Washington, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarter Ended September 30, 20192020
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number
001-09071
BBX CapitalBluegreen Vacations Holding Corporation
(Exact name of registrant as specified in its charter)
Florida |
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(State or other jurisdiction of incorporation or organization) | (I.R.S Employer Identification No.) | |
401 East Las Olas Boulevard, Suite 800 | ||
Fort Lauderdale, Florida | 33301 | |
(Address of principal executive office) | (Zip Code) |
(954) 940-4900 |
(Registrant's telephone number, including area code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Class A Common Stock, $.01 par value (including associated Preferred Share Purchase Rights) |
| New York Stock Exchange |
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 be 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][X]NO [ ]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
YES [X][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,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] | Accelerated filer[X] | 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 ]
The number of shares outstanding of each of the registrant’s classes of common stock as of October 29, 2019November 4, 2020 is as follows:
Class A Common Stock of $.01 par value, 76,932,06515,624,091 shares outstanding.
Class B Common Stock of $.01 par value, 18,627,8733,693,596 shares outstanding.
Bluegreen Vacations Holding Corporation | TABLE OF CONTENTS | |||
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Item 1. | Financial Statements | |||
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1 | ||||
2 | ||||
3 | ||||
5 | ||||
Notes to Condensed Consolidated Financial Statements - Unaudited | 7 | |||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 33 | ||
Item 3. | 58 | |||
Item 4. | 58 | |||
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OTHER INFORMATION | ||||
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Item |
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Item | ||||
59 | ||||
Item 6. | 61 | |||
62 | ||||
PART I – FINANCIAL INFORMATION
Bluegreen Vacations Holding Corporation | ||||||
Condensed Consolidated Statements of Financial Condition - Unaudited | ||||||
(In thousands, except share data) | ||||||
September 30, | December 31, | |||||
2020 | 2019 | |||||
ASSETS | ||||||
Cash and cash equivalents | $ | 211,110 | 335,846 | |||
Restricted cash ($15,135 in 2020 and $22,534 in 2019 in variable interest entities ("VIEs")) | 35,672 | 49,896 | ||||
Notes receivable | 559,918 | 589,198 | ||||
Less: Allowance for loan loss | (149,805) | (140,630) | ||||
Notes receivable, net ($271,539 in 2020 and $292,590 in 2019 in VIEs) | 410,113 | 448,568 | ||||
Vacation ownership interest ("VOI") inventory | 350,345 | 346,937 | ||||
Property and equipment, net | 93,046 | 99,670 | ||||
Intangible assets, net | 61,452 | 61,515 | ||||
Operating lease assets | 19,667 | 21,498 | ||||
Other assets | 58,168 | 68,477 | ||||
Discontinued operations total assets | — | 360,861 | ||||
Total assets | $ | 1,239,573 | 1,793,268 | |||
LIABILITIES AND EQUITY | ||||||
Liabilities: | ||||||
Accounts payable | $ | 17,794 | 16,662 | |||
Deferred income | 14,635 | 18,074 | ||||
Escrow deposits | 15,967 | 22,711 | ||||
Other liabilities | 78,278 | 99,320 | ||||
Receivable-backed notes payable - recourse | 77,417 | 88,569 | ||||
Receivable-backed notes payable - non-recourse (in VIEs) | 303,301 | 334,246 | ||||
Note payable to BBX Capital, Inc. | 75,000 | — | ||||
Notes payable and other borrowings | 160,671 | 146,160 | ||||
Junior subordinated debentures | 137,937 | 137,254 | ||||
Operating lease liabilities | 21,177 | 22,957 | ||||
Deferred income taxes | 84,224 | 89,855 | ||||
Discontinued operations total liabilities | — | 173,381 | ||||
Total liabilities | 986,401 | 1,149,189 | ||||
Commitments and contingencies (See Note 8) |
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Redeemable noncontrolling interest | — | 4,009 | ||||
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 15,624,091 in 2020 and 15,106,067 in 2019 | 156 | 151 | ||||
Class B Common Stock of $0.01 par value; authorized 4,000,000 shares; | ||||||
issued and outstanding 3,693,596 in 2020 and 3,191,571 in 2019 | 37 | 32 | ||||
Additional paid-in capital | 177,104 | 153,507 | ||||
Accumulated earnings | — | 394,551 | ||||
Accumulated other comprehensive income | — | 1,554 | ||||
Total shareholders' equity | 177,297 | 549,795 | ||||
Noncontrolling interests | 75,875 | 90,275 | ||||
Total equity | 253,172 | 640,070 | ||||
Total liabilities and equity | $ | 1,239,573 | 1,793,268 | |||
See Notes to Condensed Consolidated Financial Statements - Unaudited | ||||||
Bluegreen Vacations Holding Corporation | ||||||||||||
Condensed Consolidated Statements of Operations and Comprehensive Income - Unaudited | ||||||||||||
(In thousands, except per share data) | ||||||||||||
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||
Revenues: | ||||||||||||
Sales of VOIs | $ | 59,265 | 66,318 | 113,447 | 186,351 | |||||||
Fee-based sales commissions | 22,119 | 60,478 | 64,619 | 161,033 | ||||||||
Other fee-based services | 27,831 | 33,744 | 83,558 | 94,015 | ||||||||
Cost reimbursements | 15,684 | 17,883 | 46,654 | 48,933 | ||||||||
Interest income | 19,346 | 21,586 | 59,963 | 63,969 | ||||||||
Other revenue | — | 28 | — | 70 | ||||||||
Total revenues | 144,245 | 200,037 | 368,241 | 554,371 | ||||||||
Costs and Expenses: | ||||||||||||
Cost of VOIs sold | 3,597 | 3,121 | 8,734 | 17,541 | ||||||||
Cost of other fee-based services | 20,861 | 22,872 | 61,107 | 63,913 | ||||||||
Cost reimbursements | 15,684 | 17,883 | 46,654 | 48,933 | ||||||||
Interest expense | 7,968 | 11,754 | 27,668 | 34,270 | ||||||||
Selling, general and administrative expenses | 120,933 | 130,032 | 281,237 | 394,280 | ||||||||
Total costs and expenses | 169,043 | 185,662 | 425,400 | 558,937 | ||||||||
Other (expense) income | (339) | 2,204 | 186 | 4,364 | ||||||||
(Loss) income before income taxes | (25,137) | 16,579 | (56,973) | (202) | ||||||||
Provision for income taxes | (201) | (8,152) | (441) | (4,658) | ||||||||
Net (loss) income from continuing operations | (25,338) | 8,427 | (57,414) | (4,860) | ||||||||
Discontinued operations | ||||||||||||
(Loss) income from operations | (5,759) | 24,603 | (41,593) | 38,785 | ||||||||
Benefit (provision) for income taxes | 8,623 | (6,530) | 9,067 | (10,411) | ||||||||
Net income (loss) from discontinued operations | 2,864 | 18,073 | (32,526) | 28,374 | ||||||||
Net (loss) income | (22,474) | 26,500 | (89,940) | 23,514 | ||||||||
Less: Income attributable to noncontrolling interests - continuing operations | 3,357 | 4,210 | 4,314 | 11,441 | ||||||||
Less: (Loss) attributable to noncontrolling interests - discontinued operations | (509) | (98) | (4,822) | (166) | ||||||||
Net (loss) income attributable to shareholders | $ | (25,322) | 22,388 | (89,432) | 12,239 | |||||||
Basic (loss) earnings per share from continuing operations | $ | (1.53) | 0.23 | (3.35) | (0.88) | |||||||
Basic earnings (loss) per share from discontinued operations | 0.18 | 0.98 | (1.50) | 1.53 | ||||||||
Basic (loss) earnings per share | $ | (1.35) | 1.21 | (4.85) | 0.65 | |||||||
Diluted (loss) earnings per share from continuing operations | $ | (1.53) | 0.22 | (3.35) | (0.88) | |||||||
Diluted earnings (loss) per share from discontinued operations | 0.18 | 0.97 | (1.50) | 1.53 | ||||||||
Diluted (loss) earnings per share | $ | (1.35) | 1.19 | (4.85) | 0.65 | |||||||
Basic weighted average number of common shares outstanding | 18,731 | 18,518 | 18,442 | 18,601 | ||||||||
Diluted weighted average number of common and common equivalent shares outstanding | 18,731 | 18,812 | 18,442 | 18,601 | ||||||||
Cash dividends declared per Class A common share | $ | — | 0.0625 | — | 0.1875 | |||||||
Cash dividends declared per Class B common share | $ | — | 0.0625 | — | 0.1875 | |||||||
Net (loss) income | $ | (22,474) | 26,500 | (89,940) | 23,514 | |||||||
Other comprehensive income (loss), net of tax: | ||||||||||||
Foreign currency translation adjustments | 15 | (75) | 19 | 151 | ||||||||
Unrealized gain (loss) on securities available for sale | 157 | 16 | (198) | 54 | ||||||||
Other comprehensive income (loss), net | 172 | (59) | (179) | 205 | ||||||||
Comprehensive (loss) income, net of tax | (22,302) | 26,441 | (90,119) | 23,719 | ||||||||
Less: Comprehensive income (loss) attributable to noncontrolling interests | 2,848 | 4,112 | (508) | 11,275 | ||||||||
Comprehensive (loss) income attributable to shareholders | $ | (25,150) | 22,329 | (89,611) | 12,444 | |||||||
See Notes to Condensed Consolidated Financial Statements - Unaudited | ||||||||||||
Bluegreen Vacations Holding Corporation | ||||||||||||||||||||||||||||||
Condensed Consolidated Statements of Changes in Equity - Unaudited | ||||||||||||||||||||||||||||||
For the Three Months Ended September 30, 2019 and 2020 | ||||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||
Shares of | Accumulated | |||||||||||||||||||||||||||||
Common Stock | Common | Other | ||||||||||||||||||||||||||||
Outstanding | Stock | Additional | Comprehen- | Total | Non- | |||||||||||||||||||||||||
Class | Class | Paid-in | Accumulated | sive | Shareholders' | controlling | Total | |||||||||||||||||||||||
A | B | A | B | Capital | Earnings | Income | Equity | Interests | Equity | |||||||||||||||||||||
Balance, June 30, 2019 | 15,596 | 2,968 | $ | 156 | 30 | 166,757 | 370,983 | 1,479 | 539,405 | 92,948 | 632,353 | |||||||||||||||||||
Net income excluding $82 of loss attributable to redeemable noncontrolling interest | — | — | — | — | — | 22,388 | — | 22,388 | 4,030 | 26,418 | ||||||||||||||||||||
Repurchase and retirement of common stock | (280) | — | (3) | — | (7,012) | — | — | (7,015) | — | (7,015) | ||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | (59) | (59) | — | (59) | ||||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | — | — | — | (1,221) | (1,221) | ||||||||||||||||||||
Class A common stock cash dividends declared | — | — | — | — | — | (962) | — | (962) | — | (962) | ||||||||||||||||||||
Class B common stock cash dividends declared | — | — | — | — | — | (242) | — | (242) | — | (242) | ||||||||||||||||||||
Share-based compensation | — | — | — | — | 3,169 | — | — | 3,169 | — | 3,169 | ||||||||||||||||||||
Balance, September 30, 2019 | 15,316 | 2,968 | $ | 153 | 30 | 162,914 | 392,167 | 1,420 | 556,684 | 95,757 | 652,441 | |||||||||||||||||||
Balance, June 30, 2020 | 15,133 | 3,165 | $ | 151 | 32 | 158,015 | 329,194 | 1,203 | 488,595 | 79,011 | 567,606 | |||||||||||||||||||
Net loss excluding $484 of loss attributable to redeemable noncontrolling interest | — | — | — | — | — | (25,322) | — | (25,322) | 3,332 | (21,990) | ||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | 172 | 172 | — | 172 | ||||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | — | — | — | (6,271) | (6,271) | ||||||||||||||||||||
Reversal of accretion of redeemable noncontrolling interest | — | — | — | — | — | 3,150 | — | 3,150 | — | 3,150 | ||||||||||||||||||||
Spin-off of BBX Capital, Inc. | — | — | — | — | (643) | (307,022) | (1,375) | (309,040) | (197) | (309,237) | ||||||||||||||||||||
Accelerated vesting of restricted stock awards | 491 | 529 | 5 | 5 | 18,740 | — | — | 18,750 | — | 18,750 | ||||||||||||||||||||
Share-based compensation | — | — | — | — | 992 | — | — | 992 | — | 992 | ||||||||||||||||||||
Balance, September 30, 2020 | 15,624 | 3,694 | $ | 156 | 37 | 177,104 | — | — | 177,297 | 75,875 | 253,172 | |||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements - Unaudited | ||||||||||||||||||||||||||||||
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BBX Capital Corporation | |||||||||||
Condensed Consolidated Statements of Changes in Equity - Unaudited | |||||||||||
For the Three Months Ended September 30, 2019 and 2018 | |||||||||||
(In thousands) | |||||||||||
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| Outstanding |
| Stock | Additional |
| Comprehen- | Total | Non- |
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| Class | Paid-in | Accumulated | sive | Shareholders' | controlling | Total | ||
| A | B |
| A | B | Capital | Earnings | Income | Equity | Interests | Equity |
Balance, June 30, 2018 | 79,257 | 13,936 | $ | 793 | 139 | 175,002 | 370,262 | 1,452 | 547,648 | 91,629 | 639,277 |
Net income excluding $208 of income attributable to redeemable noncontrolling interest | - | - |
| - | - | - | 6,179 | - | 6,179 | 5,598 | 11,777 |
Other comprehensive income | - | - |
| - | - | - | - | 55 | 55 | - | 55 |
Distributions to noncontrolling interests | - | - |
| - | - | - | - | - | - | (6,021) | (6,021) |
Class A common stock cash dividends declared | - | - |
| - | - | - | (809) | - | (809) | - | (809) |
Class B common stock cash dividends declared | - | - |
| - | - | - | (179) | - | (179) | - | (179) |
Purchase and retirement of common stock | - | - |
| - | - | (17) | - | - | (17) | - | (17) |
Purchase and retirement of common stock from vesting of restricted stock awards | (375) | (137) |
| (4) | (1) | (3,777) | - | - | (3,782) | - | (3,782) |
Issuance of common stock from vesting of restricted stock awards | 535 | - |
| 5 | - | (5) | - | - | - | - | - |
Share-based compensation | - | - |
| - | - | 3,645 | - | - | 3,645 | - | 3,645 |
Balance, September 30, 2018 | 79,417 | 13,799 | $ | 794 | 138 | 174,848 | 375,453 | 1,507 | 552,740 | 91,206 | 643,946 |
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Balance, June 30, 2019 | 77,978 | 14,841 | $ | 780 | 148 | 166,015 | 370,983 | 1,479 | 539,405 | 92,948 | 632,353 |
Net income excluding $82 of income attributable to redeemable noncontrolling interest | - | - |
| - | - | - | 22,388 | - | 22,388 | 4,030 | 26,418 |
Purchase and retirement of common stock | (1,398) | - |
| (14) | - | (7,001) | - | - | (7,015) | - | (7,015) |
Other comprehensive loss | - | - |
| - | - | - | - | (59) | (59) | - | (59) |
Distributions to noncontrolling interests | - | - |
| - | - | - | - | - | - | (1,221) | (1,221) |
Class A common stock cash dividends declared | - | - |
| - | - | - | (962) | - | (962) | - | (962) |
Class B common stock cash dividends declared | - | - |
| - | - | - | (242) | - | (242) | - | (242) |
Share-based compensation | - | - |
| - | - | 3,169 | - | - | 3,169 | - | 3,169 |
Balance, September 30, 2019 | 76,580 | 14,841 | $ | 766 | 148 | 162,183 | 392,167 | 1,420 | 556,684 | 95,757 | 652,441 |
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See Notes to Condensed Consolidated Financial Statements - Unaudited | |||||||||||
Bluegreen Vacations Holding Corporation | ||||||||||||||||||||||||||||||
Condensed Consolidated Statements of Changes in Equity - Unaudited | ||||||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2019 and 2020 | ||||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||
Shares of | Accumulated | |||||||||||||||||||||||||||||
Common Stock | Common | Other | ||||||||||||||||||||||||||||
Outstanding | Stock | Additional | Comprehen- | Total | Non- | |||||||||||||||||||||||||
Class | Class | Paid-in | Accumulated | sive | Shareholders' | controlling | Total | |||||||||||||||||||||||
A | B | A | B | Capital | Earnings | Income | Equity | Interests | Equity | |||||||||||||||||||||
Balance, December 31, 2018 | 15,676 | 2,968 | $ | 157 | 30 | 162,429 | 385,789 | 1,215 | 549,620 | 87,988 | 637,608 | |||||||||||||||||||
Cumulative effect from the adoption of ASU 2016-02, net of income taxes and redeemable noncontrolling interest | — | — | — | — | — | (2,202) | — | (2,202) | — | (2,202) | ||||||||||||||||||||
Net income excluding $158 of loss attributable to redeemable noncontrolling interest | — | — | — | — | — | 12,239 | — | 12,239 | 11,433 | 23,672 | ||||||||||||||||||||
Repurchase and retirement of common stock | (360) | — | (4) | — | (8,894) | — | — | (8,898) | — | (8,898) | ||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | 205 | 205 | — | 205 | ||||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | — | — | — | (3,664) | (3,664) | ||||||||||||||||||||
Class A Common Stock cash dividends declared | — | — | — | — | — | (2,933) | — | (2,933) | — | (2,933) | ||||||||||||||||||||
Class B Common Stock cash dividends declared | — | — | — | — | — | (726) | — | (726) | — | (726) | ||||||||||||||||||||
Share-based compensation | — | — | — | — | 9,379 | — | — | 9,379 | — | 9,379 | ||||||||||||||||||||
Balance, September 30, 2019 | 15,316 | 2,968 | $ | 153 | 30 | 162,914 | 392,167 | 1,420 | 556,684 | 95,757 | 652,441 | |||||||||||||||||||
Balance, December 31, 2019 | 15,106 | 3,192 | $ | 151 | 32 | 153,507 | 394,551 | 1,554 | 549,795 | 90,275 | 640,070 | |||||||||||||||||||
Net loss excluding $4,073 of loss attributable to redeemable noncontrolling interest | — | — | — | — | — | (89,432) | — | (89,432) | 3,565 | (85,867) | ||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | (179) | (179) | — | (179) | ||||||||||||||||||||
Bluegreen purchase and retirement of common stock | — | — | — | — | (1,167) | — | — | (1,167) | (10,574) | (11,741) | ||||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | — | — | — | (7,194) | (7,194) | ||||||||||||||||||||
Accretion of redeemable noncontrolling interest | — | — | — | — | — | (1,247) | — | (1,247) | — | (1,247) | ||||||||||||||||||||
Reversal of accretion of redeemable noncontrolling interest | — | — | — | — | — | 3,150 | — | 3,150 | — | 3,150 | ||||||||||||||||||||
Conversion of common stock from Class B to Class A | 27 | (27) | — | — | — | — | — | — | — | — | ||||||||||||||||||||
Spin-off of BBX Capital, Inc. | — | — | — | — | (643) | (307,022) | (1,375) | (309,040) | (197) | (309,237) | ||||||||||||||||||||
Accelerated vesting of restricted stock awards | 491 | 529 | 5 | 5 | 18,740 | — | — | 18,750 | — | 18,750 | ||||||||||||||||||||
Share-based compensation | — | — | — | — | 6,667 | — | — | 6,667 | — | 6,667 | ||||||||||||||||||||
Balance, September 30, 2020 | 15,624 | 3,694 | $ | 156 | 37 | 177,104 | — | — | 177,297 | 75,875 | 253,172 | |||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements - Unaudited | ||||||||||||||||||||||||||||||
Bluegreen Vacations Holding Corporation | ||||||
Condensed Consolidated Statements of Cash Flows - Unaudited | ||||||
(In thousands) | ||||||
For the Nine Months Ended September 30, | ||||||
2020 | 2019 | |||||
Operating activities: | ||||||
Net (loss) income | $ | (89,940) | 23,514 | |||
Adjustment to reconcile net (loss) income to net cash | ||||||
(used in) provided by operating activities: | ||||||
Recoveries from loan losses, net | (5,844) | (4,206) | ||||
Provision for notes receivable allowances | 44,083 | 39,462 | ||||
Depreciation, amortization and accretion, net | 19,829 | 21,150 | ||||
Share-based compensation expense | 25,417 | 9,379 | ||||
Net losses (gains) on sales of real estate and property and equipment | 507 | (11,395) | ||||
Equity earnings of unconsolidated real estate joint ventures | (49) | (37,276) | ||||
Return on investment in unconsolidated real estate joint ventures | 3,933 | 38,020 | ||||
Loss on the deconsolidation of IT'SUGAR, LLC | 3,326 | — | ||||
(Decrease) increase in deferred income tax liability | (12,016) | 5,210 | ||||
Impairment losses | 31,588 | 6,786 | ||||
Interest accretion on redeemable 5% cumulative preferred stock | — | 633 | ||||
(Increase) in notes receivable | (5,628) | (46,001) | ||||
Increase in VOI inventory | (3,408) | (12,672) | ||||
Decrease (increase) in trade inventory | 279 | (5,016) | ||||
Decrease (increase) in real estate inventory | 925 | (2,865) | ||||
Net change in operating lease asset and operating lease liability | (914) | 1,134 | ||||
Decrease (increase) in other assets | 7,111 | (3,852) | ||||
(Decrease) increase in other liabilities | (16,038) | 38,389 | ||||
Net cash provided by operating activities | 3,161 | 60,394 | ||||
Investing activities: | ||||||
Return of investment in unconsolidated real estate joint ventures | 4,631 | 30,331 | ||||
Investments in unconsolidated real estate joint ventures | (14,009) | (20,076) | ||||
Proceeds from repayment of loans receivable | 6,127 | 4,766 | ||||
Proceeds from sales of real estate | 2,151 | 20,374 | ||||
Proceeds from sales of property and equipment | 167 | 15,011 | ||||
Additions to real estate | (70) | (438) | ||||
Purchases of property and equipment | (9,970) | (26,286) | ||||
Decrease in cash from other investing activities | (1,210) | (73) | ||||
Net cash (used in) provided by investing activities | (12,183) | 23,609 | ||||
(Continued) | ||||||
Bluegreen Vacations Holding Corporation | ||||||
Condensed Consolidated Statements of Cash Flows - Unaudited | ||||||
(In thousands) | ||||||
For the Nine Months Ended September 30, | ||||||
2020 | 2019 | |||||
Financing activities: | ||||||
Repayments of notes payable and other borrowings | (177,710) | (171,061) | ||||
Proceeds from notes payable and other borrowings | 144,699 | 99,921 | ||||
Payments for debt issuance costs | (1,134) | (351) | ||||
Payments of interest of redeemable 5% cumulative preferred stock | — | (375) | ||||
Purchase and retirement of Class A common stock | — | (8,898) | ||||
Cash transferred in spin-off of BBX Capital, Inc. | (96,842) | — | ||||
Purchase and retirement of subsidiary common stock | (11,741) | — | ||||
Dividends paid on common stock | (1,144) | (3,257) | ||||
Distributions to noncontrolling interests | (7,194) | (3,664) | ||||
Net cash used in financing activities | (151,066) | (87,685) | ||||
Decrease in cash, cash equivalents and restricted cash | (160,088) | (3,682) | ||||
Cash, cash equivalents and restricted cash at beginning of period | 406,870 | 421,097 | ||||
Cash, cash equivalents and restricted cash at end of period | $ | 246,782 | 417,415 | |||
Supplemental cash flow information: | ||||||
Interest paid on borrowings, net of amounts capitalized | $ | 22,912 | 30,252 | |||
Income taxes paid | 778 | 10,873 | ||||
Supplementary disclosure of non-cash investing and financing activities: | ||||||
Construction funds receivable transferred to real estate | — | 15,890 | ||||
Operating lease assets recognized upon adoption of ASC 842 | — | 113,183 | ||||
Operating lease liabilities recognized upon adoption of ASC 842 | — | 123,240 | ||||
Operating lease assets obtained in exchange for new operating lease liabilities | 7,882 | 27,715 | ||||
Increase in other assets upon issuance of Community Development District Bonds | 827 | 8,110 | ||||
Assumption of Community Development District Bonds by homebuilders | 3,837 | 1,035 | ||||
Reconciliation of cash, cash equivalents and restricted cash: | ||||||
Cash and cash equivalents | 211,110 | 336,880 | ||||
Restricted cash | 35,672 | 48,597 | ||||
Discontinued operations cash | — | 31,938 | ||||
Total cash, cash equivalents, and restricted cash | $ | 246,782 | 417,415 | |||
See Notes to Condensed Consolidated Financial Statements - Unaudited | ||||||
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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, | |||
|
| 2019 |
| 2018 |
|
Financing activities: |
|
|
|
|
|
Repayments of notes payable and other borrowings |
| (171,061) |
| (152,204) |
|
Proceeds from notes payable and other borrowings |
| 99,921 |
| 196,439 |
|
Payments for debt issuance costs |
| (351) |
| (1,131) |
|
Payments of interest on redeemable 5% cumulative preferred stock |
| (375) |
| (438) |
|
Purchase and retirement of Class A common stock |
| (8,898) |
| (60,141) |
|
Purchase of noncontrolling interest |
| - |
| (258) |
|
Proceeds from the exercise of stock options |
| - |
| 245 |
|
Dividends paid on common stock |
| (3,257) |
| (2,822) |
|
Distributions to noncontrolling interests |
| (3,664) |
| (8,263) |
|
Net cash used in financing activities |
| (87,685) |
| (28,573) |
|
(Decrease) increase in cash, cash equivalents and restricted cash |
| (3,682) |
| 15,975 |
|
Cash, cash equivalents and restricted cash at beginning of period |
| 421,097 |
| 409,247 |
|
Cash, cash equivalents and restricted cash at end of period | $ | 417,415 |
| 425,222 |
|
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|
|
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|
Supplemental cash flow information: |
|
|
|
|
|
Interest paid on borrowings, net of amounts capitalized | $ | 30,252 |
| 27,807 |
|
Income taxes paid |
| 10,873 |
| 3,103 |
|
Supplementary disclosure of non-cash investing and financing activities: |
|
|
|
|
|
Construction funds receivable transferred to real estate |
| 15,890 |
| 8,716 |
|
Acquisition of VOI inventory, property and equipment for notes payable |
| - |
| 24,258 |
|
Loans receivable transferred to real estate |
| 333 |
| 1,673 |
|
Reduction in note receivable from holder of redeemable 5% cumulative preferred stock |
| - |
| (5,000) |
|
Reduction in redeemable 5% cumulative preferred stock |
| - |
| 4,862 |
|
Increase in other assets upon issuance of Community Development District Bonds |
| 8,110 |
| - |
|
Assumption of Community Development District Bonds by builders |
| 1,035 |
| 4,573 |
|
Reconciliation of cash, cash equivalents and restricted cash: |
|
|
|
|
|
Cash and cash equivalents |
| 368,818 |
| 369,512 |
|
Restricted cash |
| 48,597 |
| 55,710 |
|
Total cash, cash equivalents, and restricted cash | $ | 417,415 |
| 425,222 |
|
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|
|
|
|
|
See Notes to Condensed Consolidated Financial Statements - Unaudited |
| ||||
Bluegreen Vacations Holding Corporation
BBX Capital Corporation
Notes to Condensed Consolidated Financial Statements - Unaudited
1. Organization and Basis of Financial Statement Presentation
Organization
Bluegreen Vacations Holding Corporation (formerly BBX Capital CorporationCorporation) and its subsidiaries (the “Company” or, unless otherwise indicated or the context otherwise requires, “we,” “us,” or “our”) is a Florida-based diversified holding company. BBX CapitalBluegreen Vacations Holding Corporation as a standalone entity without its subsidiaries is referred to as “BBX Capital.“BVH.”
Spin-Off
On September 30, 2020, BVH completed the spin-off of its wholly-owned subsidiary, BBX Capital, Inc. (“BBX Capital”). The spinoff separated BVH’s businesses, activities, and investments into two separate, publicly-traded companies: (i) the Company, which will continue to hold its investment in Bluegreen Vacations Corporation (“Bluegreen”), and (ii) BBX Capital, which will hold all of the Company’s other previous businesses and investments, including BBX Capital Real Estate LLC (“BBX Capital Real Estate” or “BBXRE”), BBX Sweet Holdings, LLC (“BBX Sweet Holdings”), and Renin Holdings, LLC (“Renin”). BBX Capital and its subsidiaries are presented as discontinued operations in the Company’s financial statements.
The spin-off was effected through a distribution of shares of BBX Capital’s common stock to BVH’s shareholders on September 30, 2020. The BVH shareholders received 1 share of BBX Capital’s Class A Common Stock for each share of BVH’s Class A Common Stock and 1 share of BBX Capital’s Class B Common Stock for each share of BVH’s Class B Common Stock held on September 22, 2020, the record date. As a result, BVH ceased to have any ownership interest in BBX Capital following the Spin-Off.
