consolidated changesinterim periods reported in equitythis Quarterly Report on Form 10-Q. The preparation of the Company for the nine months ended September 30, 2017; and the condensed consolidated cash flows of the Company for the nine months ended September 30, 2017 and 2016. Operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017 or any other future period.
These unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and related notes are presented as permitted by Form 10-Qassumptions that affect the amounts reported and, accordingly, actual results could differ from those estimates. The accompanying financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotesnotes thereto as of and for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20162021, filed with the Securities and Exchange Commission (the “2016“SEC”) on March 4, 2022 (the “2021 Annual Report”Report on Form 10-K”).
Our Business
Prior to May 5, 2021, BVH beneficially owned approximately 93% of Bluegreen’s outstanding common stock. On May 5, 2021, BVH acquired all of the approximately 7% of outstanding shares of Bluegreen’s common stock not previously beneficially owned by BVH through a statutory short-form merger under Florida law. In connection with the merger, Bluegreen’s shareholders (other than BVH) received 0.51 shares of BVH’s Class A Common Stock for each share of Bluegreen’s common stock that they held at the effective time of the merger (subject to rounding up of fractional shares). The Company issued approximately 2.66 million shares of its Class A Common Stock in connection with the merger. As a result of the completion of the merger, Bluegreen became a wholly owned subsidiary of BVH and Bluegreen’s common stock is no longer publicly traded.
Bluegreen is a leading vacation ownership company that markets and sells vacation ownership interests (“VOIs”) and manages resorts in popular leisure and urban destinations. Bluegreen’s resorts are primarily located in high-volume, “drive-to” vacation locations, including Orlando, Las Vegas, Myrtle Beach, Charleston and New Orleans, among others. The resorts in which Bluegreen markets, sells, and manages VOIs were either developed or acquired by Bluegreen, or were developed and are owned by third parties. Bluegreen earns fees for providing sales and marketing services to third party developers. Bluegreen also earns fees for providing management services to the Vacation Club and homeowners’ associations (“HOAs”), mortgage servicing, VOI title services, reservation services, and construction design and development services. In addition, Bluegreen provides financing to qualified VOI purchasers, which generates significant interest income.
Principles of Consolidation and Basis of Presentation
The Company’s unaudited consolidated financial statements include the accounts of its wholly owned subsidiaries, entities in which the Company or its consolidated subsidiaries hold controlling financial interests, including Bluegreen/Big Cedar Vacations LLC (a joint venture in which Bluegreen is deemed to hold a controlling financial interest based on its 51% equity interest, its active role as the day-to-day manager of its activities, and Bluegreen’s majority voting control of its management committee (“Bluegreen/Big Cedar Vacations”)), and any variable interest entities (“VIEs”) in which the Company or one of its consolidated subsidiaries is deemed the primary beneficiary of the VIE. All significant inter-company balancesaccounts and transactions have been eliminated in consolidation. As used throughout this document,
Impact of the term “fair value” reflectsCOVID-19 pandemic
The COVID-19 pandemic caused an unprecedented disruption in the Company’s estimateU.S. and global economies and the industries in which the Company operates due to, among other things, government ordered “shelter in place” and “stay at home” orders and advisories, travel restrictions, and restrictions on business operations, including government guidance with respect to travel, public accommodations, social gatherings, and related matters. These disruptions and the reaction of fair value as discussed herein. Certain amounts for prior periods have been reclassified to conformthe general public to the current period’s presentation.
BBX Capital ispandemic had a diversified holding company whose core investments include Bluegreen Vacations Corporation (“Bluegreen”), real estate and middle market operating businesses. Bluegreen is a sales, marketing and management company focusedsignificant adverse impact on the vacation ownership industry. The Company’s real estate investments include real estate joint venturesCompany's financial condition and operations throughout 2020, including, without limitation, due to the ownership, financing, acquisition, development and management of real estate. The Company’s investmentstemporary closure beginning in middle market operating businesses include Renin Holdings, LLC (“Renin”), a company that manufactures products for the home improvement industry, and the Company’s investments in confectionery businesses through its wholly-owned subsidiary, BBX Sweet Holdings, LLC (“BBX Sweet Holdings”). The Company’s investment in confectionery businesses includes BBX Sweet Holdings’ acquisition of IT’SUGAR, LLC (“IT’SUGAR”) in June 2017 (see Note 2 – Acquisitions).
On December 15, 2016, the Company completed the acquisitionMarch 2020 of all of Bluegreen’s VOI sales centers, its retail marketing operations at Bass Pro Shops and Cabela’s stores and outlet malls, and its Choice Hotels call transfer program, Bluegreen’s cancellation of existing owner reservations through May 15, 2020 and new prospect guest tours through June 30, 2020, and the outstanding sharestemporary closure of certain of Bluegreen’s Club Resorts and Club Associate Resorts in accordance with government mandates and advisories. While adverse conditions continued during 2021, including due to the emergence of new variants such as the Delta variant and Omicron variant, Bluegreen’s business and results generally improved during 2021 and have continued to improve in the first quarter of 2022.
Status of Current Operations
As of March 31, 2022, we were operating marketing kiosks at 128 Bass Pro Shops and Cabela’s stores, including 21 new Cabela’s locations and 2 new Bass Pro locations as compared to March 31, 2021; and all of our VOI sales centers and resorts were open, except for one resort and sales center in Surfside, Florida which was closed due to conditions unrelated to the pandemic. Further, resort occupancy rates were approximately 77% at resorts with sales centers in the first quarter of 2022. While we sold only 42,000 vacation packages in the first quarter of 2022 compared to 49,000 in the first quarter of 2021, Bluegreen’s pipeline of vacation packages was 200,600 at March 31, 2022 compared to 132,100 at March 31, 2021, which we believe reflected the impact of the former BBX Capital Corporation (“BCC”) not previously ownedtemporary cessation of marketing activities at the outset of the COVID-19 pandemic. We believe that the increase in sales of VOIs in the first quarter of 2022 reflected the improvement in general economic conditions despite continued COVID-19 cases, increasing interest rates and inflationary trends during the period. While we hope that conditions in the travel and leisure industry continue to improve, the continued future impact of economic conditions and the pandemic on the Company is uncertain. Various state and local government officials may in the future issue new or revised orders that are different than the ones under which we are currently operating, and actions of foreign government may exacerbate supply chain constraints and result in increased inflation. It is impossible to predict the duration and severity of the pandemic and the likely impact of the pandemic on the Company’s future revenues, net income and other operating results.
Use of Estimates
The Company’s financial statements are prepared in conformity with GAAP, which requires it to make estimates based on assumptions about current and, for some estimates, future economic and market conditions which affect reported amounts and related disclosures in its financial statements. Although the Company’s current estimates contemplate current and expected future conditions, as applicable, actual conditions could differ from its expectations, which could materially affect its results of operations and financial position. In particular, a number of estimates have been and will continue to be affected by the Company,ongoing COVID-19 pandemic and on January 30, 2017,general economic conditions, increasing interest rates and inflation. The severity, magnitude and duration, as well as the Company changed its name from BFC Financial Corporationeconomic consequences of these factors are uncertain, subject to BBX Capital Corporation. On September 27, 2017, Bluegreen changed its name from Bluegreen Corporationchange and difficult to Bluegreen Vacations Corporation.
Prior to the acquisition of all of the outstanding shares of BCC, the Company had an 82% equity interest in BCC and a direct 54% equity interest in Woodbridge Holdings, LLC (“Woodbridge”), the parent company of Bluegreen. BCC held the remaining 46% interest in Woodbridge.predict. As a result, accounting estimates and assumptions may change over time. Such changes could result in, among other adjustments, future impairments of intangibles and long-lived assets, incremental credit losses on Bluegreen’s VOI notes receivable, a decrease in the carrying amount of tax assets, or an increase in other obligations as of the acquisitiontime of a relevant measurement event. On an ongoing basis, management evaluates its estimates, including those that relate to the publicly held sharesestimated future sales value of BCC, BCC (directly) and Bluegreen (indirectly through Woodbridge) are wholly owned subsidiaries of the Company.
BBX Capital has two classes of common stock. Holders of the Class A common stock are entitled to one vote per share, which in the aggregate represents 22% of the combined voting power of the Class A common stock and the Class B common stock. Class B common stock represents the remaining 78% of the combined vote. The percentage of total common equity represented by Class A and Class B common stock was 87% and 13%, respectively, at September 30, 2017. Class B common stock is convertible into Class A common stock on a share for share basis at any time at the option of the holder.
6
On October 23, 2017, the Company announced that Bluegreen filed a registration statement on Form S-1 with the SEC relating to a proposed initial public offering of shares of Bluegreen’s common stock representing a minority interest in Bluegreen. The number of shares to be offered and the price range for the proposed offering have not yet been determined. It is currently contemplated that Woodbridge will participate in the proposed offering as a selling shareholder with respect to a portion of the offering. There is no assurance that Bluegreen will complete the proposed offering or that Woodbridge will sell any shares in the offering.
Recently Adopted Accounting Pronouncements
On January 1, 2017, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-09, Compensation – Stock Compensation (Topic 718), Improvements to Employee Share-based Payment Accounting. The new standard requires inventory; the recognition of excess tax benefits (“windfall”)revenue; the allowance for loan losses; the recovery of the carrying value of real estate inventories; the fair value of assets measured at, or compared to, fair value on a non-recurring basis such as intangible assets and tax deficiencies inother long-lived assets; the income statement when the stock awards vest or are settled, thus eliminating additional paid in capital pools. The new standard also removes the requirement to delay recognitionestimate of windfall tax benefits until it reduces current taxes payable. The new standard instead requires the recognition of windfall tax benefits at the time of settlement, subject to valuation allowance considerations. The new standard clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity on the Company’s statement of cash flows and cash flowscontingent liabilities related to windfall tax benefits will no longerlitigation and other claims and assessments; and deferred income taxes. Management bases its estimates on historical experience and on various other assumptions that it believes to be separately classified as a financing activity apartreasonable under the circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from other income tax cash flows which are classified as operating activities. The new standard provides an accounting policy election to account for forfeitures as they occur insteadsources. Actual results may differ materially from these estimates under different assumptions and conditions.
2. Recently Issued Accounting Pronouncements
Future Adoption of on an estimated basis and allows for the employer to repurchase more of an employee’s shares for tax withholding purposes up to the maximum statutory rate in the employee’s applicable jurisdictions without triggering liability accounting. The new standard changes the computation of diluted earnings per share as windfall tax benefits will not be included in the calculation of assumed proceeds when applying the treasury stock method.
The primary impact of the implementation of this standard on the Company’s Consolidated Financial Statements was the recognition of a $3.1 million windfall tax benefit as a cumulative effect to accumulated earnings associated with windfall tax benefits that were not previously recognized because the related tax deduction had not reduced current taxes payable.
Upon adoption of the new standard, the Company made an accounting policy election to recognize forfeitures as they occur. The presentation requirement for cash flows related to employee taxes paid for withheld shares had no impact to operating cash flows on any of the periods presented in the Company’s consolidated cash flows statements since these cash flows have historically been presented as a financing activity.
NewRecently Issued Accounting Pronouncements
The FASB has issued the following accounting pronouncementspronouncement and guidance which may be applicable to the Company but have not yet become effective. (See the 2016 Annual Report for additional accounting pronouncements and guidance issued relevant to the Company’s operations which havehad not yet been adopted as of September 30, 2017): March 31, 2022:
Accounting Standards Update (ASU) No. 2014-09 – Revenue Recognition (Topic 606): In May 2014,March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effect of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), which provides relief for companies preparing for the discontinuation of LIBOR in response to the Financial Conduct Authority (the regulatory authority over LIBOR) plan for a newphase out of regulatory oversight of LIBOR interest rate indices after 2021 to allow for an orderly transition to an alternate reference rate. The Alternative Reference Rates Committee (“ARRC”) has proposed that the Secured Overnight Financing Rate (“SOFR”) is the rate that represents best practice as the alternative to LIBOR for promissory notes or other contracts that are currently indexed to LIBOR. The ARRC has proposed a market transition plan to SOFR from LIBOR and organizations are currently working on transition plans as it relates to derivatives and cash markets exposed to LIBOR. Although the Company’s VOIs notes receivable from its borrowers are not indexed to LIBOR, as of March 31, 2022, the Company had $170.9 million of LIBOR indexed junior subordinated debentures and $73.9 million of LIBOR indexed receivable-backed notes payable. Companies can apply ASU 2020-04 immediately. However, the guidance will only be available for a limited time, generally through December 31, 2022. The Company has not yet adopted this standard related to revenue recognition. Under the new standard, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amountevaluating the potential impact that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosureeventual replacement of the nature, amount, timing,LIBOR benchmark interest rate could have on its results of operations, liquidity and uncertainty ofconsolidated financial statements.
3. Revenue from Contracts with Customers
The table below sets forth the Company’s disaggregated revenue and cash flows arisingby category from contracts with customers. The FASB has recently issued several amendments to the standard, including identifying performance obligationsand other technical corrections and minor improvements affecting a variety of topics and required disclosurescustomers (in thousands):
For the Three Months Ended | ||||||
March 31, | ||||||
2022 | 2021 | |||||
Sales of VOIs (1) | $ | 99,028 | $ | 55,931 | ||
Fee-based sales commission revenue (1) | 24,084 | 25,718 | ||||
Resort and club management revenue (2) | 26,198 | 24,928 | ||||
Cost reimbursements (2) | 18,064 | 16,608 | ||||
Title fees and other (1) | 3,082 | 2,274 | ||||
Other revenue (2) | 1,927 | 1,695 | ||||
Revenue from customers | 172,383 | 127,154 | ||||
Interest income (3) | 22,198 | 19,261 | ||||
Other income, net | 548 | — | ||||
Total revenue | $ | 195,129 | $ | 146,415 |
(1) Included in the new standard. This standard will be effectiveCompany’s sales of VOIs and financing segment described in Note 14.
(2) Included in the Company’s resort operations and club management segment described in Note 14.
(3) Interest income of $22.1 million and $19.1 million for the three months ended March 31, 2022 and 2021, respectively, is included in the Company’s sales of VOIs and financing segment described in Note 14.
As of March 31, 2022 and December 31, 2021, the Company will adopt this standard on January 1, 2018. Entities havehad commission receivables, net of an allowance, of $16.4 million and $17.4 million, respectively, related to third-party sales of VOIs, which are included in other assets in the optionunaudited consolidated balance sheets. Commission receivables relate to apply the new guidance under a full retrospective approach or a modified retrospective approachcontracts with the cumulative effect of initially applying the new guidance recognized at the date of initial application. The Company will determine the transition method of this standard later in 2017 following the issuance of timeshare industry-specific guidance.
The Company’s initial analysis identifying areas that will be impacted by the new guidance is substantially complete, and the Company is currently analyzing the potential impacts that adopting this standard may have on its consolidated financial statements and related disclosures and its business processes, accounting policies and controls.
The Company believes that the new standard will impact the timing of revenue recognitioncustomers, including amounts associated with the Company’s contractual right to consideration for completed performance obligations, and
are settled when the related cash is received. Commission receivables are recorded when the right to consideration becomes unconditional and is only contingent on the passage of time.
Contract liabilities include payments received or due in advance of satisfying performance obligations, including points awarded to customers as an incentive for the purchase of VOIs that may be redeemed in the future, advance deposits on owner programs for future services, and deferred revenue on prepaid vacation packages for future stays at the Company’s resorts. Both points incentives and owner programs are recognized upon redemption, and deferred revenue for vacation packages is recognized net of sales of marketing expenses upon customer stays.
The following table sets forth the Company’s contract liabilities as of March 31, 2022 and December 31, 2021 (in thousands):
March 31, | December 31, | |||||
2022 | 2021 | |||||
Point incentives | $ | 2,473 | $ | 2,676 | ||
Owner programs | 1,995 | 2,159 | ||||
Deferred revenue vacation packages | 1,264 | 1,274 | ||||
$ | 5,732 | $ | 6,109 |
4. Notes Receivable
The table below provides information relating to the Company’s notes receivable and its allowance for loan losses (dollars in thousands):
As of | ||||||
March 31, | December 31, | |||||
2022 | 2021 | |||||
Notes receivable secured by VOIs: | ||||||
VOI notes receivable - non-securitized | $ | 294,661 | $ | 275,163 | ||
VOI notes receivable - securitized | 326,359 | 334,266 | ||||
Gross VOI notes receivable | 621,020 | 609,429 | ||||
Allowance for loan losses - non-securitized | (82,504) | (77,714) | ||||
Allowance for loan losses - securitized | (84,899) | (85,393) | ||||
Allowance for loan losses | (167,403) | (163,107) | ||||
VOI notes receivable, net | $ | 453,617 | $ | 446,322 | ||
Allowance as a % of Gross VOI notes receivable | 27% | 27% |
The weighted-average interest rate charged on the Company’s notes receivable secured by VOIs was 15.3% at both March 31, 2022 and December 31, 2021. All of Company’s VOI loans bear interest at fixed rates. The Company’s VOI notes receivable are primarily secured by VOI inventory located in Florida, Missouri, South Carolina, Tennessee, Nevada and Virginia.
Allowance for Loan Losses
The activity in the Company’s allowance for loan losses was as follows (in thousands):
For the Three Months Ended | ||||||
March 31, | ||||||
2022 | 2021 | |||||
Balance, beginning of period | $ | 163,107 | $ | 142,044 | ||
Provision for loan losses | 16,579 | 12,319 | ||||
Less: Write-offs of uncollectible receivables | (12,283) | (11,121) | ||||
Balance, end of period | $ | 167,403 | $ | 143,242 |
The Company monitors the credit quality of its receivables on an ongoing basis. The Company holds large amounts of homogeneous VOI notes receivable and assess uncollectibility based on pools of receivables as it does not believe that there are significant concentrations of credit risk with any individual counterparty or groups of counterparties. In estimating loan losses, the Company does not use a single primary indicator of credit quality but instead evaluates its VOI notes receivable based upon a static pool analysis that incorporates the aging of the respective receivables, default trends and prepayment rates by origination year, as well as the FICO scores of the borrowers. The Company records the difference between its VOI notes receivable and the variable consideration included in the transaction price for the sale of real estate. Specifically, the Company believesrelated VOI as an allowance for loan losses and records the new standard will resultVOI notes receivables net of the allowance.
The COVID-19 pandemic or adverse changes in economic conditions, including recent inflationary trends may have an adverse impact on the collectability of our VOI notes receivable and we continue to evaluate the impact on on our default or and delinquency rates. Our estimates may not prove to be correct and our allowance for loan losses may not prove to be adequate.
Additional information about the Company’s VOI notes receivable by year of origination is as follows as of March 31, 2022 (in thousands):
Year of Origination | |||||||||||||||||||||
2022 | 2021 | 2020 | 2019 | 2018 | 2017 and Prior | Total | |||||||||||||||
701+ | $ | 39,722 | $ | 117,094 | $ | 44,535 | $ | 55,081 | $ | 36,536 | $ | 60,572 | $ | 353,540 | |||||||
601-700 | 18,111 | 81,328 | 31,597 | 31,779 | 23,900 | 50,505 | 237,220 | ||||||||||||||
<601 (1) | 1,453 | 4,056 | 2,912 | 3,464 | 2,274 | 5,095 | 19,254 | ||||||||||||||
Other (2) | 491 | 2,668 | 1,234 | 1,017 | 1,596 | 4,000 | 11,006 | ||||||||||||||
Total by FICO score | $ | 59,777 | $ | 205,146 | $ | 80,278 | $ | 91,341 | $ | 64,306 | $ | 120,172 | $ | 621,020 | |||||||
(1)Includes VOI notes receivable attributable to borrowers without a FICO score (who are primarily foreign borrowers).
(2)Includes $7.0 million related to VOI notes receivable that, as of March 31, 2022, had defaulted, but the related VOI note receivable balance had not yet been charged off in accordance with the provisions of certain receivable-backed notes payable transactions. These VOI notes receivable have been reflected in the recognitionallowance for loan losses.
Additional information about the Company’s VOI notes receivable by year of revenue soonerorigination is as follows as of December 31, 2021 (in thousands):
Year of Origination | |||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | 2016 and Prior | Total | |||||||||||||||
701+ | $ | 129,960 | $ | 49,102 | $ | 60,037 | $ | 39,760 | $ | 26,711 | $ | 40,872 | $ | 346,442 | |||||||
601-700 | 82,664 | 34,185 | 34,072 | 25,732 | 18,132 | 37,777 | 232,562 | ||||||||||||||
<601 (1) | 4,623 | 3,149 | 3,690 | 2,473 | 1,551 | 4,175 | 19,661 | ||||||||||||||
Other (2) | 2,279 | 996 | 1,201 | 1,876 | 1,429 | 2,983 | 10,764 | ||||||||||||||
Total by FICO score | $ | 219,526 | $ | 87,432 | $ | 99,000 | $ | 69,841 | $ | 47,823 | $ | 85,807 | $ | 609,429 |
(1)Includes VOI notes receivable attributable to borrowers without a FICO score (who are primarily foreign borrowers).
(2)Includes $7.0 million related to VOI notes receivable that, as of December 31, 2021, had defaulted, but the related VOI note receivable balance had not yet been charged off in accordance with the provisions of certain receivable-backed notes payable transactions. These VOI notes receivable have been reflected in the allowance for loan losses.
contingent consideration on real estate sales and on
The percentage of gross notes receivable outstanding by FICO score of the contribution of real estate to joint ventures in which the Company has an equity interest.
The Company believes that the new standard will not materially affect revenue recognition associated with trade sales. Retail trade sales performance obligations are satisfiedborrower at the time of the transactionorigination were as customersfollows:
As of | |||||
March 31, | December 31, | ||||
2022 | 2021 | ||||
FICO Score | |||||
700+ | 58 | % | 58 | % | |
601-699 | 39 | 39 | |||
<600 | 2 | 2 | |||
No Score (1) | 1 | 1 | |||
Total | 100 | % | 100 | % |
(1)Includes VOI notes receivable attributable to borrowers without a FICO score (who are primarily foreign borrowers).
The Company’s notes receivable are carried at amortized cost less an allowance for loan losses. 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 90 days contractually past due and not resumed until such loans are less than 90 days past due. As of the retail business typically pay in cash at the timeMarch 31, 2022 and December 31, 2021, $17.3 million and $16.3 million, respectively, of transfer of the promised goods. Wholesale trade sales performance obligationsour VOI notes receivable were more than 90 days past due, and accordingly, consistent with our policy, were not accruing interest income. After approximately 127 days, VOI notes receivable are generally satisfied when the promised goods are shipped by the Company or received by the customer.
The Company does not expect this standard to materially change the accounting for the recognition of its fee-based sales commission revenue, ancillary revenues, and rental revenue. The Company currently expects possible areas of impact will include (i) gross versus net presentation for payroll reimbursement and insurance premiums reimbursement related to resorts managed by Bluegreen on behalf of third parties and (ii) the timing of the recognition of VOI revenue related to the removal of certain bright line tests regarding the determination of the adequacy of the buyer’s commitment under existing industry-specific guidance. Final industry-specific guidance remains open for the following issues: (i) application of percentage of completion related to sales of incomplete VOIs, (ii) satisfaction of performance obligations and (iii) contract costs. Due to the nature and potential significant impact of these open issues, the Company expects to disclose additional details on the impact of the adoption of this accounting standard following the issuance of timeshare industry-specific guidance on these items.
Accounting Standards Update (ASU) No. 2016-02 – Leases (Topic 842). This update will require assets and liabilities to be recognized on the balance sheet of a lessee for the rights and obligations created by leases of assets with terms of more than 12 months. For income statement purposes, the update retained a dual model, requiring leases to be classified as either operating or finance based on largely similar criteria to those applied in current lease accounting, but without explicit bright lines. ASU 2016-02 also requires extensive quantitative and qualitative disclosures, including significant judgments made by management, to provide greater insight into the extent of revenue and expense recognized and expected to be recognized from existing leases. This standard will be effective for the Company on January 1, 2019. Early adoption is permitted. The Company expects that the implementation of this new standard will have an impact on its consolidated financial statements and related disclosures as the Company has aggregate future minimum lease payments of $159.7 million at September 30, 2017 under its current non-cancelable lease agreements with various expirations dates between 2017 and 2030. The Company anticipates the recognition of additional assets and corresponding liabilities related to these leases on its consolidated statement of financial condition.
Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. This update introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimatingwritten off against the allowance for loan losses. Further, public entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination (i.e., by vintage year). This standard will be effective for the Company on January 1, 2020. Early adoption is permitted beginning on January 1, 2019. The Company is currently evaluating the impact that ASU 2016-13 may have on its consolidated financial statements.
Accounting Standard Update (ASU) No. 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20). This update indicates that nonfinancial assets within the scope of Subtopic 610-20 may include nonfinancial assets transferred within a legal entity by transferring ownership in the legal entity to a counterparty. The update indicates that an entity should identify each distinct nonfinancial asset or in substance nonfinancial asset promised to a counterparty and derecognize each asset when the counterparty obtains control of the asset. This update supersedes the guidance in Topic 845 and eliminates partial sale accounting associated with the transfer of real estate to a joint venture for a noncontrollingloss. Accrued interest in the joint venture. The ASU is effective upon adoption of ASU 2014-09. In certain joint ventures, the Company accounted for the transfer of land to joint ventures for initial capital contributions as partial sales resulting in deferred gains and joint venture basis adjustments. Joint venture aggregate basis adjustments and deferred gains were $6.3 million and $0.5was $4.4 million as of September 30, 2017. The Companyboth March 31, 2022 and December 31, 2021, and is currently evaluating the requirements of this update and has not yet determined its impact on the Company’s consolidated financial statements.
Accounting Standard Update (ASU) No. 2017-09, Compensation – Stock Compensation (Topic 718). This update was issued to provide guidance on determining which changes to the terms and conditions of share-based compensation awards require an entity to apply modification accounting under Topic 718. An entity should apply modification accounting to changes to terms or conditions of a share-based compensation awards unless there is no change in the fair value, vesting or classification of the modified award as compared to the original award. The ASU is effective for
8
annual periods and interim periodsincluded within those annual periods, beginning after December 15, 2017, with early adoption permitted. The Company believes that the adoption of this update will not have a material impact on the Company’s consolidated financial statements.
2. Acquisitions
Acquisition of IT’SUGAR
On June 16, 2017 (the “Acquisition Date”), a wholly-owned subsidiary of BBX Sweet Holdings acquired IT’SUGAR, a specialty candy retailer with 95 retail locations in 26 states and Washington, DC, through the acquisition of all of its Class A Preferred Units and 90.4% of its Class B Common Units for cash consideration of approximately $58.4 million, net of cash acquired. The remaining 9.6% of IT’SUGAR’s Class B Common Units are owned by JR Sugar Holdings, LLC (“JR Sugar”), an entity owned by the founder and CEO of IT’SUGAR.
The consolidated netother assets and results of operations of IT’SUGAR are included in the Company’s unaudited consolidated financial statements commencing on the Acquisition Date and resulted in the following impact to trade sales and net income attributable to shareholders for the three and nine months ended September 30, 2017 (in thousands):balance sheets herein.
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| For the Three Months |
| For the Nine Months |
|
| Ended September 30, 2017 |
| Ended September 30, 2017 |
Trade sales | $ | 22,592 |
| 26,880 |
Net income attributable to shareholders | $ | 1,176 |
| 1,530 |
Purchase Price Allocation
The Company accounted for the acquisition of IT’SUGAR using the acquisition method of accounting, which requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair values at the Acquisition Date. The followingtable summarizesshows the provisional purchase price allocation based on the Company’s preliminary valuation, including the fair values of the assets acquired, liabilities assumed, and the redeemable noncontrolling interest in IT’SUGAR at the Acquisition Date (in thousands):
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As management is still in the process of completing its valuation analysis, our accounting for the acquisition is not complete as of the date of this report. As a result, the amounts reported in the above table are provisional amounts that
9
may be updated in subsequent periods to reflect the completion of our valuation analysis and any additional information obtained during the measurement period.
The provisional fair values reported in the above table have been estimated by the Company using available market information and appropriate valuation methods. As considerable judgment is involved in estimates of fair value, the provisional fair values presented above are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methods could have a material effect on the estimated fair value amounts.
The following summarizes the Company’s methodologies for estimating the fair values of certain assets and liabilities associated with IT’SUGAR:
Property and Equipment
Property and equipment acquired consisted primarily of leasehold improvements at IT’SUGAR’s retail stores. The fair value of the leasehold improvements and other equipment was estimated based on the replacement cost approach.
Identifiable Intangible Assets and Liabilities
The identifiable intangible assets acquired primarily consisted of the fair value of IT’SUGAR’s trademark, which was estimated using the relief-from-royalty method, a form of the income approach. Under this approach, the fair value was estimated by calculating the present value using a risk-adjusted discount rate of the expected future royalty payments that would have to be paid if the IT’SUGAR trademark was not owned.
The identifiable intangible assets and liabilities also included the fair value of IT’SUGAR’s operating lease agreements associated with its retail stores. The fair value of these assets and liabilities were estimated by calculating the present value using a risk-adjusted discount rate of the difference between the contractual amounts to be paid pursuant to the lease agreements and the estimate of market lease rates at the Acquisition Date.
The $4.2 million trademark intangible asset is amortized over 15 years and the $0.2 million favorable and the $0.7 million of unfavorable lease agreements are amortized over a weighted average period of 6.5 years. The noncompetition agreement is amortized over five years.
Goodwill
The goodwill recognized in connection with the acquisition reflects the difference between the estimated fair value of the net assets acquired and the Company’s consideration paid to acquire IT’SUGAR. The goodwill recognized in the acquisition is deductible for income tax purposes.
Pro Forma Information
The following unaudited pro forma financial data presents the Company’s revenues and earnings for the three and nine months ended September 30, 2017 and 2016 as if the Acquisition Date had occurred on January 1, 2016 (in thousands):
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| For the Three Months |
| For the Nine Months | ||||
|
| Ended September 30, |
| Ended September 30, | ||||
|
| 2017 |
| 2016 |
| 2017 |
| 2016 |
Trade sales | $ | 226,280 |
| 231,101 |
| 637,530 |
| 624,800 |
Income before income taxes | $ | 19,699 |
| 43,897 |
| 78,359 |
| 54,554 |
Net income (1) | $ | 11,499 |
| 24,232 |
| 48,059 |
| 31,739 |
Net income attributable to shareholders (1) | $ | 8,242 |
| 18,582 |
| 38,623 |
| 22,103 |
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|
10
The unaudited pro forma financial data reported in the above table does not purport to represent what the actual resultsdelinquency status of the Company’s operations would haveVOI notes receivable as of March 31, 2022 and December 31, 2021 (in thousands):
As of | ||||||
March 31, | December 31, | |||||
2022 | 2021 | |||||
Current | $ | 592,907 | $ | 581,719 | ||
31-60 days | 6,429 | 6,290 | ||||
61-90 days | 4,372 | 5,084 | ||||
Over 91 days (1) | 17,312 | 16,336 | ||||
Total | $ | 621,020 | $ | 609,429 | ||
(1)Includes $7.0 million related to VOI notes receivable that, as of both March 31, 2022 and December 31, 2021 had defaulted, but the related VOI note receivable balance had not yet been assuming that the Acquisition Date was January 1, 2016, nor does it purport to predict the Company’s results of operations for future periods.
Noncontrolling Interest
Under the terms of IT’SUGAR’s operating agreement, JR Sugar may require the Company to purchase for cash its IT’SUGAR Class B Common Units upon the occurrence of certain events, including events relating to the employment agreement between BBX Sweet Holdings and the CEO of IT’SUGAR, as described below. The purchase price payable by the Company for such Class B Common Units will be determined based on the circumstance giving rise to such purchase obligation in accordance with prescribed formulas set forth in IT’SUGAR’s operating agreement. In addition, following the seventh anniversary of the Acquisition Date, the Company shall have the right, but not the obligation, to require JR Sugar to sell its Class B Common Units to the Company in accordance with a prescribed formula set forth in IT’SUGAR’s operating agreement.
As a result of the redemption features, JR Sugar’s Class B Common Units are considered redeemable noncontrolling interests and reflected in the mezzanine section as a separate line item in the Company’s Condensed Consolidated Statements of Financial Condition. As the noncontrolling interests are not currently subject to redemption but are probable of becoming redeemable in a future period, the Company will measure the noncontrolling interests by accreting changes in the estimated purchase price from the Acquisition Date to the earliest redemption date and may adjust the carrying amount of such interests to equal the calculated value in the event it is in excess of the carrying amount at such time.
Employment and Loan Agreements
In connection with the acquisition of IT’SUGAR, BBX Sweet Holdings entered into an employment agreement with the founder and CEO of IT’SUGAR for his continued services as CEO of IT’SUGAR. Upon the occurrence of certain events constituting a breach of the employment agreement by the CEO resulting in his termination, the Company may exercise its ability to purchase JR Sugar’s Class B Common Units for cash for an amount equal to the lesser of the fair market value of such units determinedcharged off in accordance with the prescribed formula set forth in IT’SUGAR’s operating agreement and the initial value ascribed to such units at the Acquisition Date. Similarly, upon the occurrenceprovisions of certain “not for cause” termination events associated with the termination of the CEO’s employment, JR Sugar may require the Company to purchase its Class B Common Units for cash for an amount equal to the greater of the fair market value of such units determined in accordance with the prescribed formula set forth in IT’SUGAR’s operating agreement and the initial value ascribed to such units at the Acquisition Date.
Concurrent with the acquisition, JR Sugar borrowed $2.0 million from BBX Sweet Holdingsreceivable-backed notes payable transactions. These VOI notes receivable have been reflected in the form of two promissory notes, as partial considerationallowance for the purchase of its 9.6% ownership of IT’SUGAR’s Class B Common Units. The notes mature on June 16, 2024, and a portion of the aggregate principal balance and accrued interest of such notes may be forgiven on an annual basis provided that IT’SUGAR’s CEO continues to remain employed with BBX Sweet Holdings pursuant to his employment agreement. The notes receivable are presented as a deduction from the balance of the related Class B Common Units.loan losses.
3. Consolidated5. Variable Interest Entities
From time to time, BluegreenThe Company sells VOI notes receivable through special purpose finance entities. These transactions are generally structured as non-recourse to Bluegreen and are designed to provide liquidity for Bluegreen and to transfer certain of the economic risks and benefits of the notes receivable to third-parties.third parties. In a securitization, various classes of debt securities are issued by the special purpose finance entities that are generally collateralized by a single tranche of transferred assets, which consist of VOI notes receivable. Bluegreen services the securitized notes receivable for a fee pursuant to servicing agreements negotiated with third-partiesthird parties based on market conditions at the time of the securitization.
In these securitizations, Bluegreenthe Company generally retains a portion of the securities and continues to service the securitized notes receivable. Under these arrangements, the cash payments received from obligors on the receivables sold are generally applied monthly to pay fees to service providers, make interest and principal payments to investors,
and fund required reserves, if any, with the remaining balance of such cash retained by Bluegreen;the Company; however, to the extent the portfolio of receivables fails to satisfy specified performance criteria (as may occur due to, among other things, an increase in default rates or credit loss severity) or other trigger events occur, the funds received from obligors are
11
required to be distributed on an accelerated basis to investors. Depending on the circumstances and the transaction, the application of the accelerated payment formula may be permanent or temporary until the trigger event is cured. As of September 30, 2017,March 31, 2022 and December 31, 2021, Bluegreen was in compliance with all applicable terms under its securitization transactions, and no trigger events had occurred.
In accordance with applicable accounting guidance for the consolidation of VIEs, Bluegreenthe Company analyzes its variable interests, which may consist of loans, servicing rights, guarantees, and equity investments, to determine if an entity in which Bluegreenit has a variable interest is a variable interest entity. Bluegreen’sVIE. The analysis includes a review of both quantitative and qualitative factors. BluegreenThe Company bases its quantitative analysis on the forecasted cash flows of the entity and it bases its qualitative analysis on the structure of the entity, including Bluegreen’sits decision-making ability and authority with respect to the entity, and relevant financial agreements. BluegreenThe Company also uses its qualitative analysis to determine if Bluegreenit must consolidate a variable interest entityVIE as the primary beneficiary. In accordance with applicable accounting guidance, Bluegreenthe Company has determined these securitization entities to be VIEs of which Bluegreenit is the primary beneficiary and, therefore, Bluegreenthe Company consolidates thesethe entities into its financial statements.
Under the terms of certain of Bluegreen’s VOI notenotes receivable sales, Bluegreenthe Company has the right to repurchase or substitute a limited amount of defaulted notes for new notes at the outstanding principal balance plus accrued interest. Voluntary repurchases and substitutions by Bluegreen of defaulted notes duringfor the ninethree months ended September 30, 2017March 31, 2022 and 20162021 were $7.4$2.0 million and $3.5$3.8 million, respectively. Bluegreen’sThe Company’s maximum exposure to loss relating to its non-recourse securitization entities is the difference between the outstanding VOI notes receivable and the notes payable, plus cash reserves and any additional residual interest in future cash flows from collateral.
Information related to theThe assets and liabilities of Bluegreen’sthe Company’s consolidated VIEs included in the Company’s Condensed Consolidated Statements of Financial Condition is set forth beloware as follows (in thousands):
As of | ||||||
March 31, | December 31, | |||||
2022 | 2021 | |||||
Restricted cash | $ | 16,238 | $ | 15,956 | ||
Securitized notes receivable, net | 241,460 | 248,873 | ||||
Receivable backed notes payable - non-recourse | 323,043 | 340,154 |
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| September 30, |
| December 31, |
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| 2017 |
| 2016 |
Restricted cash | $ | 28,099 |
| 21,894 |
Securitized notes receivable, net |
| 304,313 |
| 287,111 |
Receivable backed notes payable - non-recourse |
| 347,308 |
| 327,358 |
The restricted cash and the securitized notes receivable balances disclosed in the table above are restricted to satisfy obligations of the VIEs.
6. VOI Inventory
4. Loans Receivable
The loans receivable portfolio consisted of the following components (in thousands):
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| September 30, 2017 |
| December 31, 2016 |
Commercial non-real estate | $ | 789 |
| 1,169 |
Commercial real estate |
| 4,677 |
| 5,880 |
Small business |
| 1,716 |
| 2,506 |
Consumer |
| 951 |
| 1,799 |
Residential |
| 12,909 |
| 14,167 |
Loans receivable | $ | 21,042 |
| 25,521 |
As of September 30, 2017, foreclosure proceedings were in process with respect to $8.5 million of residential loans and $0.1 million of consumer loans.
The total discount on loans receivable was $2.4 million and $3.3 million as of September 30, 2017 and December 31, 2016, respectively.
12
Credit Quality of Loans Receivable and the Allowance for Loan Losses
The Company assesses loan credit quality by monitoring loan delinquencies.
The unpaid principal balance less charge-offs and discounts of non-accrual loans receivable was as follows (in thousands):
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| September 30, |
| December 31, |
Loan Class |
| 2017 |
| 2016 |
Commercial non-real estate | $ | 789 |
| 1,169 |
Commercial real estate | 4,677 |
| 5,880 | |
Small business |
| 1,716 |
| 2,506 |
Consumer |
| 878 |
| 1,701 |
Residential |
| 11,563 |
| 12,762 |
Total nonaccrual loans | $ | 19,623 |
| 24,018 |
An age analysis of the past due recorded investment in loans receivable as of September 30, 2017 and December 31, 2016 was as follows (in thousands):
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| Total |
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| 31-59 Days |
| 60-89 Days |
| 90 Days |
| Total |
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| Loans |
September 30, 2017 |
| Past Due |
| Past Due |
| or More (1) |
| Past Due |
| Current |
| Receivable |
Commercial non-real estate | $ | 789 |
| - |
| - |
| 789 |
| - |
| 789 |
Commercial real estate |
| - |
| - |
| 2,995 |
| 2,995 |
| 1,682 |
| 4,677 |
Small business |
| - |
| - |
| - |
| - |
| 1,716 |
| 1,716 |
Consumer |
| 25 |
| - |
| 376 |
| 401 |
| 550 |
| 951 |
Residential |
| 343 |
| 20 |
| 8,485 |
| 8,848 |
| 4,061 |
| 12,909 |
Total | $ | 1,157 |
| 20 |
| 11,856 |
| 13,033 |
| 8,009 |
| 21,042 |
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| Total |
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| 31-59 Days |
| 60-89 Days |
| 90 Days |
| Total |
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| Loans |
December 31, 2016 |
| Past Due |
| Past Due |
| or More (1) |
| Past Due |
| Current |
| Receivable |
Commercial non-real estate | $ | - |
| - |
| 330 |
| 330 |
| 839 |
| 1,169 |
Commercial real estate |
| - |
| - |
| 3,986 |
| 3,986 |
| 1,894 |
| 5,880 |
Small business |
| - |
| - |
| - |
| - |
| 2,506 |
| 2,506 |
Consumer |
| 23 |
| - |
| 467 |
| 490 |
| 1,309 |
| 1,799 |
Residential |
| 609 |
| 231 |
| 9,541 |
| 10,381 |
| 3,786 |
| 14,167 |
Total | $ | 632 |
| 231 |
| 14,324 |
| 15,187 |
| 10,334 |
| 25,521 |
|
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13
The activity in the allowance for loan losses for the three and nine months ended September 30, 2017 and 2016 was as follows (in thousands):
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| For the Three Months |
| For the Nine Months | ||||
|
| Ended September 30, |
| Ended September 30, | ||||
Allowance for Loan Losses: | 2017 |
| 2016 |
| 2017 |
| 2016 | |
Beginning balance | $ | - |
| - |
| - |
| - |
Charge-offs |
| (5) |
| (48) |
| (123) |
| (144) |
Recoveries |
| 2,010 |
| 10,992 |
| 6,221 |
| 19,123 |
Recoveries from loan losses, net |
| (2,005) |
| (10,944) |
| (6,098) |
| (18,979) |
Ending balance | $ | - |
| - |
| - |
| - |
Loans receivable: |
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Ending balance individually evaluated for impairment | $ | 18,252 |
| 22,356 |
| 18,252 |
| 22,356 |
Ending balance collectively evaluated for impairment |
| 2,790 |
| 6,260 |
| 2,790 |
| 6,260 |
Total | $ | 21,042 |
| 28,616 |
| 21,042 |
| 28,616 |
Impaired Loans
Loans are considered impaired when, based on current information and events, management believes it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impairment is evaluated based on past due status for consumer and residential loans. Impairment is evaluated for commercial and small business loans based on payment history, financial strength of the borrower or guarantors and cash flow associated with the collateral or business. Collateral dependent impaired loans are charged down to the fair value of collateral less cost to sell. Interest payments on impaired loans are recognized on a cash basis as interest income. Impaired loans, or portions thereof, are charged off when deemed uncollectible.
Individually impaired loans as of September 30, 2017 and December 31, 2016 were as follows (in thousands):
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| As of September 30, 2017 |
| As of December 31, 2016 | ||||
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| Unpaid |
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| Unpaid |
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| Recorded | Principal | Related |
| Recorded | Principal | Related |
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| Investment | Balance | Allowance |
| Investment | Balance | Allowance |
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Total with allowance recorded | $ | - | - | - |
| - | - | - |
Total with no allowance recorded |
| 19,782 | 32,805 | - |
| 24,188 | 39,901 | - |
Total | $ | 19,782 | 32,805 | - |
| 24,188 | 39,901 | - |
Average recorded investment and interest income recognized on impaired loans for the three and nine months ended September 30, 2017 and 2016 were as follows (in thousands):
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|
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| For the Three Months Ended |
| For the Nine Months Ended | ||||
|
| September 30, 2017 |
| September 30, 2017 | ||||
|
| Average Recorded |
| Interest Income |
| Average Recorded |
| Interest Income |
|
| Investment |
| Recognized |
| Investment |
| Recognized |
Total with allowance recorded | $ | - |
| - |
| - |
| - |
Total with no allowance recorded |
| 20,174 |
| 145 |
| 21,342 |
| 523 |
Total | $ | 20,174 |
| 145 |
| 21,342 |
| 523 |
14
|
| For the Three Months Ended |
| For the Nine Months Ended | ||
|
| September 30, 2016 |
| September 30, 2016 | ||
|
| Average Recorded | Interest Income |
| Average Recorded | Interest Income |
|
| Investment | Recognized |
| Investment | Recognized |
Total with allowance recorded | $ | - | - |
| - | - |
Total with no allowance recorded |
| 25,731 | 189 |
| 24,573 | 566 |
Total | $ | 25,731 | 189 |
| 24,573 | 566 |
Impaired loans with no valuation allowances recorded represent loans that were written-down to the fair value of the collateral less cost to sell, loans in which the collateral value less cost to sell was greater than the carrying value of the loan, loans in which the present value of the cash flows discounted at the loans’ effective interest rate was equal to or greater than the carrying value of the loans, or loans that were collectively measured for impairment.
There were no commitments to lend additional funds on impaired loans as of September 30, 2017.
5. Notes Receivable
The table below provides information relating to Bluegreen’s notes receivable and related allowance for credit losses as of September 30, 2017 and December 31, 2016 (in thousands):
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| September 30, |
| December 31, |
|
| 2017 |
| 2016 |
Notes receivable: |
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|
VOI notes receivable - non-securitized | $ | 149,893 |
| 175,123 |
VOI notes receivable - securitized |
| 392,733 |
| 369,259 |
Other notes receivable (1) |
| 1,389 |
| 1,688 |
Gross notes receivable |
| 544,015 |
| 546,070 |
Allowance for credit losses |
| (114,659) |
| (115,590) |
Notes receivable, net | $ | 429,356 |
| 430,480 |
Allowance as a % of gross notes receivable |
| 21% |
| 21% |
|
|
The weighted-average interest rate on Bluegreen’s notes receivable was 15.4%, and 15.7% at September 30, 2017 and December 31, 2016, respectively. Bluegreen’s notes receivable secured by VOIs bear interest at fixed rates.
Bluegreen’s notes receivable are carried at amortized cost less an allowance for credit losses. 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 September 30, 2017 and December 31, 2016, $10.9 million and $11.4 million, respectively, of Bluegreen’s VOI notes receivable were more than 90 days past due, and accordingly, consistent with Bluegreen’s policy, were not accruing interest income. After 120 days, Bluegreen’s VOI notes receivable are generally written off against the allowance for credit losses.
Credit Quality of Notes Receivable and the Allowance for Credit Losses
Bluegreen holds large amounts of homogeneous VOI notes receivable and assesses uncollectibility based on pools of receivables. In estimating future credit losses, Bluegreen’s management does not use a single primary indicator of credit quality but instead evaluates its VOI notes receivable based upon a static pool analysis that incorporates the aging of the respective receivables, default trends and prepayment rates by origination year, as well as the FICO® scores of the borrowers at the time of origination.
15
The activity in Bluegreen’s allowance for loan losses (including notes receivable secured by homesites) was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
| For the Nine Months Ended | ||
|
| September 30, | ||
|
| 2017 |
| 2016 |
Balance, beginning of period | $ | 115,590 |
| 110,714 |
Provision for credit losses |
| 32,066 |
| 36,897 |
Write-offs of uncollectible receivables |
| (32,997) |
| (28,918) |
Balance, end of period | $ | 114,659 |
| 118,693 |
The following table shows the delinquency status of Bluegreen’s VOI notes receivable as of September 30, 2017 and December 31, 2016 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
| December 31, |
|
| 2017 |
| 2016 |
Current | $ | 520,296 |
| 521,536 |
31-60 days |
| 6,039 |
| 6,378 |
61-90 days |
| 5,341 |
| 5,082 |
> 90 days (1) |
| 10,950 |
| 11,386 |
Total | $ | 542,626 |
| 544,382 |
|
|
6. Inventory
Inventory consisted of the following (in thousands):
|
|
|
|
|
|
| September 30, |
| December 31, |
|
| 2017 |
| 2016 |
Completed VOI units | $ | 187,818 |
| 156,401 |
Construction-in-progress |
| 15,876 |
| 10,427 |
Real estate held for future VOI development |
| 65,547 |
| 71,706 |
Land held for development |
| 22,987 |
| 15,254 |
Total real estate inventory |
| 292,228 |
| 253,788 |
Trade inventory |
| 28,225 |
| 14,726 |
Total Inventory | $ | 320,453 |
| 268,514 |
In June 2017, Bluegreen revised its VOI pricing matrix, which has resulted in an increase in the average selling price of its VOIs of 4%. As a result of this pricing change, Bluegreen’s management also increased its estimate of total gross margin generated on the sale of its VOI inventory. Under the relative sales value method prescribed for timeshare developers to relieve the cost ofCompany’s VOI inventory changes to the estimate of gross margin expected to be generated on the sale of VOI inventory are recognized on a retrospective basis in earnings. Accordingly, during the second quarter of 2017, Bluegreen recognized a benefit to cost of VOIs sold of $5.1 million.
Further, in September 2016, Bluegreen increased the selling price of its VOIs by 5%. Accordingly, during the third quarter of 2016, Bluegreen recognized a benefit to cost of VOIs sold of $5.6 million.
16
The Company’s inventory includes trade inventory of Renin and BBX Sweet Holdings and consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
| December 31, |
|
| 2017 |
| 2016 |
Raw materials | $ | 4,671 |
| 5,059 |
Paper goods and packaging materials |
| 1,407 |
| 2,090 |
Finished goods |
| 22,147 |
| 7,577 |
Total | $ | 28,225 |
| 14,726 |
As of | ||||||
March 31, | December 31, | |||||
2022 | 2021 | |||||
Completed VOI units | $ | 251,555 | $ | 255,223 | ||
Construction-in-progress | 11,335 | 10,313 | ||||
Real estate held for future development | 63,817 | 69,069 | ||||
Total | $ | 326,707 | $ | 334,605 |
Trade inventories are stated
Construction-in-progress consists primarily of additional VOI units being developed at the lower of cost or market value. Cost is determined by the first-in, first out method. In valuing inventory, the Company makes assumptions regarding the write-downs required for excess The Cliffs at Long Creekand obsolete inventory based on judgments and estimates formulated from available information. The Company’s estimates for excess and obsolete inventory are based on historical and forecasted usage. Inventory is also examined for upcoming expiration and is written down where appropriate. IncludedBluegreen Wilderness Club at Big Cedar in costs of trade sales for the three and nine months ended September 30, 2017 was $0.1 million and $1.0 million, respectively, of trade inventory net write-downs. Included in costs of trade sales for the three and nine months ended September 30, 2016 was $0.2 million and $3.4 million, respectively, of trade inventory write-downs.Ridgedale, Missouri.
7. Investments in Unconsolidated Real Estate Joint Ventures
As of September 30, 2017, the Company had equity investments in 14 unconsolidated real estate joint ventures involved in the development of single-family master planned communities, multifamily apartment facilities and retail centers. Investments in unconsolidated real estate joint ventures are accounted for as unconsolidated variable interest entities. See Note 3 for information regarding the Company’s investments in consolidated variable interest entities.
The Company had the following investments in unconsolidated real estate joint ventures (in thousands):
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|
|
| September 30, |
| December 31, |
| BBX Capital |
|
Investment in unconsolidated real estate joint ventures |
| 2017 |
| 2016 |
| % Ownership |
|
Altis at Kendall Square, LLC | $ | 78 |
| 154 |
| 20.24 | % |
Altis at Lakeline - Austin Investors LLC |
| 4,825 |
| 5,165 |
| 33.74 |
|
New Urban/BBX Development, LLC |
| 1,411 |
| 907 |
| 50.00 |
|
Sunrise and Bayview Partners, LLC |
| 1,483 |
| 1,574 |
| 50.00 |
|
Hialeah Communities, LLC |
| 854 |
| 2,641 |
| 57.00 |
|
PGA Design Center Holdings, LLC |
| 1,854 |
| 1,904 |
| 40.00 |
|
CCB Miramar, LLC |
| 1,225 |
| 875 |
| 35.00 |
|
Centra Falls, LLC |
| 208 |
| 595 |
| 7.14 |
|
The Addison on Millenia Investment, LLC |
| 6,021 |
| 5,935 |
| 48.00 |
|
BBX/S Millenia Blvd Investments, LLC |
| 5,007 |
| 5,095 |
| 90.00 |
|
Altis at Bonterra - Hialeah, LLC |
| 17,567 |
| 17,626 |
| 95.00 |
|
Altis at Shingle Creek Manager, LLC |
| 336 |
| 332 |
| 2.50 |
|
Altis at Grand Central Capital, LLC |
| 1,859 |
| - |
| 10.54 |
|
Centra Falls II, LLC |
| 558 |
| 571 |
| 7.14 |
|
Investments in unconsolidated real estate joint ventures | $ | 43,286 |
| 43,374 |
|
|
|
In September 2017, the Company invested approximately $1.9 million as one of a number of investors in the Altis at Grand Central joint venture with Altman Development (“Altman”). The joint venture purchased an office building and land to develop 314 multi-family units with related amenities located in Tampa, Florida. The Company is entitled to receive its pro-rata percentage of the joint venture distributions until it receives its aggregate capital contribution plus a specified return on its investment. Any distributions thereafter are shared with the managing member receiving an increased percentage of the distributions.
BBX Capital analyzed the Altis at Grand Central joint venture operating agreement7. Debt
Lines-of-Credit and determined that it is not the primary beneficiary and therefore the investment in the real estate joint venture was accounted for under the equity method of accounting. This conclusion was based primarily on the determination that the managing member makes all decisions concerning the operations of the joint venture and is managing the construction, leasing, property management, accounting, tenant improvements and disposition of the property. The managing member can only be removed by the other members for cause. The managing member receives significant benefits from the joint venture in excess of its membership interest in the form of development, construction and other fees and is also exposed to significant joint venture losses from construction loan and cost overrun guarantees.
In October 2017, the Company invested as one of a number of investors in the BBX/Label & Co Chapel Trail Development joint venture with Label & Co. The joint venture purchased land to develop 125 townhomes located in Pembroke Pines, Florida. The Company contributed $1.3 million in cash and executed a $3.4 million promissory note to the seller of the property to the joint venture for a 47% membership interest in the joint venture. The interest on the promissory note is payable monthly at six percent per annum with the entire principal balance due in October 2022. The Company is entitled to receive its pro-rata percentage of the joint venture distributions until it receives its aggregate capital contribution plus a specified return on its investment. Any distributions thereafter are shared with the managing member receiving an increased percentage of the distributions.
In certain joint ventures, the Company transferred land to the joint venture as an initial capital contribution resulting in deferred gains and joint venture basis adjustments. The Company accounted for the contribution of land to the joint ventures on the cost recovery method. Included in other liabilities in the Company’s Condensed Consolidated Statements of Financial Condition as of September 30, 2017 and December 31, 2016 was $0.4 million and $0.9 million, respectively, of deferred gains associated with these land transfers. During the three and nine months ended September 30, 2017, the Company recognized $0 and $0.5 million, respectively, of deferred gains upon sales by joint ventures of single-family homes. During the three and nine months ended September 30, 2016, the Company recognized $1.8 million and $2.2 million, respectively, of deferred gains upon sales by joint ventures of single-family homes.
Differences between the net investments in unconsolidated real estate joint ventures and the underlying equity in the net assets of the joint ventures result from basis adjustments and the capitalization of interest.
The aggregate amount of real estate joint venture basis adjustments was $6.3 million as of September 30, 2017 and $7.6 million as of December 31, 2016. During the three and nine months ended September 30, 2017, the Company recognized $0.4 million and $1.2 million, respectively, of equity earnings associated with basis adjustments from joint ventures arising from sales by joint ventures of single-family homes. During the three and nine months ended September 30, 2016, the Company recognized $0.5 million and $0.8 million, respectively, of equity earnings associated with basis adjustments.
The equity earnings from unconsolidated real estate joint ventures was $2.5 million and $9.6 million for the three and nine months ended September 30, 2017, respectively, substantially all of which was equity earnings from the Hialeah Communities, LLC real estate joint venture. The condensed Statements of Operations for the three and nine months ended September 30, 2017 and 2016 for the Hialeah Communities, LLC real estate joint venture was as follows (in thousands):
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|
|
|
|
|
|
|
|
|
| For the Three Months Ended |
| For the Nine Months Ended | ||||
|
| September 30, |
| September 30, | ||||
|
| 2017 |
| 2016 |
| 2017 |
| 2016 |
Total revenues | $ | 15,269 |
| 34,073 |
| 68,332 |
| 44,829 |
Costs of sales |
| (10,476) |
| (25,618) |
| (47,322) |
| (33,576) |
Other expenses |
| (1,048) |
| (1,586) |
| (3,806) |
| (2,881) |
Net earnings | $ | 3,745 |
| 6,869 |
| 17,204 |
| 8,372 |
Equity in net earnings of unconsolidated real estate joint venture - Hialeah Communities, LLC | $ | 1,966 |
| 3,940 |
| 8,728 |
| 4,918 |
18
See Note 9 to the Consolidated Financial Statements included in the 2016 Annual Report for additional information on BBX Capital’s investments in unconsolidated real estate joint ventures.
8. Debt
Notes Payable
Financial data related to our lines of credit and Other Borrowings
The table below sets forth information regarding the Company’s notes payable and credit facilities (other than receivable-backed notes payable, which are discussed below) as of March 31, 2022 and junior subordinated debentures)December 31, 2021, were as follows (dollars in thousands):
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2017 |
| December 31, 2016 | ||||||||
|
|
|
|
|
| Carrying |
|
|
|
|
| Carrying |
|
|
|
|
|
| Amount of |
|
|
|
|
| Amount of |
|
| Debt |
| Interest |
| Pledged |
| Debt |
| Interest |
| Pledged |
|
| Balance |
| Rate |
| Assets |
| Balance |
| Rate |
| Assets |
Bluegreen: |
|
|
|
|
|
|
|
|
|
|
|
|
2013 Notes Payable | $ | 48,000 |
| 5.50% | $ | 29,645 | $ | 52,500 |
| 5.50% | $ | 29,349 |
Pacific Western Term Loan |
| 1,387 |
| 6.49% |
| 9,560 |
| 1,727 |
| 6.02% |
| 8,963 |
Fifth Third Bank Note |
| 4,141 |
| 4.24% |
| 8,116 |
| 4,326 |
| 3.62% |
| 9,157 |
NBA Line of Credit |
| - |
| 4.75% |
| 15,932 |
| 2,006 |
| 5.00% |
| 8,230 |
Fifth Third Syndicated Line of Credit |
| 20,000 |
| 3.99% |
| 69,689 |
| 15,000 |
| 3.46% |
| 60,343 |
Fifth Third Syndicated Term Loan |
| 24,063 |
| 4.03% |
| 22,359 |
| 25,000 |
| 3.46% |
| 20,114 |
Unamortized debt issuance costs |
| (1,997) |
|
|
| - |
| (2,177) |
|
|
| - |
Total Bluegreen | $ | 95,594 |
|
| $ | 155,301 | $ | 98,382 |
|
| $ | 136,156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
Community Development District Obligations | $ | 21,435 |
| 4.50-6.00% | $ | 22,987 | $ | 21,435 |
| 4.50-6.00% | $ | 20,744 |
TD Bank Term Loan and |
|
|
|
|
|
|
|
|
|
|
|
|
Line of Credit |
| 16,113 |
| 3.88% |
| (2) |
| - |
| - |
| - |
Wells Fargo Capital Finance |
| - |
| - |
| - |
| 9,692 |
| (1) |
| (2) |
Anastasia Note |
| 3,462 |
| 5.00% |
| (2) |
| 3,417 |
| 5.00% |
| (2) |
Iberia Line of Credit |
| 175 |
| 3.98% |
| (2) |
| - |
| 3.37% |
| (2) |
Other |
| 1,717 |
| 5.25% | $ | 2,006 |
| 1,579 |
| 5.25% | $ | 2,044 |
Unamortized debt issuance costs |
| (713) |
|
|
|
|
| (715) |
|
|
|
|
Total Other | $ | 42,189 |
|
|
|
| $ | 35,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Notes Payable and Other Borrowings | $ | 137,783 |
|
|
|
| $ | 133,790 |
|
|
|
|
As of | ||||||||||||||||
March 31, 2022 | December 31, 2021 | |||||||||||||||
Balance | Interest | Carrying | Balance | Interest | Carrying | |||||||||||
Fifth Third Syndicated LOC | $ | 40,000 | 2.11% | $ | 57,383 | $ | 10,000 | 2.25% | $ | 21,243 | ||||||
Fifth Third Syndicated Term Loan | 100,000 | 1.99% | 143,457 | 88,125 | 2.25% | 187,207 | ||||||||||
Unamortized debt issuance costs | (2,213) | — | — | (1,000) | — | |||||||||||
Total | $ | 137,787 | $ | 200,840 | $ | 97,125 | $ | 208,450 |
Fifth Third Syndicated Line-of-Credit and Fifth Third Syndicated Term Loan. Bluegreen has a corporate credit facility which at December 31, 2021 included a $100.0 million term loan (the “Fifth Third Syndicated Loan”) with quarterly amortization requirements and a $125.0 million revolving line of credit (the “Fifth Third Syndicated Line-of-Credit”). In February 2022, Bluegreen amended and increased the facility to $300.0 million. The amended facility includes a $100.0 million term loan with quarterly amortization requirements and a $200.0 million revolving line of credit. Accordingly, the amendment and restatement increased the revolving line of credit by $75.0 million. Borrowings generally bear interest at a rate of term SOFR plus 1.75-2.50% and a 0.05%-0.10% credit spread adjustment, depending on Bluegreen’s leverage ratio (as compared to LIBOR plus 2.00%-2.50% with a 0.25% LIBOR floor under the terms of the facility prior to the amendment and restatement). The amendment also extended the maturity date from October 2024 to February 2027. Fifth Third Bank acts as administrative agent, lead arranger, and participating lender. In addition, certain other banks participate as lenders. Borrowings are collateralized by certain VOI inventory, sales center buildings, management fees, short-term receivables and cash flows from residual interests relating to certain term securitizations.
Receivable-Backed Notes Payable
Financial data related to our receivable-backed notes payable facilities as of March 31, 2022 and December 31, 2021 were as follows (dollars in thousands):
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|
|
|
As of | ||||||||||||||||
March 31, 2022 | December 31, 2021 | |||||||||||||||
Debt | Interest | Principal | Debt | Interest | Principal | |||||||||||
Receivable-backed notes | ||||||||||||||||
Liberty Bank Facility | $ | 5,000 | 3.00% | $ | 7,582 | $ | 5,000 | 3.00% | $ | 7,198 | ||||||
NBA Receivables Facility | 10,000 | 3.00% | 16,336 | 10,000 | 3.00% | 15,396 | ||||||||||
Pacific Western Facility | 7,500 | 3.21% | 11,886 | 7,500 | 3.00% | 11,265 | ||||||||||
Total | 22,500 | 35,804 | 22,500 | 33,859 | ||||||||||||
Receivable-backed notes | ||||||||||||||||
Liberty Bank Facility (1) | $ | 15,233 | 3.00% | $ | 23,098 | $ | 17,965 | 3.00% | $ | 25,864 | ||||||
NBA Receivables Facility (2) | 14,891 | 3.00% | 24,327 | 18,910 | 3.00% | 29,114 | ||||||||||
Pacific Western Facility (3) | 13,967 | 3.21% | 22,135 | 16,906 | — | 25,394 | ||||||||||
KeyBank/DZ Purchase Facility | 55,067 | 2.53% | 68,665 | 42,994 | — | 53,623 | ||||||||||
Quorum Purchase Facility | 17,866 | 4.95 - 5.10% | 20,765 | 19,425 | 4.95-5.10% | 22,690 | ||||||||||
2013 Term Securitization | 4,903 | 3.20% | 5,820 | 6,023 | 3.20% | 6,965 | ||||||||||
2015 Term Securitization | 12,588 | 3.02% | 13,370 | 14,163 | 3.02% | 15,009 | ||||||||||
2016 Term Securitization | 22,331 | 3.35% | 24,528 | 24,727 | 3.35% | 27,166 | ||||||||||
2017 Term Securitization | 34,429 | 3.12% | 38,814 | 37,430 | 3.12% | 42,452 | ||||||||||
2018 Term Securitization | 50,386 | 4.02% | 56,926 | 53,919 | 4.02% | 61,269 | ||||||||||
2020 Term Securitization | 85,274 | 2.60% | 97,404 | 91,922 | 2.60% | 105,023 | ||||||||||
Unamortized debt issuance costs | (3,892) | --- | — | (4,230) | --- | — | ||||||||||
Total | 323,043 | 395,852 | 340,154 | 414,569 | ||||||||||||
Total receivable-backed debt | $ | 345,543 | $ | 431,656 | $ | 362,654 | $ | 448,428 |
(1)Recourse on the Liberty Bank Facility is generally limited to $5.0 million, subject to certain exceptions. See the 2021 Company’s Annual Report on form 10-K for additional information.
(2)Recourse on the NBA Receivables Facility is generally limited to $10.0 million subject to certain exceptions.
(3)Recourse on the Pacific Western Facility is generally limited to $7.5 million, subject to certain exceptions.
There were 0 new debt issuances or significant changes related to the above listed facilities during the three months ended March 31, 2022. See Note 1210 to the Company’s Consolidated Financial Statements included in the 2016its 2021 Annual Report on Form 10-K for additional information regarding the above listed notes payable and other borrowings.
New debt issuances and significant changes related to notes payable and credit facilities during the nine months ended September 30, 2017, as well as certain changes which occurred subsequent to September 30, 2017, are detailed below.
19
NBA Line of Credit. Bluegreen/Big Cedar Vacations has a revolving line of credit (the “NBA Line of Credit”) with National Bank of Arizona (“NBA”). On September 28, 2017, the NBA Line of Credit was amended to increase the borrowing limit from $15 million to $20 million (subject to adjustment as described below), to extend the revolving advance period from June 2018 to September 2020 and the maturity date from June 2020 to September 2022, and to provide for the NBA Line of Credit to be secured by unsold inventory and a building under construction at Bluegreen/Big Cedar Vacations’ The Cliffs at Long Creek Resort. The NBA Line of Credit was previously secured by unsold inventory and a building under construction at Bluegreen/Big Cedar Vacations’ Paradise Point Resort, but such collateral was released in connection with the repayment of all amounts then outstanding under the NBA Line of Credit during April 2017. As described below under “Receivable-Backed Notes Payable,” the borrowing limit under the NBA Line of Credit is subject to a dollar-for-dollar decrease to the extent of any increase in the maximum borrowings under the NBA Receivables Facility from $50 million to $70 million. In addition, pursuant to the amendment, borrowings under the NBA Line of Credit will accrue interest at a rate equal to the one month LIBOR plus 3.25% (with an interest rate floor of 4.75%). Prior to the amendment, the NBA Line of Credit provided for an interest rate on borrowings equal to the one month LIBOR plus 3.50% (with an interest rate floor of 5.00%). Interest payments are paid monthly. Principal payments are effected through release payments upon sales of VOIs in The Cliffs at Long Creek Resort that serve as collateral for the NBA Line of Credit, subject to mandatory principal reductions. The NBA Line of Credit is cross-collateralized and is subject to cross-default with the NBA Receivables Facility described below under “Receivable Backed Notes Payable.” As of September 30, 2017, there was no outstanding balance on the NBA Line of Credit.
Pacific Western Term Loan.Bluegreen has a non-revolving term loan (the “Pacific Western Term Loan”) with Pacific Western Bank, as successor-by-merger to CapitalSource Bank, secured by unsold inventory and undeveloped land at the Bluegreen Odyssey Dells Resort. On October 19, 2017, the Pacific Western Term Loan was amended to increase the loan from $1.4 million to $2.7 million. The Pacific Western Term Loan matures in June 2019, and bears interest at 30-day LIBOR plus 5.25%. Interest payments are paid monthly, and principal payments are effected through release payments upon sales of VOIs in the Bluegreen Odyssey Dells Resort that serve as collateral for the Pacific Western Term Loan, subject to mandatory principal reductions pursuant to the terms of the loan agreement. The Pacific Western Term Loan is cross-collateralized and is subject to cross-default with the Pacific Western Facility described below under “Receivable-Backed Notes Payable.”
Toronto-Dominion Commercial Bank (“TD Bank”) Term Loan and Line of Credit. In May 2017, Renin entered into a credit facility with TD Bank and in September 2017 the facility was amended. Under the terms and conditions of the amended credit facility, TD Bank agreed to provide term loans for up to $1.7 million and loans under a revolving credit facility for up to approximately $16.3 million based on available collateral as defined in the facility and subject to Renin’s compliance with the terms and conditions of the facility, including certain specific financial covenants. The proceeds from the TD Bank credit facility were used to repay the Wells Fargo credit facility and for working capital.
Amounts outstanding under the revolving credit facility bear interest at the Canadian or United States Prime Rate plus a margin of 1.00% per annum or the three-month LIBOR rate plus a margin of 2.75% per annum. Outstanding principal on the revolving credit facility is payable one-year from the date of the advance. As of September 30, 2017, the amount outstanding under the revolving credit facility was $14.4 million.
The term loans were funded in three tranches aggregating $1.7 million through July 2017 with no further draws permitted. Amounts outstanding under the term loans bear interest at fixed interest rates ranging from 3.85% to 4.35% for one-year from the date of the applicable drawdown for each loan. Annually, the fixed interest rates adjust to a variable rate based on Canadian or United States Prime Rate plus a margin of 1.00% per annum or the three-month LIBOR rate plus a margin of 2.75% per annum. The amounts outstanding under the term loans mature between June 2020 and June 2022.
Amounts outstanding under the term loans and borrowings under the revolving credit facility require monthly interest payments.
Under the terms and conditions of the TD Bank credit facility, Renin is required to comply with certain financial covenants including a quarterly Debt Service Coverage Ratio and a quarterly Total Debt to Tangible Net Worth Ratio. The facility also contains customary affirmative and negative covenants, including those that, among other things, limit the ability of Renin to incur liens or engage in certain asset dispositions, mergers or consolidations, dissolutions, liquidations or winding up of its businesses. The credit facility is collateralized by all of Renin’s assets. As of September 30, 2017, Renin was in compliance with the credit facility covenants.
20
Receivable-Backed Notes Payable
The table below sets forth information regarding Bluegreen’s receivable-backed notes payable facilities listed above.
Junior Subordinated Debentures
Financial data relating to the Company’s junior subordinated debentures as of March 31, 2022 and December 31, 2021 was as follows (dollars in thousands):
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| September 30, 2017 |
| December 31, 2016 | ||||||||
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| Balance of |
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| Balance of |
|
|
|
|
|
| Pledged/ |
|
|
|
|
| Pledged/ |
|
| Debt |
| Interest |
| Secured |
| Debt |
| Interest |
| Secured |
|
| Balance |
| Rate |
| Receivables |
| Balance |
| Rate |
| Receivables |
Recourse receivable-backed |
|
|
|
|
|
|
|
|
|
|
|
|
notes payable: |
|
|
|
|
|
|
|
|
|
|
|
|
Liberty Bank Facility | $ | 15,767 |
| 4.75% | $ | 20,234 | $ | 32,674 |
| 4.25% | $ | 41,357 |
NBA Receivables Facility |
| 39,960 |
| 4.00-4.50% |
| 51,583 |
| 34,164 |
| 3.50 - 4.00% |
| 40,763 |
Pacific Western Facility |
| 16,301 |
| 5.50% |
| 21,609 |
| 20,793 |
| 5.14% |
| 27,712 |
Total | $ | 72,028 |
|
| $ | 93,426 | $ | 87,631 |
|
| $ | 109,832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recourse receivable-backed |
|
|
|
|
|
|
|
|
|
|
|
|
notes payable: |
|
|
|
|
|
|
|
|
|
|
|
|
KeyBank/DZ Purchase Facility | $ | 5,656 |
| 3.98% | $ | 6,828 | $ | 31,417 |
| 3.67% | $ | 41,388 |
Quorum Purchase Facility |
| 18,285 |
| 4.75-6.90% |
| 20,926 |
| 23,981 |
| 4.75-6.90% |
| 26,855 |
2010 Term Securitization |
| - |
| - |
| - |
| 13,163 |
| 5.54% |
| 16,191 |
2012 Term Securitization |
| 25,510 |
| 2.94% |
| 28,293 |
| 32,929 |
| 2.94% |
| 36,174 |
2013 Term Securitization |
| 39,730 |
| 3.20% |
| 42,255 |
| 48,514 |
| 3.20% |
| 51,157 |
2015 Term Securitization |
| 62,087 |
| 3.02% |
| 66,077 |
| 75,011 |
| 3.02% |
| 78,980 |
2016 Term Securitization |
| 88,522 |
| 3.35% |
| 96,624 |
| 107,533 |
| 3.35% |
| 117,249 |
2017 Term Securitization |
| 114,065 |
| 3.12% |
| 125,881 |
| - |
| - |
| - |
Unamortized debt issuance costs |
| (6,547) |
|
|
| - |
| (5,190) |
|
|
| - |
Total | $ | 347,308 |
|
| $ | 386,884 | $ | 327,358 |
|
| $ | 367,994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total receivable-backed debt | $ | 419,336 |
|
| $ | 480,310 | $ | 414,989 |
|
| $ | 477,826 |
March 31, 2022 | December 31, 2021 | ||||||||||
| Effective | Effective | |||||||||
| Carrying | Interest | Carrying | Interest | Maturity | ||||||
| Amounts | Rates (1) | Amounts | Rates (1) | Years (2) | ||||||
Woodbridge - Levitt Capital Trusts I - IV | $ | 66,302 | 4.10 - 4.85% | $ | 66,302 | 3.93 - 4.07% | 2035 - 2036 | ||||
Bluegreen Statutory Trusts I - VI | 104,595 | 5.10 - 5.90% | 104,595 | 4.93 - 5.12% | 2035 - 2037 | ||||||
Unamortized debt issuance costs | (968) | (985) | |||||||||
Unamortized purchase discount | (34,732) | (34,972) | |||||||||
Total junior subordinated debentures | $ | 135,197 | $ | 134,940 |
See Note 12 to the(1)The Company’s Consolidated Financial Statements included in the 2016 Annual Report for additional information regarding Bluegreen’s receivable-backed notes payable facilities.