In connection with the spin-off, BVH changed its name from BBX Capital Corporation to Bluegreen Vacations Holding Corporation, and BBX Capital was converted to a Florida corporation and changed its name from BBX Capital Florida LLC to BBX Capital, Inc. In addition, in connection with the spin-off 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 BVH is current on all accrued payments under the note, including deferred interest.. All outstanding amounts under the note will become due and payable in five years or earlier upon certain other events.
Other Organizational Matters
In June 2020, BVH adopted a shareholder rights plan in light of the ongoing novel coronavirus disease (“COVID-19”) pandemic, the significant market volatility and uncertainties associated with the pandemic, and the impact on the Company and the market price of BVH’s Class A Common Stock and Class B Common Stock. The shareholder rights plan is similar to plans recently adopted by other public companies in light of the current environment and generally provides a deterrent to any person or group from acquiring 5% or more of BVH’s Class A Common Stock, Class B Common Stock or total common stock without the prior approval of BVH’s Board of Directors.
In July 2020, BVH effected a one-for-5 reverse split of its Class A Common Stock and Class B Common Stock. In connection with the reverse stock split, the number of authorized shares of the BVH’s Class A Common Stock was reduced from 150,000,000 shares to 30,000,000 shares, and the number of authorized shares of BVH’s Class B Common Stock was reduced from 20,000,000 shares to 4,000,000 shares. Further, the shares authorized for issuance under BVH’s Amended and Restated 2014 Incentive Plan, as amended (the “Plan”), and the underlying outstanding restricted stock awards previously granted under the Plan were ratably reduced in connection with the reverse stock split. The share and per share amounts included in this report, including the accompanying unaudited condensed consolidated financial statements, have been retroactively adjusted to reflect the one-for-five reverse stock split as if it had occurred as of the earliest period presented.
BVH 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 84%81% and 16%19%, respectively, at September 30, 2019. 2020.
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.
Basis of Financial Statement Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, these financial statements do not include all of the information and disclosures required by GAAP for complete financial statements.
Financial statements prepared in conformity with GAAP require the Company 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 the Company’s financial statements. Due to the unprecedented impact and current and potential future impact of the ongoing COVID-19 pandemic, which is discussed in more detail throughout this report, actual conditions could differ from the Company’s expectations and estimates, which could materially affect the Company’s results of operations and financial condition. The severity, magnitude, and duration, as well as the economic consequences, of the COVID-19 pandemic, are uncertain, rapidly changing, and difficult to predict. As a result, the Company’s accounting estimates and assumptions may change over time in response to COVID-19. Such changes could result in, among other adjustments, future impairments of intangibles, and long-lived assets, inventory reserves, and incremental changes in the Company’s allowance for loan losses.
In management’s opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, which include normal recurring adjustments, that are necessary for a fair statement of the condensed consolidated financial condition of the Company at September 30, 2019;2020; the condensed consolidated results of operations and comprehensive income of the Company for the three and nine months ended September 30, 20192020 and 2018;2019; the condensed consolidated changes in equity of the Company for the three and nine months ended September 30, 20192020 and 2018;2019; and the condensed consolidated cash flows of the Company for the nine months ended September 30, 20192020 and 2018.2019. Operating results for the three and nine months ended September 30, 20192020 are not necessarily indicative of the results that may be expected for the year ending December 31, 20192020 or any other future period.
These unaudited condensed consolidated financial statements and related notes are presented as permitted by Form 10-Q and should be read in conjunction with the Company’s audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20182019 (the “2018“2019 Annual Report”) filed with the Securities and Exchange Commission (“SEC”)SEC on March 12, 2019. 13, 2020.
The condensed consolidated financial statements include the accounts of BBX Capital’sBVH’s wholly-owned subsidiaries, other entities in which BBX CapitalBVH or its wholly-owned subsidiaries hold controlling financial interests, and any VIEs in which BBX CapitalBVH or one of its consolidated subsidiaries is deemed the primary beneficiary of the VIE. All significant inter-company accounts and transactions have been eliminated in consolidation.
Certain amounts for prior periods have been reclassified to conform to the presentation for the current period. The reclassifications did not have a material impact on the Company’s condensed consolidated statements of operations and comprehensive income or condensed consolidated statements of cash flows.
Principal InvestmentsBusiness
The Company’s principal investments include Bluegreen Vacations Corporation (“Bluegreen” or “Bluegreen Vacations”), BBX Capital Real Estate LLC (“BBX Capital Real Estate”), Renin Holdings, LLC (“Renin”), and IT’SUGAR, LLC (“IT’SUGAR”).
Company is a Florida-based holding company whose principle asset is its 93% ownership interest in Bluegreen. Bluegreen is a leading vacation ownership company that markets and sells VOIsvacation ownership interests (“VOIs”) and manages resorts in popular leisure and urban destinations. Bluegreen’s resort network includes 45 Club Resorts (resorts in which owners in the Bluegreen Vacation Club (“Vacation Club”) have the right to use most of the units in connection with their VOI ownership) and 24 Club Associate Resorts (resorts in which owners in Bluegreen’s Vacation Club have the right to use a limited
7
number of units in connection with their VOI ownership). Bluegreen markets, sells, and manages VOIs in resorts which are generallyprimarily located in popular, high-volume, “drive-to” vacation destinations,locations, including Orlando, Las Vegas, Myrtle Beach, Charleston and New Orleans, among others. Through its points-based system, the approximately 219,000 owners in Bluegreen’s Vacation Club have the flexibility to stay at units available at its resorts and have access to over 11,350 other hotels and resorts through partnerships and exchange networks. The resorts in which Bluegreen markets, sells, orand 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 generateshas historically generated significant interest income.
BBX Capital Real Estate is engaged in the acquisition, development, construction, ownership, financing, and management of real estate and investments in real estate joint ventures. In addition, BBX Capital Real Estate owns a 50% equity interest in The Altman Companies, LLC (the “Altman Companies”), a developer and manager of multifamily apartment communities, and manages the legacy assets acquired in connection with the Company’s sale of BankAtlantic in 2012, including portfolios of loans receivable and real estate properties.
Renin is engaged in the design, manufacture, and distribution of sliding doors, door systems and hardware, and home décor products and operates through its headquarters in Canada and two manufacturing and distribution facilities in the United States and Canada. In addition to its own manufacturing, Renin also sources various products and raw materials from China.
IT’SUGAR is a specialty candy retailer which operates approximately 100 retail locations in over 25 states and Washington D.C. Its products include bulk candy, candy in giant packaging, and novelty items that are sold at its retail locations, which include a mix of high-traffic resort and entertainment, lifestyle, mall/outlet, and urban locations across the United States.
In addition to its principal investments, the Company has investments in various operating businesses, including companies in the confectionery industry.
In 2016, Food for Thought Restaurant Group (“FFTRG”), a wholly-owned subsidiary of BBX Capital, entered into area development and franchise agreements with MOD Super Fast Pizza (“MOD Pizza”) related to the development of up to approximately 60 MOD Pizza franchised restaurant locations throughout Florida. Through 2019, FFTRG had opened nine restaurant locations. As a result of FFTRG’s overall operating performance and the Company’s goal of streamlining its investment verticals, the Company entered into an agreement with MOD Pizza to terminate the area development and franchise agreements and transferred seven of its restaurant locations, including the related assets, operations, and lease obligations, to MOD Pizza during the third quarter of 2019. In addition, the Company closed the remaining two locations and terminated the related lease agreements. In connection with the transfer of the seven restaurant locations to MOD Pizza, the Company recognized an aggregate impairment loss of $4.0 million related to the disposal group, which included property and equipment, intangible assets, and net lease liabilities, during the three months ended September 30, 2019. In addition to the impairment losses recognized during the third quarter of 2019, the Company previously recognized $2.7 million of impairment losses associated with property and equipment at three restaurant locations. Accordingly, the Company recognized $6.7 million of impairment losses associated with its investment in MOD Pizza restaurant locations duringDuring the nine months ended September 30, 2019.2020, Bluegreen repurchased and retired 1,878,400 shares of its common stock for $11.7 million.
Impact of the COVID-19 Pandemic
The Financial Accounting Standards Board (“FASB”) has issuedCOVID-19 pandemic resulted in, an unprecedented disruption in the following Accounting Standards Updates (“ASU”)U.S. economy and the travel, hospitality and vacation ownership industries due to, among other things, resort closures, travel restrictions and restrictions on business operations, including government guidance relevantand restrictions with respect to travel, public accommodations, social gatherings and related matters. On March 23, 2020, Bluegreen temporarily closed all of its 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. In connection with these actions Bluegreen also canceled existing owner reservations through May 15, 2020 and new prospect guest tours through June 30, 2020. Further, some of Bluegreen’s Club and Club Associate Resorts were closed in accordance with government mandates and advisories. Beginning in mid-May 2020, Bluegreen started the Company’sprocess of recommencing its sales and marketing operations whichand its closed resorts began to welcome guests as government mandates were adopted aslifted. By September 30, 2020, Bluegreen recommenced marketing operations at 87 Bass Pro Shops and Cabela’s stores and commenced marketing operations at 5 new Cabela’s stores, Bluegreen reactivated its Choice Hotels call transfer program, all of January 1, 2019:
ASU No. 2016-02 – Leases (Topic 842).This standard, as subsequently amendedits resorts were open, and clarified by various ASUs, requires lessees to recognize assets and liabilitiesall but one of its VOI sales centers were open. Resort occupancy for the rightsthird quarter of 2020 was approximately 70%. Additionally, in October 2020, Bluegreen recommenced marketing activities at 1 additional Bass Bro Shop and obligations created by leasescommenced marketing operations at 4 new Cabela’s stores for a total of assets. For income statement purposes,97 Bass Pro Shops and Cabela’s stores. However, there is no assurance that Bluegreen’s marketing operations at Bass Pro or Cabela’s stores or its VOI sales centers will remain open, including in the standard retains a dual model which requires leases to be classified as either operating or finance based on criteria that are largely similar to those applied under prior lease accounting but without explicit bright lines. The standard also requires extensive quantitative and qualitative disclosures, including significant judgments and assumptions made by managementevent of an increase in applying the standard, intended to provide greater insight into the amount, timing, and uncertainty of cash flows arising from leases.COVID-19 cases.
8
The Company adopted the standard on January 1, 2019 and applied the transition guidance as of the date of adoption under the current-period adjustment method. As a result of the Company recognized right-of-use assetseffect of the pandemic, Bluegreen implemented several cost mitigating activities beginning in March 2020, including reductions in workforce of over 1,600 positions and lease liabilities associated with its leasesthe placement of another approximate 3,200 of it associates on January 1, 2019, withtemporary furlough or reduced work hours. As of September 30, 2020, approximately 3,200 associates had returned to work on a cumulative-effect adjustmentfull-time basis for a total of approximately 4,400 full-time associates compared to approximately 6,060 full-time associates as of September 30, 2019. As a result of the opening balanceeffect of accumulated earnings, while the comparable prior periodsCOVID-19 pandemic, during the three and nine months ended September 30, 2020, Bluegreen incurred $0.4 million and $5.1 million in severance, respectively, and $1.5 million and $13.1 million, respectively, of payroll and payroll benefit expense relating to employees on temporary furlough or reduced work hours. These payments and expenses are included in selling, general and administrative expenses in the Company’s financial statements have beencondensed consolidated statement of operations comprehensive income for the three and will continuenine months ended September 30, 2020.
The Coronavirus Aid, Relief, and Economic Securities Act (“CARES Act”) was signed into law on March 27, 2020 in response to be reported in accordance with Topic 840, including the disclosuresCOVID-19 pandemic. As of Topic 840.
The standard includes a number of optional practical expedients underSeptember 30, 2020, we evaluated the transition guidance. The Company elected the package of practical expedients which allowed the Company to not reassess prior conclusions about lease identification, lease classification, and initial direct costs. The Company also made accounting policy elections by class of underlying asset to not apply the recognition requirementsincome tax provisions of the standard to leases with termsCARES Act and determined they would have no significant effect on either our September 30, 2020 income tax rate or the computation of 12 months or less and to not separate non-lease components from lease components. Consequently, each separate lease componentour estimated effective tax rate for the year ended December 31, 2020. However, we have taken advantage of the deferral of the employer portion of the tax withholding amounts and the non-lease components associated with that lease componentemployee retention tax credits provided for in the CARES Act. During the nine months ended September 30, 2020, we recorded a tax withholding deferral of $5.1 million, which is accounted for as a single lease component for lease classification, recognition, and measurement purposes.
Upon adoption of the standard on January 1, 2019, the Company recognized a lease liability of $123.2 million and a right-of-use asset of $113.2 million. The difference between the lease liability and right-of-use asset primarily reflects the reclassification of accrued straight-line rent and unamortized tenant allowances fromincluded in other liabilities in the Company’sour unaudited condensed consolidated statement of financial condition to a reductionas of the right-of-use asset. In addition, the Company recognized an impairment lossSeptember 30, 2020, and employee retention tax credits of $3.4$6.9 million, which are included in connection with the recognition of right-of-use assets for certain IT’SUGAR retail locations as a cumulative-effect adjustment to the opening balance of accumulated earnings. The implementation of the standard did not have a material impact on the Company’s statementselling, general and administrative expenses in our unaudited condensed consolidated statements of operations and comprehensive income for the nine months ended September 30, 2020.
As a precautionary measure to provide additional liquidity if needed, in March 2020, Bluegreen drew down $60 million under its lines-of-credit and pledged or statementsold receivables under certain of its receivable backed facilities to increase its cash flows. See Note 12 for additional information regarding the Company’s lease agreements.
Future Adoption of Recently Issued Accounting Pronouncements
The FASB has issued the following accounting pronouncements and guidance relevant to the Company’s operations which had not been adopted by the Company asposition. As of September 30, 2019: 2020, Bluegreen repaid the $60.0 million borrowed under its lines-of-credit. While Bluegreen paid a special cash dividend or $1.19 per share during August 2020, there is no assurance that Bluegreen will recommence paying regular dividends or pay any other special dividends in the future. During the second quarter of 2020, Bluegreen suspended its regular quarterly cash dividends on its common stock.
Bluegreen has historically financed a majority of its sales of VOIs, and accordingly, is subject to the risk of defaults by its customers. GAAP requires Bluegreen to reduce its sales of VOIs by its estimate of uncollectible VOI notes receivable. The COVID-19 pandemic has had a material adverse impact on unemployment in the United States and economic conditions in general and the impact may continue for some time. While Bluegreen believes that it is still too early to know the full impact of COVID- 19 on its default or delinquency rates, Bluegreen believes that the COVID-19 pandemic will have a significant impact on its VOI notes receivable. Accordingly, during March 2020, Bluegreen recorded an allowance for loan losses of $12.0 million, which includes its estimate of customer defaults as a result of the COVID–19 pandemic, based on Bluegreen’s historical experience, forbearance requests received from their customers, and other factors, including but not limited to, the seasoning of the notes receivable and FICO scores of the customers.
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial“Financial Instruments -– Credit Losses (Topic 326)” (“ASU 2016-13”), Measurement of Credit Losses on Financial Instruments (as subsequently amended and clarified by various ASUs). This standardwhich introduces an approach of estimating credit losses on certain types of financial instruments based on expected losses andlosses. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating itsthe allowance for creditloan losses. In addition,Further, the standard requires that public entities 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). The standard also allows entities to irrevocably elect to measure certain financial instruments within the scope of the standard at fair value upon the adoption of the standard. This standard will bebecame effective for the Companyus on January 1, 2020. The Company is currently evaluating the impact that ASU 2016-13 may have on its consolidated financial statements.
ASU No. 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. ThisWe adopted this standard modifies the disclosure requirements in Topic 820 related to the valuation techniques and inputs used in fair value measurements, uncertainty in measurement, and changes in measurements applied. This standard will be effective for the Company on January 1, 2020.2020 using a modified retrospective method. The Company believes that this standard willadoption did not have a material impact on itsour consolidated financial statementsstatements or related disclosures and disclosures.no cumulative adjustment was recorded primarily due to the fact our VOI notes receivable are recorded net of an allowance that is calculated in accordance with ASC 606, Revenue from Contracts with Customers. We also elected the practical expedient to not measure an allowance for credit losses for accrued interest receivables, as our 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.
In August 2018, the FASB issued ASU 2018-15, “Intangibles – Goodwill and Other – Internal–Use Software (Subtopic 350-40)” (“ASU 2018-15”), which requires a customer in a cloud computing arrangement that is a service contract (“CCA”) to follow internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets or expense as incurred. ASU 2018-15 also requires companies to present implementation costs related to a CCA in the same financial statement line items as the CCA service fees. We adopted this standard on January 1, 2020 and are applying the transition guidance as of the date of adoption prospectively, under the current period adjustment method. Upon adoption of the standard, we reclassified $1.9 million of capitalized implementation costs related to a CCA that was in the implementation phase as of January 1, 2020 from property and equipment to prepaid expenses.
Future Adoption of Recently Issued Accounting Pronouncements
The FASB has issued the following accounting pronouncement and guidance relevant to our operations which had not yet been adopted as of September 30, 2020:
In 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 discontinuation of LIBOR in response to the Financial Conduct Authority (the regulatory authority over LIBOR) plan for a phase 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 indexed to LIBOR. Although our VOIs notes receivable from our borrowers are not indexed to LIBOR, we currently have $177.1 million of LIBOR indexed junior subordinated debentures, $88.2 million of LIBOR indexed receivable-backed notes payable and lines of credit and $162.0 million of LIBOR indexed lines of credit and notes payable (which are not receivable-backed) that mature after 2021. Companies can apply ASU 2020-04 immediately. However, the guidance will only be available for a limited time, generally through December 31, 2022. We are evaluating the potential impact that the eventual replacement of the LIBOR benchmark interest rate could have on our results of operations, liquidity and consolidated financial statements.
2. Consolidated Variable Interest Entities
Bluegreen 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 the economic risks and benefits of the notes receivable to 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 parties generally based on market conditions at the time of the securitization.
In these securitizations, Bluegreen 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; 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 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. AsWhile there is no assurance that compliance will be maintained in the future, as of September 30, 2019,2020, Bluegreen was in compliance with all material terms under its securitization transactions, and no trigger events had occurred.
In accordance with the applicable accounting guidance for the consolidation of VIEs, Bluegreen analyzes its variable interests, which may consist of loans, servicing rights, guarantees, and equity investments, to determine if an entity in which Bluegreen has a variable interest is a VIE. The analysis includes a review of both quantitative and qualitative factors. Bluegreen bases its quantitative analysis on the forecasted cash flows of the entity and its qualitative analysis on the structure of the entity, including its decision-making ability and authority with respect to the entity, and relevant financial agreements. Bluegreen also uses qualitative analysis to determine if Bluegreen must consolidate a VIE as the primary beneficiary. In accordance with the applicable accounting guidance, Bluegreen has determined these securitization entities to be VIEs of which Bluegreen is the primary beneficiary and, therefore, Bluegreen consolidates the entities into its financial statements.
Under the terms of certain VOI note sales, Bluegreen has the right to repurchase or substitute a limited amount of defaulted notes for new notes at the outstanding principal balance plus accrued interest. Bluegreen’s voluntary repurchases and substitutions of defaulted notes for the nine months ended September 30, 2020 and 2019 and 2018 were $8.4$11.1 million and $4.4$8.4 million, respectively. Bluegreen’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.
The table below sets forth information regarding the assets and liabilities of Bluegreen’s consolidated VIEs included in the Company’s condensed consolidated statements of financial condition (in thousands):
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| September 30, |
| December 31, | September 30, | December 31, | |||||||||
|
| 2019 |
| 2018 | 2020 | 2019 | |||||||||
Restricted cash | $ | 19,185 |
| 28,400 | $ | 15,135 | 22,534 | ||||||||
Securitized notes receivable, net |
| 299,374 |
| 341,975 | 271,539 | 292,590 | |||||||||
Receivable backed notes payable - non-recourse |
| 341,856 |
| 382,257 | 303,301 | 334,246 | |||||||||
The restricted cash and the securitized notes receivable balances disclosedset forth in the table above are restricted to satisfy obligations of the VIEs.
3. Notes Receivable
The table below sets forth information relating to Bluegreen’s notes receivable and related allowance for loan losses (in(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
| December 31, |
|
| 2019 |
| 2018 |
Notes receivable: |
|
|
|
|
VOI notes receivable - non-securitized | $ | 188,435 |
| 124,642 |
VOI notes receivable - securitized |
| 391,922 |
| 447,850 |
Notes receivable secured by homesites (1) |
| 694 |
| 898 |
Gross notes receivable |
| 581,051 |
| 573,390 |
Allowance for loan losses - non-securitized |
| (42,728) |
| (28,258) |
Allowance for loan losses - securitized |
| (92,548) |
| (105,875) |
Allowance for loan losses - homesites (1) |
| (69) |
| (90) |
Notes receivable, net | $ | 445,706 |
| 439,167 |
Allowance as a % of gross notes receivable |
| 23% |
| 23% |
September 30, | December 31, | |||||
2020 | 2019 | |||||
Notes receivable secured by VOIs: | ||||||
VOI notes receivable - non-securitized | $ | 197,845 | 203,872 | |||
VOI notes receivable - securitized | 362,073 | 385,326 | ||||
Gross VOI notes receivable | 559,918 | 589,198 | ||||
Allowance for loan losses - non-securitized | (59,271) | (47,894) | ||||
Allowance for loan losses - securitized | (90,534) | (92,736) | ||||
Allowance for loan losses | (149,805) | (140,630) | ||||
VOI notes receivable, net | $ | 410,113 | 448,568 | |||
Allowance as a % of gross VOI notes receivable | 27% | 24% | ||||
|
|
10
The weighted-average interest rate charged on Bluegreen’s notes receivable secured by VOIs was 14.9% and 15.1% atas of September 30, 20192020 and December 31, 2018, respectively.2019. Bluegreen’s VOI notes receivable bear interest at fixed rates and are generally secured by property located in Florida, Missouri, Nevada, South Carolina, Tennessee, and Wisconsin.
Credit Quality of Notes Receivable and the Allowance for Loan Losses
Bluegreen monitors the credit quality of its receivables on an ongoing basis. Bluegreen holds large amounts of homogeneous VOI notes receivable and assesses uncollectibility based on pools of receivables as Bluegreen does not believe that there are significant concentrations of credit risk with any individual counterparty or groups of counterparties. In estimating loan losses, Bluegreen 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.
While Bluegreen does not believe the full impact of COVID-19 is reflected in its default or delinquency rates, Bluegreen believes that COVID-19 pandemic has had and is expected to continue to have a significant impact on its VOI notes receivable. Accordingly, in March 2020, Bluegreen recorded an additional allowance for loan losses of $12.0 million, which includes its estimate of customer defaults as a result of the COVID-19 pandemic based on Bluegreen’s historical experience, forbearance requests received from its customers, and other factors, including, but not limited to, the seasoning of the notes receivable and FICO scores of the customers.
The activity in Bluegreen’s allowance for loan losses (includingon VOI notes receivable secured by homesites) was as follows (in thousands):
|
|
|
|
| |||||||
|
| For the Nine Months Ended | For the Nine Months Ended | ||||||||
|
| September 30, | September 30, | ||||||||
|
| 2019 |
| 2018 | 2020 | 2019 | |||||
Balance, beginning of period | $ | 134,222 |
| 123,791 | $ | 140,630 | 134,133 | ||||
Provision for loan losses |
| 39,462 |
| 35,866 | 44,083 | 39,483 | |||||
Write-offs of uncollectible receivables |
| (38,339) |
| (31,358) | (34,908) | (38,340) | |||||
Balance, end of period | $ | 135,345 |
| 128,299 | $ | 149,805 | 135,276 | ||||
|
|
|
|
| |||||||
The table below sets forth information relating to Bluegreen’s VOI notes receivable by year of origination, including the FICO score of the borrower at the time of origination and delinquency status, as of September 30, 2020 (in thousands):
Year of Origination | |||||||||||||||||||||
2020 (3) | 2019 | 2018 | 2017 | 2016 | 2015 and Prior | Total | |||||||||||||||
By FICO score: | |||||||||||||||||||||
701+ | $ | 49,843 | $ | 92,561 | $ | 61,442 | $ | 39,863 | $ | 29,802 | $ | 39,607 | $ | 313,118 | |||||||
601-700 | 30,057 | 47,499 | 36,549 | 26,616 | 24,508 | 38,616 | 203,845 | ||||||||||||||
<601 (1) | 2,492 | 4,815 | 3,266 | 2,239 | 2,429 | 4,445 | 19,686 | ||||||||||||||
Other (2) | 225 | 3,009 | 4,848 | 4,484 | 3,551 | 7,152 | 23,269 | ||||||||||||||
Total | $ | 82,617 | $ | 147,884 | $ | 106,105 | $ | 73,202 | $ | 60,290 | $ | 89,820 | $ | 559,918 | |||||||
Defaults | $ | 610 | $ | 8,251 | $ | 9,484 | $ | 6,559 | $ | 4,901 | $ | 5,103 | $ | 34,908 | |||||||
Allowance for loan loss | $ | 22,945 | $ | 43,188 | $ | 29,545 | $ | 18,070 | $ | 17,126 | $ | 18,931 | $ | 149,805 | |||||||
Delinquency status: | |||||||||||||||||||||
Current | $ | 81,169 | $ | 141,008 | $ | 99,478 | $ | 68,010 | $ | 56,417 | $ | 81,387 | $ | 527,469 | |||||||
31-60 days | 612 | 1,521 | 1,243 | 736 | 558 | 936 | 5,606 | ||||||||||||||
61-90 days | 315 | 1,510 | 764 | 946 | 408 | 568 | 4,511 | ||||||||||||||
Over 91 days (2) | 521 | 3,845 | 4,620 | 3,510 | 2,907 | 6,929 | 22,332 | ||||||||||||||
Total | $ | 82,617 | $ | 147,884 | $ | 106,105 | $ | 73,202 | $ | 60,290 | $ | 89,820 | $ | 559,918 | |||||||
(1)Includes VOI notes receivable attributable to borrowers without a FICO score (primarily foreign borrowers).
(2)Includes $15.2 million related to VOI notes receivable that, as of September 30, 2020, had defaulted, but the related VOI note receivable balance had not yet been charged off in accordance with the provisions of certain of Bluegreen’s receivable-backed notes payable transactions. These VOI notes receivable have been reflected in the allowance for loan losses.
(3)VOI originations for the nine months ended September 30, 2020.
The table below sets forth information regarding the percentage of gross notes receivable outstanding by FICO score of the borrower at the time of origination:
|
|
|
|
| |||||||
|
|
|
|
| |||||||
| September 30, |
| December 31, |
| September 30, | December 31, | |||||
FICO Score | 2019 |
| 2018 |
| 2020 | 2019 | |||||
700+ | 59.00 | % | 57.00 | % | 59.00 | % | 59.00 | % | |||
600-699 | 38.00 |
| 39.00 |
| 37.00 | 37.00 | |||||
<600 | 2.00 |
| 3.00 |
| |||||||
No score (1) | 1.00 |
| 1.00 |
| |||||||
<601(1) | 4.00 | 4.00 | |||||||||
Total | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | |||
|
|
(1)Includes VOI notes receivable attributable to borrowers without a FICO score (primarily foreign borrowers).
Bluegreen’s notes receivable are carried at amortized cost less an allowance for loan losses. Generally, interest income is suspended, and previously accrued but unpaid interest income is reversed on 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 September 30, 2020 and December 31, 2019, $22.3 million and $19.3 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 approximately 127 days, Bluegreen’s VOI notes receivable are generally written off against the allowance for loan loss. Accrued interest was $3.8 million and $5.3 million as of September 30, 2020 and December 31, 2019, respectively, and is included within other assets in the Company’s condensed consolidated statements of financial condition herein.
The table below sets forth information regarding the delinquency status of Bluegreen’s VOI notes receivable (in thousands):
|
|
|
|
| ||||||
|
|
|
|
| ||||||
|
| September 30, |
| December 31, | September 30, | December 31, | ||||
|
| 2019 |
| 2018 | 2020 | 2019 | ||||
Current | $ | 547,425 |
| 541,783 | $ | 527,469 | 557,849 | |||
31-60 days |
| 6,797 |
| 5,783 | 5,606 | 6,794 | ||||
61-90 days |
| 5,271 |
| 4,516 | 4,511 | 5,288 | ||||
> 91 days (1) |
| 20,864 |
| 20,410 | 22,332 | 19,267 | ||||
Total | $ | 580,357 |
| 572,492 | $ | 559,918 | 589,198 | |||
|
|
(1)Includes $15.2 million and $10.6 million of VOI notes receivable as of September 30, 2020 and December 31, 2019, respectively, that, as of such dates, had defaulted but the related VOI note receivable balance had not yet been charged off in accordance with the provisions of certain of Bluegreen’s receivable-backed notes payable transactions. These VOI notes receivable have been included in the allowance for loan losses.