New debt issuances and significant changes related to Bluegreen’s receivable-backed notes payable facilities during the nine months ended September 30, 2017 are detailed below.
NBA Receivables Facility. Bluegreen/Big Cedar Vacations has a revolving VOI hypothecation facility (the “NBA Receivables Facility”) with NBA. The NBA Receivables Facility provides for advances at a rate of 85% on eligible receivables pledged under the facility, subject to eligible collateral and specified terms and conditions, during a revolving credit period. On September 28, 2017, the NBA Receivables Facility was amended to increase the maximum borrowings from $45 million (inclusive of outstanding borrowings under the NBA Line of Credit) to $50 million. Pursuant to the amendment, the maximum borrowings may be further increased by up to an additional $20 million (to a total of $70 million); provided, however, that any such increase will result in a corresponding decrease in the maximum borrowings under the NBA Line of Credit. The amendment also extended the revolving advance period from June 2018 to September 2020 and the maturity date from December 2022 to March 2025. The interest rate applicable to future borrowings under the NBA Receivables Facility, and borrowings advanced since September 2016, is equal to the one month LIBOR plus 2.75% (with an interest rate floor of 3.50%) and for all other borrowings is equal to the one month LIBOR plus 3.25% (with an interest rate floor of 4.00%). Principal repayments and interest on borrowings under the NBA Receivables Facility are paid as cash is collected on the pledged receivables, subject to future required decreases in the advance rates after the end of the revolving advance period, with the remaining outstanding balance being due upon maturity. As of September 30, 2017, $1.2 million of the outstanding balance bore interest at a rate of 4.50% and $38.8 million of the outstanding balance bore interest at a rate of 4.00%. All principal
21
and interest payments received on pledged receivables are applied to principal and interest due under the facility. The NBA Receivables Facility is cross-collateralized and is subject to cross-default with the NBA Line of Credit.
Pacific Western Facility. Bluegreen has a revolving VOI notes receivable hypothecation facility (the “Pacific Western Facility”) with Pacific Western Bank, which provides for advances on eligible VOI notes receivable pledged under the facility, subject to specified terms and conditions, during a revolving credit period. Maximum outstanding borrowings under the Pacific Western Facility are $40.0 million (inclusive of outstanding borrowings under the Pacific Western Term Loan), subject to eligible collateral and customary terms and conditions. The revolving advance period expiration date is September 2018, subject to an additional 12-month extension at the option of Pacific Western Bank. Eligible “A” VOI notes receivable that meet certain eligibility and FICO® score requirements, which Bluegreen’s management believes are typically consistent with loans originated under Bluegreen’s current credit underwriting standards, are subject to an 85% advance rate. The Pacific Western Facility also allows for certain eligible “B” VOI notes receivable (which have less stringent FICO® score requirements) to be funded at a 53% advance rate. On October 19, 2017, the Pacific Western Facility was amended to decrease the interest rate on a portion of future borrowings, to the extent such borrowings are in excess of established debt minimums, interest will accrue at 30-day LIBOR plus 3.50% to 4.00%. Principal repayments and interest on borrowings under the Pacific Western Facility are paid as cash is collected on the pledged VOI notes receivable, subject to future required decreases in the advance rates after the end of the revolving advance period, with the remaining outstanding balance maturing in September 2021, subject to an additional 12-month extension at the option of Pacific Western Bank. The Pacific Western Facility is cross-collateralized and is subject to cross-default with the Pacific Western Term Loan described above.
KeyBank/DZ Purchase Facility. On May 19, 2017, Bluegreen’s VOI notes receivable purchase facility with DZ Bank AG Deutsche Zentral-Genossenschaftsbank, Frankfurt AM Main (“DZ”), and, at that time, Branch Banking and Trust Company (“BB&T”), which permits maximum outstanding financings of $80.0 million, was amended and restated to extend the advance period from December 2017 to December 2019 and increase the advance rate with respect to VOI notes receivable securing amounts financed from 75% to 80%. In connection with the amendment and restatement, KeyBank National Association (“KeyBank”) replaced BB&T as a funding agent. The facility (the “KeyBank/DZ Purchase Facility”) will mature and all outstanding amounts will become due 36 months after the revolving advance period has expired, or earlier under certain circumstances set forth in the facility. Interest on amounts outstanding under the facility is tied to an applicable index rate of the LIBOR rate, in the case of amounts funded by KeyBank (including amounts previously funded by BB&T), and a cost of funds rate or commercial paper rates, in the case of amounts funded by or through DZ. The interest rate payable under the facility is the applicable index rate plus 2.75% until the expiration of the revolving advance period and thereafter will be the applicable index rate plus 4.75%. Subject to the terms of the facility, Bluegreen will receive the excess cash flows generated by the VOI notes receivable sold (excess meaning after payments of customary fees, interest and principal under the facility) until the expiration of the VOI notes receivable advance period, at which point all of the excess cash flow will be paid to the note holders until the outstanding balance is reduced to zero. While ownership of the VOI notes receivable included in the facility is transferred and sold for legal purposes, the transfer of these VOI notes receivable is accounted for as a secured borrowing for financial reporting purposes. The facility is nonrecourse and is not guaranteed by Bluegreen.
2010 Term Securitization. In April 2017, Bluegreen repaid in full the notes payable issued in connection with the 2010 Term Securitization. Accordingly, the related unamortized debt issuance costs of $0.3 million were written off in the second quarter of 2017.
2017 Term Securitization. On June 6, 2017, Bluegreen completed a private offering and sale of approximately $120.2 million of investment-grade, VOI receivable-backed notes (the "2017 Term Securitization"). The 2017 Term Securitization consisted of the issuance of two tranches of VOI receivable-backed notes (the “Notes”): approximately $88.8 million of Class A notes and approximately $31.4 million of Class B notes with note interest rates of 2.95% and 3.59%, respectively, which blended to an overall weighted average note interest rate of approximately 3.12%. The gross advance rate for this transaction was 88%. The Notes mature in October 2032.
The amount of the VOI notes receivable sold to BXG Receivables Note Trust 2017 (the “Trust”) was approximately $136.5 million, approximately $117.0 million of which was sold to the 2017 Trust at closing, and approximately $19.6 million of which was subsequently sold to the 2017 Trust. The gross proceeds of such sales to the 2017 Trust were $120.2 million. A portion of the proceeds was used to: repay KeyBank and DZ $32.3 million, representing all amounts outstanding (including accrued interest) under the KeyBank/DZ Purchase Facility; repay Liberty Bank approximately $26.8 million (including accrued interest) under Bluegreen's existing facility with Liberty Bank; capitalize a reserve fund; and pay fees and expenses associated with the transaction. In April 2017, Bluegreen, as servicer, redeemed the notes related to BXG Receivables Note Trust 2010-A for approximately $10.0 million, and certain of the VOI notes
22
receivable in such trust were sold to the 2017 Trust in connection with the 2017 Term Securitization. The remainder of the proceeds from the 2017 Term Securitization were used by Bluegreen for general corporate purposes.
While ownership of the VOI notes receivable included in the 2017 Term Securitization was transferred and sold for legal purposes, the transfer of these VOI notes receivable was accounted for as a secured borrowing for financial accounting purposes. Accordingly, no gain or loss was recognized as a result of this transaction. Subject to the performance of the collateral, Bluegreen will receive any excess cash flows generated by the VOI notes receivable transferred under the 2017 Term Securitization (excess meaning after payments of customary fees, interest, and principal under the 2017 Term Securitization) on a pro-rata basis as borrowers make payments on their VOI notes receivable.
Junior Subordinated Debentures
The table below sets forth information regarding junior subordinated debentures bear interest at three-month LIBOR (subject to quarterly adjustment) plus a spread ranging from 4.10% to 5.90%.
(2)As of the Company (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
| December 31, |
|
|
| Beginning |
|
|
|
| 2017 |
| 2016 |
|
|
| Optional |
|
| Issue |
| Carrying |
| Carrying | Interest |
| Maturity | Redemption |
Junior Subordinated Debentures |
| Date |
| Amount |
| Amount | Rate (1) |
| Date | Date |
Levitt Capital Trust I ("LCT I") |
| 03/15/2005 | $ | 23,196 |
| 23,196 | LIBOR + 3.85% |
| 03/01/2035 | 03/15/2010 |
Levitt Capital Trust II ("LCT II") |
| 05/04/2005 |
| 19,878 |
| 30,928 | LIBOR + 3.80% |
| 06/30/2035 | 06/30/2010 |
Levitt Capital Trust III ("LCT III") |
| 06/01/2006 |
| 7,764 |
| 15,464 | LIBOR + 3.80% |
| 06/30/2036 | 06/30/2011 |
Levitt Capital Trust IV ("LCTIV") |
| 07/18/2006 |
| 15,464 |
| 15,464 | LIBOR + 3.80% |
| 09/30/2036 | 09/30/2011 |
Total Woodbridge Holdings |
|
| $ | 66,302 |
| 85,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bluegreen Statutory Trust I |
| 03/15/2005 | $ | 14,661 |
| 14,422 | LIBOR +4.90% |
| 3/30/2035 | 03/30/2010 |
Bluegreen Statutory Trust II |
| 05/04/2005 |
| 16,430 |
| 16,164 | LIBOR +4.85% |
| 7/30/2035 | 07/30/2010 |
Bluegreen Statutory Trust III |
| 05/10/2005 |
| 6,664 |
| 6,550 | LIBOR +4.85% |
| 7/30/2035 | 07/30/2010 |
Bluegreen Statutory Trust IV |
| 04/24/2006 |
| 9,735 |
| 9,614 | LIBOR +4.85% |
| 6/30/2036 | 06/30/2011 |
Bluegreen Statutory Trust V |
| 07/21/2006 |
| 9,753 |
| 9,614 | LIBOR +4.85% |
| 9/30/2036 | 09/30/2011 |
Bluegreen Statutory Trust VI |
| 02/26/2007 |
| 12,857 |
| 12,681 | LIBOR +4.80% |
| 4/30/2037 | 04/30/2012 |
Total Bluegreen Corporation |
|
| $ | 70,100 | (2) | 69,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized debt issuance costs |
|
| $ | (1,290) |
| (1,730) |
|
|
|
|
Total Junior Subordinated Debentures |
|
| $ | 135,112 |
| 152,367 |
|
|
|
|
|
|
|
|
WoodbridgeMarch 31, 2022 and Bluegreen have each formed statutory business trusts (collectively, the “Trusts”) which issued trust preferred securities and invested the proceeds thereof in junior subordinated debenturesDecember 31, 2021, all of Woodbridge and Bluegreen, respectively. The Trusts are variable interest entities in which Woodbridge and Bluegreen, as applicable, are not the primary beneficiaries as defined by the accounting guidance for the consolidation of variable interest entities. Accordingly, the Company and its subsidiaries do not consolidate the operations of these Trusts; instead, the beneficial interests in the Trusts are accounted for under the equity method of accounting. Interest on the junior subordinated debentures and distributions onwere eligible for redemption by the trust preferred securities are payable quarterly in arrears at the same interest rate.Company.
During January 2017, Woodbridge purchased approximately $11.1 million of LCTII trust preferred securities for $6.7 million and purchased approximately $7.7 million of LCTIII trust preferred securities for $4.7 million, and in February 2017, Woodbridge delivered such securities to the respective trusts in exchange for the cancellation of $11.1 million of Woodbridge’s junior subordinated debentures held by LCTII and $7.7 million of Woodbridge’s junior subordinated debentures held by LCTIII. As a result, in February 2017, Woodbridge recognized a $6.9 million gain associated with the cancellation of the notes, which is included in “Net gains on the cancellation of junior subordinated debentures” in the Company’s Condensed Consolidated Statements of Operations for the nine months ended September 30, 2017.Availability
As of September 30, 2017,March 31, 2022, the Company was in compliance with all financial debt covenants under its debt instruments. As of March 31, 2022, the Company had availability of approximately $310.2 million under our receivable-backed purchase and credit facilities, inventory lines of credit and corporate credit facility, subject to eligible collateral and the terms of the facilities, as applicable.
Note Payable to BBX Capital
23
��
9. Income Taxes
On September 30, 2020, the Company spun-off its subsidiary, BBX Capital, and its subsidiaries fileInc. (“BBX Capital”). As a consolidated federal income tax return and income tax returns in various state and foreign jurisdictions. The Company’s effective income tax rate was 44% duringresult of the nine months ended September 30, 2017 compared to 47% during the same period in 2016. The Company’s effective tax rate was applied to income before income taxes reduced by net income attributable to non-controlling interests for joint ventures taxed as partnerships. The reduction in the effective income tax rate for the nine months ended September 30, 2017 as compared to the same period in 2016 reflects the deductibility ofspin-off, BBX Capital became a portion of executive compensation inseparate publicly traded company. In connection with the implementationspin-off, the Company issued a $75.0 million note payable to BBX Capital that accrues interest at a rate of 6% per annum and requires payments of interest on a performance incentive compensation planquarterly basis. See Note 13 Related Party Transactions for 2017. Effective income tax ratesfurther information.
8. Fair Value of Financial Instruments
ASC 820 Fair Value Measurement (Topic 820) defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The inputs used to measure fair value are classified into the following hierarchy:
Level 1: | Unadjusted quoted prices in active markets for identical assets or liabilities |
Level 2: | Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability |
Level 3: | Unobservable inputs for the asset or liability |
The carrying amounts of financial instruments included in the unaudited consolidated financial statements and their estimated fair values were as follows (in thousands):
As of March 31, 2022 | As of December 31, 2021 | |||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||
Cash and cash equivalents | $ | 179,274 | $ | 179,274 | $ | 140,225 | $ | 140,225 | ||||
Restricted cash | 46,430 | 46,430 | 42,854 | 42,854 | ||||||||
Notes receivable, net | 453,617 | 596,362 | 446,322 | 607,881 | ||||||||
Note payable to BBX Capital, Inc. | 50,000 | 49,230 | 50,000 | 50,340 | ||||||||
Lines-of-credit, notes payable, and | ||||||||||||
receivable-backed notes payable | 483,330 | 475,300 | 459,779 | 463,300 | ||||||||
Junior subordinated debentures | 135,197 | 113,500 | 134,940 | 133,500 |
Cash and cash equivalents. The amounts reported in the unaudited consolidated balance sheets for interim periods are based uponcash and cash equivalents approximate fair value due to their short maturity of 90 days or less.
Restricted cash. The amounts reported in the unaudited consolidated balance sheets for restricted cash approximate fair value.
Notes receivable, net. The fair value of the Company’s currentnotes receivable is estimated annualusing Level 3 inputs and is based on estimated future cash flows considering contractual payments and estimates of prepayments and defaults, discounted at a market rate.
Note Payable to BBX Capital. The Company’s annual effective income tax rate varies based uponfair value of the estimate of taxable earnings as well asnote payable to BBX Capital was determined using Level 3 inputs by discounting the mix of taxable earningsnet cash outflows estimated to be used to repay the debt.
Lines-of-credit, notes payable, and receivable-backed notes payable. The amounts reported in the various states in whichCompany’s unaudited consolidated balance sheets for lines of credit, notes payable, and receivable-backed notes payable, approximate fair value for indebtedness that provides for variable interest rates. The fair value of the Company operates.Company’s fixed-rate, receivable-backed notes payable was determined using Level 3 inputs by discounting the net cash outflows estimated to be used to repay the debt. These obligations are to be satisfied using the proceeds from the consumer loans that secure the obligations.
Junior subordinated debentures. The fair value of the Company’s junior subordinated debentures is estimated using Level 3 inputs based on the contractual cash flows discounted at a market rate or based on market price quotes from the over-the-counter bond market.
10.
9. Commitments and Contingencies
Litigation Matters
In the ordinary course of business, the Company is a partyand its subsidiaries are parties to lawsuits as plaintiff or defendant involving its operations and activities. activities, including the purchase, sale, marketing, or financing of VOIs. Additionally, from time to time in the ordinary course of business, the Company is involved in disputes with existing and former employees, vendors, taxing jurisdictions, and other individuals and entities, and it also receives individual consumer complaints as well as complaints received through regulatory and consumer agencies, including Offices of State Attorneys General. The Company takes these matters seriously and attempts to resolve any such issues as they arise. The Company may also become subject to litigation related to the COVID-19 pandemic, including with respect to any actions taken as a result thereof.
Reserves are accrued for matters in which management believes it is probable that a loss will be incurred and the amount of such loss can be reasonably estimated. There were no reservesManagement does not believe that the aggregate liability relating
to known contingencies in excess of the aggregate amounts accrued bywill have a material impact on the Company with respect to legal proceedings asCompany’s results of September 30, 2017. Adverse judgmentsoperations or financial condition. However, litigation is inherently uncertain and the actual costs of defending or resolving legal claims, including awards of damages, may be substantialsubstantially higher than the amounts accrued for these claims and may have a material adverse impact on the Company’s results of operations or financial statements. condition.
Management is not at this time able to estimate a range of reasonably possible losses with respect to matters in which it is reasonably possible that a loss will occur. In certain matters, management is unable to estimate the loss or reasonable range of loss until additional developments provide information sufficient to support an assessment of the loss or range of loss. Frequently in these matters, the claims are broad and the plaintiffs have not quantified or factually supported their claim.
Litigation
The following is a description of certain litigation matters:
Securities and Exchange Commission Complaint
In 2012, the SEC brought an action in the United States District Court for the Southern District of Florida against BCC and Alan B. Levan, BCC’s Chairman and Chief Executive Officer, which is further described in the 2016 Annual Report. Following an initial trial in 2014 and the appeal of certain judgments of the district court to the Eleventh Circuit Court of Appeals, a second trial was held in 2017, and on May 8, 2017, the jury rendered a verdict in favor of BCC and Mr. Levan and against the SEC on all counts.
In connection with the Eleventh Circuit Court of Appeals’ reversal of certain judgments in the first trial, which became final on January 31, 2017, and the resolution of the matter in the second trial, BBX Capital received reimbursements ofmaterial legal fees and costs from its insurance carrier of approximately $12.9 million, including $7.2 million received during the nine months ended September 30, 2017, and a $4.6 million penalty assessed against BCC in the first trial was released.
Legal fees and costs reimbursements of $7.2 million, as well as the release of the $4.6 million penalty, are reflected in “Litigation costs and penalty reimbursements” in the Company’s Condensed Consolidated Statement of Operations for the nine months ended September 30, 2017. In October 2017, the Company received an additional $1.4 million reimbursement of legal fees and costs.
In Re BCC Merger Shareholder Litigation
On August 10, 2016, Shiva Stein filed a lawsuitproceedings pending against the Company BBX Merger Sub, LLC (“Merger Sub”), BCCor its subsidiaries:
On June 28, 2018, Melissa S. Landon, Edward P. Landon, Shane Auxier and Mu Hpare, individually and on behalf of all others similarly situated, filed a purported class action lawsuit against Bluegreen and BVU asserting claims for alleged violations of the membersWisconsin Timeshare Act, Wisconsin law prohibiting illegal referral selling, and Wisconsin law prohibiting illegal attorney’s fee provisions. Plaintiffs seek certification of BCC’s board of directors, which seeks to establish a class consisting of BCC’s shareholders and challenges the Merger between BCC and BBX Capital (“the Merger”). The plaintiff asserts that the Merger consideration undervalues BCC and is unfair to BCC’s public shareholders, that the sales process was unfair, and that BCC’s directors breached their fiduciary duties of care, loyalty and candor owedall persons who, in Wisconsin, purchased from Bluegreen one or more VOIs within six years prior to the public shareholdersfiling of BCC because, among other reasons, they failedthis lawsuit. Plaintiffs seek statutory damages, attorneys’ fees and injunctive relief. Bluegreen moved to take steps to maximizedismiss the value of BCC to its public shareholderscase, and instead diverted consideration to themselves. The lawsuit also alleges that BBX Capital, as the controlling shareholder of BCC, breached its fiduciary duties of care, loyalty and candor owed to the public shareholders of BCC by utilizing confidential, non-public information to formulate the Merger consideration and not acting in the best interests of BCC’s public shareholders. In addition, the lawsuit includes a cause of action against BCC, the Company, and Merger
24
Sub for aiding and abetting the alleged breaches of fiduciary duties. The lawsuit requested that the court grant an injunction blocking the proposed Merger or, if the proposed Merger is completed, rescind the transaction or award damages as determined by the court. On September 15, 2016, the Defendants filed a Motion to Dismiss the amended complaint. Onon November 21, 2016,27, 2019, the Court issued a ruling granting the motion in part. Plaintiffs moved for class certification, and on November 5, 2021, the Court entered an order grantingdenying Plaintiff’s Motion. Bluegreen believes the Motion to Dismiss with prejudice. Plaintiff appealedremainder of the Court’s order dismissinglawsuit, which is proceeding on behalf of the amended complaint to the Fourth District Court of Appeals. The Company believes that the appealnamed Plaintiffs only, is without merit and intends to continue vigorously defendingdefend the action.
Bluegreen Litigation
On August 24, 2016, Whitney Paxton and Jeff ReeserJanuary 7, 2019, Shehan Wijesinha filed a lawsuit against Bluegreen Vacations Unlimited, Inc. (“BVU”), a wholly-owned subsidiary of Bluegreen, and certain employees of BVU, seeking to establish apurported class action of former and current employees of BVUlawsuit alleging violations of plaintiffs’ rights under the Fair Labor StandardsTelephone Consumer Protection Act of 1938 (the “FLSA”“TCPA”) and breach of contract. The lawsuit also alleges. It is alleged that BVU terminatedcalled plaintiff’s cell phone for telemarketing purposes using an automated dialing system, and that plaintiff Whitney Paxton as retaliation for her complaints about violationsdid not give BVU his express written consent to do so. Plaintiff seeks certification of the FLSA. The lawsuit seeks damagesa class comprised of other persons in the amountUnited States who received similar calls from or on behalf of BVU without the unpaid compensation owed to plaintiffs. On July 27, 2017, a magistrate judge entered a reportperson’s consent. Plaintiff seeks monetary damages, attorneys’ fees and recommendation to conditionally certify collective action and facilitate notice to potential class members be granted with respect to certain employees and denied as to others. During September 2017, the judge accepted the recommendation and granted preliminary approval of class certification. Managementinjunctive relief. Bluegreen believes that the lawsuit is without merit and intends to vigorously defend the action. On July 15, 2019, the court entered an order staying this case pending a ruling from the Federal Communications Commission clarifying the definition of an automatic telephone dialing system under the TCPA and the decision of the Eleventh Circuit in a separate action brought against a VOI company by a plaintiff alleging violations of the TCPA. On January 7, 2020, the Eleventh Circuit issued a ruling consistent with BVU’s position, and on June 26, 2020, the FCC also issued a favorable ruling. The case was stayed pending the United States Supreme Court’s decision in Facebook, Inc. v. Duguid. On April 1, 2021, the Supreme Court issued a decision a on the Facebook case which was favorable to Bluegreen’s position that an automatic telephone dialing system was not used in this case. Bluegreen believes the ruling disposes of the plaintiff’s claim and has filed a Notice of Supplemental Authority advising the court of the ruling.
On September 22, 2017, Stephen Potje, Tamela Potje, Sharon Davis, Beafus Davis, Matthew Baldwin, Tammy Baldwin, Arnor Lee, Angela Lee, Gretchen Brown, Paul Brown, Jeremy Estrada, Emily Estrada, Guillermo Astorga Jr., Michael Oliver, Carrie Oliver, Russell Walters, Elaine Walters,July 18, 2019, Eddie Boyd, and Mike Ericson,Connie Boyd, Shaundre and Kimberly Laskey, and others similarly situated filed an action alleging that BVU and co-defendants violated the Missouri Merchandise Practices Act for allegedly making false statements and misrepresentations with respect to the sale of VOIs. Plaintiffs further have filed a purported class action allegation that BVU’s charging of an administrative processing fee constitutes the unauthorized practice of law, and have also asserted that Bluegreen and its outside counsel engaged in abuse of process by filing a lawsuit against plaintiffs’ counsel (The Montgomery Law Firm). Plaintiffs seek monetary damages, attorneys’ fees and injunctive relief. On August 31, 2020, the court certified a class regarding the unauthorized practice of law claim and dismissed the claims regarding abuse of process. On January 11, 2021, the Court issued an order that the class members are not entitled to rescission of their contracts because they failed to plead fraud in the inducement. Discovery is ongoing. Bluegreen believes the lawsuit is without merit and is vigorously defending the action.
On July 14, 2020, Kenneth Johansen, individually and on behalf of all otherothers similarly situated,filed a lawsuitpurported class action against Bluegreen which asserts claimsBVU for alleged violations of the Florida Deceptive TCPA. Specifically, the named plaintiff alleges that he received numerous telemarketing calls from BVU while he was on the National Do Not Call Registry. Bluegreenfiledamotion
todismiss,and Unfair Trade Practices Actplaintiff in response filed an amended complaint onSeptember18,2020. On February 18, 2021, plaintiff filed a motion for class certification seeking to certify a class of thousands of individual proposed class members. On April 15, 2021 a court ordered mediation was conducted at which time the parties were not able to resolve the lawsuit. On September 30, 2021 the court entered an order denying plaintiff’s motion for class certification. The plaintiffs have appealed the order.Bluegreen is vigorouslydefendingtheaction.
On March 15, 2018, BVU entered into an Agreement for Purchase and Sale of Assets with T. Park Central, LLC, O. Park Central, LLC, and New York Urban Ownership Management, LLC, (collectively “New York Urban”) (“Purchase and Sale Agreement”), which provided for the purchase of The Manhattan Club inventory over a number of years and the Florida False Advertising Law. Inmanagement contract for The Manhattan Club Association, Inc. On October 7, 2019, New York Urban initiated arbitration proceedings against BVU alleging that The Manhattan Club Association, Inc. (of which BVU was a member) was obligated to pay an increased management fee to a New York Urban affiliate and that this higher amount would be the benchmark for BVU’s purchase of the management contract under the parties’ Purchase and Sale Agreement. New York Urban also sought damages in the arbitration proceedings in excess of $10 million for promissory estoppel and tortious interference. On November 19, 2019, the parties participated in mediation but did not resolve the matter. On November 20, 2019, New York Urban sent a letter to BVU advising that it was: (1) withdrawing its arbitration demand; (2) notifying the Board that it was not seeking to execute the proposed amendment to the Management Agreement that was originally sent to Bluegreen on April 24, 2019; and (3) was not going to pay itself a management fee for the 2020 operating year in an amount exceeding the 2019 operating year (i.e., $6.5 million). On November 21, 2019, BVU sent New York Urban a Notice of Termination of the Purchase and Sale Agreement. On November 25, 2019, New York Urban sent its own Notice of Termination and a separate letter containing an offer to compromise if BVU resigned its position on the Board and permitted New York Urban to enforce its rights to the collateral. On November 29, 2019, BVU accepted the offer and on December 18, 2019, BVU provided New York Urban with resignations of its members on the Board of Directors.
On August 30, 2020, over 100 VOI owners at The Manhattan Club (“TMC”) sued BVU and certain unaffiliated entities (the “Non-Bluegreen Defendants”). The complaint included claims arising out of alleged misrepresentations made during the plaintiffs allege the making of certain false representations in connection with Bluegreen’s salessale of VOIs at TMC and certain post-sale operational practices, including representations regarding the ability to use points for stays or other experiences with other vacation providers, the ability to cancel VOI purchases and receive a refund of the purchase price, the ability to roll over unused points and thatallegedly charging owners excessive annual maintenance fees wouldand implementing reservation policies that restrict the ability of VOI owners to use their points to access the resort while allowing the general public to make reservations. The plaintiffs assert in the complaint that Bluegreen acquired operational control of TMC from the Non-Bluegreen Defendants in 2018 and assumed joint liability for any prior wrongdoing by them. Bluegreen believes this assertion to be erroneous and that the claims against BVU are without merit. On September 27, 2021, the court granted Bluegreen’s motion to dismiss without prejudice and the Court declined to exercise supplemental jurisdiction over the remaining state law claims. Plaintiffs have amended their complaint. BVU filed a motion to dismiss the amended complaint on December 29, 2021 and continues to vigorously defend the action.
On April 2, 2021, New York Urban initiated new arbitration proceedings against BVU, alleging it is owed over $70 million for periodic inventory closings that have not increase. The complaint seeks to establish a class of consumers who,occurred since the beginningPurchase and Sale Agreement was terminated or that will not occur because of the applicable statute of limitations, have purchased VOIs from Bluegreen, had their annual maintenance fees relating to Bluegreen VOIs increased, or were unable to rolltermination. New York Urban also seeks over their unused points$50 million because, due to the next calendar year. The lawsuit alleges damages in excess of $5,000,000Purchase and seeks damages inSale Agreement’s termination, the amount alleged to have been improperly obtained by Bluegreen, as well as any statutory enhanced damages, attorneys’ fees and costs, and equitable and injunctive relief. Managementclosing on the management contract will not occur. BVU believes that the lawsuitthis new claim is without merit and intendsis pursuing declaratory relief and claims based on breach of the parties settlement agreement. Both New York Urban’s claims and BVU’s claims for declaratory relief and breach of the settlement agreement are being heard by an arbitration panel, and BVU is vigorously defending against New York Urban’s claims. Discovery is ongoing.
On September 14, 2021, Tamarah and Emmanuel Louis, individually and on behalf of all others similarly situated, filed a purported class action lawsuit against BVU alleging it violated the Military Lending Act (“MLA”). The complaint alleges that BVU did not make any inquiry before offering financing to the plaintiffs as to whether they were members of the United States Military and allege other claims related to certain disclosures mandated by the MLA. BVU filed a motion to dismiss the complaint, and plaintiffs then filed an amended complaint on December 3, 2021. BVU believes that plaintiffs’ claims are without merit, has filed a motion to dismiss the amended complaint, and is vigorously defenddefending the action.
Commencing in 2015, it came to Bluegreen’s attention that its collection efforts with respect to its VOI notes receivable were being impacted by a then emerging, industry-wide trend involving the receipt of “cease and desist”
letters from exit firms and attorneys purporting to represent certain VOI owners. Following receipt of these letters, Bluegreen is unable to contact the owners unless allowed by law. Bluegreen believes these attorneysexit firms have encouraged such owners to become delinquent and ultimately default on their obligations and that such actions and Bluegreen’sits inability to contact the owners arehave been a primary contributor tomaterial factor in the increase in its annual default rates. Bluegreen’s average annual default rates have increased from 6.9% in 2015 to 8.1% for8.2% in the twelve months ended September 30, 2017.first quarter of 2022. Bluegreen also estimates that approximately 10.2%6.1% of the total delinquencies on its VOI notes receivable as of September 30, 2017March 31, 2022 related to VOI notes receivable subject to these letters.this issue. Bluegreen has in a number of cases pursued, and Bluegreen may in the future pursue, legal action against the VOI owners.owners, and as described below, against the exit firms.
On November 13, 2019, Bluegreen filed a lawsuit against timeshare exit firm The Montgomery Law Firm and certain of its affiliates. In the complaint, Bluegreen alleged that through various forms of deceptive advertising, as well as inappropriate direct contact with VOI owners, such firm and its affiliates made false statements about Bluegreen and provided misleading information to the VOI owners and encouraged nonpayment by consumers. Bluegreen believes the consumers are paying fees to the firm and its affiliates in exchange for illusory services. Bluegreen has asserted claims under the Lanham Act, as well as tortious interference with contractual relations, civil conspiracy to commit tortious interference and other claims. Defendants’ motion to dismiss was denied. In January 2022, Bluegreen entered into a settlement with several of the defendants, which includes an immaterial monetary payment and a stipulated injunction. Bluegreen continues to pursue its claims against the remaining defendants.
On November 13, 2020, Bluegreen filed a lawsuit against timeshare exit firm, Carlsbad Law Group, LLP, and certain of its associated law firms and affiliates. On December 30, 2020, Bluegreen filed a lawsuit against timeshare exit firm, The Molfetta Law Firm, and certain of its associated law firms, affiliates, and cohorts, including Timeshare Termination (“TTT”). In both of these actions, Bluegreen makes substantially the same claims against the timeshare exit firms and its associated law firms and affiliates as those made in its action against The Montgomery Law Firm described above. In June 2021, counsel for TTT moved to withdraw, citing TTT’s insolvency. On October 1, 2021, the principals of TTT filed for Chapter 11 Bankruptcy Protection. Bluegreen is pursuing its damages as a claim in those proceedings. Discovery is ongoing with respect to the non-bankrupt defendants in the Molfetta matter and in the Carlsbad matter.
Other Commitments, Contingencies and Guarantees
The Company, indirectly through Bluegreen and BVU has an exclusive marketing agreement through 2024 with Bass Pro, Inc. (“Bass Pro”), a nationally-recognized retailer of fishing, marine, hunting, camping and sports gear, that provides Bluegreenthe Company with the right to market and sell vacation packages at kiosks in each of Bass Pro’s retail locations and through other means. As of September 30, 2017,Pursuant to a settlement agreement Bluegreen sold vacation packages in 68 of Bass Pro’s stores. In exchange, Bluegreen compensatesentered into with Bass Pro based on VOI sales generated through the program. No compensation isand its affiliates during June 2019, Bluegreen paid Bass Pro $20.0 million and agreed to, among other things, make 5 annual payments to Bass Pro under the agreement on salesof $4.0 million in January of each year, commencing in 2020. Bluegreen made at Bluegreen/Big Cedar Vacations’ resorts. During eachannual payments of $4.0 million to Bass Pro in January 2020, January 2021, and December 2021 (as payment of the nineamount owed in January 2022). As of March 31, 2022 and December 31, 2021, $7.5 million and $7.3 million, respectively, was included in accrued liabilities and other in the unaudited consolidated balance sheet, for the remaining payments required by the settlement agreement.
During the three months ended September 30, 2017March 31, 2022 and 2016, respectively,March 31 2021, VOI sales to prospects and leads generated by the agreement with Bass Pro accounted for approximately 15%14% and 13%, respectively, of Bluegreen’s VOI sales volume. On October 9, 2017, Bass Pro advised Bluegreen that it believes the amounts paidSubject to it as VOI sales commissions should not have been adjusted for certain purchaser defaults. Bluegreen previously informed Bass Pro that the aggregate amount of such adjustments for defaults charged back to Bass Pro between January 2008 and June 2017 totaled approximately $4.8 million. Bluegreen believes these chargebacks are appropriate and consistent with the terms and intentconditions of the agreements withsettlement agreement, in lieu of the previous commission arrangement, Bluegreen agreed to pay Bass Pro a fixed annual fee of $70,000 for each Bass Pro and Cabela’s retail store that it is accessing (excluding sales at retail stores which are designated to provide tours to Bluegreen/Big Cedar Vacations, or “Bluegreen/Big Cedar feeder stores”), plus $32.00 per net vacation package sold (less cancellations or refunds within 45 days of sale). Bluegreen is continuingalso agreed to discusscontribute to the matterWonders of Wildlife Foundation $5.00 per net package sold (less certain cancellations and refunds within 45 days of sale), subject to an annual minimum of $700,000. Bluegreen will generally be required to pay the fixed annual fee with respect to at least 59 Bass Pro. On October 20, 2017, in order to demonstrate its good faith,Pro retail stores and at least 60 Cabela’s retail stores. In December 2021, Bluegreen paid $8.3 million for the 2022 fixed fee, of which $6.3 million was unamortized as of March 31, 2022 and is included in the Company’s unaudited consolidated balance sheet. During the three months ended March 31, 2022 and 2021, Bluegreen expensed $2.1 million and $1.7 million, respectively, for this amount to Bassfixed fee, which is included in selling, general and administrative expenses in the Company’s unaudited consolidated statements of operations and comprehensive income. Notwithstanding the
foregoing, the minimum number of Bass Pro pending a resolutionand Cabela’s retail stores for purposes of the matterfixed annual fee may be reduced under certain circumstances set forth in the ordinary course.agreement, including as a result of a reduction of traffic in the stores in excess of 25% year-over-year. As of March 31, 2022, Bluegreen expects to recognize that amount as an expense during the fourth quarterhad sales and marketing operations at a total of 2017.128 Bass Pro Shops and Cabela’s Stores.
The following is a description of certain commitments and guarantees:
In lieu of paying maintenance fees for unsold VOI inventory, Bluegreen provides subsidies tomay enter into subsidy agreements with certain homeowners’ associations to provide for funds necessary to operate and maintain vacation ownership properties in excess of assessments collected from owners of the VOIs.HOAs. During the ninethree months ended September 30, 2017,March 31, 2022 and 2021, Bluegreen made subsidy payments related to such subsidies of $1.8 million.$1.5 million and $1.6 million, respectively, which are included in cost of other fee-based services in the Company’s unaudited consolidated statements of operations and comprehensive income. As of September 30, 2017,March 31, 2022, Bluegreen had an aggregate $6.7$4.9 million liabilityaccrued for such subsidies, to ten homeowners’ associations.
During 2016,which is included in accrued liabilities and other in the Company entered into a severance arrangement with an executive. Under the termsunaudited consolidated balance sheet as of the arrangement, the executive is receiving $3.7 million over a three year period ending in August 2019.such date. As of September 30, 2017, $2.1 million was left to be paid under the above arrangement. December 31, 2021, Bluegreen had 0 accrued liabilities for such subsidies.
In September 2017, Bluegreen entered an agreement with an executive in connection with his retirement. Pursuant to the terms of the agreement, Bluegreen will make payments totaling approximately $2.9 million between October 2017 and March 2019, the full amount of which was included in selling, general and administrative expenses in September 2017.10. Equity
The Company guarantees certain obligations of its wholly-owned subsidiaries and unconsolidated real estate joint ventures as follows:
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11. Common Stock
Share Repurchase Program
On September 21, 2009,In August 2021, the BoardCompany’s board of Directors of BBX Capitaldirectors approved a share repurchase program which authorized the repurchase of up to 20,000,000 shares of the Company’s Class A Common Stock and Class B Common Stock at an aggregate cost of up to $10$40.0 million. The September 2009 share repurchase program authorized management, at its discretion, to repurchase shares from time to time subject to market conditions and other factors. During April 2017,In March 2022, the Company purchased 1.0 million sharesCompany’s board of its Class A Common Stock for approximately $6.2 million under the September 2009 share repurchase program.
On June 13, 2017, the Board of Directors of BBX Capitaldirectors approved a share repurchase program which replaced$50.0 million increase in the September 2009 share repurchase program and authorizesaggregate cost of the repurchase of up to 5,000,000 shares of itsCompany’s Class A Common Stock and Class B Common Stock at an aggregate cost of up to $35 million. The June 2017 repurchase program authorizes management, at its discretion, to repurchase shares from time to time subject to market conditions and other factors. As of September 30, 2017, no shares had beenthat may be repurchased under the June 2017 share repurchase program.
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Share-based Compensation
On September 30, 2017, a total of 773,204 shares of restricted Class B common stock awards granted by the The Company to certain officers in October 2014 vestedrepurchased and 534,706 shares of restricted Class A common stock units issued by the Company to certain officers of BBX in exchange for their BCC restricted stock units pursuant to the December 2016 merger vested. The officers surrendered a total of 534,706retired approximately 152,000 shares of Class A common stockCommon Stock during the three months ended March 31, 2022 for an aggregate purchase price of $4.7 million. There were 0 repurchases during the three months ended March 31, 2021. The excess of cost over par value of the repurchased shares is recorded to additional paid in capital. As of March 31, 2022, $58.0 million remained available for the repurchase of shares under this share repurchase program. In April 2022, the Company repurchased and 11,846 sharesretired 450,000 of Class B common stockA Common Stock for $13.5 million in a private transaction.
Restricted Stock and Stock Option Plans
At the Company’s Annual Meeting of Shareholders held on July 21, 2021, the Company’s shareholders approved the Bluegreen Vacations Holding Corporation 2021 Incentive Plan (the “2021 Plan”), which allows for the issuance of up to the Company to satisfy the $4.0 million tax withholding obligation associated with the vesting of these2,000,000 shares on September 30, 2017. The Company retired the surrendered shares.
The following is a summary of the Company’s Class A Common Stock pursuant to restricted stock awards and options which may be granted under the 2021 Plan. The 2021 Plan also permits the grant of performance-based cash awards. During the three months ended March 31, 2022, the board approved restricted stock grants of 208,035 shares to certain executive officers and employees under the 2021 Plan. There were 0 restricted stock or other equity award grants during the three months ended March 31, 2021. As of March 31, 2022, 1,331,495 shares of Class B nonvested common shareA Common Stock remained available for grant under the 2021 Plan.
Restricted Stock Activity
The Company accounts for compensation cost for unvested time-based service condition restricted stock awards based on the fair value of the award on the measurement date, which is generally the grant date. The cost is recognized on a straight-line basis over the requisite service period of the award, with forfeitures recognized as incurred. The table below sets forth information regarding the Company’s unvested restricted stock award activity for the ninethree months ended September 30, 2017:March 31, 2022. There were no unvested restricted stock awards as of March 31, 2021.
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| Weighted | Per Share | |||
| Non-vested |
| Average | Weighted | |||
| Restricted |
| Grant Date | Unvested | Average | ||
| Stock |
| Fair Value | Restricted | Grant Date | ||
Nonvested balance at beginning of the year | 11,131,996 | $ | 2.74 | ||||
Stock | Fair Value | ||||||
Unvested balance outstanding, beginning of period | 460,470 | $ | 20.72 | ||||
Granted | - |
| - | 208,035 | 29.80 | ||
Vested | (1,307,910) |
| 3.36 | - | - | ||
Forfeited | - |
| - | - | - | ||
Nonvested Balance Outstanding | 9,824,086 | $ | 2.66 | ||||
Unvested balance outstanding, end of period | 668,505 | $ | 23.55 | ||||
Available for grant | 1,331,495 |
The table below sets forth information regarding the restricted stock awards granted during the three months ended March 31, 2022. There were no restricted stock awards granted during the three months ended March 31, 2021.
Per Share | |||||||||||
Number of | Weighted | Requisite | |||||||||
Plan Name | Grant Date | Awards Granted | Grant Date | Service Period | Vesting Date | ||||||
2021 Incentive Plan | 1/19/2022 | 208,035 | $ 29.80 | 4 years | (1) |
(1)154,679 of the shares granted are scheduled to vest ratably in annual installments over 4 years and 53,356 of the shares granted are scheduled to cliff vest in January 2026, in each case subject to the terms and conditions of the 2021 Plan and the appliable award agreement.
The aggregate grant date fair value of sharesthe awards granted in January 2022 was $6.2 million. As of the Company’s restricted stock awards which vested in September 2017 and 2016March 31, 2022, there was $9.6$14.0 million and $8.2 million, respectively. of unrecognized share-based compensation with a remaining weighted average period of 5 years.
The Company recognized restricted stock compensation expense included in selling general and administrative expenses in the Company’s unaudited consolidated statements of approximately $10.1 millionoperations and $4.9comprehensive income related to its restricted stock awards of $0.7 million during the ninethree months ended September 30, 2017March 31, 2022, with no such expense during the three months ended March 31, 2021. There were no tax benefits recognized on restricted stock compensation expense for the awards granted in January 2022.
11. Income Taxes
The Company and 2016,its subsidiaries file a consolidated U.S. federal income tax return and income tax returns in various state and foreign jurisdictions. With certain exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2017.
The Company’s effective income tax rate was approximately 28% and 29% during the three months ended March 31, 2022 and 2021, respectively. Effective income tax rates for interim periods are based upon the Company’s then current estimated annual rate. The effective income tax rate varies based upon the estimate of taxable earnings as well as on the mix of taxable earnings in the various states in which the Company and its subsidiaries operate. As such, the Company’s effective tax rates for the 2022 and 2021 periods reflect an estimate of its annual taxable earnings, state taxes, non-deductible items and changes in valuation allowance on deferred tax assets for each respective year.
Between October 1, 2017Certain of the Company’s state filings are under routine examination. While there is no assurance as to the results of these audits, the Company does not currently anticipate any material adjustments in connection with these examinations.
As of March 31, 2022, the Company did 0t have any significant amounts accrued for interest and October 5, 2017, a totalpenalties or recorded for uncertain tax positions.
12. Earnings Per Share
The following table presents the calculation of 566,308the Company’s basic and diluted earnings per share (“EPS”):
For the Three Months Ended | ||||||
March 31, | ||||||
(In thousands, except per share amounts) | 2022 | 2021 | ||||
Basic EPS: | ||||||
Numerator: | ||||||
Net income | $ | 15,988 | $ | 2,974 | ||
Denominator: | ||||||
Weighted average shares outstanding | 20,778 | 19,318 | ||||
Basic EPS | $ | 0.77 | $ | 0.15 | ||
Diluted EPS | ||||||
Numerator: | ||||||
Net income | $ | 15,988 | $ | 2,974 | ||
Denominator: | ||||||
Basic - weighted average shares outstanding | 20,778 | 19,318 | ||||
Dilutive effect of restricted stock rewards | 193 | - | ||||
Diluted weighted average number of common share outstanding | 20,971 | 19,318 | ||||
Diluted EPS | $ | 0.76 | $ | 0.15 |
During the three months ended March 31, 2022, 193,631 of weighted average shares of unvested restricted Class A common stock and 1,049,039 shares of restricted Class B common stock awards granted byoutstanding were included in the Company to certain officers in September 2015 and December 2016, respectively, vested. In addition, on October 7, 2017 and October 8, 2017 a totalcomputation of 892,224diluted earnings per share as the shares ofwere dilutive. There were 0 unvested restricted Class A common stock awards granted byoutstanding during the Company to certain officers in October 2014 vested and 2,322,000 shares of restricted Class A common stock units issued by the Company to certain officers of BBC in exchange for their BCC restricted stock units pursuant to the December 2016 merger vested. The officers surrendered a total of 1,859,786 shares of Class A common stock and 164,286 shares of Class B common stock to the Company to satisfy the $15.0 million tax withholding obligation associated with the vesting of these shares. The Company retired the surrendered shares in October 2017.three months ended March 31, 2021.
12. Certain Relationships and13. Related Party Transactions
The Company may be deemed to be controlled by Alan B. Levan, the Company’s Chairman, and Chief Executive Officer and President of the Company, John E. Abdo, Vice Chairman of the Company, Jarett S. Levan, a director of the Company and former President of the Company, and Seth M. Wise, a director of the Company and former Executive Vice President of the Company. Together, Mr. Alan Levan and Mr. Abdothey may be deemed to beneficially own shares of the Company’s Class A Common Stock and Class B Common Stock representing approximately 77%79% of the Company’s total voting power. Further, in connection with the spin-off of BBX Capital during September 2020, Mr. Jarett Levan became the Chief Executive Officer and President and a director of BBX Capital, Mr. Alan Levan became the Chairman of the Board of BBX Capital, Mr. John E. Abdo became Vice Chairman of BBX Capital and Seth M. Wise became Executive Vice President and a director of BBX Capital. Mr. Alan Levan, Mr. Abdo, Mr. Jarett Levan and Mr. Wise may also be deemed to control BBX Capital through their ownership of BBX Capital’s Class A Common Stock and Class B Common Stock. Mr. Alan Levan and Mr. John Abdo also receive compensation from BBX Capital.
On May 5, 2021, BVH acquired all of the approximately 7% of outstanding shares of Bluegreen’s common stock not previously owned by BVH through a statutory short-form merger under Florida law. In connection with the merger, Bluegreen’s shareholders (other than BVH) received 0.51 shares of the Company’s Class A Common Stock for each share of Bluegreen’s common stock that they held at the effective time of the merger (subject to rounding up of fractional shares). BVH issued approximately 2.66 million shares of its Class A Common Stock in connection with the merger. As a result of the completion of the merger, Bluegreen became a wholly owned subsidiary of BVH and its common stock is no longer publicly traded. Prior to the merger, BVH owned approximately 93% of Bluegreen
The Company paid or reimbursed BBX Capital $0.3 million and $0.1 million during the three months ended March 31, 2022 and 2021, respectively, for management advisory, risk management, administrative and other services. The
Company had $0.3 million in accrued expenses for the services described above as of March 31, 2022 and $0.1 million in accrued expenses for the services described above as of December 31, 2021.
During each of the three and nine months ended September 30, 2017March 31, 2022 and 2016,2021, the Company paid Abdo Companies, Inc. approximately $77,000 and $230,000, respectively,$38,000 in exchange for certain management services. John E. Abdo, the Company’s Vice Chairman, is the principal shareholder and Chief Executive Officer of Abdo Companies, Inc.
CertainIn connection with its spin-off of BBX Capital during September 2020, the Company issued a $75.0 million note payable to BBX Capital. See Note 7 for a description of the Company’s affiliates, including its executive officers, have independently made investmentsterms of BVH’s note payable to BBX Capital. In connection with their own funds in investments thatthe spin-off, the Company has sponsoredalso entered into a Transition Services Agreement, Tax Matters Agreement and Employee Matters Agreement with BBX Capital. The Transition Services Agreement generally sets out the respective rights, responsibilities and obligations of BVH and BBX Capital with respect to the support services provided to one another after the spin-off to ensure an orderly transition. The Transition Services Agreement establishes a baseline charge for certain categories or components of services to be provided, which is at cost unless the parties mutually agree to a different charge. The Transition Services Agreement will continue until terminated, in whichwhole or with respect to any service provided thereunder by either party at any time upon thirty days prior written notice to the other party. During the three months ended March 31, 2022 and March 31, 2021, BBX Capital reimbursed the Company holds investments.$0.1 million and $0.2 million, respectively, under the Transition Services agreement. No payments were made under the Tax Matters Agreement and Employee Matters Agreement during the three months ended March 31, 2022 or 2021.
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13.14. Segment Reporting
Operating segments are defined as components of an enterprise about which separate financial information is available that is regularly reviewed by the chief operating decision maker (“CODM”) in assessing performance and deciding how to allocate resources. Reportable segments consist of one or more operating segments with similar economic characteristics, products and services, production processes, type of customer, distribution system or regulatory environment.
The Company reports its results through two reportable segments: (i) sales of VOIs and if applicable,financing; and (ii) resort operations and club management.
The sales of VOIs and financing segment includes the natureCompany’s marketing and sales activities related to the VOIs that are owned by the Company, VOIs they acquire under just-in-time and secondary market inventory arrangements, or sales of VOIs through fee-for-service arrangements with third-party developers, as well as consumer financing activities in connection with sales of VOIs owned by the Company, and title services operations.
The resort operations and club management segment include management services activities for the Vacation Club and for a majority of the regulatory environment. HOAs of the resorts within the Vacation Club. The Company also provides reservation services, services to owners and billing and collections services to the Vacation Club and certain HOAs. Additionally, this segment includes revenue from the Traveler Plus program, food and beverage and other retail operations, rental services activities, and management of construction activities for certain of fee-based developer clients.
The information provided for segment reporting is obtained from internal reports utilized by management of BBX Capital and its subsidiaries.management. The presentation and allocation of assets and results of operations may not reflect the actual economic costs of the segments as standalone businesses. Due to the nature of the Company’s business, assets are not allocated to a particular segment, and therefore management does not evaluate the balance sheet by segment. If a different basis of allocation were utilized, the relative contributions of the segments might differ but the relative trends in the segments’ operating results would, in management’s view, likely not be impacted.
In June 2017, BBX Sweet Holdings acquired IT’SUGAR, which recognized sales of approximately $77 million during the year ended December 31, 2016, for cash consideration of approximately $58.4 million. Additionally, in 2017, the Company commenced a reorganization of BBX Sweet Holdings’ businesses including the consolidation of manufacturing facilities and integration of operating entities. As a result of these activities, internal management reports were modified, and the Company’s Chief Operating Decision Maker (“CODM”) began utilizing the new reporting structure to manage operations and allocate resources. As a consequence, the Company determined that it was appropriate to report its results of operations through four reportable segments: Bluegreen, BBX Capital Real Estate, Renin, and BBX Sweet Holdings. Segment information for the three and nine months ended September 30, 2016 was updated retrospectively to conform to 2017 presentation.
In the table for the three and nine months ended September 30, 2017 and 2016, amounts set forth in the column entitled “Corporate Expenses” include interest expense associated with Woodbridge’s trust preferred securities, corporate overhead, and start-up expenses for the Company’s MOD Super-Fast Pizza franchise restaurants.
The Company evaluates segment performance based on segment income before income taxes.
Set forth below is summary information regarding the Company’s reportable segments:
Bluegreen
Bluegreen markets, sells and manages real estate-based VOIs in resorts generally located in popular, high-volume, “drive-to” vacation destinations, which were developed or acquired by Bluegreen or are owned by others in which case Bluegreen earns fees for providing these services. Bluegreen also earns fees by providing club and homeowners’ association management services, mortgage servicing, VOI title services, reservation services, and construction design and development services. In addition, Bluegreen provides financing to qualified individual purchasers of VOIs, which provides significant interest income.
BBX Capital Real Estate
BBX Capital Real Estate activities include the acquisition, ownership and management of real estate, real estate development projects, and investments in real estate joint ventures. BBX Capital Real Estate also manages the legacy assets acquired in connection with the sale of BankAtlantic to BB&T Corporation in July 2012. The legacy assets include portfolios of loans receivable, real estate properties and previously charged-off BankAtlantic loans.
Renin
Renin manufactures interior closet doors, wall décor, hardware, and fabricated glass products and operates through its headquarters in Canada and two manufacturing, assembly, and distribution facilities in Canada and the United States. Total revenues for the Renin reportable segment include $6.8 million and $7.1 million of trade sales to two major customers and their affiliates for the three months ended September 30, 2017 and 2016, respectively. Renin’s revenues generated outside the United States totaled $5.0 million and $6.7 million for the three months ended September 30, 2017 and 2016, respectively. Renin’s property and equipment located outside the United States totaled $2.3 million and $1.2 million as of September 30, 2017 and 2016, respectively. Total revenues for the Renin reportable segment include $23.4 million and $18.3 million of trade sales to two major customers and their affiliates for the nine months
ended September 30, 2017 and 2016, respectively. Renin’s revenues generated outside of the United States totaled $15.8 million and $16.5 million for the nine months ended September 30, 2017 and 2016, respectively.
BBX Sweet Holdings
BBX Sweet Holdings consists of IT’SUGAR, Hoffman’s Chocolates, and manufacturing facilities in the chocolate and confection industries serving wholesalers such as boutique retailers, big box chains, department stores, national resort properties, corporate customers, and private label brands. IT’SUGAR is a specialty candy retailer with 95 retail locations in 26 states and Washington, DC. Hoffman’s Chocolates is a manufacturer of gourmet chocolates with retail locations in South Florida.
29
The table below sets forth the Company’s segment information as of andrevenue for its reportable segments for the three months ended September 30, 2017March 31, 2022 and 2021 (in thousands):
Three Months Ended | |||||
March 31, | |||||
Revenues: | 2022 | 2021 | |||
Sales of VOIs and financing | $ | 149,591 | $ | 104,362 | |
Resort operations and club management | 28,125 | 26,623 | |||
Cost reimbursements (1) | 18,064 | 16,608 | |||
Total segment revenues | 195,780 | 147,593 | |||
Corporate and other | 610 | 133 | |||
Eliminations | (1,261) | (1,311) | |||
Total revenues | $ | 195,129 | $ | 146,415 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Reportable Segments |
|
|
|
|
|
| ||||||
|
|
|
| BBX Capital |
|
|
|
|
| Corporate |
|
|
|
|
|
|
|
| Real |
|
|
| BBX Sweet |
| Expenses & |
|
|
| Segment |
|
| Bluegreen |
| Estate |
| Renin |
| Holdings |
| Other |
| Eliminations |
| Total |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of VOIs | $ | 61,687 |
| - |
| - |
| - |
| - |
| - |
| 61,687 |
Fee-based sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
commission revenue |
| 69,977 |
| - |
| - |
| - |
| - |
| - |
| 69,977 |
Other fee-based services revenue |
| 27,386 |
| - |
| - |
| - |
| - |
| - |
| 27,386 |
Trade sales |
| - |
| - |
| 16,623 |
| 28,257 |
| - |
| - |
| 44,880 |
Interest income |
| 21,296 |
| 697 |
| - |
| 1 |
| 241 |
| (1,200) |
| 21,035 |
Net losses on sales of assets |
| - |
| (18) |
| - |
| - |
| - |
| - |
| (18) |
Other revenue |
| - |
| 964 |
| - |
| 12 |
| 474 |
| (118) |
| 1,332 |
Total revenues |
| 180,346 |
| 1,643 |
| 16,623 |
| 28,270 |
| 715 |
| (1,318) |
| 226,279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales of VOIs |
| 6,284 |
| - |
| - |
| - |
| - |
| - |
| 6,284 |
Cost of other fee-based services |
| 18,176 |
| - |
| - |
| - |
| - |
| - |
| 18,176 |
Cost of trade sales |
| - |
| - |
| 12,018 |
| 16,970 |
| - |
| - |
| 28,988 |
Interest expense |
| 8,058 |
| - |
| 157 |
| 84 |
| 2,381 |
| (1,200) |
| 9,480 |
Recoveries from loan losses, net |
| - |
| (2,005) |
| - |
| - |
| - |
| - |
| (2,005) |
Asset impairments, net |
| - |
| 1,233 |
| - |
| 273 |
| - |
| - |
| 1,506 |
Litigation costs and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
penalty reimbursements |
| - |
| - |
| - |
| - |
| (2,113) |
| - |
| (2,113) |
Selling, general and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
administrative expenses |
| 113,643 |
| 3,099 |
| 4,253 |
| 12,210 |
| 15,449 |
| (118) |
| 148,536 |
Total costs and expenses |
| 146,161 |
| 2,327 |
| 16,428 |
| 29,537 |
| 15,717 |
| (1,318) |
| 208,852 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in net earnings of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
unconsolidated real |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
estate joint ventures |
| - |
| 2,451 |
| - |
| - |
| - |
| - |
| 2,451 |
Foreign exchange loss |
| - |
| - |
| (105) |
| - |
| - |
| - |
| (105) |
Other (loss) income, net |
| (119) |
| - |
| - |
| - |
| 32 |
| - |
| (87) |
Income (loss) before income taxes | $ | 34,066 |
| 1,767 |
| 90 |
| (1,267) |
| (14,970) |
| - |
| 19,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets | $ | 1,172,343 |
| 166,561 |
| 38,286 |
| 98,538 |
| 131,405 |
| (81,891) |
| 1,525,242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
fixed assets | $ | 3,973 |
| 58 |
| 615 |
| 242 |
| 893 |
| - |
| 5,781 |
Depreciation and amortization | $ | 4,479 |
| 151 |
| 464 |
| 1,403 |
| 304 |
| - |
| 6,801 |
Cash and cash equivalents | $ | 124,002 |
| 13,246 |
| - |
| 9,304 |
| 117,828 |
| - |
| 264,380 |
Equity method investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
included in total assets | $ | - |
| 43,286 |
| - |
| - |
| - |
| - |
| 43,286 |
Goodwill | $ | - |
| - |
| - |
| 41,016 |
| - |
| - |
| 41,016 |
Notes payable and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other borrowings | $ | 95,594 |
| 20,906 |
| 16,113 |
| 5,170 |
| 80,000 |
| (80,000) |
| 137,783 |
Junior subordinated debentures | $ | 70,100 |
| - |
| - |
| - |
| 65,012 |
| - |
| 135,112 |
(1)Revenue and Cost reimbursements net to zero and are excluded from the computation of adjusted EBITDA
below.
30
The table below sets forth the Company’s segment information as of andAdjusted EBITDA for its reportable segments reconciled to net income for the three months ended September 30, 2016March 31, 2022 and 2021 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Reportable Segments |
|
|
|
|
|
| ||||||
|
|
|
| BBX Capital |
|
|
|
|
| Corporate |
|
|
|
|
|
|
|
| Real |
|
|
| BBX Sweet |
| Expenses & |
|
|
| Segment |
|
| Bluegreen |
| Estate |
| Renin |
| Holdings |
| Other |
| Eliminations |
| Total |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of VOIs | $ | 71,741 |
| - |
| - |
| - |
| - |
| - |
| 71,741 |
Fee-based sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
commission revenue |
| 59,383 |
| - |
| - |
| - |
| - |
| - |
| 59,383 |
Other fee-based services revenue |
| 26,810 |
| - |
| - |
| - |
| - |
| - |
| 26,810 |
Trade sales |
| - |
| - |
| 15,624 |
| 6,454 |
| - |
| - |
| 22,078 |
Interest income |
| 22,699 |
| 1,214 |
| - |
| 8 |
| 175 |
| (2,000) |
| 22,096 |
Net gains on sales of assets |
| - |
| 5,035 |
| - |
| - |
| - |
| - |
| 5,035 |
Other revenue |
| - |
| 1,152 |
| - |
| 1 |
| 1,108 |
| (240) |
| 2,021 |
Total revenues |
| 180,633 |
| 7,401 |
| 15,624 |
| 6,463 |
| 1,283 |
| (2,240) |
| 209,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales of VOIs |
| 5,827 |
| - |
| - |
| - |
| - |
| - |
| 5,827 |
Cost of other fee-based services |
| 17,057 |
| - |
| - |
| - |
| - |
| - |
| 17,057 |
Cost of trade sales |
| - |
| - |
| 11,510 |
| 5,164 |
| - |
| - |
| 16,674 |
Interest expense |
| 8,409 |
| - |
| 62 |
| 86 |
| 2,960 |
| (2,000) |
| 9,517 |
Recoveries from loan losses, net |
| - |
| (10,944) |
| - |
| - |
| - |
| - |
| (10,944) |
Asset recoveries, net |
| - |
| (30) |
| - |
| - |
| - |
| - |
| (30) |
Selling, general and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
administrative expenses |
| 110,973 |
| 2,527 |
| 4,416 |
| 3,980 |
| 11,928 |
| (240) |
| 133,584 |
Total costs and expenses |
| 142,266 |
| (8,447) |
| 15,988 |
| 9,230 |
| 14,888 |
| (2,240) |
| 171,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in net earnings of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
unconsolidated real |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
estate joint ventures |
| - |
| 4,480 |
| - |
| - |
| - |
| - |
| 4,480 |
Foreign exchange gain |
| - |
| - |
| 5 |
| - |
| - |
| - |
| 5 |
Other income, net |
| 511 |
| - |
| - |
| - |
| 20 |
| - |
| 531 |
Income (loss) before income taxes | $ | 38,878 |
| 20,328 |
| (359) |
| (2,767) |
| (13,585) |
| - |
| 42,495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets | $ | 1,114,426 |
| 161,652 |
| 27,632 |
| 38,542 |
| 145,204 |
| (82,327) |
| 1,405,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
fixed assets | $ | 2,415 |
| 62 |
| 57 |
| 241 |
| 50 |
| - |
| 2,825 |
Depreciation and amortization | $ | 7,253 |
| 84 |
| 169 |
| 506 |
| 217 |
| - |
| 8,229 |
Cash and cash equivalents | $ | 124,523 |
| 15,990 |
| 209 |
| 7,256 |
| 132,659 |
| - |
| 280,637 |
Equity method investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
included in total assets | $ | - |
| 43,318 |
| - |
| - |
| - |
| - |
| 43,318 |
Goodwill | $ | - |
| - |
| - |
| 7,601 |
| - |
| - |
| 7,601 |
Notes payable and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other borrowings | $ | 79,875 |
| - |
| 8,173 |
| 7,374 |
| 80,000 |
| (80,000) |
| 95,422 |
Junior subordinated debentures | $ | 68,677 |
| - |
| - |
| - |
| 83,299 |
| - |
| 151,976 |
Three Months Ended | |||||
March 31, | |||||
2022 | 2021 | ||||
Adjusted EBITDA (1): | |||||
Sales of VOIs and financing | $ | 35,733 | $ | 21,128 | |
Resort operations and club management | 20,551 | 18,233 | |||
Segment Adjusted EBITDA | 56,284 | 39,361 | |||
General and administrative (2) | (25,300) | (25,467) | |||
Depreciation and amortization | (1,832) | (1,601) | |||
Other income (expense), net | 548 | (161) | |||
Interest income (other than interest earned on VOI notes receivable) | 62 | 133 | |||
Interest expense - corporate | (4,364) | (5,572) | |||
Provision for income taxes | (6,190) | (1,189) | |||
Net income | 19,208 | 5,504 | |||
Less: Net income attributable to | (3,220) | (2,530) | |||
Net income attributable to shareholders | $ | 15,988 | $ | 2,974 |
31
The table below sets forth the Company’s segment information for the nine months ended September 30, 2017 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Reportable Segments |
|
|
|
|
|
| ||||||
|
|
|
| BBX Capital |
|
|
|
|
| Corporate |
|
|
|
|
|
|
|
| Real |
|
|
| BBX Sweet |
| Expenses & |
|
|
| Segment |
|
| Bluegreen |
| Estate |
| Renin |
| Holdings |
| Other |
| Eliminations |
| Total |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of VOIs | $ | 172,839 |
| - |
| - |
| - |
| - |
| - |
| 172,839 |
Fee-based sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
commission revenue |
| 179,046 |
| - |
| - |
| - |
| - |
| - |
| 179,046 |
Other fee-based services revenue |
| 83,442 |
| - |
| - |
| - |
| - |
| - |
| 83,442 |
Trade sales |
| - |
| - |
| 51,909 |
| 44,926 |
| - |
| - |
| 96,835 |
Interest income |
| 65,673 |
| 1,915 |
| - |
| 3 |
| 674 |
| (5,200) |
| 63,065 |
Net gains on sales of assets |
| - |
| 2,161 |
| - |
| - |
| - |
| - |
| 2,161 |
Other revenue |
| - |
| 3,023 |
| - |
| 23 |
| 895 |
| (357) |
| 3,584 |
Total revenues |
| 501,000 |
| 7,099 |
| 51,909 |
| 44,952 |
| 1,569 |
| (5,557) |
| 600,972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales of VOIs |
| 10,737 |
| - |
| - |
| - |
| - |
| - |
| 10,737 |
Cost of other fee-based services |
| 51,550 |
| - |
| - |
| - |
| - |
| - |
| 51,550 |
Cost of trade sales |
| - |
| - |
| 37,150 |
| 30,303 |
| - |
| - |
| 67,453 |
Interest expense |
| 23,779 |
| - |
| 338 |
| 255 |
| 8,405 |
| (5,200) |
| 27,577 |
Recoveries from loan losses, net |
| - |
| (6,098) |
| - |
| - |
| - |
| - |
| (6,098) |
Asset impairments, net |
| - |
| 1,278 |
| - |
| 273 |
| - |
| - |
| 1,551 |
Net gains on cancellation of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
junior subordinated debentures |
| - |
| - |
| - |
| - |
| (6,929) |
| - |
| (6,929) |
Litigation costs and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
penalty reimbursements |
| - |
| - |
| - |
| - |
| (11,719) |
| - |
| (11,719) |
Selling, general and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
administrative expenses |
| 308,515 |
| 8,001 |
| 13,052 |
| 22,776 |
| 46,548 |
| (357) |
| 398,535 |
Total costs and expenses |
| 394,581 |
| 3,181 |
| 50,540 |
| 53,607 |
| 36,305 |
| (5,557) |
| 532,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in net earnings of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
unconsolidated real |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
estate joint ventures |
| - |
| 9,620 |
| - |
| - |
| - |
| - |
| 9,620 |
Foreign exchange loss |
| - |
| - |
| (312) |
| - |
| - |
| - |
| (312) |
Other (loss) income, net |
| (120) |
| - |
| - |
| - |
| 184 |
| - |
| 64 |
Income (loss) before income taxes | $ | 106,299 |
| 13,538 |
| 1,057 |
| (8,655) |
| (34,552) |
| - |
| 77,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
fixed assets | $ | 9,380 |
| 257 |
| 2,454 |
| 1,144 |
| 923 |
| - |
| 14,158 |
Depreciation and amortization | $ | 10,559 |
| 450 |
| 1,174 |
| 2,509 |
| 836 |
| - |
| 15,528 |
32
The table below sets forth the Company’s segment information as of and for the nine months ended September 30, 2016 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Reportable Segments |
|
|
|
|
|
| ||||||
|
|
|
| BBX Capital |
|
|
|
|
| Corporate |
|
|
|
|
|
|
|
| Real |
|
|
| BBX Sweet |
| Expenses & |
|
|
| Segment |
|
| Bluegreen |
| Estate |
| Renin |
| Holdings |
| Other |
| Eliminations |
| Total |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of VOIs | $ | 196,654 |
| - |
| - |
| - |
| - |
| - |
| 196,654 |
Fee-based sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
commission revenue |
| 153,718 |
| - |
| - |
| - |
| - |
| - |
| 153,718 |
Other fee-based services revenue |
| 78,421 |
| - |
| - |
| - |
| - |
| - |
| 78,421 |
Trade sales |
| - |
| - |
| 45,922 |
| 18,368 |
| - |
| - |
| 64,290 |
Interest income |
| 66,931 |
| 3,082 |
| - |
| 8 |
| 443 |
| (6,000) |
| 64,464 |
Net gains on sales of assets |
| - |
| 5,326 |
| - |
| - |
| - |
| - |
| 5,326 |
Other revenue |
| - |
| 4,137 |
| - |
| 7 |
| 1,751 |
| (737) |
| 5,158 |
Total revenues |
| 495,724 |
| 12,545 |
| 45,922 |
| 18,383 |
| 2,194 |
| (6,737) |
| 568,031 |
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Costs and Expenses: |
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|
Cost of sales of VOIs |
| 19,410 |
| - |
| - |
| - |
| - |
| - |
| 19,410 |
Cost of other fee-based services |
| 48,644 |
| - |
| - |
| - |
| - |
| - |
| 48,644 |
Cost of trade sales |
| - |
| - |
| 33,551 |
| 17,129 |
| - |
| - |
| 50,680 |
Interest expense |
| 24,461 |
| - |
| 204 |
| 402 |
| 9,255 |
| (6,000) |
| 28,322 |
Recoveries from loan losses, net |
| - |
| (18,979) |
| - |
| - |
| - |
| - |
| (18,979) |
Asset impairments, net |
| - |
| 1,692 |
| - |
| - |
| - |
| - |
| 1,692 |
Selling, general and |
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|
administrative expenses |
| 316,504 |
| 9,298 |
| 12,038 |
| 12,639 |
| 38,101 |
| (737) |
| 387,843 |
Total costs and expenses |
| 409,019 |
| (7,989) |
| 45,793 |
| 30,170 |
| 47,356 |
| (6,737) |
| 517,612 |
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Equity in net earnings of |
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unconsolidated real |
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|
estate joint ventures |
| - |
| 5,793 |
| - |
| - |
| - |
| - |
| 5,793 |
Foreign exchange gain |
| - |
| - |
| 325 |
|
|
| - |
| - |
| 325 |
Other income, net |
| 597 |
| - |
| - |
| - |
| 124 |
| - |
| 721 |
Income (loss) before income taxes | $ | 87,302 |
| 26,327 |
| 454 |
| (11,787) |
| (45,038) |
| - |
| 57,258 |
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Purchases of segment |
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|
|
fixed assets | $ | 7,012 |
| 87 |
| 330 |
| 985 |
| 514 |
| - |
| 8,928 |
Depreciation and amortization | $ | 11,268 |
| 254 |
| 502 |
| 1,444 |
| 527 |
| - |
| 13,995 |
33
14. Fair Value Measurement
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The inputs used to measure fair value are classified into the following hierarchy:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.
Level 3: Unobservable inputs for the asset or liability.
Financial Disclosures about Fair Value of Financial Instruments
The following tables present information for financial instruments at September 30, 2017 and December 31, 2016 (in thousands):
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| Fair Value Measurements Using | ||
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| Quoted prices |
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| Carrying |
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| in Active | Significant |
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| Amount |
| Fair Value | Markets | Other | Significant |
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| As of |
| As of | for Identical | Observable | Unobservable |
|
| September 30, |
| September 30, | Assets | Inputs | Inputs |
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| 2017 |
| 2017 | (Level 1) | (Level 2) | (Level 3) |
Financial assets: |
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|
|
|
|
|
Cash and cash equivalents | $ | 264,380 |
| 264,380 | 264,380 | - | - |
Restricted cash |
| 61,479 |
| 61,479 | 61,479 | - | - |
Loans receivable |
| 21,042 |
| 24,045 | - | - | 24,045 |
Notes receivable, net |
| 429,356 |
| 525,000 | - | - | 525,000 |
Notes receivable from preferred |
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|
|
|
|
|
|
shareholders (1) |
| 5,000 |
| 4,900 | - | - | 4,900 |
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Financial liabilities: |
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|
|
Receivable-backed notes payable | $ | 419,336 |
| 428,400 | - | - | 428,400 |
Notes payable and other borrowings |
| 137,783 |
| 141,679 | - | - | 141,679 |
Junior subordinated debentures |
| 135,112 |
| 142,500 | - | - | 142,500 |
Mandatorily redeemable cumulative preferred stock |
| 13,856 |
| 13,600 | - | - | 13,600 |
34
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| Fair Value Measurements Using | ||
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| Quoted prices |
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| Carrying |
|
| in Active | Significant |
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|
| Amount |
| Fair Value | Markets | Other | Significant |
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| As of |
| As of | for Identical | Observable | Unobservable |
|
| December 31, |
| December 31, | Assets | Inputs | Inputs |
|
| 2016 |
| 2016 | (Level 1) | (Level 2) | (Level 3) |
Financial assets: |
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|
|
|
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|
|
Cash and cash equivalents | $ | 299,861 |
| 299,861 | 299,861 | - | - |
Restricted cash |
| 46,456 |
| 46,456 | 46,456 | - | - |
Loans receivable |
| 25,521 |
| 27,904 | - | - | 27,904 |
Notes receivable, net |
| 430,480 |
| 545,000 | - | - | 545,000 |
Notes receivable from preferred |
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|
|
|
|
|
|
shareholders (1) |
| 5,063 |
| 4,900 | - | - | 4,900 |
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Financial liabilities: |
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|
|
|
|
|
|
Receivable-backed notes payable | $ | 414,989 |
| 420,400 | - | - | 420,400 |
Notes payable and other borrowings |
| 133,790 |
| 135,404 | - | - | 135,404 |
Junior subordinated debentures |
| 152,367 |
| 149,200 | - | - | 149,200 |
Mandatorily redeemable cumulative preferred stock |
| 13,517 |
| 13,600 | - | - | 13,600 |
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Management has made estimates of fair value that it believes to be reasonable. However, because there is no active market for many of these financial instruments, the fair value of these financial instruments has been derived using the income approach technique with Level 3 unobservable inputs. Estimates used in net present value financial models rely on assumptions and judgments regarding issues where the outcome is unknown and actual results or values may differ significantly from these estimates. These fair value estimates do not consider the tax effect that would be associated with the disposition of the assets or liabilities at their fair value estimates. As such, the estimated value upon sale or disposition of the asset may not be received and the estimated value upon disposition of the liability in advance of its scheduled maturity may not be paid.