11
4. Trade Inventory
The Company’s trade inventory consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
| December 31, |
|
| 2019 |
| 2018 |
Raw materials | $ | 3,204 |
| 2,718 |
Paper goods and packaging materials |
| 1,572 |
| 1,122 |
Finished goods |
| 20,350 |
| 16,270 |
Total trade inventory | $ | 25,126 |
| 20,110 |
5.4. VOI Inventory
Bluegreen’s VOI inventory consisted of the following (in thousands):
|
|
|
|
| ||||||
|
|
|
|
| ||||||
|
| September 30, |
| December 31, | September 30, | December 31, | ||||
|
| 2019 |
| 2018 | 2020 | 2019 | ||||
Completed VOI units | $ | 271,441 |
| 237,010 | $ | 271,985 | 269,847 | |||
Construction-in-progress |
| 1,542 |
| 26,587 | — | 3,946 | ||||
Real estate held for future VOI development |
| 73,838 |
| 70,552 | 78,360 | 73,144 | ||||
Total VOI inventory | $ | 346,821 |
| 334,149 | $ | 350,345 | 346,937 | |||
7. Investments in Unconsolidated Real Estate Joint Ventures 5. Debt
As of September 30, 2019, the Company had equity interests in unconsolidated real estate joint ventures involved in the development of multifamily apartment and townhome communities, as well as single-family master planned communities. In addition, the Company owns a 50% equity interest in the Altman Companies, a developer and manager of multifamily apartment communities.
Investments in unconsolidated real estate joint ventures are accounted for as unconsolidated VIEs. See Note 2 for information regarding the Company’s investments in consolidated VIEs.
The Company’s investments in unconsolidated real estate joint ventures consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
| December 31, |
|
| 2019 |
| 2018 |
Altis at Lakeline - Austin Investors LLC | $ | 242 |
| 4,531 |
Altis at Grand Central Capital, LLC |
| 2,660 |
| 2,549 |
Altis Promenade Capital, LLC |
| 2,190 |
| 2,195 |
Altis at Bonterra - Hialeah, LLC |
| 497 |
| 21,602 |
Altis Ludlam - Miami Investor, LLC |
| 966 |
| 675 |
Altis Suncoast Manager, LLC |
| 743 |
| 1,857 |
Altis Pembroke Gardens, LLC |
| 1,277 |
| 1,284 |
Altis Fairways, LLC |
| 1,883 |
| 1,876 |
Altis Wiregrass, LLC |
| 1,816 |
| 1,897 |
Altis LH-Miami Manager, LLC |
| 799 |
| - |
Altis Vineland Pointe Manager, LLC |
| 4,500 |
| - |
The Altman Companies, LLC |
| 15,267 |
| 14,893 |
ABBX Guaranty, LLC |
| 3,750 |
| 2,500 |
Sunrise and Bayview Partners, LLC |
| 1,499 |
| 1,439 |
PGA Design Center Holdings, LLC |
| 988 |
| 691 |
CCB Miramar, LLC |
| 4,316 |
| 1,575 |
BBX/Label Chapel Trail Development, LLC |
| 1,892 |
| 4,515 |
L03/212 Partners, LLC |
| 1,886 |
| - |
PGA Lender, LLC |
| 2,110 |
| - |
Sky Cove, LLC |
| 4,179 |
| - |
All other investments in real estate joint ventures |
| 279 |
| 659 |
Total | $ | 53,739 |
| 64,738 |
See Note 10 to the Company’s consolidated financial statements included in the 2018 Annual Report for the Company’s accounting policies relating to its investments in unconsolidated real estate joint ventures, including the Company’s analysis and determination that such entities are VIEs in which the Company is not the primary beneficiary.
Sales by Unconsolidated Real Estate Joint Ventures
In April 2019, the Altis at Lakeline joint venture sold its 354 unit multifamily apartment community located in Cedar Park, Texas. As a result of the sale, the Company recognized $5.0 million of equity earnings and received approximately $9.3 million of distributions from the venture for the nine months ended September 30, 2019.
In April 2019, the PGA Design Center joint venture sold its remaining commercial buildings located in Palm Beach Gardens, Florida for $9.2 million and provided seller financing to the buyer for $4.6 million. As a result of the sale, the Company recognized $2.8 million of equity earnings and received approximately $2.3 million of distributions from the venture for the nine months ended September 30, 2019. As described below, the joint venture contributed the promissory note received from the buyer to a newly formed joint venture between the PGA Design Center joint venture and the Company.
13
In August 2019, the Altis at Bonterra joint venture sold its 314 unit multifamily apartment community located in Hialeah, Florida. As a result of the sale, the Company recognized $29.1 million of equity earnings and received approximately $46.0 million of distributions from the venture for the three and nine months ended September 30, 2019. In addition, prior to the sale, the Company received approximately $4.3 million of distributions from the venture during the nine months ended September 30, 2019 related to the operating profits of the venture.
New Unconsolidated Real Estate Joint Ventures
In January 2019, the Company invested in L03/212 Partners, LLC, a joint venture formed to invest in the development of The Main Las Olas, a mixed-used project located in downtown Fort Lauderdale, Florida that is planned to be comprised of an office tower with approximately 365,000 square feet of leasable area, a residential tower with approximately 341 units, and approximately 45,000 square feet of ground floor retail. As of September 30, 2019, the Company had funded $1.9 million of its expected capital contribution of $4.0 million.
In April 2019, the Company invested $2.1 million in PGA Lender, LLC, a joint venture formed with the PGA Design Center joint venture to participate in the $4.6 million seller financing provided to the buyer of the PGA Design Center joint venture’s commercial buildings, as described above. In connection with the transaction, the Company contributed $2.1 million in cash in exchange for a 45.88% equity interest in the venture, while the PGA Design Center joint venture contributed the $4.6 million promissory note received from the buyer in exchange for $2.1 million in cash and a 54.12% equity interest in the venture.
In June 2019, the Company invested $4.2 million in Sky Cove, LLC, a joint venture formed to develop, construct, and sell 204 single family homes in Westlake, Florida.
In August 2019, the Company invested $4.5 million in Altis Vineland Pointe Manager, LLC, a joint venture formed to acquire land, obtain entitlements, and fund predevelopment costs for the development of a potential multifamily apartment community in Orlando, Florida.
Summarized Financial Information of Certain Unconsolidated Real Estate Joint Ventures
The condensed statements of operations for Altis at Bonterra – Hialeah, LLC were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the Three Months Ended |
| For the Nine Months Ended | ||||
|
| September 30, |
| September 30, | ||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
Total revenues | $ | 927 |
| 1,755 |
| 4,479 |
| 6,109 |
Gain on sale of real estate |
| 33,608 |
| - |
| 33,608 |
| - |
Other expenses |
| (813) |
| (1,622) |
| (4,339) |
| (6,222) |
Net earnings | $ | 33,722 |
| 133 |
| 33,748 |
| (113) |
Equity in net earnings of unconsolidated real estate joint venture - Altis at Bonterra - Hialeah, LLC | $ | 29,100 |
| 128 |
| 29,100 |
| (107) |
|
|
|
|
|
|
|
|
|
The condensed statements of financial condition for Altis at Bonterra – Hialeah, LLC were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
| December 31, |
|
| 2019 |
| 2018 |
Assets |
|
|
|
|
Cash | $ | 1,433 |
| 4,033 |
Real estate |
| - |
| 55,734 |
Other assets |
| 6 |
| 134 |
Total assets | $ | 1,439 |
| 59,901 |
|
|
|
|
|
Liabilities and Equity |
|
|
|
|
Notes payable | $ | - |
| 38,641 |
Other liabilities |
| 888 |
| 571 |
Total liabilities |
| 888 |
| 39,212 |
Total equity |
| 551 |
| 20,689 |
Total liabilities and equity | $ | 1,439 |
| 59,901 |
|
|
|
|
|
14
8. Debt
Notes Payable and Other Borrowings
The table below sets forth information regarding the Company’sBluegreen has outstanding borrowings with various financial institutions and other lenders. Financial data related to Bluegreen’s lines of credit and notes payable (other than receivable-backed notes payable, which are discussed below) as of September 30, 2020 and other borrowingsDecember 31, 2019, was as follows (dollars in thousands):
September 30, 2020 | December 31, 2019 | |||||||||||||||||
Carrying | Carrying | |||||||||||||||||
Amount of | Amount of | |||||||||||||||||
Debt | Interest | Pledged | Debt | Interest | Pledged | |||||||||||||
Balance | Rate | Assets | Balance | Rate | Assets | |||||||||||||
Bluegreen: | ||||||||||||||||||
NBA Éilan Loan | $ | 16,973 | 3.50% | $ | 28,235 | $ | 18,820 | 4.95% | $ | 31,259 | ||||||||
Fifth Third Syndicated Line of Credit | 50,000 | 2.39% | 74,028 | 30,000 | 3.85% | 49,062 | ||||||||||||
Fifth Third Syndicated Term Loan | 95,000 | 2.56% | 140,654 | 98,750 | 3.71% | 161,497 | ||||||||||||
Unamortized debt issuance costs | (1,302) | (1,410) | ||||||||||||||||
Total notes payable and other borrowings | $ | 160,671 | $ | 146,160 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2019 |
| December 31, 2018 | ||||||||
|
|
|
|
|
| Carrying |
|
|
|
|
| Carrying |
|
|
|
|
|
| Amount of |
|
|
|
|
| Amount of |
|
| Debt |
| Interest |
| Pledged |
| Debt |
| Interest |
| Pledged |
|
| Balance |
| Rate |
| Assets |
| Balance |
| Rate |
| Assets |
Bluegreen: |
|
|
|
|
|
|
|
|
|
|
|
|
2013 Notes Payable | $ | - |
| - | $ | - | $ | 28,125 |
| 5.50% | $ | 22,878 |
Fifth Third Bank Note |
| 3,649 |
| 5.11% |
| 7,757 |
| 3,834 |
| 5.34% |
| 7,892 |
NBA Éilan Loan |
| 19,974 |
| 5.34% |
| 32,821 |
| 25,603 |
| 5.60% |
| 35,615 |
Fifth Third Syndicated |
|
|
|
|
|
|
|
|
|
|
|
|
Line of Credit |
| 75,000 |
| 4.88% |
| 102,431 |
| 55,000 |
| 5.27% |
| 92,415 |
Fifth Third Syndicated |
|
|
|
|
|
|
|
|
|
|
|
|
Term Loan |
| 21,094 |
| 5.08% |
| 28,809 |
| 22,500 |
| 5.37% |
| 27,724 |
Unamortized debt |
|
|
|
|
|
|
|
|
|
|
|
|
issuance costs |
| (672) |
|
|
|
|
| (1,671) |
|
|
|
|
Total Bluegreen | $ | 119,045 |
|
|
|
| $ | 133,391 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
Community Development |
|
|
|
|
|
|
|
|
|
|
|
|
District Obligations | $ | 29,432 |
| 4.25-6.00% | $ | 44,771 | $ | 24,583 |
| 4.25-6.00% | $ | 35,155 |
TD Bank Term Loan and |
|
|
|
|
|
|
|
|
|
|
|
|
Line of Credit |
| 8,394 |
| 5.24% |
| (1) |
| 8,117 |
| 5.47% |
| (1) |
Iberia $50.0 million |
|
|
|
|
|
|
|
|
|
|
|
|
Revolving Line of Credit |
| - |
| - |
| (2) |
| 30,000 |
| 5.35% |
| (2) |
Banc of America Leasing |
|
|
|
|
|
|
|
|
|
|
|
|
& Capital Equipment Note |
| 406 |
| 4.75% |
| (3) |
| 555 |
| 4.75% |
| (3) |
Unsecured Note (4) |
| 3,400 |
| 6.00% |
| - |
| 3,400 |
| 6.00% |
|
|
Other (4) |
| 1,580 |
| 5.89% |
| 1,905 |
| 1,507 |
| 5.25% |
| 1,968 |
Unamortized debt |
|
|
|
|
|
|
|
|
|
|
|
|
issuance costs |
| (837) |
|
|
|
|
| (666) |
|
|
|
|
Total other | $ | 42,375 |
|
|
|
| $ | 67,496 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total notes payable and |
|
|
|
|
|
|
|
|
|
|
|
|
other borrowings | $ | 161,420 |
|
|
|
| $ | 200,887 |
|
|
|
|
|
|
|
|
|
|
|
|
See Note 13 to the Company’s consolidated financial statements included in the 2018 Annual Report for additional information regarding the above listed notes payable and other borrowings.
15
NewExcept as described below, there were 0 new debt issuances andor significant changes related to the above listed notes payable and other borrowings are detailed below.during the nine months ended September 30, 2020.
In February 2019,Fifth Third Syndicated Line of Credit and Fifth Third Syndicated Term Loan. During March 2020, in an effort to assure adequate liquidity for a sustained period given the Meadow View at Twin Creeks Community Development District issued $8.1 million of community development bonds in order to fund the infrastructure improvements for Phase IIeffect and uncertainties associated with of the Company’s Beacon Lake Community developmentCOVID-19 pandemic, Bluegreen drew down $60.0 million under its line of credit. Bluegreen repaid the $60 million borrowed as of September 30, 2020. Further, in October 2020, Bluegreen repaid an additional $20.0 million on its line-of-credit. to modify the definition of certain customary covenants. As of September 30, 2020, outstanding borrowings under the facility totaled $145.0 million, including $95.0 million under the Fifth Third Syndicated Term Loan with an interest rate of 2.56%, and repay$50.0 million under the Fifth Third Syndicated Line of Credit with an interest rate of 2.39%.
Iberia Revolving Line of Credit. BVH previously had a portion of the bonds previously issued in 2016 in connection with Phase I of the development. The bonds issued in February 2019 have fixed interest rates ranging from 5.20% to 5.80% and mature at various times during the years 2030 through 2049. The Company at its option has the ability to repay a specified portion of the bonds at the time that it sells developed lots in the Beacon Lakes Community.
In July 2019, the Company modified the Iberia $50.0 million revolving line of credit to, among other things, extendwith IberiaBank. Effective September 30, 2020, the maturityloan agreement was terminated at the request of BVH in connection with the completion of the linespin-off of credit from March 6, 2020 to June 30, 2021 and remove a financial covenant regarding fixed charge coverage. UnderBBX Capital. In connection with termination, IberiaBank released the terms of the modified line of credit, the Company has the option to extend the maturity of the line of credit for a twelve-month period, subjectsecurity interest over all collateral granted to the satisfaction of certain conditions.
In September 2019, Bluegreen repaid in full its 2013 Notes Payable. Accordingly, the related unamortized debt issuance costs associated with the notes of $0.4 million were written off in the third quarter of 2019.
In December 2016, Bluegreen entered into a $100.0 million syndicated credit facility with Fifth Third Bank, as administrative agent and lead arranger, and certain other bank participants as lenders. In October 2019, Bluegreen amended and restated the facility and increased the facility to $225.0 million. The amended facility includes a $100.0 million term loan (the “Fifth Third Syndicated Term Loan”) with quarterly amortization requirements and a $125.0 million revolving line of credit (the “Fifth Third Syndicated Line of Credit”). Amounts borrowedlenders under the amended facility generally bear interest at LIBOR plus 2.00% - 2.50% depending on Bluegreen’s leverage ratio, are collateralized by certain of Bluegreen’s VOI inventory, sales center buildings, management fees, short-term receivables, and cash flows from residual interests relating to certain term securitizations, and will mature in October 2024. At closing, Bluegreen borrowed the entire $100.0 million term loan and $30.0 millionfacility. NaN amounts were outstanding under the revolving line of credit. Proceeds were used to repay the outstanding balance on the existing syndicated credit facility, repay $3.6 million on the existing Fifth Third Bank Note Payable, and pay expenses and fees associated with the amendment, with the remainder to be used for general corporate purposes.loan agreement at September 30, 2020.
Receivable-Backed Notes Payable
The table below sets forth information regarding Bluegreen’s receivable-backed notes payable facilities (dollars in thousands):
September 30, 2020 | December 31, 2019 | |||||||||||||||||
Principal | Principal | |||||||||||||||||
Balance of | Balance of | |||||||||||||||||
Pledged/ | Pledged/ | |||||||||||||||||
Debt | Interest | Secured | Debt | Interest | Secured | |||||||||||||
Balance | Rate | Receivables | Balance | Rate | Receivables | |||||||||||||
Receivable-backed notes | ||||||||||||||||||
payable - recourse: | ||||||||||||||||||
Liberty Bank Facility (1) | $ | 19,715 | 3.40% | $ | 26,263 | $ | 25,860 | 4.75% | $ | 31,681 | ||||||||
NBA Receivables Facility(2) | 33,389 | 3.35% | 42,792 | 32,405 | 4.55% | 39,787 | ||||||||||||
Pacific Western Facility (1) | 24,313 | 3.03% | 31,241 | 30,304 | 4.68% | 37,809 | ||||||||||||
Total | $ | 77,417 | $ | 100,296 | $ | 88,569 | $ | 109,277 | ||||||||||
Receivable-backed notes | ||||||||||||||||||
payable - non-recourse: | ||||||||||||||||||
KeyBank/DZ Purchase Facility | 60,981 | 2.50% | 77,140 | 31,708 | 3.99% | 39,448 | ||||||||||||
Quorum Purchase Facility | 34,240 | 4.75-5.50% | 39,876 | 44,525 | 4.75-5.50% | 49,981 | ||||||||||||
2012 Term Securitization | 5,025 | 2.94% | 6,162 | 8,638 | 2.94% | 9,878 | ||||||||||||
2013 Term Securitization | 13,286 | 3.20% | 15,139 | 18,219 | 3.20% | 19,995 | ||||||||||||
2015 Term Securitization | 24,302 | 3.02% | 26,998 | 31,188 | 3.02% | 33,765 | ||||||||||||
2016 Term Securitization | 37,952 | 3.35% | 43,794 | 48,529 | 3.35% | 54,067 | ||||||||||||
2017 Term Securitization | 54,507 | 3.12% | 62,877 | 65,333 | 3.12% | 74,219 | ||||||||||||
2018 Term Securitization | 77,148 | 4.02% | 90,088 | 91,231 | 4.02% | 103,974 | ||||||||||||
Unamortized debt issuance costs | (4,140) | — | — | (5,125) | — | — | ||||||||||||
Total | $ | 303,301 | $ | 362,074 | $ | 334,246 | $ | 385,327 | ||||||||||
Total receivable-backed debt | $ | 380,718 | $ | 462,370 | $ | 422,815 | $ | 494,604 | ||||||||||
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| September 30, 2019 |
| December 31, 2018 | ||||||||
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| Balance of |
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| Pledged/ |
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| Debt |
| Interest |
| Secured |
| Debt |
| Interest |
| Secured |
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| Balance |
| Rate |
| Receivables |
| Balance |
| Rate |
| Receivables |
Receivable-backed notes |
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payable - recourse: |
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Liberty Bank Facility | $ | 28,247 |
| 5.25% | $ | 34,545 | $ | 17,654 |
| 5.25% | $ | 22,062 |
NBA Receivables Facility |
| 35,809 |
| 4.79% |
| 43,706 |
| 48,414 |
| 5.27% |
| 57,805 |
Pacific Western Facility |
| 30,848 |
| 4.92% |
| 37,954 |
| 10,606 |
| 5.52% |
| 13,730 |
Total | $ | 94,904 |
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| $ | 116,205 | $ | 76,674 |
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| $ | 93,597 |
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Receivable-backed notes |
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payable - non-recourse: |
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KeyBank/DZ Purchase Facility |
| 19,035 |
| 4.84% |
| 23,390 |
| - |
| - |
| - |
Quorum Purchase Facility |
| 44,865 |
| 4.75-5.50% |
| 50,337 |
| 40,074 |
| 4.75-5.50% |
| 45,283 |
2012 Term Securitization |
| 9,986 |
| 2.94% |
| 11,558 |
| 15,212 |
| 2.94% |
| 16,866 |
2013 Term Securitization |
| 20,090 |
| 3.20% |
| 21,995 |
| 27,573 |
| 3.20% |
| 29,351 |
2015 Term Securitization |
| 34,093 |
| 3.02% |
| 36,676 |
| 44,230 |
| 3.02% |
| 47,690 |
2016 Term Securitization |
| 52,632 |
| 3.35% |
| 58,817 |
| 63,982 |
| 3.35% |
| 72,590 |
2017 Term Securitization |
| 69,763 |
| 3.12% |
| 79,551 |
| 83,513 |
| 3.12% |
| 95,877 |
2018 Term Securitization |
| 96,907 |
| 4.02% |
| 109,599 |
| 114,480 |
| 4.02% |
| 125,916 |
Unamortized debt issuance costs |
| (5,515) |
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| - |
| (6,807) |
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| - |
Total | $ | 341,856 |
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| $ | 391,923 | $ | 382,257 |
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| $ | 433,573 |
Total receivable-backed debt | $ | 436,760 |
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| $ | 508,128 | $ | 458,931 |
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| $ | 527,170 |
(1)Recourse on these facilities is in each case limited to $10 million, subject to certain exceptions.
There(2)Pursuant to the September 25, 2020 amendment described below, recourse to Bluegreen/Big Cedar Vacations under this amended facility was reduced to $23.8 million and will be reduced by $1.3 million per month starting October 31, 2020 until it reaches a floor of $10.0 million.
Liberty Bank Facility. Since 2008, Bluegreen has maintained a revolving VOI notes receivable hypothecation facility (the “Liberty Bank Facility”) with Liberty Bank which provides for advances on eligible receivables pledged under the Liberty Bank Facility, subject to specified terms and conditions, during the revolving credit period. On June 25, 2020, Bluegreen amended the Liberty Bank Facility to extend the revolving credit period from June 2020 to June 2021, and the maturity from March 2023 to June 2024. In addition, the amendment decreased the advance rate with respect to Qualified Timeshare Loans from 85% to 80% of the unpaid principal balance of the Qualified Timeshare Loans. The advance rate with respect to Nonconforming Qualified Timeshare Loans remained 60% of the unpaid principal balance of Non-Conforming Qualified Timeshare Loans. The amendment also reduced the maximum permitted outstanding borrowings from $50.0 million to $40.0 million, subject to the terms of the facility, and commencing on July 1, 2020, decreased the interest rate to the Wall Street Journal (“WSJ”) Prime Rate minus 0.10% with a floor of 3.40% from the Prime Rate with a floor of 4.00%. In addition, recourse to Bluegreen under the amended facility was reduced to $10.0 million, with certain exceptions set forth in the facility. Subject to the terms of the facility, principal and interest due under the Liberty Bank Facility are paid as cash is collected on the pledged receivables, with the remaining balance being due at maturity. See “2020 Term Securitization” below for information regarding repayments under this facility during October 2020.
NBA Receivables Facility. Bluegreen/Big Cedar Vacations has a revolving VOI hypothecation facility (the “NBA Receivables Facility”) with National Bank of Arizona (“NBA”) which was amended and restated on September 25, 2020. The Amended and Restated NBA Receivables Facility extended the revolving advance period from September 2020 to September 2023 and the maturity date from March 2025 to March 2028. In addition, the interest rate on all new advances made under the facility will be one month LIBOR plus 2.25% (with an interest rate floor of 3.00%). Further, if new advances of at least $25.0 million are made by June 30, 2021, the interest rate on borrowings under the facility at September 25, 2020, to the extent then remaining outstanding, will be reduced from the current rate of one month LIBOR plus 2.75% (with an interest rate floor of 3.50%) to one month LIBOR plus 2.25% (with an interest rate floor of 3.00%). The Amended and Restated NBA Receivables Facility provides for advances at a rate of 80% on eligible receivables pledged under the facility (decreased from the prior rate of 85%), subject to eligible collateral and specified terms and conditions, during the revolving credit period. The maximum borrowings allowed under the
facility remains at $70.0 million. In addition, recourse to Bluegreen/Big Cedar under the amended facility was reduced to $23.8 million as of September 25, 2020 and will be reduced by $1.3 million per month starting October 31, 2020 until it reaches a floor of $10 million. Subject to the terms of the facility, principal and interest payments received on pledged receivables are applied to principal and interest due under the facility, with the remaining outstanding balance being due by maturity.
Quorum Purchase Facility. Bluegreen/Big Cedar Vacations has a VOI notes receivable purchase facility (the “Quorum Purchase Facility”) with Quorum Federal Credit Union (“Quorum”), pursuant to which Quorum has agreed to purchase eligible VOI notes receivable in an amount of up to an aggregate $50.0 million purchase price, subject to certain conditions precedent and other terms of the facility. On March 17, 2020, the Quorum Purchase Facility was amended to extend the advance period to December 2020 from June 2020. The interest rate on each advance is set at the time of funding based on rates mutually agreed upon by the parties. The maturity of the Quorum Purchase Facility is December 2032. The Quorum Purchase Facility provides for an 85% advance rate on eligible receivables sold under the facility; however, Quorum can modify this advance rate on future purchases subject to the terms and conditions of the Quorum Purchase Facility.
2012 Term Securitization. In October 2020, Bluegreen repaid in full the notes payable issued in connection with the 2012 Term Securitization. Accordingly, the related unamortized debt issuance costs of $0.1 million were nowritten off during the fourth quarter of 2020.
Except as described above, there were 0 new debt issuances or significant changes related to the above listed facilities during the nine months ended September 30, 2019.2020. See Note 13 to the Company’s consolidated financial statementsour Consolidated Financial Statements included in the 2018our 2019 Annual Report on Form 10-K for additional information regarding the above listed receivable-backed notes payable facilities.
2020 Term Securitization. In October 2020, Bluegreen completed the 2020-A Term Securitization, a private offering and sale of approximately $131.0 million of investment-grade, VOI receivable backed notes (the “Notes”), including approximately $48.6 million of Class A Notes, approximately $47.9 million of Class B Notes and approximately $34.5 million of Class C Notes with interest rates of 1.55%, 2.49%, and 4.22%, respectively, which blends to an overall interest rate of approximately 2.60%. The gross advance rate for this transaction was 88.0%. The Notes mature in February 2036. KeyBanc Capital Markets Inc. (“KeyCM”) and Barclays Capital Inc. acted as co-lead managers and were the initial purchasers of the Notes. KeyCM also acted as structuring agent for the transaction.
The amount of the VOI receivables sold or to be sold to BXG Receivables Note Trust 2020-A (the “Trust”) in the transaction is approximately $148.9 million, approximately $138.9 million of which was sold to the Trust at closing and approximately $10.0 million of which (the “Prefunded Receivables”) is expected to be sold to the Trust by February 5, 2021. The gross proceeds of such sales to the Trust are anticipated to be approximately $131.0 million. A portion of the proceeds received to date were used to: repay KeyBank National Association (“KeyBank”) and DZ Bank AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main (“DZ Bank”) approximately $61.1 million, representing all amounts outstanding (including accrued interest) under Bluegreen’s existing purchase facility with KeyBank and DZ Bank (the "KeyBank/DZ Purchase Facility"); repay Liberty Bank approximately $6.4 million the Liberty Bank Facility; repay Pacific Western Bank approximately $14.6 million under Bluegreen’s existing facility with Pacific Western Bank (the “Pacific Western Bank Facility”); capitalize a reserve fund; and pay fees and expenses associated with the transaction. Prior to the closing of the 2020-A Term Securitization, Bluegreen, as servicer, funded approximately $5.0 million in connection with the servicer redemption of the notes related to the BXG Receivables Note Trust 2012-A, and certain of the VOI notes in such trust were sold to the Trust in connection with the 2020-A Term Securitization. The remainder of the gross proceeds from the 2020-A Term Securitization are expected to be used by Bluegreen 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 $13.3 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, 2021, and (iii) there is currently approximately $9.7 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, 2021. Thus, additional availability of approximately $82.1 million in the aggregate was created under the KeyBank/DZ Purchase Facility, Liberty Bank Facility and Pacific Western Facility as a result of the repayments. With respect to each of the KeyBank/DZ Purchase Facility, the Liberty Bank Facility and the Pacific Western Bank Facility, the maximum outstanding receivable-backed borrowings permitted as set forth above is subject to eligible collateral and the other terms and conditions of the facility.
Subject to performance of the collateral, we will receive any excess cash flows generated by the receivables transferred under the 2020-A Term Securitization (excess meaning after payments of customary fees, interest, and principal under the 2020-A Term Securitization) on a pro-rata basis as borrowers make payments on their VOI loans.
While ownership of the VOI receivables included in the 2020-A 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.
Junior Subordinated Debentures
The table below sets forth information regarding the Company’s junior subordinated debentures (dollars in thousands):
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| Amounts | Rates (1) |
| Amounts | Rates (1) | Amounts | Rates (1) | Amounts | Rates (1) | ||||||||
Woodbridge - Levitt Capital Trusts I - IV | $ | 66,302 | 6.07 - 6.17% | $ | 66,302 | 6.20 - 6.65% | $ | 66,302 | 4.11 - 4.16% | $ | 66,302 | 5.74 - 5.95% | ||||||
Bluegreen Statutory Trusts I - VI |
| 110,827 | 7.07 - 7.22% |
| 110,827 | 7.32 - 7.70% | 110,827 | 5.07 - 5.21% | 110,827 | 6.74 - 6.86% | ||||||||
Unamortized debt issuance costs |
| (1,147) |
|
| (1,200) |
| (1,075) | (1,129) | ||||||||||
Unamortized purchase discount |
| (38,944) |
|
| (39,504) |
| (38,117) | (38,746) | ||||||||||
Total junior subordinated debentures | $ | 137,038 |
| $ | 136,425 |
| $ | 137,937 | $ | 137,254 | ||||||||
| (1)The Company’s |
17
Woodbridge and Bluegreen have each formed statutory business trusts (collectively, the “Trusts”), each of which issued trust preferred securities and invested the proceeds thereof in junior subordinated debentures of Woodbridge and Bluegreen, respectively. The Trusts are VIEs in which Woodbridge and Bluegreen, as applicable, are not the primary beneficiaries. Accordingly, the Company does not consolidate the operations of these Trusts; instead, the beneficial interests in the Trusts are accounted for under the equity method of accounting. Included in other assets as of September 30, 2019 and December 31, 2018 was $2.1 million of equity in the Trusts. Interest on the junior subordinated debentures and distributions on the trust preferred securities are payablebear interest at 3-month LIBOR (subject to quarterly in arrears at the same interest rate.adjustment) plus a spread ranging from 3.80% to 4.90%.
All of the junior subordinated debentures were eligible for redemption by Woodbridge and Bluegreen, as applicable, as of September 30, 20192020 and December 31, 2018.2019.
See Note 13 to the Company’s consolidated financial statements included in the 20182019 Annual Report for additional information regarding the Company’s junior subordinated debentures.
Debt Compliance and Amounts Available under Credit Facilities
As of September 30, 2019, BBX Capital2020, BVH and its subsidiaries were in compliance with all material financial debt covenants under their debt instruments, as amended.
Amounts available under credit facilities for BBX Capital and its subsidiaries asinstruments. As of September 30, 2019 were as follows (in thousands):
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The amounts available2020, Bluegreen had availability of approximately $182.4 million under the Company’sits receivable-backed purchase and credit facilities areand corporate credit line, subject to eligible collateral and the terms of the facilities, as applicable.
9.6. Revenue Recognition
The table below sets forth the Company’s revenue disaggregated by category (in thousands):
For the Three Months Ended | For the Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||
Sales of VOIs | $ | 59,265 | 66,318 | $ | 113,447 | 186,351 | ||||||
Fee-based sales commissions | 22,119 | 60,478 | 64,619 | 161,033 | ||||||||
Resort and club management revenue | 24,454 | 27,165 | 73,707 | 78,169 | ||||||||
Cost reimbursements | 15,684 | 17,883 | 46,654 | 48,933 | ||||||||
Resort title fees | 1,281 | 4,289 | 5,353 | 10,092 | ||||||||
Other customer revenue | 2,096 | 2,290 | 4,498 | 5,754 | ||||||||
Revenue from customers | 124,899 | 178,423 | 308,278 | 490,332 | ||||||||
Interest income | 19,346 | 21,586 | 59,963 | 63,969 | ||||||||
Other revenue | — | 28 | — | 70 | ||||||||
Total revenues | $ | 144,245 | 200,037 | $ | 368,241 | 554,371 | ||||||
10.7. Income Taxes
BBX CapitalBVH and its subsidiaries file a consolidated U.S. federal income tax return and income tax returns in various state and foreign jurisdictions.
Effective income tax rates for interim periods are based upon the Company’s current estimated annual rate, which varies based upon the Company’s estimate of taxable earnings or loss and the mix of taxable earnings or loss in the various states in which the Company operates. The Company’s effective tax rate was applied to income or loss before income taxes reduced by net income attributable to noncontrolling interests in joint ventures taxed as partnerships. In addition, the Company recognizes taxes related to unusual or infrequent items or resulting from a change in judgment regarding a position taken in a prior period as discrete items in the interim period in which the event occurs.
The Company’s effective income tax rate for the three and nine months ended September 30, 2020 from continuing operations was approximately 38%(0.7)%. The effective income tax rate was different than the expected federal income tax rate of 21% due to the impact of the Company’s nondeductible executive compensation. In connection with the spin-off of BBX Capital, the Company accelerated the vesting of outstanding restricted stock awards and 37% duringpaid incentive bonuses which amounted to $32.6 million of nondeductible compensation.
The Company’s effective income tax rate for the three and nine months ended September 30, 2019 respectively, compared to anfrom continuing operations was 27%. The effective tax rate was different than the expected federal income tax rate of 44%21% due to the impact of nondeductible executive compensation and 36% for the three and nine months ended September 30, 2018, respectively.state income taxes. The effective tax rate for the three and nine months ended September 30, 2019 excludes the tax benefit associated with the $39.1 million Bass Pro litigation settlement, described in Note 11 below, which the Company accounted for as a discrete item at the statutory income tax rate of 26%.
The Company’s effective income tax rate for the three and nine months ended September 30, 2018 excludes2020 from discontinued operations reflects a discrete incomechange in the Company’s forecasted operating results for the annual period, which resulted in the additional tax expense of $2.8 million related tobenefits recognized during the recognition of a provisional adjustment associated with the December 2017 Tax Reform Act.three months ended September 30, 2020.
The Company’s effective income tax ratesrate for the three and nine months ended September 30, 2019 and 2018 were higherfrom discontinued operations was different than the expected federal income tax rate of 21% due to nondeductible executive compensation andthe impact of state income taxes.
11.8. Commitments and Contingencies
Litigation Matters
In the ordinary course of business, BBX CapitalBVH and its subsidiaries are parties to lawsuits as plaintiff or defendant involving its operations and activities. Bluegreen is subject to claims or proceedings from time to time relating to the purchase, sale, marketing, or financing of VOIs and other business activities. 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 various other partiesindividuals and entities, and we also receivesreceive individual consumer complaints andas well as complaints inquiries, and orders requiring compliance from governmentalreceived 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. We may also become subject to litigation related to the COVID-19 pandemic, including with respect to any actions we take 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. Management does not believe that the aggregate liability relating to known contingencies in excess of the aggregate amounts accrued will have a material impact on the Company’s results of operations or financial condition. However, litigation is inherently uncertain, and the actual costs of resolving legal claims, including awards of damages, may be substantially higher than the amounts accrued for these claims and may have a material adverse impact on the Company’s results of operations or financial condition.
Adverse judgments and the costs of defending or resolving legal claims may be substantial and may have a material adverse impact on the Company’s financial statements. 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 reasonable range of loss. Frequently in these matters, the claims are broad, and the plaintiffs have not quantified or factually supported their claim.
The Coronavirus Aid, Relief, and Economic Securities Act (“CARES Act”) was signed into law on March 27, 2020 in response to the COVID-19 pandemic. As of September 30, 2020, we evaluated the income tax provisions of the CARES Act and determined they would have no significant effect on either our September 30, 2020 income tax rate or the computation of our estimated effective tax rate for the year ended December 31, 2020. However, we have taken advantage of the deferral of the employer portion of the tax withholding amounts and the employee retention tax credits provided for in the CARES Act. During the nine months ended September 30, 2020, we recorded a tax withholding deferral of $5.1 million and employee retention tax credits of $6.9 million, which is included in selling, general and administrative expenses in our unaudited consolidated statements of operations and comprehensive income for the nine months ended September 30, 2020.
The following is a description of certain litigation matters:
BBX Capital Litigation
There were no material pending legal proceedings against BBX Capital or its subsidiaries other than proceedings against Bluegreen as of September 30, 2019.
19
Bluegreen / Bass Pro Litigation and Settlement
Bluegreen, indirectly through Bluegreen Vacations Unlimited (“BVU”), its wholly-owned subsidiary, 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 previously disclosed, in March 2019, Bluegreen received a notice from Bass Pro stating that Bass Pro intended to cancel Bluegreen’s access to the Bass Pro marketing channels and advertising materials as of 30 days from the date of the notice unless Bluegreen cured the alleged breaches to Bass Pro’s satisfaction. While Bluegreen responded to Bass Pro with respect to each of the issues raised prior to the expiration of the cure period, on April 17, 2019, Bass Pro and its affiliates brought an action against BVU alleging that BVU failed to pay certain commissions due it under the parties’ marketing agreement, improperly charged a tour generation fee, and that its conduct in the Bass Pro retail stores breached its contractual commitments. On May 24, 2019, Bluegreen received notice from Bass Pro and its affiliates that it was terminating the marketing agreement based on the failure to cure the alleged breaches, and Bluegreen was removed from all Bass Pro retail stores. BVU subsequently filed a counter claim against Bass Pro and Big Cedar LLC.
On June 13, 2019, Bluegreen entered into a settlement agreement which resolved the litigation and reinstated and amended the marketing agreement. Pursuant to the terms of the settlement agreement, Bass Pro agreed to reinstate BVU’s access to Bass Pro’s marketing channels, including Bass Pro and Cabela’s retail stores. Additionally, with no admission of any wrongdoing, Bluegreen paid Bass Pro $20.0 million within 15 days after the execution of the settlement agreement; Bluegreen agreed to pay Bass Pro $4.0 million on each January 1 from 2020 through 2024; and Bluegreen agreed that Bass Pro would retain $1.5 million of an amount prepaid to them earlier in 2019 under the marketing agreement. Additionally, 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 BVU accesses (excluding retail stores which are designated to provide tours to Bluegreen/Big Cedar Vacations, or “Bluegreen/Big Cedar Feeder Stores”) plus $32 per net vacation package sold (less cancellations and refunds within 45 days of sale), excluding sales at Bluegreen/Big Cedar Feeder Stores. Bluegreen also agreed to contribute to the Wonders of Wildlife Foundation $5.00 per net package sold (less cancellations and refunds within 45 days of sale), subject to an annual minimum of $700,000. The fixed annual fee was prorated for 2019. Subject to the terms and conditions of the settlement agreement, Bluegreen will generally be required to pay the fixed annual fee with respect to at least 59 Bass Pro retail stores and a minimum number of Cabela’s retail stores that increases over time to a total of at least 60 Cabela’s retail stores by the end of 2021. Notwithstanding the foregoing, the minimum number of Bass Pro and Cabela’s retail stores for purposes of the fixed annual fee may be reduced under certain circumstances set forth in the parties’ agreement, including as a result of a reduction of traffic in the stores in excess of 25% year-over-year. The parties also executed mutual waivers and releases and agreed to the dismissal of the litigation. Bluegreen accrued for the net present value of the above payments required by the settlement agreement, plus attorneys’ fees and costs, totaling approximately $39.1 million, which is reflected in selling, general, and administrative expenses in the Company’s condensed consolidated statements of operations for the nine months ended September 30, 2019. As of September 30, 2019, $17.6 million was accrued for the remaining payments required by the settlement agreement, which are reflected in other liabilities in the Company’s condensed consolidated statement of financial condition.
As of September 30, 2019, Bluegreen sold vacation packages in 68 of Bass Pro retail stores and 7 Cabela’s retail stores. During the nine months ended September 30, 2019 and 2018, VOI sales to prospects and leads generated by the agreement with Bass Pro accounted for approximately 13% and 14%, respectively, of Bluegreen’s VOI sales volume.
Other Bluegreen Litigation
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, Michael Oliver, Carrie Oliver, Russell Walters, Elaine Walters, and Mike Ericson, individually and on behalf of all other similarly situated, filed a purported class action lawsuit against Bluegreen which asserted claims for alleged violations of the Florida Deceptive and Unfair Trade Practices Act and the Florida False Advertising Law. In the complaint, the plaintiffs alleged the making of false representations in connection with Bluegreen’s sales of VOIs. The purported class action lawsuit was dismissed without prejudice after mediation. However, on or about April 24, 2018, plaintiffs re-filed their individual claims in Palm Beach County Circuit Court. Subsequently, on October 15, 2019, the Court entered an order granting summary judgment in favor of Bluegreen and dismissed all claims. Bluegreen has moved for reimbursement of its attorneys’ fees. Plaintiffs have appealed the summary judgment order.
On February 28, 2018, Oscar Hernandez and Estella Michael filed a purported class action litigation in San Bernardino Superior Court against BVU.Bluegreen Vacations Unlimited, Inc. (“BVU”). The central claims in the complaint, as amended during June 2018, include alleged
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failures to pay overtime and wages at termination and to provide meal and rest periods, as well as claims relating to non-compliant wage statements and unreimbursed business expenses; and a claim under the Private Attorney’s General Act. Plaintiffs soughtseek to represent a class of approximately 660 hourly, non-exempt employees who worked in the state of California since March 1, 2014. In April 2019, the parties mediated and agreed to settle the matter for an immaterial amount. It is expected that the court will approveThe parties have executed the settlement and the dismissaldocuments. The court issued preliminary approval of the lawsuit after the settlement documents are executed. agreement on September 8, 2020. The final approval hearing is set for January 2021.
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 the CompanyBluegreen and BVU asserting claims for alleged violations of the Wisconsin Timeshare Act, Wisconsin law prohibiting illegal referral selling, and Wisconsin law prohibiting illegal attorney’s fee provisions. Plaintiffs allegations include that Bluegreen failed to disclose the identity of the seller of real property at the beginning of Bluegreen’s initial contact with the purchaser; that Bluegreen misrepresented who the seller of the real property was; that Bluegreen misrepresented the buyer’s right to cancel; that Bluegreen included an illegal attorney’s fee provision in the sales document(s); that Bluegreen offered an illegal “today only” incentive to purchase; and that Bluegreen utilizes an illegal referral selling program to induce the sale of VOIs. Plaintiffs seek certification of a class consisting of all persons who, in Wisconsin, purchased from Bluegreen one or more VOIs within six years prior to the filing of this lawsuit. Plaintiffs seek statutory damages, attorneys’ fees, and injunctive relief. Bluegreen has moved to dismiss the case, and on November 27, 2019, the Court issued a ruling granting the motion in part. Bluegreen has answered the remaining claims. Bluegreen believes the lawsuit is without merit and intends to vigorously defend the action.
On January 7, 2019, Shehan Wijesinha filed a purported class action lawsuit alleging violations of the Telephone Consumer Protection Act (the “TCPA”). It is alleged that BVU called plaintiff’s cell phone for telemarketing purposes using an automated dialing system and that plaintiff did not give BVU his express written consent to do so. Plaintiffs seekPlaintiff seeks certification of a class comprised of other persons in the United States who within the four years prior to the filing of the complaint, received similar calls from or on behalf of BVU without the person’s consent. Plaintiff seeks monetary damages, attorneys’ fees, and injunctive relief. Bluegreen believes 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 (“FCC”) 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 currently remains stayed.
On January 7, 2019, Debbie Adair and thirty-fourNaN other timeshare purchasers filed a lawsuit against BVU and Bass Pro alleging violations of the Tennessee Consumer Protection Act, the Tennessee Time-share Act, the California Time-Share Act, fraudulent misrepresentation for failure to make certain required disclosures, fraudulent inducement for inducing purchasers to remain under contract past rescission, unauthorized practice of law, civil conspiracy, unjust enrichment, and breach of contract. Plaintiffs seek rescission of their contracts, monetary damages, including statutory treble damages, or in the alternative, punitive damages in an amount not less than $0.5 million. Bluegreen believes the lawsuit is without merit and intends to vigorously defend the action. Bluegreen has agreed to indemnify Bass Pro with respect to the claims brought against itBluegreen in this proceeding.proceeding and filed a motion to dismiss. On April 6, 2020, the court granted Bluegreen’s motion to dismiss, and on April 29, 2020, the court entered final judgment in Bluegreen’s favor.
On March 15, 2018,July 18, 2019, Eddie Boyd, et al. filed an action alleging that BVU entered intoand 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 Agreement for Purchaseadministrative processing fee constitutes the unauthorized practice of law and Salehave also asserted that Bluegreen and their outside counsel engaged in abuse of Assets with T. Park Central, LLC, O. Park Central, LLC,process by filing a lawsuit against plaintiffs’ counsel (The Montgomery Law Firm). Plaintiffs seek monetary damages, attorneys’ fees, and New York Urban Ownershipinjunctive relief. On August 31, 2020, the Judge certified a class regarding the unauthorized practice of law claim and dismissed the claims regarding abuse of process. Bluegreen believes the lawsuit is without merit.
On July 7, 2020, Robert Barban and approximately 172 other plaintiffs filed an action against Bluegreen subsidiaries, Bluegreen Resorts Management, LLC (collectively “New York Urban”Inc. (“BRM”) (the “Purchase and Sale Agreement”Vacation Trust, Inc. (“VTI”), seeking a financial review. Plaintiffs further allege that the allocation system in place does not allow them to freely and easily use, occupy, and enjoy the accommodations and facilities. Finally, they allege that BRM has unreasonably escalated operating costs and that VTI failed to protect the plaintiffs from these costs. Bluegreen intends to vigorously defend the action and intend to move to dismiss the complaint on a number of grounds including the parties’ agreements to arbitrate these issues.
On July 14, 2020, Kenneth Johansen, individually and on behalf of all others similarly situated, filed a purported class action against BVU for alleged violations of the Telephone Consumer Protection Act (“TCPA”). Specifically, the named plaintiff alleges that he received at least nine telemarketing calls from BVU while he was on the National Do Not Call Registry. He seeks to certify a class of similarly situated plaintiffs. Bluegreen intends to vigorously defend the action. Bluegreen filed a motion to dismiss, and plaintiff in response filed an amended complaint on September 18, 2020. Bluegreen filed a motion to dismiss the amended complaint on October 2, 2020, which provides foris fully briefed and pending before the purchase ofCourt. Discovery has begun and is ongoing.
On August 30, 2020, over 100 VOI owners at The Manhattan Club inventory over a number(“TMC”) sued BVU and certain unaffiliated entities (the “Non-Bluegreen Defendants”). The complaint includes claims arising out of yearsalleged misrepresentations made during the sale of VOIs at TMC and certain post-sale operational practices, including allegedly charging owners excessive annual maintenance fees and implementing reservation policies that the assumptionrestrict the ability of VOI owners to use their points to access the management contract with resort while allowing the general public to make reservations. The Manhattan Club HOAanticipatedplaintiffs 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 occur in 2021. On October 7, 2019, New York Urban initiated arbitration proceedingsbe erroneous and that the claims against BVU alleging that The Manhattan Club HOA (of which BVU is a member) is 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 is also seeking damages in the arbitration proceedings in excess of $10.0 million for promissory estoppel and tortious interference. BVU has denied New York Urban’s claims and has declared New York Urban in default under the Purchase and Sale Agreement for, among other things, initiating arbitration in violation of the Purchase and Sale Agreement. BVU has informed New York Urban that it would not proceed with its inventory purchases until New York Urban’s defaults are cured. The Purchase and Sale Agreement provides that, in the event of a breach, the nonbreaching party may either waive the breach or terminate the Purchase and Sale Agreement as its sole and exclusive remedy. without merit.
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 exit firms have encouraged such owners to become delinquent and ultimately default on their obligations and that such actions and Bluegreen’s inability to contact the owners are a primary contributor to the increase in its annual default rates. Bluegreen’s average annual
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default rates have increased from 6.9% in 2015 to 8.6%9.7% in 2019.2020. Bluegreen also estimatesestimated that approximately 15.0%13.7% of the total delinquencies on its VOI notes receivable as of SeptemberJune 30, 20192020 related to VOI notes receivable subject to this issue. Bluegreen has in a number of cases pursued, and may in the future pursue, legal action against the VOI owners, and as described below, against the exit firms.
On December 21, 2018, Bluegreen filed a lawsuit against timeshare exit firm Totten Franqui and certain of its affiliates (“TPEs”). In the complaint, Bluegreen alleged that the TPEs, through various forms of deceptive advertising, as well as inappropriate direct contact with VOI owners, made false statements about Bluegreen and provided misleading information to the VOI owners. The TPEs have encouraged nonpayment by consumers and exacted fees for doing so. Bluegreen believes the consumers are paying fees to the TPEs in exchange for illusory services and has asserted claims against the TPEs under the Lanham Act, as well as tortious interference with contractual relations, civil conspiracy to commit tortious interference, and other claims. During the course of the litigation, the TPEs and Totten Franqui filed for bankruptcy, which resulted in the litigation being stayed. The bankruptcy judge has appointed an independent trustee to handle the estate of the debtors, and Bluegreen has been in discussionsreached favorable settlements with the
TPE principals and are awaiting formal court approval of a settlement with the bankruptcy trustee abouttrustee. The settlement with the principals includes findings of fact against the defendants regarding their business practices and a possible settlement.permanent injunction prohibiting the principals of the TPE from working again in the timeshare exit space.
On November 13, 2019, Bluegreen intends to assert allfiled a lawsuit against timeshare exit firm The Montgomery Law Firm and certain of its legal rightsaffiliates (also included in “TPEs”). In the bankruptcy case.complaint, Bluegreen alleged, as discussed above, that the TPEs, through various forms of deceptive advertising, as well as inappropriate direct contact with VOI owners, made false statements about Bluegreen, provided misleading information to the VOI owners, and encouraged nonpayment by consumers. Bluegreen believes the consumers are paying fees to the TPEs in exchange for illusory services. Bluegreen has asserted claims against the TPEs under the Lanham Act, as well as tortious interference with contractual relations, civil conspiracy to commit tortious interference, and other claims. Defendants have moved to dismiss the complaint which is pending.
The following is a description of certain commitments, contingencies, and guarantees:
Bluegreen, indirectly through BVU, its wholly-owned subsidiary, 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 certain Bass Pro and Cabela’s retail locations and through other means. Pursuant to a settlement agreement Bluegreen entered into with Bass Pro and its affiliates during June 2019, Bluegreen paid Bass Pro $20.0 million during June 2019 and agreed to, among other things, make 5 annual payments to Bass Pro of $4.0 million in January of each year commencing in 2020. In June 2019, Bluegreen accrued for the net present value of the settlement, plus attorney’s fees and costs, totaling approximately $39.1 million. The first $4.0 million annual payment was made during January 2020. As of September 30, 2020, $14.5 million was accrued for the remaining payments required by the settlement agreement, which are included in other liabilities in the Company’s condensed consolidated statement of financial condition as of September 30, 2020.
During the nine months ended September 30, 2020 and 2019, VOI sales to prospects and leads generated by the agreement with Bass Pro accounted for approximately 11% and 13%, respectively, of Bluegreen’s VOI sales volume. In March 2020, as a result of the COVID-19 pandemic, Bluegreen temporarily closed its retail marketing operations at Bass Pro Shops and Cabela’s stores. Subject to the terms and conditions of the settlement agreement, Bluegreen will generally be required to pay the fixed annual fee with respect to at least 59 Bass Pro retail stores and a minimum number of Cabela’s retail stores that increases over time to a total of at least 60 Cabela’s retail stores by the end of 2021. In January 2020, Bluegreen paid $5.2 million for this fixed fee, of which $1.3 million was prepaid and is included in the Company’s unaudited condensed consolidated statement of financial condition as of September 30, 2020. Bluegreen had marketing operations at 26 Cabela’s stores at September 30, 2020 and is required to begin marketing operations in at least 14 more stores by December 31, 2020. Notwithstanding the foregoing, the minimum number of Bass Pro and Cabela’s retail stores for purposes of the fixed annual fee may be reduced under certain circumstances set forth in the agreement, including as a result of a reduction of traffic in the stores in excess of 25% year-over-year.
Beginning in mid-May 2020, Bluegreen resumed its retail marketing operations at certain Bass Pro Shops and Cabela’s stores. By September 30, 2020, Bluegreen recommenced marketing operations at 87 Bass Pro Shops and Cabela’s stores and commenced marketing operations at 5 new Cabela’s stores. Additionally, in October 2020, Bluegreen recommenced marketing operations in 1 additional Bass Pro Shop and commenced marketing operations at 4 new Cabela’s stores for a total of 97 Bass Pro Shops and Cabela’s stores.
In lieu of paying maintenance fees for unsold VOI inventory, Bluegreen may enter into subsidy agreements with certain HOAs. During the nine months ended September 30, 2020 and 2019, and 2018, Bluegreen made payments related to such subsidies ofpaid $7.7 million and $10.5 million, and $2.2 million, respectively.respectively, in subsidy payments in connection with these arrangements. As of September 30, 2019,2020, Bluegreen had accrued $8.0$10.1 million for such subsidies, which is included in other liabilities in the Company’s condensed consolidated statement of financial condition. As of December 31, 2018,2019, Bluegreen had no0 accrued liabilities for such subsidies.
The Company guaranteesIn December 2019, Bluegreen’s then-serving President and Chief Executive Officer resigned. In connection with his resignation, Bluegreen agreed to make payments totaling $3.5 million over a period of 18 months, $1.8 million of which remained payable as of September 30, 2020. Additionally, during 2019, Bluegreen entered into certain obligations of its wholly-owned subsidiaries and unconsolidated real estate joint ventures, including the following:
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12. Leases
BBX Capital and its subsidiaries are lessees under various operating leases for retail stores, sales offices, call centers, office space, equipment, and vehicles. Many of the Company’s lease agreements include one or more options to renew, with renewal terms that can extend the lease term from one to seven years, and the exercise of such renewal options is generally at the Company’s discretion. Certain of the Company’s lease agreements include rental payments based on a percentage of sales generated at the leased location over contractually specified levels, and others include rental payments adjusted periodically for inflation. The Company’s lease agreements do not contain material residual value guarantees or material restrictive covenants.
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The Company recognizes right-of-use assets and lease liabilities associated with lease agreements with an initial termother executives related to their separation from Bluegreen or change in position. Pursuant to the terms of greater than 12 months, while leasethese agreements, with an initial term of 12 months or less are not recorded in the Company’s statement of financial condition. The Company generally does not include leaseBluegreen agreed to make payments associated with renewal options that are exercisable at its discretion in the measurement of its right-of-use assets and lease liabilities as it is not reasonably certain that such options will be exercised. The table below sets forth information regarding the Company’s leasetotaling $2.5 million through September 30, 2020. All payments have been made under these agreements which had an initial term of greater than 12 months (dollars in thousands):
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The Company generally recognizes lease costs associated with its operating leases on a straight-line basis over the lease term, while variable lease payments that do not depend on an index or rate are recognized as variable lease costs in the period in which the obligation for those payments is incurred. The table below sets forth information regarding the Company’s lease costs which are included in cost of trade sales and selling, general, and administrative expenses in the Company’s condensed consolidated statements of operations (in thousands):
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| For the Three |
| For the Nine |
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| Months Ended |
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| September 30, 2019 |
| September 30, 2019 |
Fixed lease costs | $ | 7,300 |
| 21,677 |
Short-term lease costs |
| 1,377 |
| 3,718 |
Variable lease costs |
| 2,237 |
| 6,717 |
Total operating lease costs | $ | 10,914 |
| 32,112 |
The table below sets forth information regarding the maturity of the Company’s operating lease liabilities as of September 30 2019 (in thousands):, 2020.
139. Common Stock and Cash Incentive Bonuses
Share Repurchase ProgramStock Incentive Plans
In June 2017, BBX Capital’s boardOn January 21, 2020, the compensation committee of directors approved a share repurchase program authorizing the purchaseBVH’s Board of up to 5,000,000Directors granted awards of 488,503 restricted shares of BBX Capital’s Class A Common Stock and Class B Common Stock at an aggregate cost of up to $35.0 million. During the three and nine months ended September 30, 2019, BBX Capital purchased 1,398,361 and 1,799,539 shares of its Class A Common Stock, respectively, for approximately $7.0 million and $8.9 million, respectively. As of September 30, 2019, BBX Capital had purchased 3,321,132 shares of its Class A Common Stock for approximately $18.9 million pursuant to the June 2017 share repurchase program.
Stock Incentive Plans
On January 8, 2019, BBX Capital’s compensation committee of the board of directors granted awards of 1,923,975 restricted shares of BBX Capital’s Class B Common Stock to its executive officers under the BBX Capital Corporation 2014 Incentive Plan. The aggregate grant date fair value of the awards was $11.8$10.2 million, and the shares were scheduled to vest ratably in annual installments of approximately 481,000122,125 shares over four4 periods beginning on October 1, 2019.2020.
In October 2019, 566,322 sharescontemplation of the spin-off, the BVH’s Compensation Committee approved the acceleration of vesting of 488,503 and 528,484 of unvested restricted Class A and Class B Common Stock awards, respectively, that were previously granted by BVH, all of which were held by BVH’s executive officers. In connection with such vesting acceleration in August 2020, BVH recognized compensation expense during the three and nine months ended September 30, 2020 of approximately $19.8 million (which represented the unrecognized compensation expenses associated with the restricted stock awards as of June 30, 2020). The fair value of the restricted stock awards that vested were $16.7 million based on the fair value of BVH’s common stock awards and 1,901,793 shares ofon the vesting date. There were 0 restricted Class B common stock awards previously grantedoutstanding as of September 30, 2020.
Cash Incentive Bonuses
BVH’s Compensation Committee approved the payment, prior to certainthe consummation of the Company’s officers vested. The officers surrenderedspin-off, of a total of 222,848approximately $19.5 million in cash to BVH’s executives for 2020 services and the payout of cash to settle the BVH’s long-term incentive program for 2020 (which, in previous years, was generally paid primarily in stock awards).
Earnings per Share
During the three and nine months ended September 30, 2020, the weighted average shares of Class A commonunvested restricted stock and 748,357awards outstanding were not included in the computation of diluted earnings per share as the shares of Class B common stockwere antidilutive due to the Company to satisfy the $4.5 million tax withholding obligation associated with the vestingCompany’s recognition of these awards. The Company retired the surrendered shares.