The amounts reported in the consolidated statements of financial condition for cash and cash equivalents and restricted cash approximate fair value.
The fair value of the Company’s accruing loans is calculated using an income approach with Level 3 inputs by discounting forecasted cash flows using estimated market discount rates that reflect the interest rate and credit risk inherent in the loan portfolio. The Company’s management assigns a credit risk premium and an illiquidity adjustment to these loans based on delinquency status. The fair value of non-accruing collateral dependent loans is estimated using an income approach with Level 3 inputs utilizing the fair value of the collateral adjusted for operating and selling expenses and discounted over the estimated holding period based on the market risk inherent in the property. Impaired loans are generally valued based on the fair value of the underlying collateral less cost to sell as the majority of the Company’s loans are collateral dependent. The fair value of the Company’s loans may significantly increase or decrease based on changes in property values as its loans are primarily secured by real estate. The Company primarily uses third-party appraisals to assist in measuring non-homogenous impaired loans and broker price opinions to assist in measuring homogeneous impaired loans. The appraisals generally use the market or income approach valuation technique and use market observable data to formulate an estimate of the fair value of the loan’s collateral. However, the appraiser uses professional judgment in determining the fair value of the collateral, and the Company may also adjust these values for changes in market conditions subsequent to the appraisal date. As a consequence, the calculation of the fair value of the collateral is considered a Level 3 input. The Company generally recognizes impairment losses based on third-party broker price opinions when impaired homogeneous loans become 120 days delinquent. These third-party valuations from real estate professionals also use Level 3 inputs in determining fair values. The observable market inputs used to fair value loans include comparable property sales, rent rolls, market capitalization rates on income producing properties, risk adjusted discount rates and foreclosure time frames and exposure periods.
35
The fair value of notes receivable and note receivable from preferred shareholders are estimated using Level 3 inputs and are based on estimated future cash flows considering contractual payments and estimates of prepayments and defaults, discounted at a market rate.
The amounts reported in the consolidated statements of financial condition for notes and mortgage notes payable, including receivable-backed notes payable, approximate fair value for indebtedness that provides for variable interest rates. The fair value of fixed rate, receivable-backed notes payable was determined using Level 3 inputs by discounting the net cash outflows estimated to be used to repay the debt. These obligations are to be satisfied using the proceeds from the consumer loans that secure the obligations.
The fair value of other borrowings is measured using the income approach with Level 3 inputs obtained by discounting the forecasted cash flows based on estimated market rates.
The fair value of Community Development Bonds is measured using the market approach with level 3 inputs obtained based on estimated market prices of similar financial instruments.
The fair value of junior subordinated debentures is estimated using Level 3 inputs based on the contractual cash flows discounted at a market rate or based on market price quotes from the over-the-counter bond market.
The fair value of the 5% Cumulative Preferred Stock, which is subject to mandatory redemption, is calculated using the income approach with Level 3 inputs by discounting the estimated cash flows at a market discount rate.
36
Item 2.(1)See Management’s Discussion and Analysis of Financial Condition and Results of Operations for information regarding Adjusted
EBITDA, including the definition of Adjusted EBITDA.
(2)Included in general and administrative expenses for the three months ended Mach 31, 2022 is $0.7 million of share-based compensation. There was 0 share-based compensation during the three months ended March 31, 2021.
Forward-Looking Statements
This document contains forward-looking15. Subsequent Events
On April 13, 2022, the Company’s board of directors declared a quarterly cash dividend of $0.15 per share on its Class A and Class B common stock, which totaled $3.0 million in the aggregate, to be paid on May 16, 2022. The record date for the dividend was May 2, 2022.
In April 2022 in connection with the 2022 Term Securitization, we repaid in full the 2013 Term Securitization Notes Payable.
In April 2022, Bluegreen completed a private offering and sale of $172.0 million of VOI receivable-backed notes (the “2022 Term Securitization”). The 2022 Term Securitization consisted of the issuance of three tranches of VOI receivable-backed notes (collectively, the “Notes”) as follows: $71.0 million of Class A Notes, $56.5 million of Class B Notes, and $44.5 million of Class C Notes. The interest rates on the Class A Notes, Class B Notes and Class C
Notes are 4.12%, 4.61% and 5.35%, respectively, which blends to an overall weighted average note interest rate of approximately 4.60%. The gross advance rate for this transaction was 88.3%. The Notes mature in September 2037.
The amount of the VOI receivables sold or to be sold to BXG Receivables Note Trust 2022-A (the “Trust”) in the transaction is $194.7 million, $185.0 million of which was sold to the Trust at closing and $9.7 million of which is expected to be sold to the Trust by August 2022. The gross proceeds of such sales to the Trust are anticipated to be $171.9 million. A portion of the proceeds received at the closing were used to: repay the Key Bank/DZ Purchase Facility $53.2 million, representing all amounts outstanding under the facility; repay the Liberty Bank facility $11.0 million; repay Pacific Western Bank Facility $16.1 million; capitalize a reserve fund; and pay fees and expenses associated with the transaction. Prior to the closing of the 2022-A Term Securitization, Bluegreen, as servicer, funded $4.9 million in connection with the servicer redemption of the notes related to the 2013 Term Securitization, as described above, and certain of the VOI notes in such trust were sold to the Trust in connection with the 2022 Term Securitization. The remainder of the gross proceeds from the 2022 Term Securitization are expected to be used for general corporate purposes.
Subject to performance of the collateral, Bluegreen will receive any excess cash flows generated by the receivables transferred under the 2022 Term Securitization (excess meaning after payments of customary fees, interest and principal under the 2022 Term Securitization) on a pro-rata basis as borrowers make payments on their VOI loans.
While ownership of the VOI receivables included in the 2022 Term Securitization is transferred and sold for legal purposes, the transfer of these receivables is accounted for as a secured borrowing for financial accounting purposes. Accordingly, no gain or loss was recognized as a result of this transaction.
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the Company’s unaudited consolidated financial statements based largelyand related notes included elsewhere in this Quarterly Report on current expectations of BBX CapitalForm 10-Q and with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, including the Company’s audited consolidated financial statements and related notes contained therein.
Except as otherwise noted or where the context requires otherwise, references in this Quarterly Report on Form 10-Q to, “the Company,” “we,” “us” and “our” refer to Bluegreen Vacations Holding Corporation, together with its consolidated subsidiaries, including Bluegreen Vacations Corporation and its consolidated subsidiaries (the “Company” or, unless otherwise indicated(“Bluegreen”). References to “BVH” or the context otherwise requires, “we,” “us,” or “our,” and is referred“Parent company” refer to withoutBluegreen Vacations Holding Corporation at its subsidiaries as “BBX Capital”) that involve a number of risks and uncertainties. All opinions, forecasts, projections, future plans or other statements, other than statements of historical fact, are forward-looking statements and can be identified by the use of words or phrases such as “plans,” “believes,” “will,” “expects,” “anticipates,” “intends,” “estimates,” “our view,” “we see,” “would” and words and phrases of similar meaning. The forward-looking statements in this document are alsoparent company only level.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),. Forward-looking statements include all statements that do not relate strictly to historical or current facts and involve substantialcan be identified by the use of words such as “anticipates,” “estimates,” “expects,” “intends,” “plans,” “believes,” “projects,” “predicts,” “seeks,” “will,” “should,” “would,” “may,” “could,” “outlook,” “potential,” and similar expressions or words and phrases of similar import. Forward-looking statements include, among others, statements relating to the Company’s future financial performance, business prospects and strategy, anticipated financial position, liquidity and capital needs, including conditions surrounding, and the impact of, the Coronavirus Disease of 2019 (“COVID-19”) pandemic, and other matters. These statements are based on management’s current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and uncertainties. We can give no assurancechanges in circumstances that such expectations will proveare difficult to have been correct.predict. Actual results performance, or achievements couldmay differ materially from those contemplated, expressed in, or implied by, the forward-looking statements contained herein. Forward-looking statements are based largely on our expectations and are subject to a number of risks and uncertainties that are subject to change based on factors which are, in many instances, beyond our control. When considering forward-looking statements, the reader should keep in mind the risks, uncertainties and other cautionary statements made in this report. The reader should not place undue reliance on any forward-looking statement, which speaks only as of the date made. This document also contains information regarding the past performance of the Company, its subsidiaries and their respective investments and operations, and the reader should note that prior or current performance is not a guarantee or indication of future performance. Future results could differ materially as a result of a varietyvarious factors, including, among others, the following:
BVH has limited sources of cash and is dependent upon dividends from Bluegreen to fund its costs of operations;
risks associated with the Company’s indebtedness, including that the Company will be required to utilize cash flow to service its indebtedness, that indebtedness may make the Company more vulnerable to economic downturns, and uncertainties.that indebtedness may subject the Company to covenants and restrictions on its operations and activities and the payment of dividends;
Some factors which may affectrisks associated with the accuracyadverse impact of economic conditions, including the impact of the forward-looking statements apply generallyCOVID-19 pandemic on the Company’s operations and results, the price and liquidity of the Company’s Class A Common Stock and Class B Common Stock, and the Company’s ability to obtain additional capital, including the risk that if the Company needs or otherwise believes it is advisable to issue debt or equity securities or to incur indebtedness in order to fund the Company’s operations or investments, it may not be able to issue any such securities or obtain such indebtedness on favorable terms, or at all, and any issuance could result in the dilution of the interest of the Company’s shareholders;
the availability of financing, the Company’s ability to sell, securitize or borrow against its VOI notes receivable on acceptable terms, and the Company’s ability to successfully increase its credit facility capacity or enter into capital market transactions or other alternatives to provide for sufficient available cash for a sustained period of time;
risks associated with adverse conditions in the stock market, the public debt market, and other capital markets and the impact of such conditions on the Company, as well as risks associated with any failure by the Company to maintain compliance with the listing requirements of the New York Stock Exchange (the “NYSE”), which include, among other things, a minimum average closing price, share volume, and market capitalization;
risks related to potential business expansion or other strategic opportunities, including that they may involve significant costs and the incurrence of significant indebtedness and may not be successful and that the
Company’s efforts and expenses including those aimed at enhancing the experience of Bluegreen Vacation Club Members, may be greater than anticipated and may not result in the benefits anticipated;
risks relating to public health issues, including in particular the COVID-19 pandemic and the effects of the pandemic, including that while conditions have improved, Bluegreen’s business was adversely impacted by the pandemic and any resurgence may have similar or worse effects, and the pandemic may continue to have adverse effects, including due to changes in consumer behavior and preferences, and potential future increases in default and delinquency rates;
adverse changes to, expirations or terminations of, or interruptions in, and other risks relating to the industriesCompany’s business and strategic relationships, management contracts, exchange networks or other strategic marketing alliances, and the risk that the Company’s business relationship with Bass Pro under the revised terms of the parties’ marketing agreement and its relationship with Choice Hotels may not be as profitable as anticipated, or at all, or otherwise not result in which the Company operates,benefits anticipated;
the risks of the real estate market and the risks associated with real estate development, including a decline in real estate values and a deterioration of other conditions relating to the real estate market and real estate development and construction industrythe risks associated with the Company’s ability to maintain adequate, sufficient or desired amounts of VOI inventory for sale;
risks associated with the Company’s ability to comply with applicable regulations, and the costs of compliance efforts or a failure to comply, including risks associated with the Company’s ability to maintain the integrity of internal or customer data, the failure of which could result in which BBX Capital Real Estate operates,damage to its reputation and/or subject the resort development andCompany to costs, fines or lawsuits;
risks associated with adverse trends or disruptions in economic conditions generally or in the vacation ownership, vacation rental and travel industries, the Company’s ability to compete effectively in which Bluegreen Vacations Corporationthe highly competitive vacation ownership industry and against hotel and other hospitality and lodging alternatives and decreased demand from prospective purchasers of vacation ownership interests (“Bluegreen”VOIs”) operates,;
risks associated with the home improvement industry in which Renin Holdings, LLC (“Renin”) operatesCompany’s customers’ compliance with their payment obligations under financing provided by the Company, the increased presence and efforts of “timeshare-exit” firms and the confectionery industrysuccess of actions which the Company has taken or may take in connection therewith, and the impact of defaults on its operating results and liquidity position;
risks associated with the ratings of third-party rating agencies, including the impact of any downgrade on the Company’s ability to obtain, renew or extend credit facilities, or otherwise raise funds;
changes in the Company’s business model and marketing efforts, plans or strategies, which BBX Sweet Holdings, LLC (“BBX Sweet Holdings”) operates. may cause marketing expenses to increase or adversely impact its operating results and financial condition, and such expenses as well as the Company’s investments, including investments in new and expanded sales offices, and other sales and marketing initiatives, including screening methods and data driven analysis, may not achieve the desired results;
technology and other changes and factors which may impact the Company’s telemarketing efforts, including new cell phone technologies that identify or block marketing vendor calls;
These risks associated with the Company’s relationships with third-party developers, including that third-party developers who provide VOIs to be sold by the Company pursuant to fee-based services or just-in-time arrangements may not provide VOIs when planned and uncertainties include, but arethat may not limited to:fulfill their obligations to the Company or to the homeowners associations that maintain the resorts they developed;
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risks associated with legal proceedings and regulatory proceedings, examinations or audits of the Company’s operations, including claims of noncompliance with applicable regulations or for development related defects, and the impact they may have on the Company’s financial condition and operating results;
37audits of the Company or its subsidiaries’ tax returns, including that they may result in the imposition of additional taxes;
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With respect to Bluegreen,mold or hazardous or toxic substances, and their impact on the Company’s financial condition and operating results;
risks that natural disasters, including hurricanes, earthquakes, fires, floods and uncertainties include, but are not limited to:windstorms, and other acts of God and conditions beyond the control of the Company may adversely impact the Company’s financial condition and operating results, including due to any damage to physical assets or interruption of access to physical assets or operations resulting therefrom, and the frequency or severity of natural disasters may increase due to climate change or other factors;
risks of cybersecurity threats, including the potential misappropriation of assets or confidential information, corruption of data or operational disruptions;
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the updating of, and developments with |
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With respect to, BBX Capital Real Estate activities,technology, including the riskscost involved in updating technology and uncertainties include, but are not limited to:
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With respect to the Company’s investment activitiesoperations or competitive position, and the Company’s information technology expenditures may not result in middle marketthe expected benefits;
the Company may not pay dividends in the future when or in the amount expected, or at all;
the impact on the Company’s consolidated financial statements and internal control over financial reporting of the adoption of new accounting standards; and
the preparation of financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) involves making estimates, judgments and assumptions, and any changes in estimates, judgments and assumptions used could have a material adverse impact on the financial condition and operating businesses,results of the risks and uncertainties include, but are not limited to:Company.
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39
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In addition to the risks and factors identified above, referenceReference is also made to the other risks and factors detaileduncertainties described in this report and the other reports filed with the SEC by the Company, with the SEC, including, without limitation, those discloseddiscussed in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (the “2016 Annual Report”).2021. The Company cautions that the foregoing factors are not exclusive.
Non-GAAP Financial Measures
This Quarterly Report on Form 10-Q includes discussions of terms that are not recognized terms under GAAP, and financial measures that are not calculated in accordance with GAAP, including system-wide sales of VOIs, guest tours, sale to tour conversion ratio, average sales volume per guest, EBITDA, Segment Adjusted EBITDA, and Adjusted EBITDA Attributable to Shareholders. For a discussion of EBITDA, Adjusted EBITDA, and EBTIDA Attributable to Shareholders, see “Key Business and Financial Metrics Used by Management” below. In addition, see “Reportable Segments Results of Operations” below for a reconciliation of Adjusted EBITDA to net income and system-wide sales of VOIs to gross sales of VOIs. See also “Key Business and Financial Metrics used by Management in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of the Company’s Annual Report on Form10-K for the year ended December 31, 2021.
For a discussion of critical accounting policies, see “Critical“Significant Accounting Policies” in the Company’s 2016 Annual Report.Report on Form 10-K for the year ended December 31, 2021.
New Accounting Pronouncements
See Note 12 to the Company’s unaudited consolidated financial statements included underin Item 1 of this report for a discussion of new accounting pronouncements applicable to the Company.
Company Overview
Overview
BBX CapitalThe Company is a Florida-based diversified holdingleading vacation ownership company with investmentsthat markets and sells VOIs and manages resorts in Bluegreen, real estatepopular leisure and real estate joint venturesurban destinations.
As of March 31, 2022, the Company had total consolidated assets of approximately $1.3 billion and middle market operating businesses. Bluegreen isshareholders’ equity of approximately $255.5 million.
Summary of Consolidated Results of Operations
Consolidated Results
The following summarizes key financial highlights for the three months ended March 31, 2022 compared to the three months ended March 31, 2021:
Total consolidated revenues of $195.1 million, a 33% increase compared to the three months ended March 31, 2021.
Income before income taxes from continuing operations of $19.2 million compared to income of $5.5 million during the three months ended March 31, 2021.
Net income attributable to shareholders of $16.0 million compared to net income of $3.0 million during the three months ended March 31, 2021.
Diluted earnings per share from continuing operations of $0.76 compared to diluted earnings per share of $0.15 during the three months ended March 31, 2021.
The comparison the Company’s consolidated results from continuing operations for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 were significantly impacted by the timing of, and the Company’s response to the COVID-19 pandemic. Specifically, the Company experienced:
An increase in revenues attributable to improved conditions and performance in the 2022 period.
A decrease in the provision for loan losses as a percentage of sales marketingduring the 2022 period as a result of lower than estimated first quarter 2022 defaults and management company focusedrelatively higher prepayments on the vacation ownership industry. The Company’s real estate investments include real estate joint venturesexisting portfolio.
An increase in selling, general and the ownership, financing, acquisition, developmentadministrative expenses primarily attributable to improved industry and management of real estate. The Company’s investments in middle market operating businesses include Renin, a company that manufactures products for the home improvement industry, the Company’s investments in confectionery businesses through its wholly-owned subsidiary, BBX Sweet Holdings, and more recently its activities as a franchisee of MOD Super-Fast Pizza. Renin, which was acquired in October 2013, achieved profitability in 2016. BBX Sweet Holdings, which we consider to be in an earlier stage of development, is not yet profitable. In 2016, a wholly owned subsidiary of the Company entered into area development agreements with MOD Super-Fast Pizza Franchising, LLC with a goal of developing approximately 60 MOD franchised pizza restaurant locations throughout Florida over seven years. The MOD Pizza franchise activities commenced in 2017 and the first restaurant location opened in October 2017. In June 2017, BBX Sweet Holdings acquired IT’SUGAR for a purchase price of $58.4 million, net of cash acquired. IT’SUGAR is a specialty candy retailer with 95 locations in 26 states and Washington, DC, and its trade sales for the year ended December 31, 2016 totaled approximately $77 million. BBX Sweet Holdings plans to further expand IT’SUGAR by opening three to four retail locations during the remainder of 2017. While the acquisition of IT’SUGAR is not expected to generate net incomeeconomic conditions in the short term due to costs2022 period noted above, as well as continued expansion of opening new stores, the acquisition is expected to be cash flow accretive to BBX Capitalour sales and will expand BBX Sweet Holdings’ retail footprint in the confectionery industry. marketing operations.
In July 2017, the Company’s Class A Common Stock began trading on the New York Stock Exchange (“NYSE”) under the ticker symbol “BBX.” Upon commencement of trading on the NYSE the Company’s Class A Common Stock ceased trading on the OTCQX Best Market. Segment Results
The Company’s Class B Common Stock continues to trade on the OTCQX under the ticker symbol “BBXTB.”
The Company’s strategy is to build long-term shareholder value. Since many of the Company’s assets do not generate income on a regular or predictable basis, our objective continues to be long-term growth as measured by increases in book value and intrinsic value over time.
We currently reportCompany reports the results of ourits business activities through the following reportable segments: Bluegreen, BBX Capital Real Estate, Renin,Sales of VOIs and BBX Sweet Holdings.Financing; and Resort Operations and Club Management.
Summary of Consolidated Results of Operations by Reportable Segment
Information regarding income before income taxes by reportable segment for the three and nine months ended September 30, 2017 and 2016 is set forth in the table below (in thousands):below:
For the Three Months Ended | |||||
2022 | 2021 | ||||
(in thousands) | |||||
Sales of VOIs and financing | $ | 34,084 | $ | 19,723 | |
Resort operations and club management | 20,368 | 18,037 | |||
Bluegreen corporate and other | (27,104) | (28,545) | |||
BVH corporate | (1,950) | (2,522) | |||
Income before income taxes from continuing operations | 25,398 | 6,693 | |||
Provision for income taxes | (6,190) | (1,189) | |||
Net income | 19,208 | 5,504 | |||
Less: Net income attributable to noncontrolling interest | 3,220 | 2,530 | |||
Net income attributable to shareholders | $ | 15,988 | $ | 2,974 |
Executive Overview
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| For the Three Months Ended September 30, |
| For the Nine Months Ended September 30, | ||||||||
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| Change |
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Bluegreen | $ | 34,066 |
| 38,878 |
| (4,812) |
| 106,299 |
| 87,302 |
| 18,997 |
BBX Capital Real Estate |
| 1,767 |
| 20,328 |
| (18,561) |
| 13,538 |
| 26,327 |
| (12,789) |
Renin |
| 90 |
| (359) |
| 449 |
| 1,057 |
| 454 |
| 603 |
BBX Sweet Holdings |
| (1,267) |
| (2,767) |
| 1,500 |
| (8,655) |
| (11,787) |
| 3,132 |
Corporate Expenses & Other |
| (14,970) |
| (13,585) |
| (1,385) |
| (34,552) |
| (45,038) |
| 10,486 |
Income before income taxes |
| 19,686 |
| 42,495 |
| (22,809) |
| 77,687 |
| 57,258 |
| 20,429 |
Provision for income taxes |
| (8,195) |
| (19,118) |
| 10,923 |
| (30,028) |
| (23,857) |
| (6,171) |
Net income |
| 11,491 |
| 23,377 |
| (11,886) |
| 47,659 |
| 33,401 |
| 14,258 |
Less: Net income attributable to |
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noncontrolling interests |
| 3,256 |
| 5,602 |
| (2,346) |
| 9,467 |
| 9,900 |
| (433) |
Net income attributable to shareholders | $ | 8,235 |
| 17,775 |
| (9,540) |
| 38,192 |
| 23,501 |
| 14,691 |
Bluegreen Reportable Segment
Overview
Bluegreen is a sales, marketing, and management company focused on theleading vacation ownership industry. Bluegreencompany that markets and sells VOIs and manages VOIsresorts in resorts,popular leisure and urban destinations. Bluegreen’s resort network includes 45 Club Resorts (resorts in which owners in its Vacation Club have the right to use most of the units in connection with their VOI ownership) and 23 Club Associate Resorts (resorts in which owners in its Vacation Club have the right to use a limited number of units in connection with their VOI ownership). These Club Resorts and Club Associate Resorts are generallyprimarily located in popular, high-volume, “drive-to” vacation destinations. Thelocations, including Orlando, Las Vegas, the Smoky Mountains, Myrtle Beach, Charleston and New Orleans, among others. Through Bluegreen’s points-based system, the approximately 218,000 owners in Bluegreen’s Vacation Club have the flexibility to stay at units available at any of Bluegreen’s resorts in which Bluegreen markets, sells and manages VOIs were either developed or acquired by Bluegreen, or were developedhave access to over 11,300 other hotels and were owned by third-parties. Bluegreen earns fees for providingresorts through partnerships and exchange networks. Bluegreen’s sales and marketing servicesplatform is supported by marketing relationships with nationally-recognized consumer brands, such as Bass Pro and Choice Hotels. The Company believes these marketing relationships drive sales within its core demographic. In 2020, Bluegreen launched its Bluegreen Renewal Program, which is part of its company-wide effort to revitalize sales, grow revenue and increase efficiency.
Impact of the COVID-19 pandemic
The COVID-19 pandemic caused an unprecedented disruption in the U.S. and global economies and the industries in which the Company operates due to, among other things, government ordered “shelter in place” and “stay at home” orders and advisories, travel restrictions, and restrictions on business operations, including government guidance with respect to travel, public accommodations, social gatherings, and related matters. These disruptions and the reaction of the general public to the pandemic had a significant adverse impact on the Company's financial condition and operations throughout 2020, including, without limitation, due to the temporary closure beginning in March 2020 of all of Bluegreen’s VOI sales centers, its retail marketing operations at Bass Pro Shops and Cabela’s stores and outlet malls, and its Choice Hotels call transfer program, Bluegreen’s cancellation of existing owner reservations through May 15, 2020 and new prospect guest tours through June 30, 2020, and the temporary closure of certain of Bluegreen’s Club Resorts and Club Associate Resorts in accordance with government mandates and advisories. While adverse conditions continued during 2021, including due to the emergence of new variants such as the Delta and Omicron variants, Bluegreen’s business and results generally improved during 2021 and continued to improve in the first quarter of 2022.
Status of Current Operations
As of March 31, 2022, we were operating marketing kiosks at 128 Bass Pro Shops and Cabela’s stores, including 21 new Cabela’s locations and two new Bass Pro locations as compared to March 31, 2021; and all of our VOI sales centers and resorts were open, except for one resort and sales center in Surfside, Florida which was closed due to conditions unrelated to the pandemic. Further, resort occupancy rates were approximately 77% at resorts with sales centers in the first quarter of 2022. While we sold only 42,000 vacation packages in the first quarter of 2022 compared
to 49,000 in the first quarter of 2021, Bluegreen’s pipeline of vacation packages was 200,600 at March 31, 2022 compared to 132,100 at March 31, 2021, which we believe reflected the impact of the temporary cessation of marketing activities at the outset of the COVID-19 pandemic. We believe that the increase in sales of VOIs in the first quarter of 2022 reflected the improvement in general economic conditions despite continued COVID-19 cases, increasing interest rates and inflationary trends during the period. While we hope that conditions in the travel and leisure industry continue to improve, the continued future impact of economic conditions and the pandemic on the Company is uncertain. Various state and local government officials may in the future issue new or revised orders that are different than the ones under which we are currently operating, and actions of foreign government may exacerbate supply chain constraints and result in increased inflation. It is impossible to predict the duration and severity of the pandemic and the likely impact of the pandemic on the Company’s future revenues, net income and other operating results.
VOI Sales and Financing
Bluegreen’s primary business is the marketing and sale of deeded VOIs, developed either internally or by third parties. Customers who purchase these VOIs receive an allotment of points, which can be redeemed for stays at one of Bluegreen’s resorts or at 11,300 other hotels and resorts available through partnerships and exchange networks. Bluegreen’s goal is to employ a flexible model with a mix of sales of our owned, acquired or developed VOIs and sales of VOIs on behalf of third-party developers.developers, as determined by management to be appropriate from time to time based on market and economic conditions, available cash, and other factors. Our relationships with third-party developers enables us to generate fees from the sale and marketing of their VOIs without incurring the significant upfront capital investment generally associated with resort acquisition or development. While sales of Bluegreen also earns feesowned inventory typically result in a greater contribution to EBITDA and Adjusted EBITDA, fee-based sales typically do not require an initial investment or involve development financing risk. Both Bluegreen owned VOI sales and fee-based VOI sales result in recurring, incremental and long-term fee streams by providing management servicesadding owners to the Bluegreen Vacation Club and homeowners’ associations (“HOAs”), mortgage servicing,new resort management contracts. Fee-based sales of VOIs comprised 24% and 36% of Bluegreen’s system-wide sales of VOIs during the three months ended March 31, 2022 and 2021, respectively. Bluegreen intends to remain flexible with respect to its sales of the different categories of its VOI title services,inventory in the future based on economic conditions, business initiatives and construction design and development services.other considerations. In conjunction with sales of VOIs, the Company generates interest income by providing financing to qualified purchasers. Collateralized by the underlying VOIs, Bluegreen’s loans are generally structured as 10-year, fully-amortizing loans with a fixed interest rate ranging from approximately 12% to approximately 18% per annum. As of March 31, 2022, the weighted-average interest rate on Bluegreen’s VOI notes receivable was 15.3%. In addition, Bluegreen provides financing to FICO® score-qualified individual purchasers of VOIs, which generates significant interest income.
In addition to Bluegreen’s traditional vacation ownership operations, Bluegreen’s operations also include “capital-light” business activities that typically do not require the significant costsCompany earns fees for various other services, including title and capital investments generally incurredescrow services in connection with the acquisitionclosing of VOI sales, and developmentmortgage servicing.
Resort Operations and Club Management
Bluegreen enters into management agreements with the HOAs that maintain most of VOIs underthe resorts in Bluegreen’s Vacation Club and earns fees for providing management services to those HOAs and the approximately 218,000 Vacation Club owners. These resort management services include providing or overseeing front desk operations, housekeeping services, maintenance, and certain accounting and administration functions. Our management contracts generally yield recurring cash flows and do not have the traditional risks associated with hotel management contracts that are generally linked to daily rate or occupancy. Our management contracts are typically structured as “cost-plus,” with an initial term of three years and automatic one year renewals. In connection with the management services provided to the Bluegreen Vacation Club, we manage the reservation system and provide owner, billing and collection services.
Key Business and Financial Metrics Used by Management
Management uses several key business and financial metrics that are specific to or typically utilized in the vacation ownership business. Bluegreen believes its capital-light business activities enable itindustry. EBITDA, Adjusted EBITDA, Adjusted EBITDA Attributable to leverage its expertise and existing infrastructure in resort management, sales and marketing, mortgage servicing, title services, and construction management to generate recurring revenues from third-parties. As of September 30, 2017, Bluegreen’s capital-light business activities consistedShareholders are discussed below. For a discussion of the following: fee-based salesother metrics, see “Key Business and marketing arrangements; just-in-time inventory acquisition arrangements; secondary market arrangements; and other fee-based services. Each of these categories is describedFinancial Metrics Used by Management” in the “ResultsCompany’s Annual Report on Form 10-K for the year ended December 31, 2021.
EBITDA, Adjusted EBITDA, and Adjusted EBITDA Attributable to Shareholders
The Company defines EBITDA as earnings, or net income, before taking into account interest income (excluding interest earned on VOI notes receivable), interest expense (excluding interest expense incurred on debt secured by VOI notes receivable), and depreciation and amortization. The Company defines Adjusted EBITDA as EBITDA, adjusted to exclude amounts of Operations” section below. loss (gain) on assets held for sale, share-based compensation expense, and items that the Company believes are not representative of ongoing operating results. Adjusted EBITDA Attributable to Shareholders is Adjusted EBITDA excluding amounts attributable to the non-controlling interest in Bluegreen/Big Cedar Vacations (in which Bluegreen owns a 51% interest). For purposes of the calculation of EBITDA, Adjusted EBITDA and Adjusted EBITDA Attributable to Shareholders, no adjustments were made for interest income earned on VOI notes receivable or the interest expense incurred on debt that is secured by such notes receivable because they are both considered to be part of the ordinary operations of the Company’s business.
DuringThe Company considers EBITDA, Adjusted EBITDA, and Adjusted EBITDA Attributable to Shareholders to be indicators of operating performance, and they are used by the Company to measure its ability to service debt, fund capital expenditures and expand its business. EBITDA and Adjusted EBITDA are also used by companies, lenders, investors and others because they exclude certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company’s capital structure, debt levels and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provision for income taxes can vary considerably among companies. EBITDA, Adjusted EBITDA and Adjusted EBITDA Attributable to Shareholders also exclude depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.
EBITDA, Adjusted EBITDA and Adjusted EBITDA Attributable to Shareholders are not recognized terms under GAAP and should not be considered as an alternative to net income or any other measure of financial performance or liquidity, including cash flow, derived in accordance with GAAP, or to any other method or analyzing results as reported under GAAP. The limitations of using EBITDA, Adjusted EBITDA or Adjusted EBITDA Attributable to Shareholders as an analytical tool include, without limitation, that EBITDA, Adjusted EBITDA and Adjusted EBITDA Attributable to Shareholders do not reflect (i) changes in, or cash requirements for, working capital needs; (ii) interest expense, or the cash requirements necessary to service interest or principal payments on indebtedness (other than as noted above); (iii) tax expense or the cash requirements to pay taxes; (iv) historical cash expenditures or future requirements for capital expenditures or contractual commitments; or (v) the effect on earnings or changes resulting from matters that the Company does not believe to be indicative of future operations or performance. Further, although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often have to be replaced in the future, and EBITDA, Adjusted EBITDA and Adjusted EBITDA Attributable to Shareholders do not reflect any cash that may be required for such replacements. In addition, the Company’s definition of Adjusted EBITDA or Adjusted EBITDA Attributable to Shareholders may not be comparable to definitions of Adjusted EBITDA, Adjusted EBITDA Attributable to Shareholders or other similarly titled measures used by other companies.
Reportable Segments Results of Operations
Adjusted EBITDA Attributable to Shareholdersfor the three months ended September 30, 2017:March 31, 2022 and 2021:
The Company considers Segment Adjusted EBITDA in connection with its evaluation of its business segments as described in Note 14: Segment Reporting to the Company’s unaudited consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q. See above for a discussion of the definition of Adjusted EBITDA and related measures, how management uses it to manage its business and material limitations on its usefulness. The following tables set forth Segment Adjusted EBITDA, Adjusted EBITDA, Adjusted EBITDA Attributable to Shareholders, EBITDA and a reconciliation of EBITDA, Adjusted EBITDA, and Adjusted EBITDA Attributable to Shareholders to net income, the most comparable GAAP financial measure:
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For the Three Months Ended March 31, | ||||||
2022 | 2021 | |||||
(in thousands) | ||||||
Adjusted EBITDA - sales of VOIs and financing | $ | 35,733 | $ | 21,128 | ||
Adjusted EBITDA - resort operations | ||||||
and club management | 20,551 | 18,233 | ||||
Total Segment Adjusted EBITDA | 56,284 | 39,361 | ||||
Less: Bluegreen's Corporate and other | (21,492) | (22,643) | ||||
Less: BVH Corporate and other | (468) | (759) | ||||
Adjusted EBITDA | 34,324 | 15,959 | ||||
Less: Adjusted EBITDA attributable to non-controlling | (3,269) | (3,239) | ||||
Total Adjusted EBITDA attributable | $ | 31,055 | $ | 12,720 |
For the Three Months Ended March 31, | ||||||
2022 | 2021 | |||||
(in thousands) | ||||||
Net income attributable to shareholders | $ | 15,988 | $ | 2,974 | ||
Net income attributable to the non-controlling interest | 3,220 | 2,530 | ||||
Net Income | 19,208 | 5,504 | ||||
Add: Depreciation and amortization | 3,922 | 3,851 | ||||
Less: Interest income (other than interest earned on | ||||||
VOI notes receivable) | (62) | (133) | ||||
Add: Interest expense - corporate and other | 4,364 | 5,572 | ||||
Add: Provision for income taxes | 6,190 | 1,189 | ||||
EBITDA | 33,622 | 15,983 | ||||
Add: Share-based compensation expense(1) | 746 | — | ||||
Gain on assets held for sale | (44) | (24) | ||||
Adjusted EBITDA | 34,324 | 15,959 | ||||
Adjusted EBITDA attributable to the non-controlling | ||||||
interest | (3,269) | (3,239) | ||||
Adjusted EBITDA attributable to shareholders | $ | 31,055 | $ | 12,720 |
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During each of(1)Share-based compensation expense for the three months ended September 30, 2017March 31, 2022 consisted of $0.7 million related to restricted stock awards granted in June 2021 and 2016, 38%January 2022.