Earnings per Share
a loss for such periods. During the three and nine months ended September 30, 2019, approximately 3,039,265 shares of unvested restricted stock awards were not included in the computation of diluted earnings per share for such periods because such awardsas the shares were assumedantidilutive due to be fully repurchased under the treasury stock method based on the unrecognized compensation cost associated with such awards. During the three and nine months ended September 30, 2018, there were no unvested restricted stock awards that were excluded from the computationCompany’s recognition of diluted earnings per sharea loss for such periods.
1410. Noncontrolling Interests and Redeemable Noncontrolling Interest
Noncontrolling interests in the Company’s consolidated subsidiaries consisted of the following (in thousands):
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| 2018 | 2020 | 2019 | ||||
Bluegreen (1) | $ | 40,159 |
| 41,478 | $ | 22,320 | 39,740 | |||
Bluegreen / Big Cedar Vacations (2) |
| 54,706 |
| 45,611 | 53,555 | 49,534 | ||||
Joint ventures and other |
| 892 |
| 899 | ||||||
Other (3) | — | 1,001 | ||||||||
Total noncontrolling interests | $ | 95,757 |
| 87,988 | $ | 75,875 | 90,275 | |||
The redeemable noncontrolling interest included inDuring the Company’s condensed consolidated statements of financial condition as ofnine months ended September 30, 20192020, Bluegreen repurchased and December 31, 2018retired 1,878,400 shares of $2.2 million and $2.6 million, respectively, is comprised of a redeemable noncontrolling interest associated with IT’SUGAR. The Company owns 90.4% of IT’SUGAR’s Class B Units, while the remaining 9.6% of such units are held by a noncontrolling interest and may be redeemedits common stock for cash at the holder’s option upon a contingent event outside of the Company’s control.$11.7 million.
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Income (loss) attributable to noncontrolling interests from continuing operations, including redeemable noncontrolling interests, consisted of the following (in thousands):
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| 2018 | 2020 | 2019 | 2020 | 2019 | ||||||||
Bluegreen (1) | $ | 1,962 |
| 2,048 |
| 2,346 |
| 6,817 | $ | 713 | 1,962 | 293 | 2,346 | |||||||
Bluegreen / Big Cedar Vacations (2) |
| 2,248 |
| 3,585 |
| 9,095 |
| 9,509 | 2,644 | 2,248 | 4,021 | 9,095 | ||||||||
Joint ventures and other |
| (98) |
| 173 |
| (166) |
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Net income attributable to noncontrolling interests | $ | 4,112 |
| 5,806 |
| 11,275 |
| 16,324 | ||||||||||||
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Net income (loss) attributable to noncontrolling interests - continuing operations | $ | 3,357 | 4,210 | 4,314 | 11,441 | |||||||||||||||
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15.(1)As a result of Bluegreen’s IPO during the fourth quarter of 2017 and subsequent share repurchases in 2018 and 2020, the Company owned approximately 93% of Bluegreen as of September 30, 2020. Bluegreen was a wholly-owned subsidiary of the Company immediately prior to the Bluegreen IPO.
(2)Bluegreen has a joint venture arrangement pursuant to which it owns 51% of Bluegreen/Big Cedar Vacations.
(3)Reflects the spin-off of BBX Capital on September 30, 2020.
11. Fair Value Measurementof Financial Instruments
ASC 820 Fair Value Measurements and Disclosures (Topic 820) defines fair value is defined as the price that would be received on the sale ofto sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Accounting standards define an inputdate (exit price). The inputs used to measure fair value hierarchy that has three broad levels and givesare classified into the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).following hierarchy:
The input fair value hierarchy is summarized below:
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 |
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Financial Disclosures about Fair ValueThe carrying amounts of Financial Instruments
The tables below set forth information regardingfinancial instruments included in the Company’s consolidated financial instrumentsstatements and their estimated fair values are as follows (in thousands):
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| September 30, | Assets | Inputs | Inputs |
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| 2019 | (Level 1) | (Level 2) | (Level 3) |
Financial assets: |
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Cash and cash equivalents | $ | 368,818 |
| 368,818 | 368,818 | - | - |
Restricted cash |
| 48,597 |
| 48,597 | 48,597 | - | - |
Notes receivable, net |
| 445,706 |
| 587,000 | - | - | 587,000 |
Financial liabilities: |
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Receivable-backed notes payable | $ | 436,760 |
| 456,600 | - | - | 456,600 |
Notes payable and other borrowings |
| 161,420 |
| 169,366 | - | - | 169,366 |
Junior subordinated debentures |
| 137,038 |
| 149,500 | - | - | 149,500 |
Redeemable 5% cumulative preferred stock |
| 9,730 |
| 9,538 | - | - | 9,538 |
As of September 30, 2020 | As of December 31, 2019 | |||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||
Cash and cash equivalents | $ | 211,110 | 211,110 | 335,846 | 335,846 | |||||||
Restricted cash | 35,672 | 35,672 | 49,896 | 49,896 | ||||||||
Notes receivable, net | 410,113 | 542,309 | 448,568 | 587,000 | ||||||||
Note payable to BBX Capital, Inc. | 75,000 | 75,000 | — | — | ||||||||
Lines-of-credit, notes payable, and receivable-backed notes payable | 541,389 | 543,500 | 568,975 | 589,300 | ||||||||
Junior subordinated debentures | 137,937 | 108,200 | 137,254 | 146,000 | ||||||||
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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 |
|
| December 31, |
| December 31, | Assets | Inputs | Inputs |
|
| 2018 |
| 2018 | (Level 1) | (Level 2) | (Level 3) |
Financial assets: |
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Cash and cash equivalents | $ | 366,305 |
| 366,305 | 366,305 | - | - |
Restricted cash |
| 54,792 |
| 54,792 | 54,792 | - | - |
Notes receivable, net |
| 439,167 |
| 537,000 | - | - | 537,000 |
Financial liabilities: |
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Receivable-backed notes payable | $ | 458,931 |
| 462,400 | - | - | 462,400 |
Notes payable and other borrowings |
| 200,887 |
| 203,547 | - | - | 203,547 |
Junior subordinated debentures |
| 136,425 |
| 132,400 | - | - | 132,400 |
Redeemable 5% cumulative preferred stock |
| 9,472 |
| 9,538 | - | - | 9,538 |
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 assumptionsCash 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.
26
cash equivalents.The amounts reported in the consolidatedCompany’s condensed statements of financial condition for cash and cash equivalents andapproximate fair value.
Restricted cash. The amounts reported in the unaudited consolidated balance sheets for restricted cash approximate fair value.
Notes receivable, net.The fair valuesvalue of Bluegreen’sour notes receivable areis estimated using Level 3 inputs and areis 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, Inc. The fair value of the note payable to BBX Capital, Inc. approximates fair value as the note was issued on September 30, 2020.
Lines-of-credit, notes payable, and receivable-backed notes payable.The amounts reported in the consolidatedCompany’s condensed statements of financial condition relating to Bluegreen’sfor lines of credit, notes payable, and other borrowings, as well as variable rate receivable-backed notes payable approximate fair value for indebtedness that provides for variable interest rates. The fair valuesvalue of Bluegreen’s fixed rate,fixed-rate, receivable-backed notes payable are estimatedwas 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 Community Development Bonds, which are included in notes payable and other borrowings above, is measured using the market approach with Level 3 inputs obtained based on estimated market prices of similar financial instruments.
The fair values of the Company’s other borrowings (other than Bluegreen’s notes payable and other borrowings and Community Development Bonds above) are 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 the Company’sour 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.
16.12. Certain Relationships and 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, John E. Abdo, the Company’s Vice Chairman.Chairman, Jarett S. Levan, a director of the Company and its former President and Seth M. Wise, former Executive Vice President. Together, Mr. Alan B. Levan and Mr. Abdothey may be deemed to beneficially own shares of the Company’sBVH’s Class A Common Stock and Class B Common Stock representing approximately 78%79% of the Company’sBVH’s total voting power. Mr. Alan B. Levan and Mr. Abdo also serve as Chairman and Vice Chairman, respectively, of Bluegreen’s Board of Directors. Jarett S. Levan, the Company’s PresidentDirectors, and son ofeffective January 1, 2020, Mr. Alan B. Levan also became Bluegreen’s President and Seth M.Chief Executive Officer. During 2019, Bluegreen accrued $2.0 million of compensation for Mr. Alan Levan for the performance of certain services provided to Bluegreen in a non-executive capacity, all of which was paid during March 2020. John E. Abdo is Bluegreen’s Vice Chairman, has been in an executive capacity at Bluegreen since October 1, 2020 and previously had been in a non-executive capacity. Further, Mr. Jarett Levan and Mr. Wise are members of Bluegreen’s Board. In addition, Raymond S. Lopez, the Company’s Executive Vice President and Chief Financial Officer, also serveserves as directorsBluegreen’s Chief Financial Officer and Chief Operating Officer. Mr. Alan Levan, Mr. Abdo and Mr. Lopez receive a significant portion of their compensation from Bluegreen and also receive compensation from BVH for their respective services to BVH. Further, following the spin-off, Mr. Jarett Levan became the Chief Executive Officer and President and a director of BBX Capital, Inc., Mr. Alan Levan became the Chairman of the CompanyBoard of BBX Capital, Inc. Mr. John E. Abdo became Vice Chairman of BBX Capital, Inc. and Bluegreen. Seth M. Wise became Vice President and director of BBX Capital, Inc.
Woodbridge, is a wholly-owned subsidiary of the Company and owned 90.3%BVH, owns approximately 93% of Bluegreen’s outstanding common stock as of September 30, 2019. 2020.
Bluegreen paid or reimbursed the Company for management advisory, risk management, administrative and other services in the amounts of $0.7 million and $1.3 million during the three and nine months ended September 30, 2020, and $0.4 million and $1.3 million during the three and nine months ended September 30, 2019, respectively, and $0.6 million and $1.2 million during the three and nine months ended September 30, 2018, respectively.
The Company received $11.4 million and $34.3 million of dividends from Bluegreen during the three and nine months ended September 30, 2019, respectively, and $10.1 million and $30.3 million of dividends from Bluegreen during the three and nine months ended September 30, 2018, respectively.
In April 2015, pursuant to a Loan Agreement and Promissory Note, a wholly-owned subsidiary of Bluegreen provided an $80.0 million loan to BBX Capital. AmountsBVH. During July 2020, Bluegreen declared a special cash dividend of $1.19 per share on its common stock, which was payable on August 21, 2020 to shareholders of record as of the close of business on August 6, 2020. The Company used its proceeds of the special cash dividend of approximately $80.0 million to repay the outstanding$80.0 million that BVH owed to Bluegreen. During the three months ended September 30, 2020 and 2019, BVH recognized $0.5 million and $1.2 million, respectively, of interest expense on the loan bear interest at a rate of 6% per annum. Payments of interest are required on a quarterly basis, and all outstanding amounts are due and payable in April 2020. BBX Capital is permitted to prepayfrom Bluegreen. During the loan in whole or in part at any time, and prepayments may be required, to the extent necessary, in order for Bluegreen or its subsidiaries to remain in compliance with covenants under outstanding indebtedness. During each of the three and nine months ended September 30, 2020 and 2019, and 2018, BBX CapitalBVH recognized $1.2$2.5 million and $3.6 million, respectively, of interest expense on the loan. The loan to Bluegreen. Thebalance and related interest expense waswere eliminated in consolidation in the Company’s condensed consolidated financial statements.
27Excluding the special dividend described above, the Company received $0 and $8.7 million of dividends from Bluegreen during the three and nine months ended September 30, 2020, and $11.4 million and $34.3 million of dividends from Bluegreen during the three and nine months ended September 30, 2019. In April 2020, Bluegreen suspended the payment of its regular quarterly dividend for the foreseeable future due to the effects of the COVID-19 pandemic and economic uncertainty.
In May 2015, the Company,BVH, Woodbridge, Bluegreen, Renin, and their respective subsidiaries entered into an Agreement to Allocate Consolidated Income Tax Liability and Benefits pursuant to which, among other customary terms and conditions, the parties agreed to file consolidated federal tax returns. UnderPursuant to the agreement,Consolidated Tax Agreement, the parties calculate their respective income tax liabilities and attributes as if each of them were a separate filer. If any tax attributes of one party to the agreement are used by another party to the agreementConsolidated Tax Agreement to offset such other party’sits tax liability, the party providing the benefit will receive an amount for the tax benefits realized. During the nine months ended September 30, 2019, BBX Capital received $13.0 million and $1.0 million of tax sharing payments fromrealized. Under this agreement, Bluegreen and Renin, respectively. BBX Capital did not make or receive any tax sharing payments from Bluegreen and Reninto BVH or its affiliated entities during the three months ended September 30, 2019. DuringBluegreen paid BVH or its affiliated entities $13.0 million during the three and nine months ended September 30, 2018,2019. Bluegreen did 0t make or receive any payments under the agreement during the three or nine months ended September 30, 2020. The Consolidated Tax Agreement was terminated with respect to BVH’s subsidiaries other than Woodbridge and Bluegreen in connection with BVH’s spin-off of BBX Capital received $7.1on September 30, 2020.
In connection with the spin-off, BVH issued a $75.0 million note payable to BBX Capital, Inc. that accrues interest at a rate of 6% per annum and $21.0requires 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 outstanding balance thereafter to accrue at a compounded rate of 8% per annum until such time as BVH is current on all accrued payments under the note, including deferred interest. All outstanding amounts will become due and payable in five years or earlier upon certain other events.
In connection with the spin-off the Company entered in the Transition Services Agreement, Tax Matters Agreement, and Employee Matters Agreement with BBX Capital, Inc.
The Transition Services Agreement generally sets out the respective rights, responsibilities and obligations of Parent and BBX Capital with respect to the support services to be provided to one another after the spin-off, as may be necessary to ensure an orderly transition. The Transition Services Agreement establishes a baseline charge for certain categories or components of services to be provided, which will be at cost unless the parties mutually agree to a different charge. The Transition Services Agreement was effective on September 30, 2020 and will continue for a minimum term of one year, provided that after that year, Parent or BBX Capital may terminate the Transition Services Agreement with respect to any or all services provided thereunder at any time upon thirty (30) days prior written notice to the other party. Either party may renew or extend the term of the Transition Services Agreement with respect to the provision of any service which has not been previously terminated.
The Tax Matters Agreement generally sets out the respective rights, responsibilities, and obligations of Parent and BBX Capital with respect to taxes (including taxes arising in the ordinary course of business and taxes incurred as a result of the spin-off), tax attributes, tax returns, tax contests, and certain other related tax matters. The Tax Matters Agreement allocates responsibility for the preparation and filing of certain tax returns (and the payment of taxes reflected thereon). Under the Tax Matters Agreement, Parent will generally be liable for its own taxes and taxes of all of its subsidiaries (other than the taxes of BBX Capital and its subsidiaries, for which BBX Capital shall be liable) for all tax periods (or portion thereof) ending on September 30, 2020, the effective date of the spin-off. BBX Capital will be responsible for its taxes, including for taxes of its subsidiaries, as well as for taxes of Parent arising as a result of the spin-off (including any taxes resulting from an election under Section 336(e) of the Internal Revenue Code of 1986, as amended (the “Code”) in connection with the spin-off). BBX Capital will bear liability for any transfer taxes incurred in the spin-off. Each of Parent and BBX Capital will indemnify each other against any taxes to the extent paid by one party but allocated to the other party under the Tax Matters Agreement, or arising from any breach of its covenants thereunder, and related out-of-pocket costs and expenses.
The Employee Matters Agreement sets out the respective rights, responsibilities, and obligations of Parent and BBX Capital with respect to the transfer of certain employees of the businesses of BBX Capital and related matters, including benefit plans, terms of employment, retirement plans and other employment-related matters. Under the Employee Matters Agreement, BBX Capital or its subsidiaries will generally assume or retain responsibility as employer of employees whose duties primarily relate to their respective businesses as well as all obligations and liabilities with respect thereto.
As further described in Note 1, in connection with the spin-off, the Company issued a $75.0 million respectively,note payable to BBX Capital, Inc. that accrues interest at a rate of tax sharing6% per annum and requires payments from Bluegreen. of interest on a quarterly basis.
During each of the three and nine months ended September 30, 20192020 and 2018,2019, the Company paid Abdo Companies, Inc. approximately $77,000 and $230,000, respectively, 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.
Certain of the Company’s affiliates, including its executive officers, have independently made investments with their own funds in investments that the Company has sponsored or in which the Company holds investments.
17.13. 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 one1 or more operating segments with similar economic characteristics, products and services, production processes, type of customer, distribution system or regulatory environment.
Prior to BVH’s spin-off of BBX Capital on September 30, 2020, BVH’s reportable segments were its then principal holdings: Bluegreen, BBX Capital Real Estate, BBX Sweet Holdings, and Renin. However, as a result of the spin-off of BBX Capital, BVH is a holding company whose operations primarily reflect its 93% ownership interest in Bluegreen. As a result, BVH’s CODM, who is also Bluegreen’s CODM, has determined that he will manage BVH’s operations in a manner consistent with how he manages Bluegreen’s operations. As a result, the Company’s results of operations are reported through 2 reportable segments: (i) Sales of VOIs and financing; and (ii) Resort operations and club management.
The sales of VOIs and financing segment includes Bluegreen’s marketing and sales activities related to the VOIs that it owns, Bluegreen’s VOIs they acquire under just-in-time and secondary market inventory arrangements, Bluegreen’s sales of VOIs through fee-for-service arrangements with third-party developers, Bluegreen’s consumer financing activities in connection with sales of VOIs that Bluegreen owns, and Bluegreen’s title services operations through a wholly-owned subsidiary.
The Resort operations and club management segment includes Bluegreen’s provision of management services activities for Bluegreen’s Vacation Club and for a majority of the HOAs of the resorts within Bluegreen’s Vacation Club. In connection with those services, Bluegreen also provides club reservation services, services to owners and billing and collections services to the Bluegreen Vacation Club and certain HOAs. Additionally, this segment includes revenue from Bluegreen’s Traveler Plus program, food and beverage and other retail operations, its rental services activities, and management of construction activities for certain of their fee-based developer clients.
The information provided for segment reporting is obtained from internal reports utilized by management of the Company,Company’s CODM, and 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 our 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 materially impacted.
The Company’s reportable segmentsamount set forth in the column “Bluegreen Corporate and Other” and in the column entitled “BVH Corporate” are general and administrative expenses that consist primarily of costs associated with administering the various support functions at its principal investments: Bluegreen, BBX Capital Real Estate, Renin,corporate headquarters, including executive compensation, legal, accounting, human resources, investor relations, and IT’SUGAR. See Note 1executive offices including corporate overhead for a descriptiondiscontinued operations. Included in BVH Corporate selling and general administrative expenses are spin-off related costs associated with the acceleration of these segments.
In the segment informationvesting of unvested restricted stock awards and payments to settle BVH’s long-term incentive program for 2020 which in the aggregate resulted in $31.3 million of compensation expense for the three and nine months ended September 30, 2019 and 2018, amounts set forth in the column entitled “Other” include the Company’s investments in various operating businesses, including its remaining operating businesses in the confectionery industry, a controlling financial interest in a restaurant acquired in connection with a loan receivable default, and its pizza restaurant operations as a franchisee of MOD Pizza. As described in Note 1, the Company exited its pizza restaurant operations as a franchisee of MOD Pizza in September 2019. The amounts set forth in the column entitled “Reconciling Items and Eliminations” include corporate general and administrative expenses, interest expense associated with Woodbridge’s junior subordinated debentures and BBX Capital’s $50.0 million revolving line of credit, and elimination entries. 2020.
The Company evaluates segment performance based on segment income before income taxes.Adjusted EBITDA. See Management’s Discussion and Analysis of Financial Condition and Results of Operations for information regarding Adjusted EBITDA, including how we define Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income.
The table below sets forth the Company’s segment information for the three months ended September 30, 2020 (in thousands):
Revenue: | Sales of | Resort | Bluegreen Corporate | BVH Corporate | Elimination |
| |||||||||||
Sales of VOIs | $ | 59,265 | $ | — | $ | — | — | $ | — | $ | 59,265 | ||||||
Fee-based sales commission revenue | 22,119 | — | — | — | — | 22,119 | |||||||||||
Other fee-based services revenue | 1,281 | 26,550 | — | — | — | 27,831 | |||||||||||
Cost reimbursements | — | 15,684 | — | — | — | 15,684 | |||||||||||
Mortgage servicing revenue | 1,403 | — | — | — | (1,403) | — | |||||||||||
Interest income | 19,049 | — | 623 | 127 | (453) | 19,346 | |||||||||||
Other revenue | — | — | — | — | — | — | |||||||||||
Total revenue | 103,117 | 42,234 | 623 | 127 | (1,856) | 144,245 | |||||||||||
Costs and expenses: | |||||||||||||||||
Cost of VOIs sold | 3,597 | — | — | — | — | 3,597 | |||||||||||
Net carrying cost of VOI inventory | 8,580 | — | — | — | (8,580) | — | |||||||||||
Cost of other fee-based services | 800 | 11,481 | — | — | 8,580 | 20,861 | |||||||||||
Cost reimbursements | — | 15,684 | — | — | — | 15,684 | |||||||||||
Selling, general and administrative expenses | 59,502 | — | 20,254 | 41,583 | (406) | 120,933 | |||||||||||
Mortgage servicing expense | 997 | — | — | — | (997) | — | |||||||||||
Interest expense | 3,910 | — | 3,409 | 1,102 | (453) | 7,968 | |||||||||||
Total costs and expenses | 77,386 | 27,165 | 23,663 | 42,685 | (1,856) | 169,043 | |||||||||||
Other (expense) income | — | — | (365) | 26 | — | (339) | |||||||||||
Income (loss) before non-controlling interest and (benefit) provision for income taxes | $ | 25,731 | $ | 15,069 | $ | (23,405) | (42,532) | $ | — | $ | (25,137) | ||||||
Add: Depreciation and amortization | 1,405 | 208 | |||||||||||||||
Add: Severance | 208 | 114 | |||||||||||||||
Segment Adjusted EBITDA | $ | 27,344 | $ | 15,391 | |||||||||||||
The table below sets forth the Company’s segment information as of and for the three months ended September 30, 2019 (in thousands):
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Revenues: |
| Bluegreen |
| BBX Capital Real Estate |
| Renin |
| IT'SUGAR |
| Other |
| Reconciling Items and Eliminations |
| Segment Total |
Sales of VOIs | $ | 66,318 |
| - |
| - |
| - |
| - |
| - |
| 66,318 |
Fee-based sales commissions |
| 60,478 |
| - |
| - |
| - |
| - |
| - |
| 60,478 |
Other fee-based services |
| 33,744 |
| - |
| - |
| - |
| - |
| - |
| 33,744 |
Cost reimbursements |
| 21,111 |
| - |
| - |
| - |
| - |
| - |
| 21,111 |
Trade sales |
| - |
| - |
| 16,442 |
| 24,678 |
| 6,541 |
| (1) |
| 47,660 |
Sales of real estate inventory |
| - |
| 370 |
| - |
| - |
| - |
| - |
| 370 |
Interest income |
| 22,081 |
| 166 |
| - |
| - |
| 45 |
| (495) |
| 21,797 |
Net gains on sales of real estate assets |
| - |
| 399 |
| - |
| - |
| - |
| - |
| 399 |
Other revenue |
| 2,146 |
| 197 |
| - |
| 15 |
| 1,053 |
| (174) |
| 3,237 |
Total revenues |
| 205,878 |
| 1,132 |
| 16,442 |
| 24,693 |
| 7,639 |
| (670) |
| 255,114 |
Costs and expenses: |
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|
Cost of VOIs sold |
| 3,121 |
| - |
| - |
| - |
| - |
| - |
| 3,121 |
Cost of other fee-based services |
| 23,746 |
| - |
| - |
| - |
| - |
| - |
| 23,746 |
Cost reimbursements |
| 21,111 |
| - |
| - |
| - |
| - |
| - |
| 21,111 |
Cost of trade sales |
| - |
| - |
| 12,983 |
| 13,902 |
| 4,976 |
| (1) |
| 31,860 |
Cost of real estate inventory sold |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Interest expense |
| 10,388 |
| - |
| 131 |
| 24 |
| 29 |
| 1,298 |
| 11,870 |
Recoveries from loan losses, net |
| - |
| (1,821) |
| - |
| - |
| - |
| - |
| (1,821) |
Impairment losses |
| - |
| 37 |
| - |
| - |
| 3,993 |
| - |
| 4,030 |
Selling, general and administrative expenses |
| 117,159 |
| 2,336 |
| 2,849 |
| 9,567 |
| 4,900 |
| 11,738 |
| 148,549 |
Total costs and expenses |
| 175,525 |
| 552 |
| 15,963 |
| 23,493 |
| 13,898 |
| 13,035 |
| 242,466 |
Equity in net earnings of unconsolidated real estate joint ventures |
| - |
| 28,534 |
| - |
| - |
| - |
| - |
| 28,534 |
Foreign exchange gain (loss) |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Income (loss) before income taxes | $ | 30,353 |
| 29,114 |
| 479 |
| 1,200 |
| (6,259) |
| (13,705) |
| 41,182 |
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Total assets | $ | 1,360,829 |
| 147,712 |
| 32,103 |
| 150,841 |
| 32,135 |
| 93,818 |
| 1,817,438 |
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Expenditures for property and equipment | $ | 3,986 |
| 1 |
| 79 |
| 3,752 |
| 224 |
| - |
| 8,042 |
Depreciation and amortization | $ | 3,585 |
| - |
| 303 |
| 1,181 |
| 714 |
| 101 |
| 5,884 |
Debt accretion and amortization | $ | 1,430 |
| 22 |
| 6 |
| 56 |
| 1 |
| 60 |
| 1,575 |
Cash and cash equivalents | $ | 183,207 |
| 21,781 |
| - |
| 2,412 |
| 7,745 |
| 153,673 |
| 368,818 |
Real estate equity method investments | $ | - |
| 53,739 |
| - |
| - |
| - |
| - |
| 53,739 |
Goodwill | $ | - |
| - |
| - |
| 35,167 |
| 2,081 |
| - |
| 37,248 |
Receivable-backed notes payable | $ | 436,760 |
| - |
| - |
| - |
| - |
| - |
| 436,760 |
Notes payable and other borrowings | $ | 119,045 |
| 32,009 |
| 8,394 |
| 406 |
| 1,861 |
| (295) |
| 161,420 |
Junior subordinated debentures | $ | 71,883 |
| - |
| - |
| - |
| - |
| 65,155 |
| 137,038 |
Revenue: | Sales of | Resort | Bluegreen Corporate | BVH Corporate | Elimination |
| |||||||||||
Sales of VOIs | $ | 66,318 | $ | — | $ | — | $ | — | $ | — | $ | 66,318 | |||||
Fee-based sales commission revenue | 60,478 | — | — | — | — | 60,478 | |||||||||||
Other fee-based services revenue | 4,289 | 29,455 | — | — | — | 33,744 | |||||||||||
Cost reimbursements | — | 17,883 | — | — | — | 17,883 | |||||||||||
Mortgage servicing revenue | 1,588 | — | — | — | (1,588) | — | |||||||||||
Interest income | 20,043 | — | 2,038 | 705 | (1,200) | 21,586 | |||||||||||
Other income, net | — | — | — | (45) | 73 | 28 | |||||||||||
Total revenue | 152,716 | 47,338 | 2,038 | 660 | (2,715) | 200,037 | |||||||||||
Costs and expenses: | |||||||||||||||||
Cost of VOIs sold | 3,121 | — | — | — | — | 3,121 | |||||||||||
Net carrying cost of VOI inventory | 5,878 | — | — | — | (5,878) | — | |||||||||||
Cost of other fee-based services | 2,442 | 14,552 | — | — | 5,878 | 22,872 | |||||||||||
Cost reimbursements | — | 17,883 | — | — | — | 17,883 | |||||||||||
Selling, general and administrative expenses | 95,672 | — | 22,388 | 11,926 | 46 | 130,032 | |||||||||||
Mortgage servicing expense | 1,561 | — | — | — | (1,561) | — | |||||||||||
Interest expense | 5,062 | — | 5,326 | 2,566 | (1,200) | 11,754 | |||||||||||
Total costs and expenses | 113,736 | 32,435 | 27,714 | 14,492 | (2,715) | 185,662 | |||||||||||
Other income | 537 | — | 1,609 | 58 | — | 2,204 | |||||||||||
Income (loss) before non-controlling interest and (benefit) provision for income taxes | $ | 39,517 | $ | 14,903 | $ | (24,067) | $ | (13,774) | $ | — | $ | 16,579 | |||||
Add: Depreciation and amortization | 1,507 | 321 | |||||||||||||||
Add: Bass Pro Settlement | 594 | 238 | |||||||||||||||
Segment Adjusted EBITDA | $ | 41,618 | $ | 15,462 | |||||||||||||
The table below sets forth the Company’s segment information as of and for the threenine months ended September 30, 20182020 (in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Bluegreen |
| BBX Capital Real Estate |
| Renin |
| IT'SUGAR |
| Other |
| Reconciling Items and Eliminations |
| Segment Total |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of VOIs | $ | 70,698 |
| - |
| - |
| - |
| - |
| - |
| 70,698 |
Fee-based sales commissions |
| 61,641 |
| - |
| - |
| - |
| - |
| - |
| 61,641 |
Other fee-based services |
| 31,057 |
| - |
| - |
| - |
| - |
| - |
| 31,057 |
Cost reimbursements |
| 16,900 |
| - |
| - |
| - |
| - |
| - |
| 16,900 |
Trade sales |
| - |
| - |
| 15,330 |
| 22,663 |
| 5,815 |
| (5) |
| 43,803 |
Sales of real estate inventory |
| - |
| 7,478 |
| - |
| - |
| - |
| - |
| 7,478 |
Interest income |
| 21,531 |
| 229 |
| - |
| - |
| 10 |
| (613) |
| 21,157 |
Other revenue |
| 378 |
| 572 |
| - |
| 99 |
| 840 |
| (220) |
| 1,669 |
Total revenues |
| 202,205 |
| 8,279 |
| 15,330 |
| 22,762 |
| 6,665 |
| (838) |
| 254,403 |
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of VOIs sold |
| 11,237 |
| - |
| - |
| - |
| - |
| - |
| 11,237 |
Cost of other fee-based services |
| 19,937 |
| - |
| - |
| - |
| - |
| - |
| 19,937 |
Cost reimbursements |
| 16,900 |
| - |
| - |
| - |
| - |
| - |
| 16,900 |
Cost of trade sales |
| - |
| - |
| 12,306 |
| 12,236 |
| 4,420 |
| (5) |
| 28,957 |
Cost of real estate inventory sold |
| - |
| 4,655 |
| - |
| - |
| - |
| - |
| 4,655 |
Interest expense |
| 9,208 |
| - |
| 157 |
| - |
| 53 |
| 1,712 |
| 11,130 |
Recoveries from loan losses, net |
| - |
| (443) |
| - |
| - |
| - |
| - |
| (443) |
Impairment losses |
| - |
| 193 |
| - |
| - |
| - |
| - |
| 193 |
Selling, general and administrative expenses |
| 112,407 |
| 2,307 |
| 2,250 |
| 8,962 |
| 4,868 |
| 12,765 |
| 143,559 |
Total costs and expenses |
| 169,689 |
| 6,712 |
| 14,713 |
| 21,198 |
| 9,341 |
| 14,472 |
| 236,125 |
Equity in net earnings of unconsolidated real estate joint ventures |
| - |
| 373 |
| - |
| - |
| - |
| - |
| 373 |
Foreign exchange gain |
| - |
| - |
| 76 |
| - |
| - |
| - |
| 76 |
Income (loss) before income taxes | $ | 32,516 |
| 1,940 |
| 693 |
| 1,564 |
| (2,676) |
| (15,310) |
| 18,727 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets | $ | 1,336,992 |
| 136,290 |
| 28,798 |
| 71,450 |
| 37,577 |
| 66,660 |
| 1,677,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures for property and equipment | $ | 9,242 |
| 131 |
| 99 |
| 1,942 |
| 1,704 |
| 125 |
| 13,243 |
Depreciation and amortization | $ | 3,169 |
| 91 |
| 292 |
| 1,153 |
| 644 |
| 108 |
| 5,457 |
Debt accretion and amortization | $ | 1,086 |
| - |
| 4 |
| (90) |
| 143 |
| 91 |
| 1,234 |
Cash and cash equivalents | $ | 195,439 |
| 21,625 |
| - |
| 4,483 |
| 10,068 |
| 137,897 |
| 369,512 |
Real estate equity method investments | $ | - |
| 42,550 |
| - |
| - |
| - |
| - |
| 42,550 |
Goodwill | $ | - |
| - |
| - |
| 35,167 |
| 4,315 |
| - |
| 39,482 |
Receivable-backed notes payable | $ | 433,450 |
| - |
| - |
| - |
| - |
| - |
| 433,450 |
Notes payable and other borrowings | $ | 137,834 |
| 16,285 |
| 9,422 |
| 620 |
| 3,090 |
| 29,926 |
| 197,177 |
Junior subordinated debentures | $ | 71,147 |
| - |
| - |
| - |
| - |
| 65,084 |
| 136,231 |
Revenue: | Sales of | Resort | Bluegreen Corporate | BVH Corporate | Elimination |
| |||||||||||
Sales of VOIs | $ | 113,447 | $ | — | $ | — | $ | — | $ | — | $ | 113,447 | |||||
Fee-based sales commission revenue | 64,619 | — | — | — | — | 64,619 | |||||||||||
Other fee-based services revenue | 5,353 | 78,205 | — | — | — | 83,558 | |||||||||||
Cost reimbursements | — | 46,654 | — | — | — | 46,654 | |||||||||||
Mortgage servicing revenue | 4,508 | — | — | — | (4,508) | — | |||||||||||
Interest income | 58,258 | — | 3,388 | 841 | (2,524) | 59,963 | |||||||||||
Other revenue | — | — | — | — | — | — | |||||||||||
Total revenue | 246,185 | 124,859 | 3,388 | 841 | (7,032) | 368,241 | |||||||||||
Costs and expenses: | |||||||||||||||||
Cost of VOIs sold | 8,734 | — | — | — | — | 8,734 | |||||||||||
Net carrying cost of VOI inventory | 27,407 | — | — | — | (27,407) | — | |||||||||||
Cost of other fee-based services | 2,989 | 30,711 | — | — | 27,407 | 61,107 | |||||||||||
Cost reimbursements | — | 46,654 | — | — | — | 46,654 | |||||||||||
Selling, general and administrative expenses | 174,969 | — | 48,603 | 58,810 | (1,145) | 281,237 | |||||||||||
Mortgage servicing expense | 3,363 | — | — | — | (3,363) | — | |||||||||||
Interest expense | 12,745 | — | 11,932 | 5,515 | (2,524) | 27,668 | |||||||||||
Total costs and expenses | 230,207 | 77,365 | 60,535 | 64,325 | (7,032) | 425,400 | |||||||||||
Other income, net | — | — | 41 | 145 | — | 186 | |||||||||||
Income (loss) before non-controlling interest and (benefit) provision for income taxes | $ | 15,978 | $ | 47,494 | $ | (57,106) | $ | (63,339) | $ | — | $ | (56,973) | |||||
Add: Depreciation and amortization | 4,447 | 588 | |||||||||||||||
Add: Severance | 3,977 | 1,347 | |||||||||||||||
Segment Adjusted EBITDA | $ | 24,402 | $ | 49,429 | |||||||||||||
The table below sets forth the Company’s segment information as of and for the nine months ended September 30, 2019 (in thousands):
Revenue: | Sales of | Resort | Bluegreen Corporate and other | BVH Corporate | Elimination |
| |||||||||||
Sales of VOIs | $ | 186,351 | $ | — | $ | — | — | $ | — | $ | 186,351 | ||||||
Fee-based sales commission revenue | 161,033 | — | — | — | — | 161,033 | |||||||||||
Other fee-based services revenue | 10,092 | 83,923 | — | — | — | 94,015 | |||||||||||
Cost reimbursements | — | 48,933 | — | — | — | 48,933 | |||||||||||
Mortgage servicing revenue | 4,621 | — | — | — | (4,621) | — | |||||||||||
Interest income | 59,985 | — | 5,979 | 1,605 | (3,600) | 63,969 | |||||||||||
Other income, net | — | — | — | (127) | 197 | 70 | |||||||||||
Total revenue | 422,082 | 132,856 | 5,979 | 1,478 | (8,024) | 554,371 | |||||||||||
Costs and expenses: | |||||||||||||||||
Cost of VOIs sold | 17,541 | — | — | — | — | 17,541 | |||||||||||
Net carrying cost of VOI inventory | 18,853 | — | — | — | (18,853) | — | |||||||||||
Cost of other fee-based services | 4,832 | 40,228 | — | — | 18,853 | 63,913 | |||||||||||
Cost reimbursements | — | 48,933 | — | — | — | 48,933 | |||||||||||
Selling, general and administrative expenses | 299,028 | — | 59,145 | 36,417 | (310) | 394,280 | |||||||||||
Mortgage servicing expense | 4,114 | — | — | — | (4,114) | — | |||||||||||
Interest expense | 15,391 | — | 14,564 | 7,915 | (3,600) | 34,270 | |||||||||||
Total costs and expenses | 359,759 | 89,161 | 73,709 | 44,332 | (8,024) | 558,937 | |||||||||||
Other income | 537 | — | 3,691 | 136 | — | 4,364 | |||||||||||
Income (loss) before non-controlling interest and provision (benefit) for income taxes | $ | 62,860 | $ | 43,695 | $ | (64,039) | $ | (42,718) | $ | — | $ | (202) | |||||
Add: Depreciation and amortization | 4,577 | 1,050 | |||||||||||||||
Add: Severance | 594 | 238 | |||||||||||||||
Add: Bass Pro Settlement | 39,121 | — | |||||||||||||||
Segment Adjusted EBITDA (1) | $ | 107,152 | 44,983 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Bluegreen |
| BBX Capital Real Estate |
| Renin |
| IT'SUGAR |
| Other |
| Reconciling Items and Eliminations |
| Segment Total |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of VOIs | $ | 186,351 |
| - |
| - |
| - |
| - |
| - |
| 186,351 |
Fee-based sales commissions |
| 161,033 |
| - |
| - |
| - |
| - |
| - |
| 161,033 |
Other fee-based services |
| 94,015 |
| - |
| - |
| - |
| - |
| - |
| 94,015 |
Cost reimbursements |
| 58,705 |
| - |
| - |
| - |
| - |
| - |
| 58,705 |
Trade sales |
| - |
| - |
| 51,124 |
| 63,347 |
| 24,250 |
| (16) |
| 138,705 |
Sales of real estate inventory |
| - |
| 5,030 |
| - |
| - |
| - |
| - |
| 5,030 |
Interest income |
| 65,964 |
| 631 |
| - |
| - |
| 130 |
| (1,995) |
| 64,730 |
Net gains on sales of real estate assets |
| - |
| 11,395 |
| - |
| - |
| - |
| - |
| 11,395 |
Other revenue |
| 4,228 |
| 1,492 |
| 152 |
| 241 |
| 2,020 |
| (593) |
| 7,540 |
Total revenues |
| 570,296 |
| 18,548 |
| 51,276 |
| 63,588 |
| 26,400 |
| (2,604) |
| 727,504 |
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of VOIs sold |
| 17,541 |
| - |
| - |
| - |
| - |
| - |
| 17,541 |
Cost of other fee-based services |
| 66,538 |
| - |
| - |
| - |
| - |
| - |
| 66,538 |
Cost reimbursements |
| 58,705 |
| - |
| - |
| - |
| - |
| - |
| 58,705 |
Cost of trade sales |
| - |
| - |
| 40,989 |
| 37,442 |
| 16,563 |
| (16) |
| 94,978 |
Cost of real estate inventory sold |
| - |
| 2,643 |
| - |
| - |
| - |
| - |
| 2,643 |
Interest expense |
| 29,955 |
| - |
| 387 |
| 81 |
| 72 |
| 4,184 |
| 34,679 |
Recoveries from loan losses, net |
| - |
| (4,206) |
| - |
| - |
| - |
| - |
| (4,206) |
Impairment losses |
| - |
| 37 |
| - |
| - |
| 6,749 |
| - |
| 6,786 |
Selling, general and administrative expenses |
| 355,041 |
| 6,709 |
| 8,326 |
| 26,645 |
| 16,061 |
| 35,728 |
| 448,510 |
Total costs and expenses |
| 527,780 |
| 5,183 |
| 49,702 |
| 64,168 |
| 39,445 |
| 39,896 |
| 726,174 |
Equity in net earnings of unconsolidated real estate joint ventures |
| - |
| 37,276 |
| - |
| - |
| - |
| - |
| 37,276 |
Foreign exchange loss |
| - |
| - |
| (24) |
| - |
| - |
| - |
| (24) |
Income (loss) before income taxes | $ | 42,516 |
| 50,641 |
| 1,550 |
| (580) |
| (13,045) |
| (42,500) |
| 38,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures for property and equipment | $ | 18,502 |
| 4 |
| 284 |
| 6,233 |
| 1,245 |
| 18 |
| 26,286 |
Depreciation and amortization | $ | 10,453 |
| 93 |
| 897 |
| 3,313 |
| 1,889 |
| 320 |
| 16,965 |
Debt accretion and amortization | $ | 3,616 |
| 133 |
| 23 |
| 168 |
| 2 |
| 243 |
| 4,185 |
(1)See Management’s Discussion and Analysis of Financial Condition and Results of Operations for information regarding Adjusted EBITDA, including how we define Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income.
14. Discontinued Operations
31As described in Note 1, on September 30, 2020, BVH (formerly BBX Capital Corporation) completed the spin off its subsidiary, BBX Capital, Inc. (formerly known as BBX Capital Florida LLC), and changed its name to Bluegreen Vacations Holding Corporation in order to separate its business, activities, and investments into two separate, publicly-traded companies. BVH continues to hold its investment in Bluegreen, and BBX Capital, Inc. holds all of the other businesses and investments previously owned by BVH, including BBX Capital Real Estate, BBX Sweet Holdings, and Renin.
The table below sets forthBBX Capital, Inc. and its subsidiaries’ operations are presented as discontinued operations in the Company’s segment informationfinancial statements.
The carrying amount of major classes of assets and liabilities included as part of and for the nine months ended September 30, 2018discontinued operations is as follows (in thousands):
September 30, | December 31, | |||||
2020 | 2019 | |||||
Cash and cash equivalents | $ | — | 20,758 | |||
Restricted cash | — | 370 | ||||
Trade inventory | — | 22,843 | ||||
Real estate | — | 65,818 | ||||
Investments in and advances to unconsolidated real estate joint ventures | — | 57,330 | ||||
Property and equipment, net | — | 29,836 | ||||
Goodwill | — | 37,248 | ||||
Intangible assets, net | — | 6,671 | ||||
Operating lease assets | — | 87,854 | ||||
Deferred income taxes | — | 2,297 | ||||
Other assets | — | 29,656 | ||||
Discontinued operations total assets | $ | — | 360,681 | |||
Liabilities: | ||||||
Accounts payable | $ | — | 9,294 | |||
Other liabilities | — | 21,043 | ||||
Notes payable and other borrowings | — | 42,571 | ||||
Operating lease liability | — | 100,473 | ||||
Discontinued operations total liabilities | $ | — | 173,381 | |||
The major components of loss from discontinued operations are as follows (in thousands):
For the Three Months | For the Nine Months | |||||||||||
Ended September 30, | Ended September 30, | |||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||
Revenues: | ||||||||||||
Trade sales | $ | 35,692 | 47,660 | $ | 99,628 | 138,705 | ||||||
Sales of real estate inventory | 4,970 | 371 | 14,248 | 5,030 | ||||||||
Interest income | 366 | 212 | 586 | 762 | ||||||||
Net gains on sales of real estate assets | 164 | 399 | 130 | 11,395 | ||||||||
Other revenue | 933 | 1,137 | 2,398 | 3,033 | ||||||||
Total revenues | 42,125 | 49,779 | 116,990 | 158,925 | ||||||||
Costs and Expenses: | ||||||||||||
Cost of trade sales | 27,981 | 31,860 | 80,154 | 94,978 | ||||||||
Cost of real estate inventory sold | 3,367 | — | 9,473 | 2,643 | ||||||||
Interest expense | — | 118 | — | 409 | ||||||||
Recoveries from loan losses, net | (807) | (1,821) | (5,844) | (4,206) | ||||||||
Impairment losses | — | 4,030 | 31,588 | 6,786 | ||||||||
Selling, general and administrative expenses | 13,394 | 19,590 | 40,342 | 57,492 | ||||||||
Total costs and expenses | 43,935 | 53,777 | 155,713 | 158,102 | ||||||||
Equity in net (losses) earnings of unconsolidated real estate joint ventures | (646) | 28,534 | 50 | 37,276 | ||||||||
Foreign exchanges (loss) gain | (59) | (1) | 214 | (24) | ||||||||
Loss on the deconsolidation of IT'SUGAR, LLC | (3,326) | — | (3,326) | — | ||||||||
Other income | 82 | 68 | 192 | 710 | ||||||||
(Loss) income from discontinued operations before income taxes | $ | (5,759) | 24,603 | $ | (41,593) | 38,785 | ||||||
The following are the major components of the statement of cash flows from discontinued operations (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Bluegreen |
| BBX Capital Real Estate |
| Renin |
| IT'SUGAR |
| Other |
| Reconciling Items and Eliminations |
| Segment Total |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of VOIs | $ | 195,412 |
| - |
| - |
| - |
| - |
| - |
| 195,412 |
Fee-based sales commissions |
| 167,581 |
| - |
| - |
| - |
| - |
| - |
| 167,581 |
Other fee-based services |
| 89,472 |
| - |
| - |
| - |
| - |
| - |
| 89,472 |
Cost reimbursements |
| 47,157 |
| - |
| - |
| - |
| - |
| - |
| 47,157 |
Trade sales |
| - |
| - |
| 47,205 |
| 58,967 |
| 19,954 |
| (12) |
| 126,114 |
Sales of real estate inventory |
| - |
| 17,138 |
| - |
| - |
| - |
| - |
| 17,138 |
Interest income |
| 63,771 |
| 2,064 |
| - |
| 1 |
| 105 |
| (2,203) |
| 63,738 |
Net gains on sales of real estate assets |
| - |
| 4,802 |
| - |
| - |
| - |
| - |
| 4,802 |
Other revenue |
| 1,269 |
| 2,020 |
| - |
| 134 |
| 1,455 |
| (600) |
| 4,278 |
Total revenues |
| 564,662 |
| 26,024 |
| 47,205 |
| 59,102 |
| 21,514 |
| (2,815) |
| 715,692 |
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of VOIs sold |
| 19,838 |
| - |
| - |
| - |
| - |
| - |
| 19,838 |
Cost of other fee-based services |
| 53,983 |
| - |
| - |
| - |
| - |
| - |
| 53,983 |
Cost reimbursements |
| 47,157 |
| - |
| - |
| - |
| - |
| - |
| 47,157 |
Cost of trade sales |
| - |
| - |
| 38,454 |
| 34,020 |
| 15,583 |
| (12) |
| 88,045 |
Cost of real estate inventory sold |
| - |
| 11,283 |
| - |
| - |
| - |
| - |
| 11,283 |
Interest expense |
| 25,470 |
| - |
| 497 |
| - |
| 241 |
| 4,661 |
| 30,869 |
Recoveries from loan losses, net |
| - |
| (7,258) |
| - |
| - |
| - |
| - |
| (7,258) |
Impairment losses |
| - |
| 362 |
| - |
| - |
| 187 |
| - |
| 549 |
Selling, general and administrative expenses |
| 315,535 |
| 7,175 |
| 7,641 |
| 25,559 |
| 16,541 |
| 37,908 |
| 410,359 |
Total costs and expenses |
| 461,983 |
| 11,562 |
| 46,592 |
| 59,579 |
| 32,552 |
| 42,557 |
| 654,825 |
Equity in net earnings of unconsolidated real estate joint ventures |
| - |
| 1,165 |
| - |
| - |
| - |
| - |
| 1,165 |
Foreign exchange gain |
| - |
| - |
| 91 |
| - |
| - |
| - |
| 91 |
Income (loss) before income taxes | $ | 102,679 |
| 15,627 |
| 704 |
| (477) |
| (11,038) |
| (45,372) |
| 62,123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures for property and equipment | $ | 24,347 |
| 298 |
| 447 |
| 4,169 |
| 3,841 |
| 214 |
| 33,316 |
Depreciation and amortization | $ | 9,087 |
| 283 |
| 869 |
| 3,327 |
| 1,445 |
| 387 |
| 15,398 |
Debt accretion and amortization | $ | 2,765 |
| 2 |
| 12 |
| - |
| 159 |
| 221 |
| 3,159 |
For the Nine Months Ended | ||||||
September 30, | ||||||
2020 | 2019 | |||||
Operating activities: | ||||||
Net (loss) income | $ | (32,526) | 28,374 | |||
Adjustment to reconcile net (loss) income to net cash | ||||||
(used in) provided by operating activities: | ||||||
Recoveries from loan losses, net | (5,844) | (4,206) | ||||
Depreciation, amortization and accretion, net | 5,468 | 6,519 | ||||
Net gains on sales of real estate and property and equipment | (130) | (11,105) | ||||
Equity earnings of unconsolidated real estate joint ventures | (49) | (37,276) | ||||
Return on investment in unconsolidated real estate joint ventures | 3,933 | 38,020 | ||||
Loss from the deconsolidation of IT'SUGAR, LLC | 3,326 | - | ||||
(Increase) decrease in deferred income tax asset | (9,066) | 6,277 | ||||
Impairment losses | 31,588 | 6,786 | ||||
Increase in trade inventory | (279) | (5,016) | ||||
(Increase) decrease in trade receivables | (2,336) | 5,042 | ||||
Decrease (increase) in real estate inventory | 925 | (2,865) | ||||
Net change in operating lease assets and liabilities | (964) | 683 | ||||
(Increase) decrease in other assets | (1,388) | 3,744 | ||||
(Decrease) increase in other liabilities | 6,512 | (483) | ||||
Net cash (used in) provided by operating activities | $ | (830) | 34,494 | |||
Investing activities: | ||||||
Return of investment in unconsolidated real estate joint ventures | 4,631 | 30,331 | ||||
Investments in unconsolidated real estate joint ventures | (14,009) | (20,076) | ||||
Proceeds from repayment of loans receivable | 5,960 | 4,935 | ||||
Proceeds from sales of real estate | 2,151 | 32,136 | ||||
Proceeds from sales of property and equipment | — | — | ||||
Additions to real estate | (70) | (438) | ||||
Purchases of property and equipment | (4,032) | (7,765) | ||||
Decrease in cash from other investing activities | (1,065) | (73) | ||||
Net cash (used in) provided by investing activities | $ | (6,434) | 39,050 | |||
18.15. Subsequent Events
Subsequent events have been evaluated through the date the financial statements were available to be issued. As of such date, there were no subsequent events identified that required recognition or disclosure other than as disclosed in the footnotes herein.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Except as otherwise noted or where the context otherwise requires, the terms “the Company,” “we,” “us,” or “our” refers to BBX CapitalBluegreen Vacations Holding Corporation and its consolidated subsidiaries, and the term “BBX Capital”“BVH” refers to BBX CapitalBluegreen Vacations Holding Corporation as a standalone entity.
Cautionary Note Regarding Forward-Looking Statements
This documentQuarterly Report on Form 10-Q contains forward-looking statements based largely on current expectations of the Company 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 import. The forward-looking statements in this document are also 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 our future financial performance, our business prospects, strategy and relationships, our anticipated financial position, liquidity and capital needs, economic and industry conditions and their impact on our business and future financial performance, and other similar 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 be correct. Actualpredict. Our actual results performance, or achievements couldmay differ materially from those contemplated, expressed in, or implied by, the forward-looking statements contained herein. Forward-looking statementsas a result of various factors, including, among others:
adverse trends or disruptions in economic conditions generally or in the vacation ownership, vacation rental and travel industries;
risks relating to public health issues, including in particular the COVID-19 pandemic and the effects of the pandemic. These include resort closures, travel and business restrictions, volatility in the international and national economy and credit markets, worker absenteeism, quarantines and other health-related restrictions; the length and severity of the COVID-19 pandemic and our ability to successfully resume full business operations thereafter; governmental and agency orders, mandates and guidance in response to the COVID-19 pandemic and the duration thereof, which is uncertain and will impact our ability to fully utilize resorts, sales centers and other marketing activities; the pace of recovery following the COVID-19 pandemic; competitive conditions; our liquidity and the availability of capital; our ability to successfully implement our strategic plans and initiatives to navigate the COVID-19 pandemic; risks that our current or future marketing alliances may not be available to us in the future; risks that default rates may increase and exceed our expectations; risks related to our indebtedness, including the potential for accelerated maturities and debt covenant violations; the risk of heightened litigation as a result of actions taken in response to the COVID-19 pandemic; the impact of the COVID-19 pandemic on consumers, including their income, their level of discretionary spending both during and after the pandemic, and their views towards travel and the vacation ownership industries; and the risk that our resort management fees and finance operations may not continue to generate recurring sources of cash during or following the pandemic to the extent anticipated or at all;
adverse changes to, expirations or terminations of, or interruptions in, and other risks relating to Bluegreen’s business and strategic relationships, management contracts, exchange networks or other strategic marketing alliances, and the risk that our business relationship with Bass Pro under the revised terms of our marketing agreement and our relationship with Choice Hotels may not be as profitable as anticipated, or at all, or otherwise result in the 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;
adverse events or trends in vacation destinations and regions where the resorts in our network are based largelylocated, including weather-related events and adverse conditions related to the COVID-19 pandemic;
decreased demand from prospective purchasers of vacation ownership interests (“VOIs”);
our ability to maintain inventory of VOIs for sale;
the availability of financing, our ability to sell, securitize or borrow against our VOI notes receivable at acceptable terms; and our ability to successfully increase our credit facility capacity or enter into capital market transactions or other alternatives to provide for sufficient available cash for a sustained period of time;
our indebtedness may impact our financial condition and results of operations, and the terms of our indebtedness may limit, among other things, our activities and ability to pay dividends, and we may not comply with the terms of our indebtedness;
changes in senior management;
our ability to comply with regulations applicable to the vacation ownership industry or our other activities, and the costs of compliance efforts or a failure to comply;
our ability to successfully implement our marketing strategies and plans and the impact they may have on our expectationsresults and arefinancial condition, including that efforts to increase our VOI sales, to the extent pursued, may not be successful and may adversely impact our cash flow;
our ability to compete effectively in the highly competitive vacation ownership industry and against hotel and providers of other hospitality and lodging alternatives;
our ability to offer or further enhance the Vacation Club experience for our Vacation Club owners and risks related to our efforts and expenses in connection therewith, including that they may not result in the benefits anticipated and expenses may be greater than anticipated;
our customers’ compliance with their payment obligations under financing provided by us, the increased presence and efforts of “timeshare-exit” firms and the success of actions which we may take in connection therewith, and the impact of defaults on our operating results and liquidity position;
the ratings of third-party rating agencies, including the impact of any downgrade on our ability to obtain, renew or extend credit facilities, or otherwise raise funds;
changes in our business model and marketing efforts, plans or strategies, which may cause marketing expenses to increase or adversely impact our revenue, operating results and financial condition, and such expenses as well as our investments, including investments in new and expanded sales centers, 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 our telemarketing efforts, including new cell phone technologies that identify or block marketing calls;
the impact of the resale market for VOIs on our business, operating results and financial condition;
risks associated with our relationships with third-party developers, including that third-party developers who provide VOIs to be sold by us pursuant to fee-based services or just-in-time arrangements may not provide VOIs when planned and that third-party developers may not fulfill their obligations to us or to the homeowners associations that maintain the resorts they developed;
risks associated with legal proceedings and regulatory proceedings, examinations or audits of our operations, including claims of noncompliance with applicable regulations or for development related defects, and the impact they may have on our financial condition and operating results;
audits of our or our subsidiaries’ tax returns, including that they may result in the imposition of additional taxes;
environmental liabilities, including claims with respect to mold or hazardous or toxic substances, and their impact on our financial condition and operating results;
risks that natural disasters, including hurricanes, earthquakes, fires, floods and windstorms may adversely impact our business 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 and severity of natural disasters may increase due to climate change or other factors;
our ability to maintain the integrity of internal or customer data, the failure of which could result in damage to our reputation and/or subject us to a numbercosts, fines or lawsuits;
risks related to potential business expansion or other opportunities that we may pursue, including that they may involve significant costs and the incurrence of significant indebtedness and may not be successful;
the updating of, and developments with respect to, technology, including the cost involved in updating our technology and the impact that any failure to keep pace with developments in technology could have on our operations or competitive position, and the risk that our information technology expenditures may not result in the expected benefits;
the impact on our consolidated financial statements and internal control over financial reporting of the adoption of new accounting standards; and
other risks and uncertainties that are subjectinherent to change based on factors which are, in many instances, beyond our control. When considering forward-looking statements,business, the reader should keep in mind the risks, uncertainties,vacation ownership industry and other cautionary statements made in this report andownership of our common stock, including those discussed in the Company’s other reports filed with the SEC. The reader should not place undue reliance on any forward-looking statement, which speaks only as“Risk Factors” section of, the date made. This document also contains information regarding the past performance of the Company and its respective investments and operations. The reader should note that prior or current performance is not a guarantee or indication of future performance. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, and all such information should only be viewed as historical data.
Future results and the accuracy of forward-looking statements may be affected by various risks and uncertainties, including the risk factors applicable to the Company which are describedelsewhere in, “Item 1. Business – Cautionary Note Regarding Forward-Looking Statements” and “Item 1A. Risk Factors” of the Company’sour Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Annual Report”), as well as the risk that Bluegreen Vacations Corporation’s (“Bluegreen” or “Bluegreen Vacations”) relationship with Bass Pro under the revised terms of its marketing agreement with Bass Pro may not be as profitable as under the prior terms, or at all, or otherwise result in the benefits anticipated, and that Bluegreen may not open kiosks in Cabela’s stores in the number or at the times anticipated. The risk factors described in the 2018 Annual Report, as well as the other risks and factors detailed in this report2019 and the other reports filed by the Company with the SEC, are not necessarily all of the important factors that could cause the Company’s actual results to differ materially from those expressed in any of the forward-looking statements. Other unknown or unpredictable factors could cause the Company’s actual results to differ materially from those expressed in any of the forward-looking statements. As a result, the Company cautions that the foregoing factors are not exclusive.