For the Three Months Ended | ||||||
(in thousands) | 2022 | 2021 | ||||
Gross sales of VOIs | $ | 115,607 | $ | 68,250 | ||
Add: Fee-Based sales | 35,937 | 38,797 | ||||
System-wide sales of VOIs | $ | 151,544 | $ | 107,047 |
For the three months ended March 31, 2022 compared to the three months ended March 31, 2021
Sales of VOIs and Financing
For the Three Months Ended March 31, | ||||||||||
2022 | 2021 | |||||||||
Amount | % of | Amount | % of | |||||||
(in thousands) | ||||||||||
Bluegreen owned VOI sales(1) | $ | 115,607 | 76 | $ | 68,250 | 64 | ||||
Fee-Based VOI sales | 35,937 | 24 | 38,797 | 36 | ||||||
System-wide sales of VOIs | 151,544 | 100 | 107,047 | 100 | ||||||
Less: Fee-Based sales | (35,937) | (24) | (38,797) | (36) | ||||||
Gross sales of VOIs | 115,607 | 76 | 68,250 | 64 | ||||||
Provision for loan losses (2) | (16,579) | (14) | (12,319) | (18) | ||||||
Sales of VOIs | 99,028 | 65 | 55,931 | 52 | ||||||
Cost of VOIs sold (3) | (11,841) | (12) | (5,169) | (9) | ||||||
Gross profit (3) | 87,187 | 88 | 50,762 | 91 | ||||||
Fee-Based sales commission revenue (4) | 24,084 | 67 | 25,718 | 66 | ||||||
Financing revenue, net of financing expense | 18,741 | 12 | 15,122 | 14 | ||||||
Other expense | (152) | 0 | — | 0 | ||||||
Other fee-based services, title operations and other, net | 2,130 | 1 | 1,555 | 1 | ||||||
Net carrying cost of VOI inventory | (4,056) | (3) | (7,780) | (7) | ||||||
Selling and marketing expenses | (83,889) | (55) | (58,001) | (54) | ||||||
General and administrative expenses - sales and | (9,961) | (7) | (7,653) | (7) | ||||||
Operating profit - sales of VOIs and financing | 34,084 | 22% | 19,723 | 18% | ||||||
Add: Depreciation and amortization | 1,649 | 1,405 | ||||||||
Adjusted EBITDA - sales of VOIs and financing | $ | 35,733 | $ | 21,128 |
(1)Bluegreen owned VOI sales represent sales of VOIs acquired or developed by Bluegreen.
(2)Percentages for provision for loan losses are calculated as a percentage of gross sales of VOIs, which excludes Fee-Based sales (and not as a percentage of system-wide sales of VOIs).
(3)Percentages for costs of VOIs sold and gross profit are calculated as a percentage of sales of VOIs (and not as a percentage of system-wide sales of VOIs).
(4)Percentages for Fee-Based sales commission revenue are calculated as a percentage of Fee-Based sales (and not as a percentage of system-wide sales of VOIs).
(5)Represents the applicable line item, calculated as a percentage of system-wide sales of VOIs unless otherwise indicated in the above footnotes.
System-wide sales of VOIs. System-wide sales of VOIs were $151.5 million and $107.0 million during the three months ended March 31, 2022 and 2021, respectively. System-wide sales of VOIs are driven by the number of guests attending a timeshare sale presentation (a “guest tour”) and our ability to convert such guest tours into purchases of VOIs. The number of guest tours is driven by the number of existing owner guests Bluegreen has staying at a resort with a sales center and new guests who agree to attend a sales presentation. During the first quarter of 2022, we experienced an increase in stays at our resorts and the use of our vacation packages, which contributed to an increase in the number of guest tours by 40% compared to the first quarter of 2021. The COVID-19 pandemic impacted guest tours during the 2021 period, resulting in lower system-wide sales of VOIs. The ultimate extent and duration of the impact from the COVID-19 pandemic cannot be predicted at this time.
Included in system-wide sales are Fee-Based Sales and Bluegreen-owned sales. Sales by category are tracked based on which deeded VOI is conveyed in each transaction. The individual VOIs sold is based on several factors, including the needs of fee-based clients, the Company’s debt service requirements and default resale requirements under term securitizations and similar transactions. These factors and business initiatives contribute to fluctuations in the amount of sales by category from period to period.
Sales of VOIs. Sales of VOIs were $99.0 million and $55.9 million during the three months ended March 31, 2022 and 2021, respectively. Sales of VOIs were impacted by the factors described in the discussion of system-wide sales of VOIs above, primarily the continued impact of the COVID-19 pandemic in 2021. Gross sales of VOIs were reduced by $16.6 million and $12.3 million during the three months ended March 31, 2022 and 2021, respectively, for the provision for loan losses. The provision for loan losses varies based on the amount of financed, non-fee based sales during the period and changes in estimates of future VOI notes receivable performance for existing and newly originated loans. The percentage of sales which were realized in cash within approximately 30 days from the contract date. See “Liquidity and Capital Resources”below for additional information.
Seasonality
Bluegreen has historically experienced, and expects to continue to experience, seasonal fluctuations in its revenues and results of operations. This seasonality has resulted, and may continue to result, in fluctuations in Bluegreen’s quarterly operating results. Although Bluegreen typically sees more potential customers at its sales officessale was 45% during the quarters ending in Juneboth the three months ended March 31, 2022 and September, ultimate recognition2021. The provision for loan losses as a percentage of the resulting sales during these periods may be delayed due to down payment requirements for recognition of real estate sales under GAAP or due to the timing of development and the required use of the percentage-of-completion method of accounting.
VOI Notes Receivable and Allowance for Credit Losses
Bluegreen offers financing to buyers of VOIs and accordingly, Bluegreen is subject to the risk of defaults by these customers. Pursuant to GAAP,gross sales of VOIs are reduced by an estimatewas 14% and 18% during the three months ended March 31, 2022 and 2021, respectively. The decrease in the provision for loan loss as a percentage of future uncollectible note balancessales during the 2022 period as compared to the 2021 period is due to lower than estimated first quarter 2022 defaults and higher than anticipated prepayments on originated VOI notes receivable, excluding any benefit for the value of future recoveries of defaulted VOI inventory. Bluegreen updates its estimate of such future losses each quarter, and consequently, the charge against sales in a particular period may be impacted, favorably or unfavorably, by a change in expected losses related to notes originated in prior periods. existing portfolio.
The average annual default rates and delinquency rates (more than 30 days past due) on Bluegreen’s notes receivable were as follows:
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| For the Twelve Months Ended September 30, | ||
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| 2017 |
| 2016 |
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Average annual default rates |
| 8.1% |
| 7.3% |
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| As of September 30, | ||
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| 2017 |
| 2016 |
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Delinquency rates |
| 3.1% |
| 2.9% |
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Bluegreen believes that a portionthe COVID-19 pandemic and general economic conditions including inflationary trends may have an impact on the collectibility of the default increase in recent years is a result of an increase inits VOI notes receivable. The provision for loan losses also continues to be impacted by defaults which Bluegreen believes are attributable to the receipt of cease and desist letters from third parties and attorneys who purport to represent certain VOI owners and who have encouraged such owners to become delinquent and ultimately default on their obligations. Following receipt of such a letter, contact of the VOI owner is ceased, unless otherwise allowed by law. See Note 109: Commitments and Contingencies to the Condensed Consolidated Financial StatementsCompany’s unaudited consolidated financial statements included in Item 1 of this report for additional information regarding such letters and actions we have taken in connection with such letters. The impact of the COVID-19 pandemic, the continued impact of actions taken by Bluegreen in connection therewith. While Bluegreen believes itstimeshare exit firms and changing economic conditions are highly uncertain and there is no assurance that steps taken to mitigate the impact of these factors will be successful or they will not otherwise impact the collectability or our VOI notes receivable are adequately reserved at this time,to a greater extent than estimated. As a result, actual defaults may differ from theour estimates and the reserveallowance for loan losses may not prove to be adequate.
See Note 5The average annual default rates and delinquency rates (more than 30 days past due) on our VOI notes receivable were as follows:
For the Twelve Months Ended March 31, | ||||
2022 | 2021 | |||
Average annual default rates (1) | 8.19% | 9.64% | ||
As of March 31, | ||||
2022 | 2021 | |||
Delinquency rates (1) | 2.82% | 3.09% |
(1)The average annual default rates in the table above include VOIs which have been defaulted but had not yet charged off due to the Condensed Consolidated Financial Statementsprovisions of certain of our receivable-backed notes payable transactions, as well as certain VOI loans over 127 days past due where we received cease and desist letters from attorneys and other third-party exit firms. Accordingly, these are excluded for additional information about Bluegreen’s notes receivable, including Bluegreen’s allowance for credit losses.purposes of calculating the delinquency rates above.
Results of Operations
Selected information regarding the results of Bluegreen’s operations for the three and nine months ended September 30, 2017 and 2016 is set forth below (dollars in thousands):
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| For the Three Months Ended September 30, | ||||||
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| 2017 |
| 2016 | ||||
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| Amount |
| % of System-wide sales of VOIs, net(10) |
| Amount |
| % of System-wide sales of VOIs, net(10) |
Traditional VOI sales (1) | $ | 76,727 |
| 45% | $ | 107,528 |
| 62% |
VOI sales-secondary market program(2) |
| 38,732 |
| 23% |
| 45,404 |
| 26% |
Sales of third-party VOIs-commission basis(3) |
| 97,963 |
| 58% |
| 88,059 |
| 51% |
Sales of third-party VOIs-just-in-time basis(4) |
| 14,306 |
| 8% |
| 11,094 |
| 7% |
Less: Equity trade allowance (5) |
| (57,543) |
| -34% |
| (79,349) |
| -46% |
System-wide sales of VOIs, net |
| 170,185 |
| 100% |
| 172,736 |
| 100% |
Less: Sales of third-party VOIs-commission basis |
| (97,963) |
| -58% |
| (88,059) |
| -51% |
Gross sales of VOIs |
| 72,222 |
| 42% |
| 84,677 |
| 49% |
Estimated uncollectible VOI |
|
|
|
|
|
|
|
|
notes receivable (6) |
| (10,535) |
| -15% |
| (12,936) |
| -15% |
Sales of VOIs |
| 61,687 |
| 36% |
| 71,741 |
| 42% |
Cost of VOIs sold (7) |
| (6,284) |
| -10% |
| (5,827) |
| -8% |
Gross profit (7) |
| 55,403 |
| 90% |
| 65,914 |
| 92% |
Fee-based sales commission revenue (8) |
| 69,977 |
| 71% |
| 59,383 |
| 67% |
Other fee-based services revenue(9) |
| 27,386 |
| 16% |
| 26,810 |
| 16% |
Cost of other fee-based services |
| (17,339) |
| -10% |
| (15,682) |
| -9% |
Net carrying cost of VOI inventory |
| (837) |
| 0% |
| (1,375) |
| -1% |
Selling and marketing expenses |
| (87,818) |
| -52% |
| (90,643) |
| -52% |
General and administrative expenses |
| (25,825) |
| -15% |
| (20,330) |
| -12% |
Net interest spread |
| 13,238 |
| 8% |
| 14,290 |
| 8% |
Operating profit | $ | 34,185 |
| 20% | $ | 38,367 |
| 22% |
Other (expense) income |
| (119) |
|
|
| 511 |
|
|
Income before income taxes | $ | 34,066 |
|
| $ | 38,878 |
|
|
43
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|
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|
| For the Nine Months Ended September 30, | ||||||
|
| 2017 |
| 2016 | ||||
|
| Amount |
| % of System-wide sales of VOIs, net(10) |
| Amount |
| % of System-wide sales of VOIs, net(10) |
Traditional VOI sales (1) | $ | 211,780 |
| 46% | $ | 316,701 |
| 69% |
VOI sales-secondary market program(2) |
| 117,711 |
| 25% |
| 106,410 |
| 23% |
Sales of third-party VOIs-commission basis(3) |
| 257,756 |
| 56% |
| 225,763 |
| 49% |
Sales of third-party VOIs-just-in-time basis(4) |
| 37,374 |
| 8% |
| 36,775 |
| 8% |
Less: Equity trade allowance (5) |
| (161,951) |
| -35% |
| (226,258) |
| -49% |
System-wide sales of VOIs, net |
| 462,670 |
| 100% |
| 459,391 |
| 100% |
Less: Sales of third-party VOIs-commission basis |
| (257,756) |
| -56% |
| (225,763) |
| -49% |
Gross sales of VOIs |
| 204,914 |
| 44% |
| 233,628 |
| 51% |
Estimated uncollectible VOI |
|
|
|
|
|
|
|
|
notes receivable (6) |
| (32,075) |
| -16% |
| (36,974) |
| -16% |
Sales of VOIs |
| 172,839 |
| 37% |
| 196,654 |
| 43% |
Cost of VOIs sold (7) |
| (10,737) |
| -6% |
| (19,410) |
| -10% |
Gross profit (7) |
| 162,102 |
| 94% |
| 177,244 |
| 90% |
Fee-based sales commission revenue (8) |
| 179,046 |
| 69% |
| 153,718 |
| 68% |
Other fee-based services revenue (9) |
| 83,442 |
| 18% |
| 78,421 |
| 17% |
Cost of other fee-based services |
| (48,331) |
| -10% |
| (43,896) |
| -10% |
Net carrying cost of VOI inventory |
| (3,219) |
| -1% |
| (4,748) |
| -1% |
Selling and marketing expenses |
| (241,184) |
| -52% |
| (238,064) |
| -52% |
General and administrative expenses |
| (67,331) |
| -15% |
| (78,440) |
| -17% |
Net interest spread |
| 41,894 |
| 9% |
| 42,470 |
| 9% |
Operating profit | $ | 106,419 |
| 23% | $ | 86,705 |
| 19% |
Other (expense) income |
| (120) |
|
|
| 597 |
|
|
Income before income taxes | $ | 106,299 |
|
| $ | 87,302 |
|
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44
Bluegreen – For the three and nine months ended September 30, 2017 compared to the same periods in 2016.
System-wide sales of VOIs, net.System-wide sales of VOIs, net include all sales of VOIs, regardless of whether Bluegreen or a third-party owned the VOI immediately prior to the sale. Sales of third-party owned VOIs are transacted as sales of VOIs in the Bluegreen Vacation Club through the same selling and marketing process Bluegreen uses to sell its VOI inventory. System-wide sales of VOIs, net were $170.2 million and $462.7 million during the three and nine months ended September 30, 2017, respectively, and $172.7 million and $459.4 million during the three and nine months ended September 30, 2016, respectively. We estimate that system-wide sales of VOIs, net for the three and nine months ended September 30, 2017 were adversely impacted by approximately $6.2 million as a result of Hurricane Irma in September 2017. System-wide sales of VOIs, net during the three and nine months ended September 30, 2017 were favorably impacted by a 14% and 9% increase in the average sales volume per guest (“VPG”), respectively, partially offset by a decrease of 13% and 9%, respectively, in the number of guest tours. During the nine months ended September 30, 2017, Bluegreen began screening the credit qualifications of potential marketing guests, resulting in a higher average transaction price, higher VPG, and a lower number of tours.
Bluegreen believes its screening of marketing guests will ultimately result in improved efficiencies in its sales process. In July 2017, Bluegreen adopted new consumer-oriented materials to support the purchase of lower-point VOIs and reinstated its former, lower minimum transaction size requirements resulting in an increase in its sales-to-tour conversion ratio.
Included in system-wide sales are FBS Sales, Just-In-Time Sales, Secondary Market Sales and traditional sales. Sales by category are tracked based on which deeded VOI is conveyed in each transaction. Bluegreen manages which category of VOIs are sold based on several factors, including the needs of third-party clients, Bluegreen’s debt service requirements and default resale requirements under term securitization and similar transactions. These factors contribute to fluctuations in the amount of sales by category from period to period.
The following table sets forth certain information for system-wide sales of VOIs net for the periods indicated. The information is provided before giving effect to the deferral of Bluegreen VOI sales in accordance with GAAP:
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| For the Three Months Ended September 30, |
|
| For the Nine Months Ended September 30, | ||||||||
|
| 2017 |
| 2016 |
| % Change |
|
| 2017 |
| 2016 |
| % Change |
Number of sales offices at period-end |
| 23 |
| 23 |
| - |
|
| 23 |
| 23 |
| - |
Number of active sales arrangements with third-party clients at period-end |
| 14 |
| 15 |
| -7% |
|
| 14 |
| 15 |
| -7% |
Total number of VOI sales transactions |
| 11,598 |
| 12,896 |
| -10% |
|
| 30,638 |
| 35,422 |
| -14% |
Average sales price per transaction | $ | 15,055 | $ | 13,679 |
| 10% |
| $ | 15,440 | $ | 13,415 |
| 15% |
Number of total guest tours |
| 69,479 |
| 80,322 |
| -13% |
|
| 193,687 |
| 212,090 |
| -9% |
Sale-to-tour conversion ratio– total marketing guests |
| 16.7% |
| 16.1% |
| 4% |
|
| 15.8% |
| 16.7% |
| -5% |
Number of new guest tours |
| 45,060 |
| 57,160 |
| -21% |
|
| 125,673 |
| 148,109 |
| -15% |
Sale-to-tour conversion ratio– new marketing guests |
| 14.1% |
| 13.2% |
| 7% |
|
| 13.1% |
| 13.6% |
| -4% |
Percentage of sales to existing owners |
| 48.1% |
| 43.8% |
| 10% |
|
| 48.8% |
| 45.6% |
| 7% |
Average sales volume per guest | $ | 2,513 | $ | 2,196 |
| 14% |
| $ | 2,442 | $ | 2,241 |
| 9% |
Sales of VOIs. Sales of VOIs represent sales of Bluegreen-owned VOIs, including traditional VOIs, those obtained on a Just-In-Time basis, and those acquired through Secondary Market arrangements, reduced by equity trade allowances and an estimate of uncollectible VOI notes receivable. In addition to the above-described factors impacting system-wide sales of VOIs, net, sales of VOIs are impacted by the proportion of system-wide sales of VOIs, net sold on behalf of third-parties on a commission basis, which are not included in sales of VOIs. Sales of VOIs were $61.7 million and $172.8 million during the three and nine months ended September 30, 2017, respectively, compared to $71.7 millionMarch 31, 2022 and $196.7 million during the three and nine months ended September 30, 2016, respectively.2021:
For the Three Months Ended | |||||||||
2022 | 2021 | Change | |||||||
(dollars in thousands) | |||||||||
Number of sales centers open at period-end | 24 | 24 | — | % | |||||
Total number of VOI sales transactions | 7,514 | 6,197 | 21 | % | |||||
Average sales price per transaction | $ | 20,226 | $ | 17,303 | 17 | % | |||
Number of total guest tours | 48,861 | 34,821 | 40 | % | |||||
Sale-to-tour conversion ratio– | 15.4% | 17.8% | (240) | bp | |||||
Number of existing owner guest tours | 24,841 | 18,332 | 36 | % | |||||
Sale-to-tour conversion ratio– | 16.8% | 20.6% | (380) | bp | |||||
Number of new guest tours | 24,020 | 16,489 | 46 | % | |||||
Sale-to-tour conversion ratio– | 13.9% | 14.7% | (80) | bp | |||||
Percentage of sales to existing owners | 57.0% | 63.5% | (650) | bp | |||||
Average sales volume per guest | $ | 3,110 | $ | 3,079 | 1 | % |
Gross sales of VOIs were reduced by $10.5 million and $32.1 million during the three and nine months ended September 30, 2017, respectively, and $12.9 million and $37.0 million during the three and nine months ended September 30, 2016, respectively, for estimated future uncollectible notes receivable. Estimated losses for
45
uncollectible VOI notes receivable vary with the amount of financed, non-fee based sales during the period and changes in Bluegreen’s estimates of future note receivable performance for existing and newly originated loans. In connection with Bluegreen’s quarterly analysis of its loan portfolio, which consists of evaluating the expected future performance of loans with remaining lives of one to ten years, Bluegreen may identify factors or trends that change its estimate of future loan performance and result in a change in the allowance for credit losses. Bluegreen’s estimated uncollectible VOI notes receivable as a percentage of gross sales of VOIs were 15% and 16% during each of the three and nine months ended September 30, 2017, and September 30, 2016, respectively.
Cost of VOIs Sold. Cost of VOIs sold represents the cost at which Bluegreen-owned VOIs sold during the period were relieved from inventory. In addition to Bluegreen’s inventory from its traditional timeshare business, Bluegreen-owned VOIs also include those that were acquired by Bluegreen under Just-In-Time and Secondary Market arrangements. Compared to the cost of Bluegreen’s traditional inventory, VOIs acquired in connection with Just-In-Time arrangements typically have a relatively higher associated cost of sales as a percentage of sales while those acquired in connection with Secondary Market arrangements typically have a lower cost of sales as a percentage of sales because Secondary Market inventory is generally obtained from HOAs at a significant discount.Sold. During the three months ended September 30, 2017March 31, 2022 and 2016,2021, cost of VOIs sold were $6.3was $11.8 million and $5.8$5.2 million, respectively, and represented 10%12% and 8%, respectively, of sales of VOIs. During the nine months ended September 30, 2017 and 2016, cost of VOIs sold were $10.7 million and $19.4 million, respectively, and represented 6% and 10%9%, respectively, of sales of VOIs. Cost of VOIs sold as a percentage of sales of VOIs varies between periods based on the relative costs of the specific VOIs sold in each period and the size of the point packages of the VOIs sold (due to offered volume discounts, including consideration of cumulative sales to existing owners). Additionally, the effect of changes in estimates under the relative sales value method, including estimates of projected sales, future defaults, upgrades and incremental revenue from the resale of repossessed VOI inventory, are reflected on a retrospective basis inaccounted for as VOI inventory true-ups and retrospectively adjust the periodmargin previously recognized subject to those estimates. During the change occurs. Therefore,three months ended March 31, 2022, approximately $2.7 million of cost of VOIs sold related to these true-ups. Cost of sales willis typically be favorably impacted in periods where a significant amount of Secondary Market VOI inventory is acquired or actual defaults and equity trades are higher than anticipated and the resulting change in estimate is recognized. While Bluegreen believes that there is additional inventory that can be obtained through the Secondary Market at favorable costs to Bluegreen in the future, there can be no assurance that such inventory will be available as expected.
In June 2017, Bluegreen increased the average selling price of its VOIs by 4%. As a result of this pricing change, Bluegreen’s management also increased its estimate of total gross margin generated on the sale of its VOI inventory. Under the relative sales value method prescribed for timeshare developers to relieve the cost of VOI inventory, changes to the estimate of gross margin expected to be generated on the sale of VOI inventory are recognized on a retrospective basis in earnings. Accordingly, during the second quarter of 2017, Bluegreen recognized a benefit to costCost of VOIs sold as a percentage of $5.1 million. Further, in September 2016, Bluegreen increased the selling price of its VOIs by 5%. Accordingly, during the third quarter of 2016, Bluegreen recognized a benefit to costsales of VOIs was higher for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021 due to the relative mix of inventory being sold of $5.6 million.and lower secondary market purchases in the 2022 period.
Fee-Based Sales Commission Revenue. Revenue. During the three months ended September 30, 2017March 31, 2022 and 2016,2021, Bluegreen sold $98.0$35.9 million and $88.1$38.8 million, respectively, of third-party VOI inventory under commission arrangements and earned sales and marketing commissions of $70.0$24.1 million and $59.4 million, respectively, in connection with those sales. During the nine months ended September 30, 2017 and 2016, Bluegreen sold $257.8 million and $225.8 million, respectively, of third-party VOI inventory under commission arrangements and earned sales and marketing commissions of $179.0 million and $153.7$25.7 million, respectively, in connection with those sales. The increasedecrease in the sales of third-party developer inventory on a commission basis during the 2017 periods2022 period was due primarily to the factors described above related to the increase in system-wide sales of VOIs, net.Bluegreen’s increased focus on selling Bluegreen owned VOI sales. Bluegreen earned an average sales and marketing commission of 71% and 69% during each of the three and nine months ended September 30, 2017, respectively, as compared to 67% and 68%66% during the three and nine months ended September 30, 2016, respectively. The increase in sales and marketing commissions as a percentage of fee-based sales for the three months ended September 30, 2017March 31, 2022 and 2021, respectively, which is primarily related to an incentivenet of a reserve for commission of $2.9 million related to the achievement of certain sales thresholdsrefunds in connection with early defaults and cancellations pursuant to the terms and conditionsof certain of the applicable contractual arrangement, with no such comparable incentivefee-based service arrangements. Bluegreen typically recognizes a sales and marketing commission earned in the three months ended September 30, 2016.between 65% and 68% on sales of third-party VOI inventory.
Financing Revenue, Net Carrying Cost of VOI InventoryFinancing Expense — Sales of VOIs. Bluegreen is responsible for paying maintenance fees and developer subsidies for its unsold VOI inventory to the HOAs that maintain the resorts. Bluegreen attempts to mitigate this expense, to the extent possible, through the rental of unsoldInterest income on VOIs owned and through proceeds from Bluegreen’s sampler programs. Thecarrying cost of Bluegreen’s inventorynotes receivable was $4.1$22.1 million and $4.2$19.1 million during the three months ended September 30, 2017March 31, 2022 and 2016,2021, respectively, which was partlypartially offset by interest expense on receivable-backed debt of $3.4 million and $4.1 million, respectively. The increase in finance revenue, net of finance expense in the 2022 period as compared to the 2021 period is primarily due to higher VOI notes receivable balances as a result of higher sales of VOIs and lower outstanding receivable-backed debt balances and a lower weighted-average cost of borrowing attributable to the lower interest rate in the 2022 period. Revenues from mortgage servicing during both the three months ended March 31, 2022 and 2021 of $1.3 million are
included in financing revenue, net of mortgage servicing expenses of $1.4 million and $1.2 million during the three months ended March 31, 2022 and 2021, respectively.
Other Fee-Based Services — Title Operations, net. During the three months ended March 31, 2022 and 2021, revenue from title operations was $3.1 million and $2.3 million, respectively, which was partially offset by expenses directly related to title operations of $1.0 million and $0.7 million, respectively. Resort title fee revenue varies based on VOI sales volumes as well as the title costs in the jurisdictions where the inventory being sold is located. The increase in the 2022 period is due to the increase in system-wide sales of VOIs during such period compared to the 2021 period, as described above.
Net Carrying Cost of VOI Inventory. The gross carrying cost of VOI inventory was $10.3 million and $10.9 million during the three months ended March 31, 2022 and 2021, respectively, which was partially offset by rental and sampler revenues of $3.3$6.2 million and $2.8 million, respectively. The carrying cost of Bluegreen’s inventory was $12.5 million and $12.7 million during the nine months ended September 30, 2017 and 2016, respectively, which was partly offset by rental and sampler revenues of $9.3 million and $8.0$3.1 million, respectively. The decrease in net carrying costs isof VOI inventory was primarily related to increased rentals of developer inventory and increased sampler stays due to the more significant impact of the COVID-19 pandemic on operations in the 2021 period, and to a result of Bluegreen’s capital light business activitieslesser extent lower maintenance fees and an increasedeveloper subsidies associated with the decrease in sampler revenues. VOI inventory. In certain circumstances, marketing costs are offset by using inventory for marketing guest stays.
46
Selling and Marketing Expenses. Expenses.Selling and marketing expenses were $87.8$83.9 million and $241.2$58.0 million during the three and nine months ended September 30, 2017, respectively,March 31, 2022 and $90.6 million2021, respectively. The increase in selling and $238.1 millionmarketing expenses during the three and ninemonths ended March 31, 2022 compared to the three months ended September 30, 2016, respectively. March 31, 2021 is primarily attributable to the expansion of marketing operations into two Bass Pro stores and 21 additional Cabela’s stores since March 31, 2021 and the expansion of our sales operations in general. We utilize Bass Pro and Cabela’s stores to sell discounted vacation packages to customers for future travel which require the customers to attend a timeshare presentation. Further, we have invested in various local and national marketing programs in an effort to attract new customers. These program changes may not be successful or generate a sufficient number of prospects to offset the program costs incurred.
As a percentage of system-wide sales of VOIs, net, selling and marketing expenses were 52%55% and 54% during each of the three months ended March 31, 2022 and nine month periods ended September 30, 2017 and September 30, 2016. Selling2021, respectively. The increase in selling and marketing expenses vary as a percentage of system-wide sales from period to period based in part by the relativeof VOIs reflects a higher proportion of marketing methods utilized during such periods, most notably the percentage of sales to Bluegreen’s existing owners, which has a relatively lower costnew customers compared to the prior year.
The following table sets forth certain new customer marketing information, excluding sampler and other methods. As discussed above, duringreturning owner vacation packages, for the ninethree months ended September 30, 2017, Bluegreen began screeningMarch 31, 2022 and 2021:
For the Three Months Ended | ||||||||
2022 | 2021 | % Change | ||||||
Number of Bass Pro and Cabela's marketing | 128 | 105 | 22 | |||||
Number of vacation packages outstanding, | 187,244 | 121,915 | 54 | |||||
Number of vacation packages sold | 41,990 | 49,374 | (15) | |||||
Number of vacation packages outstanding, | 200,627 | 132,142 | 52 | |||||
% of Bass Pro vacation packages at period end | 45% | 54% | (17) | |||||
% of Cabela's vacation packages at period end | 19% | 18% | 6 | |||||
% of Choice Hotel vacation packages at period end | 24% | 20% | 20 | |||||
% of Other vacation packages at period end | 12% | 9% | 33 |
(1)Excludes vacation packages sold to customers more than one year prior to the credit qualificationsperiod presented and vacation packages sold to customers who had already toured but purchased an additional vacation package.
In addition to vacation packages sold to new prospects, we also sell vacation packages to customers who have already toured, some of potential marketing guests, resulting in lower guest tours, higher VPG’s,whom purchased a VOI, and higher costs perhave indicated they would tour duringagain. As of March 31, 2022, the period.pipeline
of such packages was approximately 15,500. There is no assurance that such packages will convert to sales at historical or expected levels.
Included in the variety of methods that Bluegreen uses to attract prospective purchasers of VOIs are marketing arrangements with various third-parties. Sales of VOIs to prospects and leads generated by Bluegreen’s marketing relationship with Bass Pro accounted for approximately 15% of Bluegreen’s VOI sales volume during each of the nine months ended September 30, 2017 and 2016. There can be no guarantee that Bluegreen will be able to maintain, extend or renew such arrangement or any other marketing arrangements in the future, and a loss of any significant marketing relationships would have a material adverse impact on Bluegreen’s financial condition, including cash position and operating results.
General and Administrative Expenses. — Sales and Marketing Operations. General and administrative expenses, which representrepresenting expenses directly attributable to sales and marketing operations, and corporate overhead, were $25.8$10.0 million and $20.3$7.7 million during the three months ended September 30, 2017March 31, 2022 and 2016,2021, respectively, reflecting the increased compensation costs due to expansion of our sales and $67.3 million and $78.4 million during the nine months ended September 30, 2017 and 2016, respectively.marketing support operations. As a percentage of system-wide sales of VOIs, net, general and administrative expenses directly attributable to sales and marketing operations were 15%7% during both the three months ended March 31, 2022 and 12%2021.
Resort Operations and Club Management
For the Three Months Ended | |||||||||||
(dollars in thousands) | 2022 | 2021 | |||||||||
Resort operations and club management revenue | $ | 46,189 | $ | 43,231 | |||||||
Resort operations and club management expense | (25,821) | (25,194) | |||||||||
Operating profit - resort operations and club | 20,368 | 44% | 18,037 | 42% | |||||||
Add: Depreciation and amortization | 183 | 196 | |||||||||
Adjusted EBITDA - resort operations and | $ | 20,551 | $ | 18,233 |
Resort Operations and Club Management Revenue. Resort operations and club management revenue increased 7% during the three months ended September 30, 2017March 31, 2022 as compared to the three months ended March 31, 2021. Cost reimbursement revenue, which consists of payroll and 2016, respectively,other operating expenses which we incur and 15% and 17%passes through to the HOAs, increased 9% during the ninethree months ended September 30, 2017 and 2016, respectively.March 31, 2022 as compared to the three months ended March 31, 2021. The increase in the three month period ended September 30, 2017 iscost reimbursement revenue was primarily attributable to an increase in headcount due to the $2.9 million severance accruedrecovery from the COVID-19 pandemic. Excluding cost reimbursement revenue, resort operations and club management revenues increased 6% during the three months ended March 31, 2022 as compared to the three months ended March 31, 2021 primarily due to an increase in management fees commensurate with higher resort operating costs. Our resort network includes 68 Club and Club Associate Resorts as of both March 31, 2022 and 2021. We managed 49 resort properties as of both March 31, 2022 and 2021.
Resort Operations and Club Management Expense. During the three months ended March 31, 2022, resort operations and club management expense increased 2% compared to three months ended March 31, 2021. The increase was primarily due to increased compensation costs incurred during the first quarter of 2022 as a result of or in connection with the retirementcontinued recovery from the impact of an executive during September 2017. See Liquidity and Capital Resources for additional information. The decrease during the nine month period was primarily related to special bonuses totaling $10.0 million which were paid to certain Bluegreen employees in June 2016, with no such comparable bonus paid in the 2017 periodsCOVID-19 pandemic described above and a decrease in other personnel related costs during the 2017 period, partially offset by higher information technology related costs. Revenues from mortgage servicing of $1.4competitive labor market.
Bluegreen Corporate and Other
For the Three Months Ended | ||||||
(dollars in thousands) | 2022 | 2021 | ||||
General and administrative expenses - | $ | (24,801) | $ | (24,655) | ||
Other income (expense), net | 517 | (214) | ||||
Gain on assets held for sale | (44) | (24) | ||||
Add: Depreciation and amortization | 2,090 | 2,250 | ||||
Add: Share-based compensation and other | 746 | — | ||||
Adjusted EBITDA - Corporate and other | $ | (21,492) | $ | (22,643) |
General and Administrative Expenses — Corporate and Other. General and administrative expenses directly attributable to corporate overhead were $24.8 million and $1.0$24.7 million during the three months ended September 30, 2017March 31, 2022 and 2016, respectively, and $3.82021, respectively.
Other Income (Expense), net. Other income (expense), net was $0.5 million and $2.7 million during the nine months ended September 30, 2017 and 2016, respectively, have been netted against general and administrative expenses.
Other Fee-Based Services Revenue. Other fee-based services revenue increased 2% and 6% during the three and nine months ended September 30, 2017, respectively, as compared to the three and nine months ended September 30, 2016. Bluegreen provides management services to the Bluegreen Vacation Club and to a majority of the HOAs of the resorts within the Bluegreen Vacation Club. In connection with Bluegreen’s management services, Bluegreen also manages the club reservation system, provides services to owners and performs billing and collection services to the Bluegreen Vacation Club and certain HOAs. The resort properties managed by Bluegreen increased from 46 as of September 30, 2016 to 48 as of September 30, 2017. Fee-based management services revenue increased during the 2017 periods compared to the 2016 periods, primarily as a result of increases in the number of managed resorts and the number of owners in the Bluegreen Vacation Club. Additionally, Bluegreen generates revenues from providing title services, its Traveler Plus™ program, and food and beverage and other retail operations. Bluegreen also earns commissions from providing rental services to third-parties and fees from managing the construction activities of certain of its fee-based third-party developer clients.
Cost of Other Fee-Based Services. During the three and nine months ended September 30, 2017, cost of other fee-based services increased 11% and 10%, respectively, compared to the three and nine months ended September 30, 2016. The increase is primarily due to the increased cost of providing management services as a result of the higher service volumes described above and the higher costs associated with programs to VOI owners.
Net Interest Spread. Net interest spread was $13.2 million and $14.3($0.2) million during the three months ended September 30, 2017March 31, 2022 and 2016, respectively, and $41.92021, respectively.
Interest Expense. Interest expense unrelated to receivable-backed debt was $2.9 million and $42.5 million during the nine months ended September 30, 2017 and 2016, respectively. The decrease in net interest spread during the 2017 periods is primarily due to the reduction in the interest rate on Bluegreen’s loan to BBX Capital from 10% per annum to 6% per annum, effective during July 2017, resulting in a decrease of approximately $0.8 million in interest income in the three and nine months ended September 30, 2017 as compared to the same 2016 periods.
47
Bluegreen’s effective cost of borrowing was 5.0% and 5.3% during the nine months ended September 30, 2017 and 2016, respectively. The decrease was primarily attributable to Bluegreen’s repayment of debt with higher-interest rates.
Other (Expense) Income, Net.Other (expense) income, net was ($0.1) million and $0.5$3.8 million during the three months ended September 30, 2017March 31, 2022 and 2016, respectively, and ($0.1) million and $0.6 million during the nine months ended September 30, 2017 and 2016,2021, respectively. The decrease in the 2017 periods was mainly the result of the disposition of fixed assets in the 2017 periods.