Given these uncertainties, you are cautioned not to place undue reliance on forward-looking statements, and you should read this Quarterly Report on Form 10-Q with the understanding that actual future results, levels of activity, performance, and events and circumstances may be materially different from prior results or what the Company expects. The Company qualifies all forward-looking statements by these cautionary statements.
Forward-looking statements speak only as of the date“Risk Factors” section of this Quarterly Report on Form 10-Q, and the Company undertakes no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this report.10-Q.
Critical Accounting Policies
See Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the section “Critical Accounting Policies” to the Company’s 20182019 Annual Report for a discussion of the Company’s critical accounting policies.
33
New Accounting Pronouncements
See Note 1 to the Company’s condensed consolidated financial statements included in Item 1 of this report for a discussion of new accounting pronouncements applicable to the Company.
Overview
BBX CapitalBluegreen Vacations Holding Corporation is a Florida-based diversified holding company whose principal investments arewhich owns approximately 93% of Bluegreen Vacations BBX Capital Real Estate LLCCorporation (“BBX Capital Real Estate”), Renin Holdings, LLC (“Renin”), and IT’SUGAR, LLC (“IT’SUGAR”Bluegreen Vacations” or “Bluegreen”). In addition to its principal investments, the Company has other investments in various operating businesses, including companies in the confectionery industry.
The Company’s goal is to build long-term shareholder value. Since many of the Company’s assets do not generate income on a regular or predictable basis, theThe Company’s objective continues to beis long-term growth as measured by increases in book value and intrinsic value over time. In addition, the Company’s goal is to streamline its investment verticals so thatAs described below, the Company can be more easily analyzed and followed byconsummated the marketplace. The Company regularly reviews the performancespin-off of its investments and, based upon economic, market, and other relevant factors, considers transactions involving the sale or disposition of all or a portion of its assets investments, or subsidiaries. These include, amongand businesses other alternatives, a sale or spin-offthan the assets and activities related to Bluegreen Vacations. Further, the Company from time to time considers repurchases of its assets, investments, or subsidiaries or transactions involving public or private issuances of debt or equityoutstanding securities which decrease or dilute the Company’s ownership interest in such investments.
In 2016, Food for Thought Restaurant Group (“FFTRG”), a wholly-owned subsidiary of BBX Capital, entered into area development and franchise agreements with MOD Super Fast Pizza (“MOD Pizza”) related to the development of up to approximately 60 MOD Pizza franchised restaurant locations throughout Florida. Through 2019, FFTRG had opened nine restaurant locations. As a result of FFTRG’s overall operating performance and the Company’s goal of streamlining its investment verticals, the Company entered into an agreement with MOD Pizza to terminate the area development and franchise agreements and transferred sevenoutstanding securities of its restaurant locations, including the related assets, operations,subsidiaries subject to market conditions and lease obligations, to MOD Pizza during the third quarter of 2019. In addition, the Company closed the remaining two locations and terminated the related lease agreements. The Company recognized $4.0 million and $6.7 million of impairment losses associated with its investment in MOD Pizza restaurant locations during the three and nine months ended September 30, 2019, respectively.other factors.
As of September 30, 2019,2020, the Company had total consolidated assets of approximately $1.8$1.2 billion and shareholders’ equity of approximately $556.7$177.3 million.
Spin-Off
On September 30, 2020, BVH completed the spinoff of its wholly-owned subsidiary, BBX Capital. The spinoff separated BVH’s businesses, activities, and investments into two separate, publicly-traded companies: (i) BVH, which continues to hold approximately 93% of Bluegreen’s outstanding common stock, and (ii) BBX Capital, which will hold all of BVH’s other businesses and investments, including BBX Capital Real Estate LLC (“BBX Capital Real Estate” or “BBXRE”), BBX Sweet Holdings, LLC (“BBX Sweet Holdings”), and Renin Holdings, LLC (“Renin”). BBX Capital and its subsidiaries are presented as discontinued operations in the Company’s financial statements.
In connection with the spin-off, BVH (formerly BBX Capital Corporation) changed its name to Bluegreen Vacations Holding Corporation, and BBX Capital changed its name from BBX Capital Florida LLC to BBX Capital, Inc. In addition, in connection with the spin-off 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 BVH is current on all accrued payments under the note, including deferred interest. All outstanding amounts under the note will become due and payable in five years or earlier upon certain other events.
Reverse Stock Split
In July 2020, BBX Capital effected a one-for-five reverse split of its Class A Common Stock and Class B Common Stock.The share and per share amounts described herein have been retroactively adjusted to reflect the one-for-five reverse stock split as if it had occurred as of the earliest period presented.
Shareholder Rights Plan
In June 2020, BVH adopted a shareholder rights plan in light of the ongoing novel coronavirus disease (“COVID-19”) pandemic, the significant market volatility and uncertainties associated with the pandemic, and the impact on the Company and the market price of BVH’s Class A Common Stock and Class B Common Stock. The shareholder rights plan is similar to plans recently adopted by other public companies in light of the current environment and generally provides a deterrent to any person or group from acquiring 5% or more of BVH’s Class A Common Stock and Class B Common Stock without the prior approval of BVH’s Board of Directors.
Summary of Consolidated Results of Operations
Consolidated Results
The following summarizes key financial highlights for the three months ended September 30, 20192020 compared to the same 20182019 period:
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Total consolidated revenues of $144.2 million, a 27.9% decrease compared to the same 2019 period.
Loss before income taxes from continuing operations of $25.1 million compared to income of $16.6 million during the same 2019 period.
Net loss attributable to common shareholders of $25.3 million compared to income of $22.4 million during the same 2019 period.
Diluted loss per share from continuing operations of $1.53 compared to a diluted earnings per share of $0.23 for the same 2019 period.
The following summarizes key financial highlights for the nine months ended September 30, 20192020 compared to the same 20182019 period:
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34Total consolidated revenues of $368.2 million, a 33.6% decrease compared to the same 2019 period.
Loss before income taxes from continuing operations of $57.0 million compared to a loss of $0.2 million during the same 2019 period.
Net loss attributable to common shareholders of $89.4 million compared to income of $12.2 million during the same 2019 period.
Diluted loss per share from continuing operations of $3.35 compared to a diluted loss per share of $0.88 for the same 2019 period.
The Company’s consolidated results from continuing operations for the three months ended September 30, 20192020 compared to the same 20182019 period were significantly impacted by the following:
A decrease in the Company’s revenues primarily attributable to the impact of the COVID-19 pandemic on its operations. A net decrease in selling, general and administrative expenses primarily attributable to cost mitigating activities implemented in the 2020 period in response to the COVID-19 pandemic, including permanent and temporary reductions in workforce. |
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In addition to the items discussed above for the three months ended September, 30, 2019,2020, the Company’s consolidated results for the nine months ended September 30, 20192020 compared to the same 20182019 period were significantly impacted by the following:
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An increase in Bluegreen’s allowance for loan losses in the 2020 period as a result of the estimated impact of the COVID-19 pandemic on customer defaults.
35The recognition of a $39.1 million charge in the 2019 period associated with Bluegreen’s settlement agreement with Bass Pro in June 2019.
Segment Results
WeBVH currently reportreports the results of ourits business activities through the following reportable segments: Bluegreen, BBX Capital Real Estate, Renin,Sales of VOIs and IT’SUGAR.financing and Resort Operations and Club Management.
Information regarding income before income taxes by reportable segment is set forth in the table below (in thousands):
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||
September 30, | September 30, | |||||||||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||
Sales of VOIs and financing | $ | 25,731 | 39,517 | (13,786) | 15,978 | 62,860 | (46,882) | |||||||||||
Resort operations and club management | 15,069 | 14,903 | 166 | 47,494 | 43,695 | 3,799 | ||||||||||||
Corporate and other | (23,405) | (24,067) | 662 | (57,106) | (64,039) | 6,933 | ||||||||||||
BVH corporate | (42,532) | (13,774) | (28,758) | (63,339) | (42,718) | (20,621) | ||||||||||||
(Loss) income before income taxes from continuing operations | (25,137) | 16,579 | (41,716) | (56,973) | (202) | (56,771) | ||||||||||||
Provision for income taxes | (201) | (8,152) | 7,951 | (441) | (4,658) | 4,217 | ||||||||||||
Net (loss) income from continuing operations | (25,338) | 8,427 | (33,765) | (57,414) | (4,860) | (52,554) | ||||||||||||
Discontinued operations | 2,864 | 18,073 | (15,209) | (32,526) | 28,374 | (60,900) | ||||||||||||
Net (loss) income | (22,474) | 26,500 | (48,974) | (89,940) | 23,514 | (113,454) | ||||||||||||
Less: Net income (loss) attributable to noncontrolling interests | 2,848 | 4,112 | (1,264) | (508) | 11,275 | (11,783) | ||||||||||||
Net (loss) income attributable to shareholders | $ | (25,322) | 22,388 | (47,710) | (89,432) | 12,239 | (101,671) | |||||||||||
Executive Overview
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| For the Three Months Ended September 30, |
| For the Nine Months Ended September 30, | |||||||||
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| 2019 |
| 2018 |
| Change |
| 2019 |
| 2018 |
| Change | |
Bluegreen | $ | 30,353 |
| 32,516 |
| (2,163) |
| 42,516 |
| 102,679 |
| (60,163) | |
BBX Capital Real Estate |
| 29,114 |
| 1,940 |
| 27,174 |
| 50,641 |
| 15,627 |
| 35,014 | |
Renin |
| 479 |
| 693 |
| (214) |
| 1,550 |
| 704 |
| 846 | |
IT'SUGAR |
| 1,200 |
| 1,564 |
| (364) |
| (580) |
| (477) |
| (103) | |
Other |
| (6,259) |
| (2,676) |
| (3,583) |
| (13,045) |
| (11,038) |
| (2,007) | |
Reconciling items and eliminations |
| (13,705) |
| (15,310) |
| 1,605 |
| (42,500) |
| (45,372) |
| 2,872 | |
Income before income taxes |
| 41,182 |
| 18,727 |
| 22,455 |
| 38,582 |
| 62,123 |
| (23,541) | |
Provision for income taxes |
| (14,682) |
| (6,742) |
| (7,940) |
| (15,068) |
| (21,997) |
| 6,929 | |
Net income |
| 26,500 |
| 11,985 |
| 14,515 |
| 23,514 |
| 40,126 |
| (16,612) | |
Less: Net income attributable to noncontrolling interests |
| 4,112 |
| 5,806 |
| (1,694) |
| 11,275 |
| 16,324 |
| (5,049) | |
Net income attributable to shareholders | $ | 22,388 |
| 6,179 |
| 16,209 |
| 12,239 |
| 23,802 |
| (11,563) | |
Bluegreen Reportable Segment
Segment Description
BluegreenThe Company is a leading vacation ownership company that markets and sells VOIs and manages resorts in popular leisure and urban destinations. Bluegreen’sOur resort network includes 45 Club Resorts (resorts in which owners in itsour Vacation Club have the right to use most of the units in connection with their VOI ownership) and 2423 Club Associate Resorts (resorts in which owners in itsour Vacation Club have the right to use a limited number of units in connection with their VOI ownership). Bluegreen’sOur Club Resorts and Club Associate Resorts are primarily located in popular, high-volume, “drive-to” vacation locations, including Orlando, Las Vegas, Myrtle Beach and Charleston, among others. Through itsour points-based system, the approximately 219,000218,000 ownersin itsour Vacation Club have the flexibility subject to availability to stay at units available at any of itsour resorts and have access to approximately 11,350nearly 11,300 other hotels and resorts through partnerships and exchange networks. Bluegreen hasWe also have a robust sales and marketing platform supported by exclusive marketing relationships, which drivesuch as with Bass Pro and Choice Hotels. These marketing relationships have historically generated sales within itsour core demographic.
See Item 7Impact of the COVID-19 Pandemic
The COVID-19 pandemic has resulted in an unprecedented disruption in the U.S. economy and the travel, hospitality and vacation ownership industries due to, the Company’s 2018 Annual Report for additional informationamong other things, resort closures, travel restrictions and restrictions on business operations, including government guidance and restrictions with respect to Bluegreen’stravel, public accommodations, social gatherings and related matters. On March 23, 2020 we temporarily closed all of our VOI sales centers; our retail marketing operations at Bass Pro Shops and Cabela’s stores and outlet malls; and our Choice Hotels call transfer program. In connection with these actions we canceled existing owner reservations through May 15, 2020 and new prospect guest tours through June 30, 2020. Further, some of our Club and Club Associate Resorts were closed in accordance with government mandates and advisories. Beginning in mid-May 2020, we started the process of
recommencing our sales and marketing operations and our closed resorts began to welcome guests as government mandates were lifted. By September 30, 2020, we recommenced marketing operations at 87 Bass Pro Shops and Cabela’s stores and commenced marketing operations at 5 new Cabela’s stores, we reactivated our Choice Hotels call transfer program, all of our resorts were open, and all but one of our VOI sales centers were open. Resort occupancy for the third quarter of 2020 was approximately 70%. Additionally, in October 2020, we recommenced marketing operations in one additional Bass Pro Shop and commenced marketing operations at 4 new Cabela’s stores for a total of 97 Bass Pro Shops and Cabela’s stores. However, there is no assurance that our marketing operations at Bass Pro or Cabela’s stores or our VOI sales centers will remain open, including in the event of an increase in COVID-19 cases.
As a result of the effect of the pandemic, we implemented several cost mitigating activities beginning in March 2020, including reductions in workforce of over 1,600 positions and the placement of another approximate 3,200 of our associates on temporary furlough or reduced work hours. As of September 30, 2020, approximately 3,200 associates had returned to work on a full-time basis for a total of approximately 4,400 full-time associates as of September 30, 2020 compared to approximately 6,060 full-time associates as of September 30, 2019. As a result of the effect of the COVID-19 pandemic, during the three and nine months ended September 30, 2020, we incurred $0.4 million and $5.1 million in severance, respectively, and $1.5 million and $13.1 million, respectively, of payroll and payroll benefit expense relating to employees on temporary furlough or reduced work hours. These payments and expenses are included in selling, general and administrative expenses in our unaudited consolidated statement of operations and comprehensive income for the three and nine months ended September 30, 2020.
As a precautionary measure to provide additional liquidity if needed, in March 2020, Bluegreen drew down $60 million under its lines-of-credit and pledged or sold receivables under certain of its receivable backed facilities to increase its cash position. As of September 30, 2020, Bluegreen repaid the $60.0 million borrowed under its lines-of-credit. While Bluegreen paid a special cash dividend of $1.19 per share during August 2020, there is no assurance that Bluegreen will recommence paying regular dividends or pay any other special dividends in the future. During the second quarter of 2020, Bluegreen suspended its regular quarterly cash dividends on its common stock.
We have historically financed a majority of our sales of VOIs, and accordingly, are subject to the risk of defaults by our customers. GAAP requires that we reduce sales of VOIs by our estimate of uncollectible VOI notes receivable. The COVID-19 pandemic has had a material adverse impact on unemployment in the United States and economic conditions in general and the impact may continue for some time. While we believe that it is still too early to know the full impact of COVID- 19 on our default or delinquency rates as of September 30, 2020, we believe that the COVID-19 pandemic will have a significant impact on our VOI notes receivable. Accordingly, during March 2020, we recorded an allowance for loan losses of $12.0 million, which includes our estimate of customer defaults as a result of the COVID–19 pandemic, based on our historical experience, forbearance requests received from our customers, and other factors, including but not limited to, the seasoning of the notes receivable and FICO scores of the customers.
The Coronavirus Aid, Relief, and Economic Securities Act (“CARES Act”) was signed into law on March 27, 2020 in response to the COVID-19 pandemic. As of September 30, 2020, we evaluated the income tax provisions of the CARES Act and determined they would have no significant effect on either our September 30, 2020 income tax rate or the computation of our estimated effective tax rate for the year ended December 31, 2020. However, we have taken advantage of the deferral of the employer portion of the tax withholding amounts and the employee retention tax credits provided for in the CARES Act. During the nine months ended September 30, 2020, we recorded a tax withholding deferral of $5.0 million and employee retention tax credits of $6.9 million, which is included in selling, general and administrative expenses in our unaudited consolidated statements of operations and comprehensive income for the nine months ended September 30, 2020.
VOI Sales and Financing
Our primary business is the marketing and operations.selling of deeded VOIs, developed either by us or by third parties. Customers who purchase these VOIs receive an annual allotment of points, which can be redeemed for stays at one of our resorts or at nearly 11,300 other hotels and resorts available through partnerships and exchange networks. Historically, VOI companies have funded the majority of the capital investment in connection with resort development with internal resources and acquisition and development financing. In 2009, we began selling VOIs on behalf of third-party developers and have successfully diversified from a business focused on capital-intensive resort development to a more flexible model with a mix of developed and capital-light inventory 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 enable us to generate fees from the sales and marketing of their VOIs without incurring the significant upfront capital investment generally associated with resort acquisition or development. While sales of acquired or developed inventory typically result in a greater contribution to EBITDA and Adjusted EBITDA,
fee-based VOI sales typically do not require an initial investment or involve development financing risk. Both acquired or developed VOI sales and fee-based VOI sales drive recurring, incremental and long-term fee streams by adding owners to our Vacation Club and new resort management contracts. Fee-based sales of VOIs comprised 32% and 38% of system-wide sales of VOIs during the three month and nine months ended September 30, 2020, respectively, and 51% for each of the three and nine months ended September 30, 2019. While we intend to remain flexible with respect to our sales of the different categories of our VOI inventory in the future based on economic conditions, business initiatives and other considerations, we currently expect that our percentage of fee-based sales will continue to decrease over time to reflecting our recent focus on developed VOI sales. In conjunction with our VOI sales, we also generate interest income by originating loans to qualified purchasers. Collateralized by the underlying VOIs, our loans are generally structured as 10-year, fully-amortizing loans with a fixed interest rate ranging from approximately 12% to 18% per annum. As of September 30, 2020, the weighted-average interest rate on our VOI notes receivable was 14.9%. In addition, we earn fees for various other services, including title and escrow services in connection with the closing of VOI sales, and we generate fees for mortgage servicing.
Resort Operations and Club Management
We enter into management agreements with the HOAs that maintain most of the resorts in our Vacation Club and earn fees for providing management services to those HOAs and our approximately 218,000 Vacation Club owners. These resort management services include oversight of 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 Vacation Club, we manage the reservation system and provide owner, billing and collection services. In addition to resort and club management services, we earn fees for various other services that generally produce recurring, predictable and long term-revenue, including construction management services for third-party developers. As described above, while some of our Club and Club Associate Resorts were closed during March 2020 in response to the COVID-19 pandemic, all were subsequently reopened and remained open as of September 30, 2020.
Key Business and Financial Metrics and Terms Used by Management
In addition to the principal components of revenues and expenses affecting Bluegreen’ results of operations, which are further described in Item 7 to the Company’s 20182019 Annual Report, Bluegreen’s management useswe use certain key business and financial metrics and terms to discuss itsour results of operations, including certain terms which are not recognized by GAAP, which are described below.
Sales of VOIs. Represent sales of Bluegreen’sour owned VOIs, including developed VOIs and those acquired through just-in-time (“JIT”)JIT and secondary market arrangements, reduced by equity trade allowances and a provision for loan losses.an estimate of uncollectible VOI notes receivable. In addition to the factors impacting system-wide sales of VOIs (as described below), sales of VOIs are impacted by the proportion of system-wide sales of VOIs sold on behalf of third partiesthird-parties on a commission basis, which are not included in sales of VOIs.
System-wide Sales of VOIs. Represents all sales of VOIs, whether owned by Bluegreenus or a third party immediately prior to the sale. Sales of VOIs owned by third parties are transacted as sales of VOIs in Bluegreen’sour Vacation Club through the same selling and marketing process usedwe use to sell Bluegreen’sour VOI inventory. Bluegreen considersWe consider system-wide sales of VOIs to be an important operating measure because it reflects all sales of VOIs by Bluegreen’sour sales
36
and marketing operations without regard to whether Bluegreenwe or a third party owned such VOI inventory at the time of sale. System-wide sales of VOIs is not a recognized term under GAAP and should not be considered as an alternative to sales of VOIs or any other measure of financial performance derived in accordance with GAAP or to any other method of analyzing Bluegreen’sour results as reported under GAAP.
Guest Tours. Represents the number of sales presentations given at Bluegreen’sour sales centers during the period.
Sale to Tour Conversion Ratio. Represents the rate at which guest tours are converted to sales of VOIs and is calculated by dividing the number of sales transactionsguest tours by the number of guest tours.VOI sales transactions.
Average Sales Volume Per Guest (“VPG”). Represents the sales attributable to each guest tourtours at Bluegreen’sour sales locations and is calculated by dividing VOI sales of VOIs by guest tours. Bluegreen considersWe consider VPG to be an important operating measure because it measures the effectiveness of Bluegreen’sour sales process, combining the average transaction price with the sale-to-tour conversion ratio.
EBIDTA and Adjusted EBITDA. Bluegreen definesWe define EBITDA as earnings, or net income, (loss), before taking into account interest income (excluding interest earned on VOI notes receivable), interest expense (excluding interest expense incurred on debt secured by our VOI notes receivable), income and franchise taxes and depreciation and amortization. We define Adjusted EBITDA as our EBITDA, adjusted to exclude amounts attributable to the non-controlling interest in Bluegreen/Big Cedar Vacations (in which we own a 51% interest), loss (gain) on assets held for sale, and other items that we believe are not representative of ongoing operating results. Accordingly, we exclude severance charges net of employee retention tax credits, incremental costs associated with the COVID-19 pandemic, and amounts paid, accrued or incurred in connection with the Bass Pro settlement in June 2019 in the computation of Adjusted EBITDA. For the purposes of the EBITDA calculation,and Adjusted EBITDA calculations for each period presented, no adjustments arewere made for interest income earned on our 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 Bluegreen’sour business.
Adjusted EBITDA. Bluegreen defines Adjusted EBITDA as EBITDA adjusted for EBITDA attributable to the noncontrolling interest in Bluegreen/Big Cedar Vacations (in which Bluegreen owns a 51% interest) and items that Bluegreen believes are not representative of ongoing operating results. Accordingly, amounts paid, accrued, or incurred in connection with the Bass Pro settlement in June 2019 were excluded in the computation of Adjusted EBITDA for the nine months ended September 30, 2019.
Bluegreen considers EBITDA andWe consider our Segment Adjusted EBITDA to be an indicatorindicators of itsBluegreen’s operating performance, and they are used by Bluegreenus to measure itsBluegreen’s ability to service debt, fund capital expenditures and expand its business. EBITDA isand Adjusted EBITDA are also used by companies, lenders, investors and others because it excludesthey 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 and Adjusted EBITDA also excludesexclude 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.
Bluegreen considers Adjusted EBITDA to be a useful supplemental measure of Bluegreen’s operating performance that facilitates the comparability of historical financial periods.
EBITDA and Adjusted EBITDA are not recognized terms under GAAP and should not be considered as an alternative to net income (loss) or any other measure of financial performance or liquidity, including cash flow, derived in accordance with GAAP, or to any other method ofor analyzing Bluegreen’sour results as reported under GAAP. The limitations of using EBITDA or Adjusted EBITDA as an analytical tool include, without limitation, that EBITDA orand Adjusted EBITDA doesdo not reflect (i) changes in, or cash requirements for, our working capital needs; (ii) our interest expense, or the cash requirements necessary to service interest or principal payments on our indebtedness (other than as noted above); (iii) our tax expense or the cash requirements to pay our 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 Bluegreen considerswe consider not to be indicative of itsour future operations or performance. Further, although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements. In addition, Bluegreen’sour definition of Adjusted EBITDA may not be comparable to definitions of Adjusted EBITDA or other similarly titled measures used by other companies.
Reportable Segments Results of Operations
Information regardingAdjusted EBITDA for the resultsthree and nine months ended September 30, 2020 and 2019:
We consider Segment Adjusted EBITDA in connection with our evaluation of operationsthe operating performance of Bluegreen’s business segments as described in Note 13 to our condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q. See above for Bluegreen, includinga discussion of our definition of Adjusted EBITDA, how management uses it to manage Bluegreen’s business, and material limitations on its usefulness. The following tables set forth our Segment Adjusted EBITDA, total Adjusted EBITDA and a reconciliation of net income to EBITDA and Adjusted EBITDA is set forth below (dollars in thousands):to the most closely related comparable GAAP financial measure:
1 |
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| For the Three Months Ended September 30, | ||||||
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| 2019 |
| 2018 | ||||
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| Amount |
| % of System-wide sales of VOIs (5) |
| Amount |
| % of System-wide sales of VOIs (5) |
Developed VOI sales (1) | $ | 87,863 |
| 52% | $ | 90,596 |
| 52% |
Secondary market sales |
| 72,081 |
| 42% |
| 54,300 |
| 31% |
Fee-based sales |
| 87,646 |
| 51% |
| 88,155 |
| 51% |
JIT sales |
| 4,505 |
| 3% |
| 13,591 |
| 8% |
Less: Equity trade allowances (6) |
| (81,720) |
| -48% |
| (73,336) |
| -42% |
System-wide sales of VOIs |
| 170,375 |
| 100% |
| 173,306 |
| 100% |
Less: Fee-based sales |
| (87,646) |
| -51% |
| (88,155) |
| -51% |
Gross sales of VOIs |
| 82,729 |
| 49% |
| 85,151 |
| 49% |
Provision for loan losses (2) |
| (16,411) |
| -20% |
| (14,453) |
| -17% |
Sales of VOIs |
| 66,318 |
| 39% |
| 70,698 |
| 41% |
Cost of VOIs sold (3) |
| (3,121) |
| -5% |
| (11,237) |
| -16% |
Gross profit (3) |
| 63,197 |
| 95% |
| 59,461 |
| 84% |
Fee-based sales commissions (4) |
| 60,478 |
| 69% |
| 61,641 |
| 70% |
Financing revenue, net of |
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financing expense |
| 11,693 |
| 7% |
| 12,323 |
| 7% |
Other fee-based services |
| 54,855 |
| 32% |
| 47,957 |
| 28% |
Cost of other fee-based services |
| (38,979) |
| -23% |
| (33,929) |
| -20% |
Net carrying cost of VOI inventory |
| (5,878) |
| -3% |
| (2,908) |
| -2% |
Selling and marketing expenses |
| (87,358) |
| -51% |
| (84,955) |
| -49% |
General and administrative expenses |
| (29,801) |
| -17% |
| (27,452) |
| -16% |
Operating profit |
| 28,207 |
| 17% |
| 32,138 |
| 19% |
Other income |
| 2,146 |
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| 378 |
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Provision for income taxes |
| (7,778) |
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| (8,443) |
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Net income | $ | 22,575 |
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| $ | 24,073 |
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Adjustments for EBITDA: |
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Provision for income taxes |
| 7,778 |
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| 8,443 |
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Income before taxes |
| 30,353 |
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| 32,516 |
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Depreciation and amortization |
| 3,585 |
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| 3,169 |
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Franchise taxes |
| 112 |
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| 56 |
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Interest expense (other than interest |
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incurred on debt that is secured by |
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VOI notes receivable) |
| 5,326 |
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| 4,207 |
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Interest income (other than interest |
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earned on VOI notes receivable) |
| (1,799) |
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| (1,407) |
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EBITDA |
| 37,577 |
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| 38,541 |
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Adjustments for Adjusted EBITDA: |
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(Gain) loss on assets held for sale |
| (166) |
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| 18 |
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EBITDA attributable to |
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noncontrolling interest in |
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Bluegreen/Big Cedar Vacations |
| (2,364) |
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| (3,637) |
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Severance |
| 1,924 |
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| - |
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Adjusted EBITDA | $ | 36,971 |
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| $ | 34,922 |
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For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||
(in thousands) | 2020 | 2019 | 2020 | 2019 | ||||||||
Adjusted EBITDA - sales of VOIs | $ | 27,344 | $ | 41,618 | $ | 24,402 | $ | 107,152 | ||||
Adjusted EBITDA - resort operations | 15,391 | 15,462 | 49,429 | 44,983 | ||||||||
Total Segment Adjusted EBITDA | 42,735 | 57,080 | 73,831 | 152,135 | ||||||||
Less: corporate and other | (20,373) | (20,109) | (44,575) | (60,308) | ||||||||
Total Adjusted EBITDA | $ | 22,362 | $ | 36,971 | $ | 29,256 | $ | 91,827 | ||||
The following table reconciles system-wide sales of VOIs to gross sales of VOIs, the most comparable GAAP financial measure.