BBX Capital Real Estate Reportable Segment
Overview
BBX Capital Real Estate’s primary activities include the acquisition, ownership and management of real estate and real estate development projects, and investments in real estate joint ventures. BBX Capital Real Estate also manages the legacy assets retained by the former BBX Capital Corporation (“BCC”) in connection with the July 2012 sale of BankAtlantic to BB&T Corporation. The legacy assets include portfolios of loans receivable, real estate properties and loans previously charged-off by BankAtlantic.
Results of Operations
The following table is a condensed income statement before income taxes summarizing the results of operations of BBX Capital Real Estate (in thousands):
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| For the Three Months Ended |
| For the Nine Months Ended | ||||||||
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| September 30, |
| September 30, | ||||||||
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| 2017 |
| 2016 |
| Change |
| 2017 |
| 2016 |
| Change |
Interest income | $ | 697 |
| 1,214 |
| (517) |
| 1,915 |
| 3,082 |
| (1,167) |
Net (losses) gains on sales of assets |
| (18) |
| 5,035 |
| (5,053) |
| 2,161 |
| 5,326 |
| (3,165) |
Other |
| 964 |
| 1,152 |
| (188) |
| 3,023 |
| 4,137 |
| (1,114) |
Total revenues |
| 1,643 |
| 7,401 |
| (5,758) |
| 7,099 |
| 12,545 |
| (5,446) |
Recoveries from loan losses, net |
| (2,005) |
| (10,944) |
| 8,939 |
| (6,098) |
| (18,979) |
| 12,881 |
Asset impairments (recoveries), net |
| 1,233 |
| (30) |
| 1,263 |
| 1,278 |
| 1,692 |
| (414) |
Selling, general and |
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administrative expenses |
| 3,099 |
| 2,527 |
| 572 |
| 8,001 |
| 9,298 |
| (1,297) |
Total costs and expenses |
| 2,327 |
| (8,447) |
| 10,774 |
| 3,181 |
| (7,989) |
| 11,170 |
Equity in net earnings of unconsolidated |
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joint ventures |
| 2,451 |
| 4,480 |
| (2,029) |
| 9,620 |
| 5,793 |
| 3,827 |
Income before income taxes | $ | 1,767 |
| 20,328 |
| (18,561) |
| 13,538 |
| 26,327 |
| (12,789) |
Interest Income
The decrease insuch interest income for the three and nine months ended September 30, 2017 compared to the same 2016 periods reflects lower interest income recognized on a cash basis due to payoffs of nonaccrual loans and the declining balance of the loan portfolio. Loan balances declined from $55.4 million at December 31, 2015 to $21.0 million at September 30, 2017.
Net (Losses) Gains on Sales of Assets
The net losses on sales of assetsexpense during the three months ended September 30, 2017 resultedMarch 31, 2022 was primarily from $0.2 milliondue to lower outstanding debt balances and lower weighted-average cost of losses from sales of residential foreclosed properties partially offset by gains associated with the sale of lotsborrowing, as compared to a homebuilder. The net gains on sales of assets during the nine months ended September 30, 2017 resulted primarily from $2.1 million of gains on the sales of commercial land parcels and the recognition of $0.5 million of deferred gains associated with properties contributed for equity interests in joint ventures during 2013. The gains on the sales of assets for the nine months ended September 30, 2017 were partially offset by losses on sales of foreclosed residential properties.
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The net gains on sales of assets during the three months ended September 30, 2016 resulted primarily from a $3.5 million gain on the saleMarch 31, 2021. The weighted average cost of two commercial land parcels and the recognitionborrowing excluding receivable-backed debt as of a $1.6 million deferred gain associated with property contributed to a joint venture during the second quarter of 2014. The net gains on the sales of assets during the nine months ended September 30, 2016 also included an additional $0.4 million of deferred gains associated with properties contributed for equity interests in joint ventures partially offset by losses on the sales of foreclosed residential properties.
Other
Other revenues consisted primarily of rental income from real estate properties. The lower other revenues during the three months ended September 30, 2017March 31, 2022 was approximately 5.18% compared to the same 2016 period resulted primarily from the recognitionapproximately 6.47% as of $0.2 million of other revenue in connection with a nonrefundable deposit on a terminated commercial property sales contract. The lower other revenues during the nine months ended September 30, 2017 compared to the same 2016 periods was primarily the result of the sale of one student housing rental property during the second quarter of 2016.March 31, 2021.
Recoveries from Loan Losses, net
Recoveries from loan losses during the three and nine months ended September 30, 2017 primarily reflect $1.9 million and $5.5 million, respectively, of collections from the charged off loan portfolio. The remaining net recoveries were from the settlement of consumer loans.
Recoveries from loan losses during the three and nine months ended September 30, 2016 resulted primarily from settlements on charged off loans and recoveries from the charged off loan portfolio. Recoveries from loan settlements for the three and nine months ended September 30, 2016 were $10.1 million and $16.2 million, respectively. Recoveries from the charged off loan portfolio for the three and nine months ended September 30, 2016 were $0.8 million and $2.5 million, respectively.
Recoveries from loan losses for the three and nine months ended September 30, 2017 and 2016 were generated by legacy loans and due to the nature of these collection activities and the declining balances of legacy loans it is not expected that BBX Capital Real Estate will continue to generate recoveries consistent with historical amounts.
Asset Impairments (Recoveries), net
Asset impairments, net during the three and nine months ended September 30, 2017 resulted primarily from impairments on commercial land parcels held-for-sale.
Asset impairments, net during the three and nine months ended September 30, 2016 resulted primarily from $0.1 million and $2.9 million, respectively, of impairments on real estate held for sale properties based on updated valuations reflecting executed sales contracts and reductions in listing prices. The above impairments were partially offset by $1.2 million of net recoveries during nine month ended September 30, 2016 resulting primarily from the foreclosure of residential loans. The foreclosure recoveries reflect that the fair values of the properties less costs to sell were higher than the recorded investment of the foreclosed loans as real estate values appreciated subsequent to the charging down of the loans.
Selling, General and Administrative Expenses
The increase in selling, general and administrative expenses for the three months ended September 30, 2017 compared to the same 2016 period reflect higher property maintenance costs on residential loans in foreclosure and lower foreclosure expense recoveries from loan settlements.
The lower selling, general and administrative expenses for the nine months ended September 30, 2017 compared to the same 2016 period reflect lower professional fees associated with collections and foreclosure filings associated with a declining legacy loan and real estate portfolio. Additionally, compensation expenses were lower during the nine months ended September 30, 2017 compared to the same 2016 period resulting primarily from performance bonuses associated with the timing of real estate transactions.
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Equity in Net Earnings of Unconsolidated Joint Ventures
The unconsolidated real estate joint ventures are generally real estate joint ventures involved in the development of properties for residential and commercial use. The equity in earnings for the three and nine months ended September 30, 2017 and 2016 primarily reflects earnings from the Hialeah Communities, New Urban/BBX Development, and BBX/S Millenia Blvd Investments joint ventures.
As of September 30, 2017, the Hialeah Communities joint venture had executed sales contracts on 392 single-family homes of which 373 transactions closed in a planned development of 394 single-family homes. During the three and nine months ended September 30, 2017, the Hialeah Communities joint venture closed on 36 and 161 single-family homes, respectively. During the three and nine months ended September 30, 2016, the Hialeah Communities joint venture closed on 87 and 114 single-family homes, respectively.
BBX Capital Real Estate received $5.5 million and $10.5 million of cash distributions and recognized $2.0 million and $8.7 million of equity earnings from the Hialeah Communities joint venture for the three and nine months ended September 30, 2017, respectively.
BBX Capital Real Estate received $5.0 million and $6.6 million of cash distributions and recognized $3.9 million and $4.9 million of equity earnings from the Hialeah Communities joint venture for the three and nine months ended September 30, 2016, respectively.
As of September 30, 2017, the New Urban/BBX Development joint venture had executed sales contracts on 24 single-family homes of which 17 transactions closed in a planned development of 30 single-family homes. During the three and nine months ended September 30, 2017, the New Urban/BBX Development joint venture closed on 2 and 5 single-family homes, respectively.
BBX Capital Real Estate received $0.4 million of cash payments on its $1.6 million joint venture note receivable and recognized $0.2 million and $0.8 million of equity earnings from the New Urban/BBX Development joint venture for the three and nine months ended September 30, 2017, respectively.
BBX Capital Real Estate received $0.5 million and $1.2 million of cash payments on its $1.6 million joint venture note receivable and recognized $0.6 million and $1.1 million of equity earnings from the New Urban/BBX Development joint venture for the three and nine months ended September 30, 2016.
As of September 30, 2017, the BBX/S Millenia Blvd Investments joint venture had completed the development of the retail center on the site in Orlando with an occupancy rate of 97%. The joint venture has also engaged a real estate agent to sell the property.
BBX Capital Real Estate received $0.3 million and $0.8 million of cash distributions and recognized $0.2 million and $0.7 million of equity earnings from the BBX/S Millenia Blvd Investments joint venture for the three and nine months ended September 30, 2017, respectively.
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Renin Reportable Segment
Overview
Renin manufactures interior doors, wall décor, hardware and fabricated glass products and operates through headquarters in Canada and two manufacturing, assembly and distribution facilities in Canada and the United States.
Results of Operations
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| For the Three Months Ended September 30, |
| For the Nine Months Ended September 30, | ||||||||
(dollars in thousands) |
| 2017 |
| 2016 |
| Change |
| 2017 |
| 2016 |
| Change |
Trade sales | $ | 16,623 |
| 15,624 |
| 999 |
| 51,909 |
| 45,922 |
| 5,987 |
Cost of goods sold |
| (12,018) |
| (11,510) |
| (508) |
| (37,150) |
| (33,551) |
| (3,599) |
Gross margin |
| 4,605 |
| 4,114 |
| 491 |
| 14,759 |
| 12,371 |
| 2,388 |
Interest expense |
| 157 |
| 62 |
| 95 |
| 338 |
| 204 |
| 134 |
Selling, general and |
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administrative expenses |
| 4,253 |
| 4,416 |
| (163) |
| 13,052 |
| 12,038 |
| 1,014 |
Loss (gain) on foreign |
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currency exchange |
| 105 |
| (5) |
| 110 |
| 312 |
| (325) |
| 637 |
Total costs and expenses |
| 4,515 |
| 4,473 |
| 42 |
| 13,702 |
| 11,917 |
| 1,785 |
Income (loss) before income taxes | $ | 90 |
| (359) |
| 449 |
| 1,057 |
| 454 |
| 603 |
Gross margin percentage | % | 27.70 |
| 26.33 |
| 49.15 |
| 28.43 |
| 26.94 |
| 39.89 |
SG&A as a percent of trade sales | % | 25.59 |
| 28.26 |
| (16.32) |
| 25.14 |
| 26.21 |
| 16.94 |
The improvement in trade sales for the three and nine months ended September 30, 2017 compared to the same 2016 periods reflects increased sales volume from Renin’s retail channel customers driven by higher sales of its barn door product. The improvement in the gross margin percentage for the three and nine months ended September 30, 2017 compared to the same 2016 period resulted primarily from a higher proportion of sales of higher margin door and hardware products.
The increase in Renin’s interest expense for the three and nine months ended September 30, 2017 compared to the corresponding 2016 periods reflects higher revolving line of credit loan balances in connection with higher working capital requirements from increased sales volume including higher sales volume to big-box retailers with sixty-day payment terms.
The decrease in selling, general and administration expenses for the three months ended September 30, 2017 compared to the same 2016 period reflects lower severance costs and recruitment fees as well as a decrease in consulting expenditures for product development and manufacturing improvements. The increase in selling, general and administration expenses for the nine months ended September 30, 2017 compared to the same 2016 period reflects increased compensation and benefits associated with new hires and incentive bonuses, higher distribution costs from increased sales volume, higher depreciation expense in connection with technology expenditures as well as increased marketing expenses from product promotions.
Foreign currency exchange gains or losses for the three and nine months ended September 30, 2017 and 2016 reflect changes in the value of the Canadian dollar compared to the U.S. dollars.
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BBX Sweet Holdings Reportable Segment
Overview
Beginning in December 2013, BBX Sweet Holdings commenced acquiring operating businesses in the confectionery industry. These companies manufacture chocolate and hard candy products which are sold through wholesale and retail distribution channels. BBX Sweet Holdings is currently integrating and consolidating the operations of the acquired companies, upgrading personnel, and hiring experienced marketing, finance and senior executives. BBX Sweet Holdings also opened additional retail outlets during 2016, and in June 2017 acquired IT’SUGAR, a specialty candy retailer with 95 retail locations in 26 states and Washington, DC, for cash consideration of approximately $58.4 million.
The BBX Sweet Holdings Reportable segment consists of IT’SUGAR and other acquired operating businesses in the confectionery industry.
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| For the Three Months Ended September 30, |
| For the Nine Months Ended September 30, | ||||||||
(dollars in thousands) |
| 2017 |
| 2016 |
| Change |
| 2017 |
| 2016 |
| Change |
Trade sales | $ | 28,257 |
| 6,454 |
| 21,803 |
| 44,926 |
| 18,368 |
| 26,558 |
Interest income |
| 1 |
| 8 |
| (7) |
| 3 |
| 8 |
| (5) |
Other revenue |
| 12 |
| 1 |
| 11 |
| 23 |
| 7 |
| 16 |
Total revenues |
| 28,270 |
| 6,463 |
| 21,807 |
| 44,952 |
| 18,383 |
| 26,569 |
Cost of goods sold |
| 16,970 |
| 5,164 |
| 11,806 |
| 30,303 |
| 17,129 |
| 13,174 |
Interest expense |
| 84 |
| 86 |
| (2) |
| 255 |
| 402 |
| (147) |
Assets impairments, net |
| 273 |
| - |
| 273 |
| 273 |
| - |
| 273 |
Selling, general and |
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administrative expenses |
| 12,210 |
| 3,980 |
| 8,230 |
| 22,776 |
| 12,639 |
| 10,137 |
Total costs and expenses |
| 29,537 |
| 9,230 |
| 20,307 |
| 53,607 |
| 30,170 |
| 23,437 |
Loss before income taxes | $ | (1,267) |
| (2,767) |
| 1,500 |
| (8,655) |
| (11,787) |
| 3,132 |
Gross margin percentage | % | 39.94 |
| 19.99 |
| 45.85 |
| 32.55 |
| 6.75 |
| 50.39 |
SG&A as a percent of trade sales | % | 43.21 |
| 61.67 |
| 37.75 |
| 50.70 |
| 68.81 |
| 38.17 |
The BBX Sweet Holdings results of operations for the three and nine months ended September 30, 2017 and 2016 include the activities of IT’SUGAR from the date of acquisition (June 16, 2017) though September 30, 2017. IT’SUGAR’s trade sales are highly seasonal with approximately 30% of trade sales in the third quarter.
The improvement in BBX Sweet Holdings loss before income taxes for the three and nine months ended September 30, 2017 compared to the same 2016 periods resulted primarily from the acquisition of IT’SUGAR. IT’SUGAR contributed income before income taxes for the three and nine months ended September 30, 2017 of $2.3 million and $3.0 million, respectively.
The increase in trade sales, cost of goods sold and selling, general and administrative expenses for the three and nine months ended September 30, 2017 compared to the same 2016 periods resulted primarily from the acquisition of IT’SUGAR. IT’SUGAR’s trade sales, cost of goods sold and selling, general and administrative expenses for the three months ended September 30, 2017 were $22.6 million, $11.3 million and $8.9 million, respectively. IT’SUGAR’s trade sales, cost of goods sold and selling, general and administrative expenses from the date of acquisition through September 30, 2017 were $26.9 million, $13.3 million and $10.6 million, respectively.
Included in selling, general and administrative expenses for the three and nine months ended September 30, 2017 was inventory impairments, severance costs and a lease termination obligation aggregating approximately $0.4 million and $0.9 million, respectively, associated with the consolidation of manufacturing facilities. BBX Sweet Holdings is in the process of consolidating its manufacturing facilities to reduce excess capacity. We anticipate that BBX Sweet Holdings will continue to generate losses during the remaining three months of 2017. Additionally, if BBX Sweet
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Holdings’ operations do not meet expectations or if there is a downturn in the confectionery industry, BBX Sweet Holdings may recognize goodwill and other intangible assets impairment charges in future periods.
Corporate Expenses & Other
Corporate Expenses & Other in the Company’s segment information consists of BBX Capital’s selling, general and administrative expenses, Woodbridge’s interest expense associated with Woodbridge’s junior subordinated debentures, BBX Capital’s interest expense associated with its $80.0 million note payable to Bluegreen and selling, general and administrative expenses associated with the activities of the Company’s MOD Super-Fast Pizza restaurant business. Also included in “Corporate Expenses & Other” for the three and nine months ended September 30, 2017 are net gains on the cancellation of junior subordinated debentures, insurance carrier reimbursements for litigation costs and the reimbursement of the fine previously paid in connection with the SEC civil litigation against BCC.
BBX Capital’s selling, general and administrative expenses consist primarily of expenses associated with administering the various support functions at its corporate headquarters, including executive compensation, accounting, legal, human resources, risk management, investor relations and executive offices and were $14.7 million and $44.9 million for the three and nine months ended September 30, 2017, respectively, compared to $11.8 million and $38.0 million during the same periods in 2016.
The increase in BBX Capital’s selling, general and administrative expenses for the three months ended September 30, 2017 compared to the same period in 2016 was primarily due to the timing of compensation expense associated with the BBX Capital’s 2017 Incentive Plan partially offset by lower professional fees.
The increase in BBX Capital’s selling, general and administrative expenses for the nine months ended September 30, 2017 compared to the same 2016 period resulted primarily from $2.8 million of transaction costs incurred in connection with the IT’SUGAR acquisition, higher compensation expenses, and a $3.4 million increase in legal costs associated with the SEC civil action trial litigation. The above increases in corporate overhead were partially offset by $3.7 million of lower employee severance costs.
Woodbridge’s interest expense on its junior subordinated debentures was $0.9 million and $2.5 million for the three and nine months ended September 30, 2017, respectively, compared to $1.0 million and $3.1 million during the same periods in 2016.
Interest expense on the Bluegreen notes payable was $1.2 million and $5.2 million for the three and nine months ended September 30, 2017, respectively, compared to $2.0 million and $6.0 million during the same periods in 2016. The interest rate on the Bluegreen notes payable was reduced from 10% per annum to 6% per annum effective July 1, 2017. The interest expense on the Bluegreen notes payable is eliminated in the Company’s condensed consolidated statements of operations for the three and nine months ended September 30, 2017 and 2016.
MOD Super-Fast Pizza restaurant franchise selling, general and administrative expenses were $0.7 million and $1.6 million for the three and nine months ended September 30, 2017, respectively, compared to $0.1 million during each of the three and nine months ended September 30, 2016. The first MOD Super-Fast Pizza franchise restaurant location opened in October 2017.
Included in litigation costs and penalty reimbursements for the three and nine months ended September 30, 2017 was $2.1 million and $7.2 million of insurance carrier reimbursements of litigation costs in connection with the SEC civil litigation compared with no legal fee reimbursements during the three and nine months ended September 30, 2016. Also included in litigation costs and penalty reimbursement for the nine months ended September 30, 2017 was a $4.6 million penalty reimbursement.
As discussed in Note 10 under Item 1 of this report, the Eleventh Circuit Court of Appeals reversal of a 2015 judgment against the Company and Mr. Levan in the SEC civil litigation became final on January 31, 2017 and, as a consequence, the monetary penalty in the SEC litigation of $4.6 million imposed by the district court and held in an escrow account was refunded to BBX Capital.
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Also included in “Corporate Expenses & Other” for the nine months ended September 30, 2017 was $6.9 million of gains associated with the cancellation of a portion of Woodbridge’s outstanding junior subordinated debentures described in further detail in Note 8 – Debt included in Item 1 of this report.
Provision for Income Taxes
The provision for income taxes for the nine months ended September 30, 2017 reflects the Company’s effective tax rate of 44% compared to 47% during the same period in 2016. The Company’s effective tax rate was applied to income before income taxes reduced by net income attributable to non-controlling interests for joint ventures taxed as partnerships. The reduction in the effective income tax rate for the nine months ended September 30, 2017 as compared to the same period in 2016 reflects the deductibility of a portion of executive compensation in connection with the implementation of a performance incentive compensation plan for 2017.
Net Income Attributable to Non-Controlling Interest
BBX CapitalInterest. The Company includes in its consolidated financial statements the results of operations and financial condition of Bluegreen/Big Cedar Vacations, Bluegreen’s 51% owned subsidiary, BBX Capital’s 82% ownership of BCC through December 15, 2016 (the date on which BBX Capital acquired BCC’s outstanding common stock not previously owned by it) and its 93% equity ownership interest in IT’SUGAR. The-owned subsidiary. Net income attributable to non-controlling interest in income of Bluegreen/Big Cedar Vacations and IT’SUGAR is the portion of Bluegreen/Big Cedar Vacations’ and IT’SUGAR’s consolidated net incomeVacations that is attributable to their respective unaffiliatedBig Cedar LLC, which holds the remaining 49% and 7% interest holder and the non-controlling interest in BCC’s consolidated net income is the portion of BCC’s consolidated net income that is attributable to its shareholders other than BBX Capital through December 15, 2016. Bluegreen/Big Cedar Vacations. Net income attributable to noncontrolling interests during the non-controlling interests totaled $3.3three months ended March 31, 2022 and 2021 was $3.2 million and $9.5$2.5 million, respectively. The increase in net income attributable to noncontrolling interests for the three and nine months ended September 30, 2017, respectively,March 31, 2022 compared to $5.6 millionthe three months ended March 31, 2021 reflects the continued recovery from the COVID-19 pandemic, as discussed above.
BVH Corporate and $9.9 millionOther
BVH Corporate and other in the Company’s segment information primarily includes the following:
BVH’s corporate general and administrative expenses;
Interest expense associated with Woodbridge’s junior subordinated debentures and its outstanding note payable to BBX Capital; and
Interest income on interest-bearing cash accounts.
Corporate General and Administrative Expenses
BVH’s corporate general and administrative expenses for the three and nine months ended September 30, 2016, respectively.
Consolidated Financial Condition
Consolidated AssetsMarch 31, 2022 and Liabilities
Total assets at September 30, 2017 and December 31, 20162021 were $1.5 billion at $1.4 billion, respectively. The primary changes in components of total assets are summarized below:
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Total liabilities at September 30, 2017 and December 31, 2016 were $982.6$0.5 million and $940.6$0.8 million, respectively, and consist primarily of costs associated with BVH being a publicly traded company (including, but not limited to, executive compensation, shareholder relations, and legal and auditing expenses).
Interest Expense
BVH’s interest expense for the three months ended March 31, 2022 and 2021 was $1.5 million and $1.8 million, respectively. The primary changes in components of total liabilities are summarized below:
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Consolidated Cash Flows
A summary of our consolidated cash flows is set forth below (in thousands):
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| For the Nine Months Ended | ||
|
| September 30, | ||
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| 2017 |
| 2016 |
Cash flows provided by operating activities | $ | 38,157 |
| 61,108 |
Cash flows (used in) provided by investing activities |
| (55,516) |
| 54,143 |
Cash flows used in financing activities |
| (18,122) |
| (33,519) |
Net (decrease) increase in cash and cash equivalents | $ | (35,481) |
| 81,732 |
Cash and cash equivalents at beginning of period |
| 299,861 |
| 198,905 |
Cash and cash equivalents at end of period | $ | 264,380 |
| 280,637 |
Cash Flows provided by Operating Activities
The Company’s operating cash flows decreased by $23.0 million duringInterest expense for the ninethree months ended March 31, 2022 and 2021 includes $0.8 million and $1.1 million, respectively, of interest expense on the note payable to BBX Capital, issued in connection with the spin-off of BBX Capital in September 30, 2017 compared to the same 2016 period. The decrease was due primarily to development expenditures at the Bluegreen/Big Cedar Vacations facility and an increase in Renin’s trade inventory.
Cash Flows (used in) provided by Investing Activities
The Company’s investing cash flows decreased by $109.7 million during the nine months ended September 30, 2017 compared to the same 2016 period. The decrease reflects the $58.4 million of cash paid for the acquisition of IT’SUGAR in June 2017, increased purchases of property and equipment primarily at Bluegreen and lower repayments of loans receivable and proceeds from the sale of real estate.
Cash Flows used in Financing Activities
The amount of cash used in the Company’s financing activities decreased by $15.4 million during the nine months ended September 30, 2017 compared to the same 2016 period.2020. The decrease in cash used in financing activitiesinterest expense was primarily due to the lower repayments (netrepayment of new borrowings) on Bluegreen’s lines-of-credit$25.0 million of the note payable to BBX Capital in December 2021.
Provision for Income Taxes from continuing operations
The provision for income taxes was $6.2 million and notes payable $1.2 million for the three months ended March 31, 2022 and 2021, respectively. The Company’s effective income tax rate was approximately 28% and 29% for the three months ended March 31, 2022 and 2021, respectively.
Changes in Financial Condition
The following table summarizes the Company’s cash flows for the periods indicated (in thousands):
For the Three Months Ended | ||||||
2022 | 2021 | |||||
Net cash provided by operating activities | $ | 29,492 | $ | 11,969 | ||
Net cash used in investing activities | (4,895) | (4,049) | ||||
Net cash provided by (used in) financing activities | 18,028 | (25,138) | ||||
Net increase (decrease) in cash, cash equivalents, and restricted cash | $ | 42,625 | $ | (17,218) |
Cash Flows from Operating Activities
The Company’s operating cash flow increased $17.5 million during the three months ended March 31, 2022 compared to the three months ended March 31, 2021, primarily reflecting the following:
increased operating profit in the 2022 period reflecting the stronger 2022 performance and continued recovery from the COVID-19 pandemic; and
timing of the payment of certain 2022 expenses, including those to Bass Pro, made in December 2021;
partially offset by an increase in our VOI notes receivable portfolio.
Cash Flows from Investing Activities
Cash used in investing activities was $4.9 million and $4.0 million during the redemptionthree months ended March 31, 2022 and cancellation2021, respectively, and consisted of $18.75spending on purchases of property and equipment.
Cash Flows from Financing Activities
Cash provided by financing activities increased by $43.1 million during the three months ended March 31, 2022 compared to the three months ended March 31, 2021, primarily due to a $45.6 million decrease in net borrowings in the 2022 period. In addition, the Company repurchased $4.7 million of shares of its common stock in the 2022 period with no such repurchases in the 2021 period.
For additional information on the availability of cash from existing credit facilities, as well as repayment obligations, see “Liquidity and Capital Resources” below.
Seasonality
The Company has historically, and expects to continue to experience, seasonal fluctuations in its revenues and results of operations. This seasonality has resulted, and may continue to result, in fluctuations in quarterly operating results. Due to consumer travel patterns, we typically experience more tours and higher VOI sales volume during the second and third quarters.
Liquidity and Capital Resources
The Company, excluding Bluegreen
As of March 31, 2022, the Company, excluding its subsidiaries, had cash, cash equivalents, and short-term investments of approximately $8.2 million. Its primary source of liquidity for the forseeable future is expected to be its available cash, cash equivalents, and short-term investments and distributions from Bluegreen.
In connection with the spin-off of BBX Capital in September 2020, BVH issued a $75.0 million note payable to BBX Capital that accrues interest at a rate of 6% per annum and requires payments of interest on a quarterly basis. Under the terms of the note, BVH has the option in its discretion to defer interest payments under the note, with interest on the entire outstanding balance thereafter to accrue at a cumulative, compounded rate of 8% per annum until such time as all accrued payments under the note are brought current, including deferred interest. In December 2021, BVH repaid $25.0 million on the note payable to BBX Capital, leaving a remaining balance as of March 31, 2022 of $50.0 million. All outstanding amounts under the note will become due and payable in September 2025 or earlier upon certain other events.
The Company’s wholly owned subsidiary, Woodbridge, had $65.3 million of junior subordinated debentures during the nine months ended September 30, 2017 for cash of $11.4 million.
Commitments
The Company’s material commitmentsoutstanding as of September 30, 2017 included required payments due on its receivable-backed debt, lines-of-credit and other notes payable,March 31, 2022. Woodbridge’s junior subordinated debentures commitmentsaccrue interest at a rate of 3-month LIBOR plus a spread ranging from 4.10% to complete certain projects4.85%, mature between 2035 and 2036, and require interest payments on a quarterly basis.
The Company, at its parent company level, is a holding company with limited operations which currently expects to incur approximately $2.0 million annually in executive compensation expenses and public company costs and annual interest expense of approximately $6.0 million associated with Woodbridge’s junior subordinated debentures and the note payable to BBX Capital. These amounts are based on current expectations and assumptions, currently available information and, with respect to interest expense on Woodbridge’s junior subordinated debentures, interest rates as of March 31, 2022. Such assumptions and expectations may not prove to be accurate, interest rates may increase and, accordingly or otherwise, actual expenses may exceed the amounts expected. BVH will rely primarily on cash on hand and cash equivalents, as well as distributions, if any, that may be paid by Bluegreen in the future, to fund its operations and satisfy its debt service requirements and other liabilities, including its note payable to BBX Capital. BVH is dependent on the payment of distributions from Bluegreen to fund its operations and debt service requirements in future periods. There is no assurance that Bluegreen will pay distributions in the amounts required to fund BVH’s needs or at all.
Except as otherwise noted, the debts and obligations of Bluegreen are not direct obligations of BVH and generally are non-recourse to BVH. Similarly, the assets of Bluegreen are not available to BVH absent a distribution. Furthermore, certain of Bluegreen’s credit facilities contain terms which could limit the payment of distributions without the lender’s consent or waiver. BVH may also seek additional liquidity in the future from outside sources, including traditional bank financing, secured or unsecured indebtedness, or the issuance of equity and/or debt securities. However, these alternatives may not be available to BVH on attractive terms, or at all. The inability to raise funds through such sources when or to the extent needed would have a material adverse effect on the Company’s business, results of operations, and financial condition.
In August 2021, the Company’s board of directors approved a share repurchase program which authorized the repurchase of the Company’s Class A Common Stock and Class B Common Stock at an aggregate cost of up to $40.0 million. In March 2022, the Company’s board of directors approved a $50.0 million increase in the aggregate cost of the Company’s Class A Common Stock and Class B Common Stock that may be repurchased under the program. The Company repurchased and retired 151,232 of Class A Common Stock during the three months ended March 31, 2022 for an aggregate purchase price of $4.7 million. As of March 31, 2022, $58.0 million remained available for the repurchase of shares under the Company’s share repurchase program. In April 2022, the Company repurchased and retired 450,000 of Class A Common stock for $13.5 million in a private transaction. No shares were repurchased during the three months ended March 31, 2021.
On April 13, 2022, the Company’s board of directors declared a quarterly cash dividend of $0.15 per share on its Class A and Class B common stock, which totaled $3.0 million in the aggregate, to be paid on May 16, 2022. The record date for the dividend was May 2, 2022. The Company also indicated that it intends to continue to declare regular quarterly cash dividends on its Class A and Class B common stock of $0.15 per share, subject to declaration by, and the discretion of, the Company’s board of directors and limitations in its credit facilities.
Bluegreen
Bluegreen believes that it has sufficient liquidity from the sources described below to fund its operations, including its anticipated working capital, capital expenditure, and debt service requirements for the foreseeable future, subject to the success of its operations and initiatives (including those taken in connection with or in response to the COVID-19 pandemic) and the ongoing availability of credit.
Bluegreen’s primary sources of funds from internal operations are: (i) cash sales; (ii) down payments on VOI sales contractswhich are financed; (iii) proceeds from borrowings collateralized by notes receivable; (iv) cash from finance operations; and (v) net cash generated from sales and marketing fee-based services and other fee-based services, including resort management operations.
The ability to borrow against notes receivable from VOI buyers has been critical to Bluegreen’s continued liquidity. A financed VOI buyer is generally only required to pay a minimum of 10% of the purchase price in cash at the time of sale; however, selling, marketing and administrative expenses attributable to the sale are primarily cash expenses that generally exceed a buyer’s minimum required down payment. Accordingly, having financing facilities available to borrow against Bluegreen’s VOI notes receivable has been critical to its ability to meet its short and long-term cash needs. Bluegreen has attempted to maintain a number of diverse financing facilities. Historically, Bluegreen has relied on the term securitization market in order to generate liquidity and create capacity in its receivable facilities. In addition, maintaining adequate VOI inventory to sell and pursue growth into new markets requires Bluegreen to use cash on hand or incur debt for the acquisition, construction and development of new resorts. Development expenditures for the remainder of 2022 are expected to range between $50.0 million to $60.0 million and include development activity at resorts in Missouri and Tennessee. In addition, Bluegreen continues to look at opportunities for new resort or land acquisitions.
As described above, Bluegreen’s ability to borrow against its VOI notes receivable has historically been a critical factor in Bluegreen’s liquidity. If Bluegreen is unable to renew credit facilities or obtain new credit facilities, Bluegreen’s business, results of operations, liquidity, or financial condition would be materially, adversely impacted.
Bluegreen has entered into agreements with customers, subsidy advancesthird-party developers that allow Bluegreen to buy VOI inventory, typically on a non-committed basis, prior to when it intends to sell such VOIs. Bluegreen also enters into secondary market arrangements with certain HOAs and others generally on a non-committed basis, which allows Bluegreen to acquire VOIs generally at a significant discount, as such VOIs are typically obtained by the HOAs through foreclosure in connection with maintenance fee defaults. Acquisition of JIT and secondary market inventory, both of which are considered Bluegreen-owned inventory, is expected to range between $10.0 million to $20.0 million in 2022.
In April 2022, Bluegreen completed a private offering and sale of $172.0 million of VOI receivable-backed notes (the “2022 Term Securitization”). The 2022 Term Securitization consisted of the issuance of three tranches of VOI receivable-backed notes (collectively, the “Notes”) as follows: $71.0 million of Class A Notes, $56.5 million of Class B Notes, and $44.5 million of Class C Notes. The interest rates on the Class A Notes, Class B Notes and Class C Notes are 4.12%, 4.61% and 5.35%, respectively, which blends to an overall weighted average note interest rate of approximately 4.60%. The gross advance rate for this transaction was 88.3%. The Notes mature in September 2037.
The amount of the VOI receivables sold or to be sold to BXG Receivables Note Trust 2022-A (the “Trust”) in the transaction is $194.7 million, $185.0 million of which was sold to the Trust at closing and $9.7 million of which is expected to be sold to the Trust by August 2022. The gross proceeds of such sales to the Trust are anticipated to be $171.9 million. A portion of the proceeds received at the closing were used to: repay the Key Bank/DZ Purchase Facility $53.2 million, representing all amounts outstanding under the facility; repay the Liberty Bank facility $11.0 million; repay Pacific Western Bank Facility $16.1 million; capitalize a reserve fund; and pay fees and expenses associated with the transaction. Prior to the closing of the 2022-A Term Securitization, Bluegreen, as servicer, funded $4.9 million in connection with the servicer redemption of the notes related to the 2013 Term Securitization, and certain of the VOI notes in such trust were sold to the Trust in connection with the 2022 Term Securitization. The remainder of the gross proceeds from the 2022 Term Securitization are expected to be used for general corporate purposes. As a result of the facility repayments described above, (i) there currently are no amounts outstanding under the KeyBank/DZ Purchase Facility, which allows for maximum outstanding receivable-backed borrowings of $80.0 million on a revolving basis through December 31, 2022, (ii) there is currently approximately $11.7 million
outstanding under the Liberty Bank Facility, which permits maximum outstanding receivable-backed borrowings of $40.0 million on a revolving basis through June 30, 2024, and (iii) there is currently approximately $5.3 million outstanding under the Pacific Western Bank Facility, which permits maximum outstanding receivable-backed borrowings of $40.0 million on a revolving basis through September 20, 2024. Thus, additional availability of approximately $80.3 million in the aggregate was generated as a result of the repayments.
Subject to performance of the collateral, Bluegreen will receive any excess cash flows generated by the receivables transferred under the 2022 Term Securitization (excess meaning after payments of customary fees, interest and principal under the 2022 Term Securitization) on a pro-rata basis as borrowers make payments on their VOI loans.
While ownership of the VOI receivables included in the 2022 Term Securitization is transferred and sold for legal purposes, the transfer of these receivables is accounted for as a secured borrowing for financial accounting purposes. Accordingly, no gain or loss was recognized as a result of this transaction.
Bluegreen has $12.4 million of required contractual obligations due to be paid within one year, as well as two financing facilities with advance periods that will expire within one year. While there is no assurance that Bluegreen will be successful, Bluegreen intends to seek to renew or extend its debt and extend its advance periods on certain facilities.
Bluegreen’s level of debt and debt service requirements have several important effects on its operations and in turn on the Company, including that: (i) significant debt service cash requirements reduce the funds available for operations and future business opportunities and increase Bluegreen’s vulnerability to adverse economic and industry conditions, as well as conditions in the credit markets, generally; (ii) Bluegreen’s leverage position increases its vulnerability to economic and competitive pressures; (iii) the financial covenants and other restrictions contained in indentures, credit agreements and other agreements relating to its indebtedness require Bluegreen to meet certain financial tests and may restrict Bluegreen’s ability to, among other things, pay dividends, borrow additional funds, dispose of assets or make investments; and (iv) Bluegreen’s leverage position may limit funds available for acquisitions, working capital, capital expenditures, dividends and other general corporate purposes. Certain of Bluegreen’s competitors may operate on a less leveraged basis and may have greater operating and financial flexibility than Bluegreen does.
Credit Facilities for Receivables with Future Availability
Bluegreen maintains various credit facilities with financial institutions which allow Bluegreen to borrow against or sell its VOI notes receivable. As of March 31, 2022, Bluegreen had the following credit facilities with future availability, all of which are subject to terms and conditions during the advance period (dollars in thousands):
Borrowing | Outstanding | Availability | Advance Period | Borrowing Rate; | |||||||||
Liberty Bank Facility | $ | 40,000 | $ | 20,233 | $ | 19,767 | June 2024; | Prime + 0.10% to 0.50%; floor of 3.00%; 3.00%(1) | |||||
NBA Receivables Facility | 70,000 | 24,891 | 45,109 | September 2023; | 30 day LIBOR+2.25%; | ||||||||
Pacific Western Facility | 50,000 | 21,467 | 28,533 | September 2024; | 30 day LIBOR+2.50% to 2.75%(3); 3.21% | ||||||||
KeyBank/DZ Purchase Facility | 80,000 | 55,067 | 24,933 | December 2022; | 30 day LIBOR or CP +2.25%; interest rate floor of 0.25%; 2.53% (4) | ||||||||
Quorum Purchase Facility | 50,000 | 17,866 | 32,134 | December 2022; | (5) | ||||||||
$ | 290,000 | $ | 139,524 | $ | 150,476 |
(1)Recourse is limited to $5.0 million, subject to certain HOAs,exceptions.
(2)Borrowings after September 25, 2020 accrue interest at one-month LIBOR plus 2.25% (with an inventory purchase commitment under a Just-in-Time arrangement and commitments under non-cancelable operating leases.interest rate floor of 3.00%). Recourse to Bluegreen/Big Cedar Vacations is limited to $10.0 million, subject to certain exceptions.
(3)Recourse is limited to $7.5 million, subject to certain exceptions.
(4)Borrowings accrue interest at a rate equal to either LIBOR, a “Cost of Funds” rate or commercial paper (“CP”) rates plus 2.25%. The
interest rate will increase to the applicable rate plus 3.25% upon the expiration of the advance period.
(5)Of the amounts outstanding under the Quorum Purchase Facility at March 31, 2022, $9.7 million accrues interest at a rate per
annum of 4.95%, and $8.1 million accrues interest at a fixed rate of 5.10%.
See Note 10 to the Company’s Consolidated Financial Statements included in its Annual Report on Form 10-K for the year ended December 31, 2021 for additional information with respect to Bluegreen’s receivable-backed notes payable facilities.
Other Credit Facilities
Fifth Third Syndicated Line-of-Credit and Fifth Third Syndicated Term Loan. Bluegreen’s has a corporate credit facility which included a $100.0 million term loan (the “Fifth Third Syndicated Loan”) with quarterly amortization requirements and a $125.0 million revolving line of credit (the “Fifth Third Syndicated Line-of-Credit”) as of December 31, 2021. In February 2022, Bluegreen amended and increased the revolving line of credit by $75.0 million. Borrowings generally bear interest at a rate of term SOFR plus 1.75-2.50% and a 0.05%-0.10% credit spread adjustment, depending on Bluegreen’s leverage ratio. Borrowings are collateralized by certain VOI inventory, sales center buildings, management fees, short-term receivables and cash flows from residual interests relating to certain term securitizations. As of March 31, 2022, outstanding borrowings under the facility totaled $140.0 million, including $100.0 million under the Fifth Third Syndicated Term Loan with an interest rate of 1.99%, and $40.0 million under the Fifth Third Syndicated Line of Credit with an interest rate of 2.11%.
Bluegreen also has outstanding obligations under various credit facilities and securitizations that have no remaining future availability as the advance periods have expired.
Commitments
The following table summarizes the contractual minimum principal and interest payments net of unamortized discount, required on all of the Company’s outstanding debt, and non-cancelable operating leases and inventory purchase commitments by period due date, as of September 30, 2017March 31, 2022 (in thousands):
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| Payments Due by Period | ||||||||||
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| Unamortized |
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| Debt |
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| Less than |
| 1 — 3 |
| 4 — 5 |
| After 5 |
| Issuance |
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Contractual Obligations |
| 1 year |
| Years |
| Years |
| Years |
| Costs |
| Total |
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Receivable-backed notes payable | $ | - |
| - |
| 48,251 |
| 377,631 |
| (6,546) |
| 419,336 |
Lines-of-credit and notes payable |
| 32,568 |
| 42,603 |
| 43,697 |
| 21,625 |
| (2,710) |
| 137,783 |
Jr. subordinated debentures (1) |
| - |
| - |
| - |
| 177,129 |
| (1,290) |
| 175,839 |
Inventory purchase commitment |
| 8,873 |
| - |
| - |
| - |
| - |
| 8,873 |
Noncancelable operating leases |
| 26,523 |
| 45,511 |
| 39,283 |
| 48,405 |
| - |
| 159,722 |
Total contractual obligations |
| 67,964 |
| 88,114 |
| 131,231 |
| 624,790 |
| (10,546) |
| 901,553 |
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Interest Obligations (2) |
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Receivable-backed notes payable |
| 14,872 |
| 29,745 |
| 26,797 |
| 97,996 |
| - |
| 169,410 |
Lines-of-credit and notes payable |
| 4,249 |
| 5,335 |
| 1,956 |
| - |
| - |
| 11,540 |
Jr. subordinated debentures |
| 6,823 |
| 13,646 |
| 13,646 |
| 154,232 |
| - |
| 188,347 |
Total contractual interest |
| 25,944 |
| 48,726 |
| 42,399 |
| 252,228 |
| - |
| 369,297 |
Total contractual obligations | $ | 93,908 |
| 136,840 |
| 173,630 |
| 877,018 |
| (10,546) |
| 1,270,850 |
Payments Due by Period | ||||||||||||||||||
Contractual Obligations | Less than | 1 – 3 | 4 – 5 | After 5 | Unamortized | Total | ||||||||||||
Receivable-backed notes payable | $ | — | $ | 58,801 | $ | 33,244 | $ | 257,390 | $ | (3,892) | $ | 345,543 | ||||||
Bluegreen notes payable and other borrowings | 5,000 | 10,000 | 125,000 | — | (2,213) | 137,787 | ||||||||||||
BVH note payable to BBX Capital, Inc. | 50,000 | 50,000 | ||||||||||||||||
Jr. subordinated debentures (1) | — | — | — | 170,897 | (982) | 169,915 | ||||||||||||
Noncancelable operating leases (2) | 7,378 | 10,624 | 5,767 | 23,133 | 46,902 | |||||||||||||
Bass Pro Settlement (3) | 8,000 | 8,000 | ||||||||||||||||
Contractual interest (4) | 25,441 | 49,868 | 43,942 | 128,774 | 248,025 | |||||||||||||
Total contractual obligations | $ | 37,819 | $ | 137,293 | $ | 257,953 | $ | 580,194 | $ | (7,087) | $ | 1,006,172 | ||||||
(1)Amounts do not include purchase accounting adjustments for junior subordinated debentures of $34.7 million. (2)Amounts represent the cash payment for leases and include interest of $10.5 million (3)Amounts represent the $4.0 million annual cash payments to Bass Pro during each of 2023 and 2024 pursuant to the June 2019 settlement agreement and include imputed interest of $0.5 million. |
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(4)Assumes that the scheduled minimum principal payments are made in accordance with the table above and the interest rate on variable rate debt remains the same as the rate at March 31, 2022.
The future commitments of the Company, excluding Bluegreen, relate to Woodbridge’s junior subordinated debentures and the note payable to BBX Capital, including interest thereon. The Company will rely primarily on cash on hand and cash equivalents, as well as dividends, if any, that may be paid by Bluegreen in the future, in order to satisfy the principal payments required on its contractual obligations. As discussed above, while the Company believes that it will have sufficient cash and cash equivalents to fund its operations for the foreseeable future, it will be dependent on the payment of distribution by Bluegreen to fund its operations in future periods. There is no assurance that Bluegreen will pay distributions in amounts required to fund BVH’s needs or at all.
In lieu of paying maintenance fees for unsold VOI inventory, Bluegreen provides subsidies tomay enter into subsidy agreements with certain homeowners’ associations to provide for funds necessary to operate and maintain vacation ownership properties in excess of assessments collected from owners of the VOIs.HOAs. During the ninethree months ended September 30, 2017,March 31, 2022 and 2021, Bluegreen made payments related to such subsidies of $1.8 million.$1.5 million and $1.6 million, respectively, which are included within cost of other fee-based services in the Company’s unaudited consolidated statements of operations and comprehensive income. As of September 30, 2017, BluegreenMarch 31, 2022, we had an aggregate $6.7$4.9 million liabilityaccrued for such subsidies, to ten homeowners’ associations.
During 2016, BBX Capital entered into a severance arrangement with an executive. Underwhich is included in accrued liabilities and other in the termsunaudited consolidated balance sheet as of the arrangement, the executive is receiving $3.7 million over a three year period ending in August 2019.such date. As of September 30, 2017, $2.1 million remainsDecember 31, 2021, Bluegreen had no accrued liabilities for such subsidies.
Bluegreen intends to be paiduse cash on hand and cash flow from operations, including cash received from the sale or pledge of VOI notes receivable, and cash received from new borrowings under the above arrangement.
In September 2017, Bluegreen entered into an agreement with an executive, in connection with his retirement. Pursuant to the terms of the agreement, Bluegreen will make payments totaling approximately $2.9 million between October 2017 and March 2019.
Bluegreen has an exclusive marketing agreement with Bass Pro, a nationally-recognized retailer of fishing, marine, hunting, camping and sports gear, that provides Bluegreen with the right to market and sell vacation packages at kiosks in each of Bass Pro’s retail locations and through other means. As of September 30, 2017, Bluegreen sold vacation packages in 68 of Bass Pro’s stores. In exchange, Bluegreen compensates Bass Pro based on VOI sales generated through the program. No compensation is paid to Bass Pro under the agreement on sales made at Bluegreen/Big Cedar Vacations’ resorts. During each of the nine months ended September 30, 2017 and 2016 VOI sales to prospects and leads generated by the agreement with Bass Pro accounted for approximately 15% of Bluegreen’s VOI sales volume. On October 9, 2017, Bass Pro advised Bluegreen that it believes the amounts paid to it as VOI sales commissions should not have been adjusted for certain purchaser defaults. Bluegreen previously informed Bass Pro that the aggregate amount of such adjustments for defaults charged back to Bass Pro between January 2008 and June 2017
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totaled approximately $4.8 million. Bluegreen believes these chargebacks were appropriate and consistent with the terms and intent of the agreements with Bass Pro, and Bluegreen is continuing to discuss the matter with Bass Pro. On October 20, 2017,existing or future credit facilities in order to demonstrate its good faith, Bluegreen paid this amount to Bass Pro pending a resolution ofsatisfy the matter in the ordinary course. Bluegreen expects to recognize that amount as an expense during the fourth quarter of 2017.principal and interest payments required on contractual obligations.
A wholly owned subsidiary of the Company has entered into area development agreements with MOD Super-Fast Pizza Franchising, LLC which will involve entering into lease agreements for MOD restaurant locations. The Company may be required to guarantee performance on these lease agreements.
The CompanyBluegreen believes that its existing cash, anticipated cash generated from operations, anticipated future permitted borrowings under existing or future credit facilities, and anticipated future sales of notes receivable under existing, future or replacement purchase facilities will be sufficient to meet its anticipated working capital, capital expenditure and debt service requirements, including the contractual payment of the Bluegreen obligations set forth above, for the foreseeable future subject to the success of the Company’sits ongoing business strategy andstrategies, the ongoing availability of credit. The Companycredit and the impact of general economic conditions, the COVID-19 pandemic and the success of any actions Bluegreen has taken in response thereto. Bluegreen will continue its efforts to renew, extend or replace any credit and receivables purchase facilities that have expired or that will expire in the near term. The CompanyBluegreen may, in the future, also obtain additional credit facilities and may issue corporate debt or equity securities.debt. Any debt incurred or issued by the Company may be secured or unsecured, bear interest at fixed or variable rates and may be subject to such terms as the lender may require. In addition, the Company’srequire and management believes acceptable. There can be no assurance that Bluegreen’s efforts to renew or replace the credit facilities or receivables purchase facilities which have expired or which are scheduled to expire in the near term may notwill be successful andor that sufficient funds may notwill be available from operations or under existing, proposed or future revolving credit or other borrowing arrangements or receivables purchase facilities to meet itsBluegreen’s cash needs, including debt service obligations. To the extent the CompanyBluegreen is not ableunable to sell notes receivable or borrow under such facilities, its ability to satisfy its obligations would be materially adversely affected. In addition, the Company’s future operating performance and ability to meet its financial obligations will be subject to future economic conditions and to financial, business and other factors, many of which may be beyond the Company’s control.
Bluegreen’s receivables purchase facilities, and its credit facilities, indentures and other outstanding debt instruments include what Bluegreen believes to be customary conditions to funding, eligibility requirements for collateral, cross-default and other acceleration provisions and certain financial and other affirmative and negative covenants, including, among others, limits on the incurrence of indebtedness, payment of dividends, investments in joint ventures and other restricted payments, the incurrence of liens and transactions with affiliates, as well as covenants concerning net worth, fixed charge coverage requirements, debt-to-equity ratios, portfolio performance requirements and cash balances, and events of default or termination. In the future, Bluegreen may be required to seek waivers of such covenants, but may not be successful in obtaining waivers, and such covenants may limit Bluegreen’sits ability to raise funds, sell receivables or satisfy or refinance its obligations, or otherwise adversely affect the Company’sits financial condition and results of operations, as well as its ability to pay dividends.
Off-balance-sheet Arrangements
BBX Capital guarantees certain obligations of its wholly-owned subsidiariesdistributions. Bluegreen’s future operating performance and unconsolidated real estate joint ventures, which are not included in the contractual obligations table above, and also guarantees certain of the obligations in the above table as described in further detail in Item 1 – Note 10 of this Report.
Liquidity and Capital Resources
BBX Capital Corporation
As of September 30, 2017 and December 31, 2016, the Company, excluding Bluegreen, had cash and cash equivalents of approximately $140.4 million and $155.7 million, respectively.
BBX Capital’s principal sources of liquidity are its available cash and short-term investments, funds obtained from scheduled payments on loans, loan recoveries, loan payoffs, sales of real estate, income from income producing real estate, distributions from unconsolidated real estate joint ventures and distributions received from Bluegreen. BBX Capital expects to use its available funds for general corporate purposes and to make additional investments in real estate based opportunities and middle market operating businesses, to invest in other opportunities or to repurchase
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shares of its common stock pursuant to its share repurchase program. In June 2017, the Company paid $58.4 million, net of cash acquired, to purchase IT’SUGAR and plans to expand IT’SUGAR’s footprint by opening three to four new retail locations during 2017 and expects to open additional stores in 2018. The Company anticipates opening up to 60 MOD Super-Fast Pizza restaurant locations over the next seven years and expects the aggregate capital expenditures for the new restaurant locations to be in the range of $1.5 million to $2 million during the remainder of 2017.
BBX Capital believes that its current financial condition and credit relationships, together with anticipated cash flows from other sources of funds, including potential dividends from Bluegreen (which, as described below, are subject to certain limitations), and, to the extent determined to be advisable, proceeds from the disposition of properties or investments, will allow it to meet its anticipated near-term liquidity needs. BBX Capital may also seek additional liquidity from outside sources, including traditional bank financing, secured or unsecured indebtedness, or the issuance of equity and/or debt securities. However, these alternatives may not be available to us on attractive terms, or at all. The inability to obtain funds through the sources discussed above would have a material adverse effect on the Company’s business, results of operations and financial condition.
BBX Capital expects that it will receive dividends from time to time from its wholly owned subsidiary, Bluegreen. During the three and nine months ended September 30, 2017, Bluegreen paid dividends totaling $20.0 million and $40 million, respectively, compared to $20.0 million and $45.0 million, respectively, during the same periods in 2016. Dividends from Bluegreen will be dependent on and subject to Bluegreen’s results of operations and cash flows, as well as restrictions contained in Bluegreen’s debt facilities. Except as otherwise noted, the debts and obligations of Bluegreen are not direct obligations of the Company and generally are non-recourse to the Company. Similarly, the assets of Bluegreen are not available to us, absent a dividend or distribution. Furthermore, certain of Bluegreen’s credit facilities contain terms which could limit the payment of cash dividends without the lender’s consent or waiver and Bluegreen may only pay dividends subject to such restrictions as well as the declaration of dividends by its board of directors. As a result, BBX Capital may not receive dividends from Bluegreen consistent with prior periods or in the time frames or amounts anticipated, or at all. In addition, Bluegreen’s dividends to BBX Capital may be reduced if Bluegreen’s proposed initial public offering, as further discussed below, is consummated. BBX Capital may also receive funds from Bluegreen in connection with its tax sharing agreement to the extent Bluegreen utilizes BBX Capital’s tax benefits in BBX Capital’s consolidated tax return. During the three and nine months ended September 30, 2017, BBX Capital received $13.9 million and $39.4 million, respectively, of tax sharing payments from Bluegreen compared to $6.6 million and $20.4 million, respectively, during the same periods in 2016.
In April 2015, BBX Capital borrowed $80.0 million from a wholly-owned subsidiary of Bluegreen to finance in part the purchase of 4,771,221 shares of BCC’s Class A Common Stock. This debt accrues interest as of July 1, 2017 at a per annum rate of 6%, with quarterly payments to Bluegreen of $1.2 million and BBX Capital may be required to repay all or a portion of the $80.0 million borrowed from Bluegreen if Bluegreen is not in compliance with debt covenants under its debt instruments.
In March 2017, June 2017 and September 2017, the Company’s Board of Directors declared quarterly cash dividends on the Company’s Class A and Class B Common Stock of $0.0075 per share. In June 2016 and September 2016, the Company’s Board of Directors declared a quarterly cash dividend on the Company’s Class A and Class B Common Stock at $0.005 per share. Prior to June 2016, the Company had never paid cash dividends on its common stock. Future declaration and payment of cash dividends with respect to the Company’s Common Stock, if any, will be determined in light of the then-current financial condition of the Company and other factors deemed relevant by the board of directors.
On September 21, 2009, our board of directors approved a share repurchase program which authorized the repurchase of up to 20,000,000 shares of Class A Common Stock and Class B Common Stock at an aggregate cost of up to $10 million. The share repurchase program authorized management, at its discretion, to repurchase shares from time to time subject to market conditions and other factors. During April 2017, the Company repurchased 1.0 million shares of its Class A Common Stock under this share repurchase program for approximately $6.2 million.
On June 13, 2017, our board of directors approved a share repurchase program which authorizes the repurchase of a total of up to 5,000,000 shares of the Company’ Class A Common Stock and Class B Common Stock at an aggregate cost of no more than $35 million. This program replaces the Company’s repurchase program that the board approved in September 2009 discussed above. The current program, like the prior program, authorizes management, at its discretion, to repurchase shares from time to time subject to market conditions and other factors. No shares have been repurchased under the current program.
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The Company has outstanding 15,000 shares of 5% Cumulative Preferred Stock at a stated value of $1,000 per share. The shares of 5% Cumulative Preferred Stock are redeemable at the option of the Company, from time to time, at a redemption price of $1,000 per share. Shares of the 5% Cumulative Preferred Stock are also subject to mandatory redemption as described below. The 5% Cumulative Preferred Stock’s liquidation preference is equal to its stated value of $1,000 per share plus any accumulated and unpaid dividends or an amount equal to the applicable redemption price in a voluntary liquidation or winding up of the Company. Holders of the 5% Cumulative Preferred Stock have no voting rights, except as provided by Florida law, and are entitled to receive, when and as declared by the Company’s board of directors, cumulative quarterly cash dividends on each such share at a rate per annum of 5% of the stated value from the date of issuance. The Company pays regular quarterly cash dividends of $187,500 on its 5% Cumulative Preferred Stock. The terms of the 5% Cumulative Preferred Stock requires a mandatory redemption of the stock and accordingly is classified as a liability in the Company’s Condensed Consolidated Statements of Financial Condition. The Company is required to redeem the preferred shares in $5.0 million annual payments in each of the years ending December 31, 2018, 2019 and 2020. During December 2013, the Company made a $5.0 million loan to the preferred shareholders. The loan is secured by 5,000 shares of 5% Cumulative Preferred Stock, has a term of five years, accrues interest at a rate of 5% per annum and provides for payments of interest only on a quarterly basis during the term of the loan, with all outstanding amounts being due and payable at maturity.
Additionally, in October 2017, BBX Capital borrowed $3.4 million from the preferred shareholder in connection with its initial capital contribution to the Chapel Trail real estate joint venture. See Note 7 included under Item 1 of this report for a discussion of the promissory note and investment in the real estate joint venture.
Bluegreen
As of September 30, 2017 and December 31, 2016, Bluegreen, had cash and cash equivalents of approximately $124.0 million and $144.1 million, respectively. Bluegreen’s primary sources of funds from internal operations are: (i) cash sales, (ii) down payments on VOI sales which are financed, (iii) proceeds from the sale of, or borrowings collateralized by, notes receivable, (iv) cash from finance operations, including mortgage servicing fees and principal and interest payments received on the purchase money mortgage loans arising from sales of VOIs, and (v) net cash generated from sales and marketing fee-based services and other resort fee-based services, including resort management operations.
While the vacation ownership business has historically been capital intensive and Bluegreen may from time to time pursue transactions or activities which may require significant capital investments and adversely impact cash flow, Bluegreen has generally sought to focus on the generation of “free cash flow” (defined as cash flow from operating activities, less capital expenditures) by (i) incentivizing its sales associates and creating programs with third-party credit card companies to generate a higher percentage of sales in cash; (ii) maintaining sales volumes that focus on efficient marketing channels; (iii) limiting its capital and inventory expenditures; (iv) utilizing sales and marketing, mortgage servicing, resort management services, title and construction expertise to pursue fee-based-service business relationships that generally require minimal up-front capital investment and have the potential to produce incremental cash flows, and (v) selling VOIs through Secondary Market Sales and Just-In-Time Sales.
VOI sales are generally dependent upon providing financing to buyers. The ability to sell and/or borrow against notes receivable from VOI buyers has been a critical factor in Bluegreen’s continued liquidity. A financed VOI buyer is generally only required to pay a minimum of 10% to 20% of the purchase price in cash at the time of sale; however, selling, marketing, and administrative expenses attributable to the sale are primarily cash expenses that generally exceed a buyer’s minimum required down payment. Accordingly, having financing facilities available for the hypothecation, sale, or transfer of these VOI receivables has been a critical factor in Bluegreen’s ability to meet its shortfinancial obligations will be subject to future economic conditions and long-term cash needs. Bluegreen has attempted to maintain a number of diverse financing facilities. Historically, Bluegreen has relied on its ability to sell receivables in the term securitization market in order to generate liquidity and create capacity in its receivable facilities. In addition, maintaining adequate VOI inventory to sell and pursue growth into new markets has historically required Bluegreen to incur debt for the acquisition, construction, and development of new resorts. Development expenditures during 2017 are expected to be in a range of $40.0 million to $45.0 million which primarily relates to Bluegreen/Big Cedar Vacations Resort and proposed development at Bluegreen’s Fountains Resort in Orlando. Bluegreen expects to seek to acquire or develop additional VOI inventory, which would increase acquisition and development expenditures and may involve or require the incurrence of additional debt.
In connection with Bluegreen’s capital-lightfinancial, business strategy, Bluegreen has entered into agreements with third-party developers that allow Bluegreen to buy VOI inventory typically on a non-committed basis just prior to when Bluegreen intends to sell such VOI. Bluegreen’s capital-light business strategy also includes Secondary Market Sales pursuant to which Bluegreen enters into secondary market arrangements with certain resort HOAs and others on a non-
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committed basis, which allows Bluegreen to acquire VOIs generally at a significant discount as such VOIs are typically obtained by the HOAs through foreclosure in connection with maintenance fee defaults. Acquisitions of Just-in-Time and Secondary Market inventory in 2017 is expected to range from $30.0 million to $40.0 million.
In addition, capital expenditures in connection with the expansion of Bluegreen’s sales and marketing facilities, as well as, information technology capital expenditures are expected to be in a range of $15.0 million to $25.0 million in 2017.
Available funds may also be invested to acquire other business or assets, invested in real estate based opportunities and middle market operating businesses outside of the VOI and hospitality industries or loaned to affiliates or others.
Bluegreen’s level of debt and debt service requirements have several important effects on Bluegreen’s operations, including the following: (i) significant debt service cash requirements reduce the funds available for operations and future business opportunities and increase Bluegreen’s vulnerability to adverse economic and industry conditions, as well as conditions in the credit markets, generally; (ii) Bluegreen’s leverage position increases its vulnerability to economic and competitive pressures; (iii) the financial covenants and other restrictions contained in indentures, credit agreements and other agreements relating to Bluegreen’s indebtedness require Bluegreen to meet certain financial tests and may restrict Bluegreen’s ability to, among other things, pay dividends, borrow additional funds, dispose of assets or make investments; and (iv) Bluegreen’s leverage position may limit funds available for acquisitions, working capital, capital expenditures, dividends, and other general corporate purposes. Certain of Bluegreen’s competitors operate on a less leveraged basis and have greater operating and financial flexibility than Bluegreen does.
On October 23, 2017, the Company announced that Bluegreen filed a registration statement on Form S-1 with the SEC relating to a proposed initial public offering of shares of Bluegreen’s common stock representing a minority interest in Bluegreen. The number of shares to be offered and the price range for the proposed offering have not yet been determined. It is currently contemplated that Woodbridge will participate in the proposed offering as a selling shareholder with respect to a portion of the offering. There is no assurance that Bluegreen will complete the proposed offering or that Woodbridge will sell any shares in the offering.
Credit Facilities for Bluegreen Receivables with Future Availability
Bluegreen maintains various credit facilities with financial institutions which allow Bluegreen to borrow against or sell its VOI notes receivable. Bluegreen had the following credit facilities with future availability as of September 30, 2017, allfactors, many of which are subject to revolving availability terms during the advance period and therefore provide for additional availability as the facility is paid down, subject to compliance with relevant covenants, eligible collateral and applicable terms and conditions during the advance period (dollars in thousands):may be beyond its control.
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| Borrowing Limit as of September 30, 2017 |
| Outstanding Balance as of September 30, 2017 |
| Availability as of September 30, 2017 |
| Advance Period Expiration; Borrowing Maturity |
| Borrowing Rate; Rate as of September 30, 2017 |
Liberty Bank Facility | $ | 50,000 | $ | 15,767 | $ | 34,233 |
| January 2018; November 2020 |
| Prime Rate +0.50%; floor of 4.00%; 4.75% |
NBA Receivable Facility (2) |
| 50,000 |
| 39,960 |
| 10,040 |
| September 2020; March 2025 |
| 30-Day LIBOR + 2.75% to 3.25%; floor of 3.5% to 4.00%; 3.99% to 4.48% (1) |
Pacific Western Bank Facility |
| 40,000 |
| 17,688 | (3) | 22,312 | (3) | September 2018; September 2021 |
| 30 day LIBOR+3.50% to 4.50%; 5.50% |
KeyBank/DZ Purchase Facility |
| 80,000 |
| 5,656 |
| 74,344 |
| December 2019; December 2022 |
| 30 day LIBOR+2.75%; 3.98%(4) |
Quorum Purchase Facility |
| 50,000 |
| 18,285 |
| 31,715 |
| June 2018; December 2030 |
| (5) |
| $ | 270,000 | $ | 97,356 | $ | 172,644 |
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Other Credit Facilities and Outstanding Notes Payable
Fifth Third Syndicated Line-of-Credit and Fifth Third Syndicated Term Loan. In December 2016,As previously disclosed, Bluegreen entered into a $100.0settlement agreement and revised marketing arrangement with Bass Pro and its affiliates during June 2019. Pursuant to the Settlement Agreement, Bluegreen agreed to make five annual
payments to Bass Pro of $4.0 million, syndicated credit facility with Fifth Third Bank, as administrative agentwhich commenced in January 2020. Additionally, in lieu of the previous commission arrangement, Bluegreen agreed to pay to Bass Pro a fixed annual fee for each Bass Pro and lead arranger,Cabela’s retail store that Bluegreen accessed and certain other bank participants as lenders. The facility includes a $25.0 million term loan (the “Fifth Third Syndicated Term Loan”) with quarterly amortization requirements and a $75.0 million revolving line of credit (the “Fifth Third Syndicated Line-of-Credit”). Amounts borrowed under the facility generally bear interest at LIBOR plus 2.75% - 3.75% depending on Bluegreen’s leverage ratio, are collateralized by certain of Bluegreen’s VOI inventory, sales center buildings, management fees and short-term receivables, and will mature in December 2021.an amount per net vacation package sold. As of September 30, 2017, outstanding borrowings underMarch 31, 2022, Bluegreen had sales and marketing operations at a total of 128 Bass Pro Shops and Cabela’s Stores. In December 2021, Bluegreen paid Bass Pro $8.3 million in payment of the facility totaled $44.12022 fixed fee, of which $6.3 million including $24.1 million under the Fifth Third Syndicated Term Loan with an interest ratewas unamortized as of 4.02%,March 31, 2022 and $20.0 million under the Fifth Third Syndicated Line of Credit with an interest rate of 3.99%.
See Item 8 - Note 12 tois included in prepaid expenses in the Company’s Consolidated Financial Statements included inunaudited consolidated balance sheet.
Off-balance-sheet Arrangements
As of March 31, 2022, the 2016 Annual Report for additional information with respect to Bluegreen’s credit facilities termsCompany did not have any “off-balance sheet” arrangements.
Item 3. Quantitative and covenants.Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. ControlsControls and ProceduresProcedures.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, ourThe Company’s management, evaluated, with the participation of our principal executive officerits Chief Executive Officer and principal financial officer,its Chief Financial Officer, conducted an evaluation of the effectiveness of ourits disclosure controls and procedures (as such term is defined in RuleRules 13a-15(e) and 15d-15(e) under the Exchange Act)., as of March 31, 2022. Based uponon that evaluation, our principal executive officerthe Company’s Chief Executive Officer and principal financial officerChief Financial Officer concluded that, ouras of March 31, 2022, the Company’s disclosure controls and procedures were effective as of September 30, 2017 to ensurein ensuring that information required to be disclosed by usthe Company in the reports that we fileit files or submitsubmits under the Exchange Act (i) ishas been recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) ishas been accumulated and communicated to ourits management, including our principal executive officerthe Chief Executive Officer and principal financial officer,Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
ThereDuring the three months ended March 31, 2022, there were no changes in ourthe Company’s internal control over financial reporting that occurred during the quarter ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, ourits internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings Legal Proceedings.
There have been no material changes in ourthe Company’s material legal proceedings from those disclosed in the “Legal Proceedings” section of our Annual Report in Form 10-K for the year ended December 31, 2016 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2017.
There have been no material changes in the risks and uncertainties that we face from those disclosed in the “Risk Factors” section of ourits Annual Report on Form 10-K for the year ended December 31, 2016. 2021, other than those described in Note 9 to the unaudited consolidated financial statements included in Part I of this Quarterly Report on Form 10-Q, which are incorporated into this Item by reference.
Item 1A. Risk Factors.
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Exhibit 10.1Fourth Amended and Restated Revolving Promissory Note (Hypothecation Facility) dated September 28, 2017,There have been no material changes to the risk factors faced by and among Bluegreen / Big Cedar Vacations, LLC, as Borrower, and ZB, N.A. dba National Bank of Arizona, as Lender
Exhibit 10.2Second Amended and Restated Loan and Security Agreement (Hypothecation Facility) dated September 28, 2017, by and among Bluegreen / Big Cedar Vacations, LLC, as Borrower, and ZB, N.A. dba National Bank of Arizona, as Lender
Exhibit 10.3Second Amended and Restated Promissory Note (Inventory Loan) dated September 28, 2017, by and among Bluegreen / Big Cedar Vacations, LLC, as Borrower, and ZB, N.A. dba National Bank of Arizona, as Lender
Exhibit 10.4Second Amended and Restated Loan Agreement (Inventory Loan) dated September 28, 2017, by and among Bluegreen / Big Cedar Vacations, LLC, as Borrower, and ZB, N.A. dba National Bank of Arizona, as Lender
Exhibit 10.6Guarantor Consent and Ratification and Confirmation of an Amendment to Full Guaranty (Hypothecation Facility) dated September 28, 2017, by Bluegreen Vacations Corporation, as Guarantor,the Company from those disclosed in favor of Z.B., National Bank of Arizona, as Lender
Exhibit 10.7Full Guaranty (Inventory Loan) dated December 13, 2013, by Bluegreen Corporation, as Guarantor, in favor of National Bank of Arizona, as Lender
Exhibit 10.8Guarantor Consent and Ratification and Confirmation of an Amendment to Full Guaranty (Inventory Loan) dated September 28, 2017, by Bluegreen Vacations Corporation, as Guarantor, in favor of Z.B., National Bank of Arizona, as Lender
Exhibit 31.1Principal Executive Officer Certification pursuant to Section 302the “Risk Factors” section of the Sarbanes-Oxley ActCompany’s Annual Report on Form 10-K for the year ended December 31, 2021.
Item 2. Unregistered sales of 2002Equity Securities and Use of Proceeds
Exhibit 31.2Principal Financial Officer Certification pursuant to Section 302Information regarding the Company’s purchase of its Class A and Class B Common Stock during the quarter ended March 31, 2022 is set forth in the table below:
Period | Total Number of Shares Purchased | Average Price Per Share | Total Number of Shares Purchased as a Part of Publicly Announced Programs | Maximum Number of Shares That May Yet Be Purchased Under the Program (1) | |||||
January 1 - January 31, 2022 | - | - | - | 12,737,633 | |||||
February 1 - February 28, 2022 | - | - | - | 12,737,633 | |||||
March 1 - March 31, 2022 | 151,232 | $ | 31.07 | 151,232 shares (or $4,698,190) | 58,039,443 | ||||
Total | 151,232 | $ | 31.07 | 151,232 shares (or $4,698,190) | 58,039,443 |
(1)In August 2021, the Company’s board of directors approved a share repurchase program which authorizes the repurchase of the Sarbanes-Oxley ActCompany’s Class A Common Stock and Class B Common Stock at an aggregate cost of 2002
Exhibit 32.1*Principal Executive Officer Certification pursuantup to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906$40.0 million. In March 2022, the Company’s board of directors approved a $50.0 million increase in the aggregate cost of the Sarbanes-Oxley Act of 2002Company’s Class A Common Stock and Class B Common Stock that may be repurchased under the program.
Exhibit 32.2*Principal Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Item 6. Exhibits.
EXHIBIT INDEX
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| Indenture, dated as of April 28, 2022, among BXG Receivables Note Trust 2022-A, as Issuer, Bluegreen Vacations Corporation, as Servicer, Vacation Trust, Inc., as Club Trustee, Concord Servicing LLC, as Backup Servicer, and U.S. Bank Trust Company, National Association, as Indenture Trustee, U.S. Bank National association, as Custodian (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2022) | |
Sale Agreement, dated as of April 28, 2022, by and between BRFC 2022-A LLC, as Depositor, and BXG Receivables Note Trust 2022-A, as Issuer (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2022) | ||
Transfer Agreement, dated as of April 28, 2022, by and among Bluegreen Vacations Corporation, BXG Timeshare Trust I, as Seller, and BRFC 2022-A LLC, as Depositor (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2022) | ||
Purchase and Contribution Agreement, dated as of April 28, 2022, by and between Bluegreen Vacations Corporation, as Seller, and BRFC 2022-A LLC, as Depositor (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2022) | ||
BXG Receivables Note Trust 2022-A, Standard Definitions (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 2, 2022) | ||
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Labels | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | The cover page for the Company’s Quarterly Report on Form 10-Q has been formatted in Inline XBRL and contained in Exhibit 101 |
* Exhibits† Exhibit is furnished, and not filed, with this Form 10-Q.
report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BBX CAPITAL CORPORATION
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May 5, 2022 | By:/s/ Alan B. Levan | |
Alan B. Levan | ||
Chairman of the Board, Chief Executive Officer and President | ||
May 5, 2022 | By: /s/ Raymond S. Lopez | |
Raymond S. Lopez | ||
Executive Vice President, Chief Operating Officer, Chief Financial Officer and Treasurer |
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