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||
(in thousands) | 2020 | 2019 | 2020 | 2019 | ||||||||
Gross sales of VOIs | $ | 71,149 | $ | 82,729 | $ | 157,530 | $ | 225,834 | ||||
Add: Fee-Based sales | 33,159 | 87,646 | 97,266 | 237,793 | ||||||||
System-wide sales of VOIs | $ | 104,308 | $ | 170,375 | $ | 254,796 | $ | 463,627 | ||||
As of and for the Three Months Ended September 30, | As of and for the Nine Months Ended September 30, | |||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||
Other Financial Data: | ||||||||||||
(in thousands) | ||||||||||||
System-wide sales of VOIs | $ | 104,308 | $ | 170,375 | $ | 254,796 | $ | 463,627 | ||||
Adjusted EBITDA - sales of VOIs and | $ | 27,344 | $ | 41,618 | $ | 24,402 | $ | 107,152 | ||||
Adjusted EBITDA - resort operations | ||||||||||||
and club management | $ | 15,391 | $ | 15,462 | $ | 49,429 | $ | 44,983 | ||||
Number of Bluegreen Vacation Club / | ||||||||||||
Vacation Club Associate resorts | ||||||||||||
at period end | 68 | 69 | 68 | 69 | ||||||||
Total number of sale transactions | 6,130 | 11,613 | 15,657 | 30,530 | ||||||||
Average sales volume per guest | $ | 2,889 | $ | 2,609 | $ | 3,079 | $ | 2,605 | ||||
38
For the three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019
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| For the Nine Months Ended September 30, | ||||||
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| 2019 |
| 2018 | ||||
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| Amount |
| % of System-wide sales of VOIs (5) |
| Amount |
| % of System-wide sales of VOIs (5) |
Developed VOI sales (1) | $ | 255,288 |
| 55% | $ | 218,842 |
| 46% |
Secondary market sales |
| 184,571 |
| 40% |
| 185,847 |
| 38% |
Fee-based sales |
| 237,793 |
| 51% |
| 246,773 |
| 52% |
JIT sales |
| 9,157 |
| 2% |
| 32,274 |
| 7% |
Less: Equity trade allowances (6) |
| (223,182) |
| -48% |
| (205,625) |
| -43% |
System-wide sales of VOIs |
| 463,627 |
| 100% |
| 478,111 |
| 100% |
Less: Fee-based sales |
| (237,793) |
| -51% |
| (246,773) |
| -52% |
Gross sales of VOIs |
| 225,834 |
| 49% |
| 231,338 |
| 48% |
Provision for loan losses (2) |
| (39,483) |
| -17% |
| (35,926) |
| -16% |
Sales of VOIs |
| 186,351 |
| 40% |
| 195,412 |
| 41% |
Cost of VOIs sold (3) |
| (17,541) |
| -9% |
| (19,838) |
| -10% |
Gross profit (3) |
| 168,810 |
| 91% |
| 175,574 |
| 90% |
Fee-based sales commissions (4) |
| 161,033 |
| 68% |
| 167,581 |
| 68% |
Financing revenue, net of |
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financing expense |
| 36,009 |
| 8% |
| 38,301 |
| 8% |
Other fee-based services |
| 152,720 |
| 33% |
| 136,629 |
| 29% |
Cost of other fee-based services |
| (106,390) |
| -23% |
| (94,065) |
| -20% |
Net carrying cost of VOI inventory |
| (18,853) |
| -4% |
| (7,075) |
| -1% |
Selling and marketing expenses |
| (235,580) |
| -51% |
| (233,961) |
| -49% |
General and administrative expenses |
| (119,461) |
| -26% |
| (81,574) |
| -17% |
Operating profit |
| 38,288 |
| 8% |
| 101,410 |
| 21% |
Other income |
| 4,228 |
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| 1,269 |
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Provision for income taxes |
| (9,124) |
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| (24,997) |
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Net income | $ | 33,392 |
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| $ | 77,682 |
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Adjustments for EBITDA: |
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Provision for income taxes |
| 9,124 |
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| 24,997 |
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Income before taxes |
| 42,516 |
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| 102,679 |
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Depreciation and amortization |
| 10,453 |
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| 9,087 |
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Franchise taxes |
| 171 |
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| 180 |
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Interest expense (other than interest |
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incurred on debt that is secured by |
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VOI notes receivable) |
| 14,564 |
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| 11,136 |
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Interest income (other than interest |
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earned on VOI notes receivable) |
| (5,437) |
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| (4,222) |
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EBITDA |
| 62,267 |
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| 118,860 |
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Adjustments for Adjusted EBITDA: |
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(Gain) loss on assets held for sale |
| (2,146) |
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| 9 |
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EBITDA attributable to |
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noncontrolling interest in |
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Bluegreen/Big Cedar Vacations |
| (9,339) |
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| (9,521) |
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Severance |
| 1,924 |
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| 751 |
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Bass Pro Settlement |
| 39,121 |
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| - |
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Adjusted EBITDA | $ | 91,827 |
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| $ | 110,099 |
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Sales of VOIs and Financing
For the Three Months Ended September 30, | ||||||||||
2020 | 2019 | |||||||||
Amount | % of | Amount | % of | |||||||
(in thousands) | ||||||||||
Developed VOI sales (1) | $ | 37,314 | 36% | $ | 87,863 | 52% | ||||
Secondary Market sales | 24,076 | 23 | 72,081 | 42 | ||||||
Fee-Based sales | 33,159 | 32 | 87,646 | 51 | ||||||
JIT sales | 14,845 | 14 | 4,505 | 3 | ||||||
Less: Equity trade allowances (6) | (5,086) | (5) | (81,720) | (48) | ||||||
System-wide sales of VOIs | 104,308 | 100% | 170,375 | 100% | ||||||
Less: Fee-Based sales | (33,159) | (32) | (87,646) | (51) | ||||||
Gross sales of VOIs | 71,149 | 68 | 82,729 | 49 | ||||||
Provision for loan losses (2) | (11,884) | (17) | (16,411) | (20) | ||||||
Sales of VOIs | 59,265 | 57 | 66,318 | 39 | ||||||
Cost of VOIs sold (3) | (3,597) | (6) | (3,121) | (5) | ||||||
Gross profit (3) | 55,668 | 94 | 63,197 | 95 | ||||||
Fee-Based sales commission revenue (4) | 22,119 | 67 | 60,478 | 69 | ||||||
Financing revenue, net of financing expense | 15,545 | 15 | 15,008 | 9 | ||||||
Other income, net | — | 0 | 537 | (1) | ||||||
Other fee-based services, title operations and other, net | 481 | 0 | 1,847 | 1 | ||||||
Net carrying cost of VOI inventory | (8,580) | (8) | (5,878) | (3) | ||||||
Selling and marketing expenses | (53,613) | (51) | (88,232) | (52) | ||||||
General and administrative expenses - sales and | (5,889) | (6) | (7,440) | (4) | ||||||
Operating profit - sales of VOIs and financing | 25,731 | 25% | 39,517 | 23% | ||||||
Add: Depreciation and amortization | 1,405 | 1,507 | ||||||||
Add: Severance | 208 | 594 | ||||||||
Adjusted EBITDA - sales of VOI and financing | $ | 27,344 | $ | 41,618 | ||||||
(1)Developed VOI sales represent sales of VOIs acquired or developed by us as part of our developed VOI business. Developed VOI sales do not include Secondary Market sales, Fee-Based sales or JIT sales.
(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.
(6)Equity trade allowances are amounts granted to customers upon trading in their existing VOIs in connection with the purchase of additional VOIs. Subject to certain exceptions, equity trade allowances were generally eliminated in June 2020.
For the Nine Months Ended September 30, | ||||||||||
2020 | 2019 | |||||||||
Amount | % of | Amount | % of | |||||||
(in thousands) | ||||||||||
Developed VOI sales (1) | $ | 128,396 | 50% | $ | 255,288 | 55% | ||||
Secondary Market sales | 98,576 | 39 | 184,571 | 40 | ||||||
Fee-Based sales | 97,266 | 38 | 237,793 | 51 | ||||||
JIT sales | 20,453 | 8 | 9,157 | 2 | ||||||
Less: Equity trade allowances (6) | (89,895) | (35) | (223,182) | (48) | ||||||
System-wide sales of VOIs | 254,796 | 100% | 463,627 | 100% | ||||||
Less: Fee-Based sales | (97,266) | (38) | (237,793) | (51) | ||||||
Gross sales of VOIs | 157,530 | 62 | 225,834 | 49 | ||||||
Provision for loan losses (2) | (44,083) | (28) | (39,483) | (17) | ||||||
Sales of VOIs | 113,447 | 45 | 186,351 | 40 | ||||||
Cost of VOIs sold (3) | (8,734) | (8) | (17,541) | (9) | ||||||
Gross profit (3) | 104,713 | 92 | 168,810 | 91 | ||||||
Fee-Based sales commission revenue (4) | 64,619 | 66 | 161,033 | 68 | ||||||
Financing revenue, net of financing expense | 46,658 | 18 | 45,101 | 10 | ||||||
Other income, net | — | 0 | 537 | 0 | ||||||
Other fee-based services, title operations and other, net | 2,364 | 1 | 5,260 | 1 | ||||||
Net carrying cost of VOI inventory | (27,407) | (11) | (18,853) | (4) | ||||||
Selling and marketing expenses | (155,597) | (61) | (238,205) | (51) | ||||||
General and administrative expenses - sales and | (19,372) | (8) | (60,823) | (13) | ||||||
Operating profit - sales of VOIs and financing | 15,978 | 6% | 62,860 | 14% | ||||||
Add: Depreciation and amortization | 4,447 | 4,577 | ||||||||
Add: Severance | 3,977 | 594 | ||||||||
Add: Bass Pro Settlement | — | 39,121 | ||||||||
Adjusted EBITDA - sales of VOIs and financing | $ | 24,402 | $ | 107,152 | ||||||
(1)Developed VOI sales represent sales of VOIs acquired or developed by us as part of our developed VOI business. Developed VOI sales do not include Secondary Market sales, Fee-Based sales or JIT sales.
(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.
(6)Equity trade allowances are amounts granted to customers upon trading in their existing VOIs in connection with the purchase of additional VOIs. Subject to certain exceptions equity trade allowances were generally eliminated in June 2020.
Sales of VOIs. Sales of VOIs were $59.3 million and $113.4 million during the three and nine months ended September 30, 2020, respectively, and $66.3 million and $186.4 million during the three and nine months ended September 30, 2019, respectively, and $70.7respectively. Sales of VOIs were impacted by the factors described in the discussion of system-wide sales of VOIs, primarily the adverse impact of the COVID-19 pandemic. Gross sales of VOIs were reduced by $11.9 million and $195.4$44.1 million during the three and nine months ended September 30, 2018, respectively. Sales of VOIs are impacted by the factors described below in system-wide sales of VOIs. Gross sales of VOIs were reduced by2020, respectively, and $16.4 million and $39.5 million during the three and nine months ended September 30, 2019, respectively, and $14.5 million and $35.9 million during the three and nine months ended September 30, 2019, 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 our estimates of future notes receivable performance for existing and newly originated loans. Bluegreen’sOur provision for loan losses as a percentage of gross sales of VOIs was 20%17% and 17%28% during the three and nine months ended September 30, 2019,2020, respectively, and 17%20% and 16%17% for the three and nine months ended September 30, 2018,2019, respectively. The percentage of our sales which were realized in cash within 30 days from sale was approximately 41% and 40% during the three months ended September 30, 2020 and September 30, 2019, respectively, and 41% and 42% during the three and nine months ended September 30, 2019, respectively, compared to 39%2020 and 41% during the three and nine months ended September 30, 2018,2019, respectively. The increases
We believe that the decrease in the provision for loan losses wereduring the three months ended September 30, 2020 as compared to the same period in 2019 was primarily due to an increase in average annualsales realized in cash and an increase in sales to existing owners during the 2020 period. Further, we believe that it is still too early to know the full impact of COVID-19 on our default or delinquency rates, however, we believe that the COVID-19 pandemic will have a significant impact on our VOI notes receivable. Accordingly, in March 2020, we recorded an allowance for loan losses of $12.0 million, which Bluegreen believes isincludes our estimate of customer defaults as a result of the COVID-19 pandemic, based on our historical experience, forbearance requests received from our customers, and other factors, including but not limited to, the seasoning of the notes receivable and FICO scores of the customers. In March 2020, we began receiving requests from borrowers requesting a modification of their VOI note receivable due to financial hardship resulting from the economic impacts of the COVID-19 pandemic. Hardship requests declined in large partJune 2020 and the program was discontinued on June 30, 2020. As of September 30, 2020, 3.8% of our portfolio was granted up to a three-month deferral or extension of payments, of which 86% have subsequently resumed payments under the newly modified terms. In addition to the COVID-19 pandemic, the provision for loan losses continues to be impacted by defaults which we believe are attributable to the receipt of 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. Defaults associated with such letters induring the third quarter of 2019 were up 61%nine months ended September 30, 2020, decreased by 4% compared to the third quarter of 2018 and up 26% compared to the second quartersame period of 2019. The increase in such defaults were primarily driven by higher attorney default activity for Bluegreen’s resorts and owners located in Missouri, where Bluegreen believes certain attorneys are currently targeting its customers. See Note 118: Commitments and Contingencies to the Company’s condensed 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 is highly uncertain and there is no assurance that our steps taken to mitigate the impact on the pandemic or actions taken by Bluegreen in connection therewith. While Bluegreen believes its notes receivable are adequately reserved at this time,timeshare exit firms will be successful. As a result, actual defaults may differ from theour estimates and the reserveallowance for loan losses may not prove to be adequate.
In addition to the factors described below impactingwhich impact system-wide sales of VOIs, sales of VOIs are impacted by the proportion of system-wide sales of VOIs sold on behalf of third parties on a commission basis, which are not included in sales of VOIs.
The average annual default rates and delinquency rates (more than 30 days past due) on Bluegreen’sour VOI notes receivable were as follows:
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Average annual default rates |
| 8.59% |
| 8.41% | 9.71% | 8.59% | ||
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Delinquency rates |
| 3.31% |
| 2.79% | 3.23% | 3.31% | ||
System-wide sales of VOIs. System-wide sales of VOIs were $104.3 million and $254.8 million during the three and nine months ended September 30, 2020, respectively, and $170.4 million and $463.6 million during the three and nine months ended September 30, 2019, respectively,respectively. System-wide sales of VOIs increased by 16.5% through February 29, 2020 compared to the same period in 2019. However, as previously described, on March 23, 2020, as a result of the COVID-19 pandemic, we temporarily closed all of our VOI sales centers; our retail marketing operations at Bass Pro Shops and $173.3 millionCabela’s stores and $478.1 millionoutlet malls; and our Choice Hotels call transfer program. Beginning in mid-May 2020, we started the process of recommencing our sales and marketing operations, except for marketing operations at outlet malls due to our determination that traffic to the malls did not justify reopening. By September 30, 2020, we recommenced our marketing operations at 87 Bass Pro Shops and Cabela’s stores and commenced marketing operations at 5 new Cabela’s stores, we reactivated our Choice Hotels call transfer program, all of our resorts were open, and all but one of our VOI sales centers were open.The temporary closure of all marketing operations and VOI sales centers as a result of the COVID-19 pandemic and other adverse impacts of the pandemic significantly impacted system-wide sales of VOIs during the three and nine months ended September 30, 2019, respectively. Bluegreen estimates that2020 and is expected to continue to significantly impact system-wide sales of VOIs were adversely impacted by approximately $6.0 million and $5.8 million as a result of named hurricanes in September 2019 and 2018, respectively. System-wide VOI sales decreased during the three and nine months ended September 30, 2019 compared to same 2018 periods due to a decrease in VPG and the number of guest tours. In addition, Bluegreen believes that the decrease in system-wide VOI sales for the nine months ended September 30, 2019 was due in part to disruptions in staffingforeseeable future, including the remainder of 2020. However, the ultimate impact, including the extent and operationsduration of the impact, cannot be predicted at certain of Bluegreen’s sales offices related to the issues with Bass Pro which were resolved when the parties entered into a settlement agreement in June 2019. See Note 11 to the Company’s condensed consolidated financial statements included in Item 1 of this report for additional information regarding the Bass Pro settlement. time.
40
Included in system-wide sales are Fee-Based Sales, JIT Sales, Secondary Market Sales and developed VOI sales. Sales by category are tracked based on which deeded VOI is conveyed in each transaction. Bluegreen managesWe manage which VOIs
are sold based on several factors, including the needs of fee-based clients, Bluegreen’sour 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. Fee-Based Sales comprised 32% and 38% of system-wide sales of VOIs during the three and nine months ended September 30, 2020, respectively, and 51% during both of the three and nine months ended September 30, 2019, respectively. The decrease in system-wide sales was due in part to the temporary closure of our VOI sales centers in response to the COVID-19 pandemic and other adverse impacts of the pandemic, as described above. While we intend to remain flexible with respect to our sales of the different categories of our VOI inventory in the future based on economic conditions, business initiatives and other considerations, we currently expect that our percentage of fee-based sales will decrease over time as we have recently increased efforts with respect to our developed VOI sales. Actual trends may differ from current expectations.
The following table sets forth certain information related to Bluegreen’sfor system-wide sales of VOIs: VOIs for the three and nine months ended September 30, 2020 and 2019:
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| 2018 |
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Number of sales offices at period-end |
| 26 |
| 25 |
| 4% |
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| 25 |
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Number of active sales arrangements with |
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third-party clients at period-end |
| 15 |
| 15 |
| 0% |
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| 15 |
| 15 |
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Total number of VOI sales transactions |
| 11,613 |
| 10,955 |
| 6% |
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| 30,530 |
| 30,959 |
| -1% | ||||
Average sales price per transaction | $ | 14,799 | $ | 15,988 |
| -7% |
| $ | 15,290 | $ | 15,576 |
| -2% | ||||
Number of total guest tours |
| 65,875 |
| 66,434 |
| -1% |
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| 179,180 |
| 182,183 |
| -2% | ||||
Sale-to-tour conversion ratio – total |
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marketing guests |
| 17.6% |
| 16.5% |
| 7% |
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| 17.0% |
| 17.0% |
| 0% | ||||
Number of new guest tours |
| 40,914 |
| 42,118 |
| -3% |
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| 109,451 |
| 113,621 |
| -4% | ||||
Sale-to-tour conversion ratio – new |
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marketing guests |
| 14.4% |
| 13.9% |
| 4% |
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| 14.0% |
| 14.5% |
| -3% | ||||
Percentage of sales to existing owners |
| 52.5% |
| 50.7% |
| 4% |
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| 53.9% |
| 51.0% |
| 6% | ||||
Average sales volume per guest | $ | 2,609 | $ | 2,636 |
| -1% |
| $ | 2,605 | $ | 2,647 |
| -2% | ||||
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||
Number of sales centers open at period-end | 25 | 26 | (4) | % | 25 | 26 | (4) | % | ||||||||||
Number Bass Pro and Cabela's marketing locations at period-end | 92 | 75 | 23 | % | 92 | 75 | 23 | % | ||||||||||
Number of active sales arrangements with third-party clients at period-end | 15 | 15 | — | % | 15 | 15 | — | % | ||||||||||
Total number of VOI sales transactions | 6,130 | 11,613 | (47) | % | 15,657 | 30,530 | (49) | % | ||||||||||
Average sales price per transaction | $ | 17,094 | $ | 14,799 | 16 | % | $ | 16,324 | $ | 15,290 | 7 | % | ||||||
Number of total guest tours | 36,268 | 65,875 | (45) | % | 83,022 | 179,180 | (54) | % | ||||||||||
Sale-to-tour conversion ratio– | 16.9% | 17.6% | (70) | bp | 18.9% | 17.0% | 190 | bp | ||||||||||
Number of new guest tours | 17,583 | 40,914 | (57) | % | 40,762 | 109,451 | (63) | % | ||||||||||
Sale-to-tour conversion ratio– | 12.4% | 14.4% | (200) | bp | 15.1% | 14.0% | 110 | bp | ||||||||||
Percentage of sales to existing owners | 66.8% | 52.5% | 1,430 | bp | 63.9% | 53.9% | 1,000 | bp | ||||||||||
Average sales volume per guest | $ | 2,889 | $ | 2,609 | 11 | % | $ | 3,079 | $ | 2,605 | 18 | % | ||||||
Cost of VOIs Sold. During the three months ended September 30, 20192020 and 2018,2019, cost of VOIs sold was $3.1$3.6 million and $11.2$3.1 million, respectively, and represented 5%6% and 16%5%, respectively, of sales of VOIs. During the nine months ended September 30, 20192020 and 2018,2019, cost of VOIs sold was $17.5$8.7 million and $19.8$17.5 million, respectively, and represented 9%8% 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 or acquired (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 project sales, future defaults, upgrades and incremental revenue from the resale of repossessed VOI inventory, are reflected on a retrospective basis in the period the change occurs. Therefore, cost of sales will typically be favorably impacted in periods in whichwhere 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. During the 2019 periods, Bluegreen acquired more Secondary Market VOI inventory compared to the 2018 periods due toCost of VOIs sold as a temporary suspensionpercentage of Secondary Market VOI inventory purchases in September 2018 in connection with a computer system conversion involving Bluegreen’s sales and inventory process. In addition,of VOIs increased during the 2019 periods, Bluegreen’s cost of sales benefited from sales of relatively lower cost VOIsthree months ended September 30, 2020, as compared to the 2018 periods in whichprior year period, primarily due to sales of relatively higher cost VOIs were sold. and lower secondary market purchases during the current year period. Cost of VOIs sold as a percentage of sales of VOIs decreased during the nine months ended September 30, 2020, as compared to the prior year period, primarily due to the impact of anticipated higher future defaults partially offset by lower cost secondary market purchases.
Fee-Based Sales Commission Revenue.During the three months ended September 30, 2020 and 2019, and 2018, Bluegreenwe sold $87.6$33.2 million and $88.2$87.6 million, respectively, of third-party VOI inventory under commission arrangements and earned sales and marketing commissions of $60.5$22.1 million and $61.6$60.5 million, respectively, in connection with those sales. During the nine months ended September 30, 2020 and 2019, we sold $97.3 million and 2018, Bluegreen sold $237.8 million, and $246.8 million,
respectively, of third-party VOI inventory under commission arrangements and earned sales and marketing commissions of $161.0$64.6 million and $167.6$161.0 million, respectively, in connection with those sales. The decreases in sales of third-party developer inventory on a commission basis during the 20192020 periods werewas due primarily to the temporary closure of VOI sales centers as a result of the COVID-19 pandemic and other factors described above relating to the decrease in system-wide sales of VOIs. Bluegreenabove. We earned an average sales and marketing commission of 67% and 66% during the three and nine months ended September 30, 2020, respectively, and 69% and 68% during the three and nine months ended September 30, 2019, respectively, and 70% and 68% during the three and nine months ended September 30, 2018, respectively, which is net of a reserve for commission refunds in connection with early defaults and cancellations, pursuant to the terms of certain of Bluegreen’sour fee-based service arrangements. The decrease in sales and marketing commissions as a percentage of fee-based sales for the three months ended September 30, 20192020 as compared to the three months ended September 30, 2018 is2019 was primarily related to the mix of developer sales at higher commission ratesan increase in the 2018 period as well as higher reservesour reserve for early tenured defaultscancellations coupled with a decrease in the 2019 period, which Bluegreen refunds to third-party developers in certain circumstances.fee-based sales.
41
Financing Revenue, Net of Financing Expense — Sales of VOIs. During Interest income on VOI notes receivable was $19.0 million and $20.0 million during the three months ended September 30, 2020 and 2019, respectively, which was partially offset by interest expense on receivable-backed debt of $3.9 million and $5.1 million, respectively. Interest income on VOI notes receivable was $58.3 million and $60.0 million during the nine months ended September 30, 2020 and 2019, respectively, which was partially offset by interest expense on receivable-backed debt of $12.7 million and $15.4 million, respectively. The increase in finance revenue net of finance expense during the 2020 periods as compared to the 2019 periods is primarily due to lower outstanding receivable-backed debt balances and lower weighted-average cost of borrowings due to lower interest rates partially offset by lower notes receivable balances primarily due to the temporary closure of VOI sales centers as a result of the COVID-19 pandemic and other factors described above. Revenues from mortgage servicing of $1.4 million and $4.5 million during the three and nine months ended September 30, 2019, financing revenue, net of financing expense was $11.72020, respectively, and $1.6 million and $36.0$4.6 million respectively, compared to $12.3 million and $38.3 million during the respective comparable 2018 periods. The decrease is primarily attributable to a higher weighted average cost of borrowing and higher outstanding debt balances during the 2019 periods as compared to the 2018 periods. Additionally, in September 2019, Bluegreen paid off its 2013 Notes Payable and, in connection with this repayment, wrote off unamortized debt issuance costs of $0.4 million which contributed to the increase in interest expense in the 2019 periods.
Other Fee-Based Services. During the three and nine months ended September 30, 2019, revenue from Bluegreen’s resort operations, club management, and title operations was $54.9 million and $152.7 million, respectively, compared to $48.0 million and $136.6 million, respectively during the comparable 2018 periods. These other fee-based services revenues were partially offset by expenses directly related to these operations of $39.0 million and $106.4 million, for the three and nine months ended September 30, 2019, respectively, and $33.9 million and $94.1 million for the comparable 2018 periods, respectively.
Other fee-based services revenue increased 14% and 12% during the three and nine months ended September 30, 2019, respectively, as compared to the same periodsare included in 2018. Cost reimbursementfinancing revenue, which primarily consistsnet of payrollmortgage servicing expenses of $1.0 million and payroll related costs for management of the HOAs and other services Bluegreen provides where Bluegreen is the employer, increased 25%$3.4 million during both the three and nine months ended September 30, 2019 as compared to the comparable 2018 periods. Net of cost reimbursement revenue, resort operations2020, respectively, and club management revenues increased 7%$1.6 million and 5% for the three and nine months ended September 30, 2019 as compared to the comparable 2018 periods. Resort operations and club management revenues increased during the 2019 periods compared to the 2018 periods primarily as a result of the receipt of management fees for the full periods in 2019 related to managed resorts added during 2018 and higher third-party rental commissions. Bluegreen managed 49 resort properties as of both September 30, 2019 and September 30, 2018.
Cost of other fee-based services increased 15% and 13%$4.1 million during the three and nine months ended September 30, 2019, respectively.
Other Fee-Based Services — Title Operations, net. During the three months ended September 30, 2020 and 2019, revenue from our title operations was $1.3 million and $4.3 million, respectively, which was partially offset by expenses directly related to our title operations of $0.8 million and $2.4 million, respectively. During the nine months ended September 30, 2020 and 2019, revenue from our title operations was $5.4 million and $10.1 million, respectively, which was partially offset by expenses directly related to our title operations of $3.0 million and $4.8 million, respectively. Resort title fee revenue varies based on sales volumes as comparedwell as the relative title costs in the jurisdictions where the inventory being sold is located. The decrease in the 2020 periods is due to the same periods in 2018. This increase was primarily due to increased cost reimbursement expense and the timingtemporary closure of VOI sales centers as a result of the new managed resortsCOVID-19 pandemic and other factors described above.
Net Carrying Cost of VOI Inventory. The carrying cost of Bluegreen’sour VOI inventory was $9.2$10.4 million and $7.2$9.2 million during the three months ended September 30, 20192020 and 2018,2019, respectively, which was partially offset by rental and sampler revenues of $3.3$1.8 million and $4.3$3.4 million, respectively. The carrying cost of Bluegreen’sour VOI inventory was $26.7$30.9 million and $20.1$26.6 million during the nine months ended September 30, 20192020 and 2018,2019, respectively, which was partially offset by rental and sampler revenues of $7.8$3.5 million and $13.0$7.8 million, respectively. The increase in net carrying costs of VOI inventory was primarily related to Bluegreen’s acquisitiondecreased rentals of developer inventory and decreased sampler stays due to, among other things, government ordered travel restrictions and temporary resort closures in accordance with government mandates and advisories associated with the Éilan Hotel and Spa during April 2018,COVID-19 pandemic as well as increased maintenance fees and developer subsidies associated with theour increase in VOI inventory. In certain circumstances, we offset marketing costs by using inventory decreased rentals of developer inventory, and decreased net operating profits from Bluegreen’s sampler program.for marketing guest stays.
Selling and Marketing Expenses.Selling and marketing expenses were $87.4$53.6 million and $235.6$155.6 million during the three and nine months ended September 30, 2019,2020, respectively, and $85.0$88.2 million and $234.0$238.2 million during the three and nine months ended September 30, 2018,2019, respectively. As a percentage of system-wide sales of VOIs, selling and marketing expenses increasedwere 51% and 61% during the three and nine months ended September 30, 2020, respectively, compared to 52% and 51% during both the three and nine months ended September 30, 2019, from 49%respectively. The decrease in selling and marketing expenses as a percentage of system-wide sales of VOIs during both the three and six months ended September 30, 2018, respectively.2020 compared to September 30, 2019, is primarily due to cost mitigation efforts as well as a higher proportion of sales to owners in the third quarter of 2020. The increase in selling and marketing expenses as a percentage of system-wide sales of VOIs during the nine months ended September 30, 2020 compared to September 30, 2019, is primarily attributable to highercertain fixed costs per guest tourinherent in Bluegreen’s sales and lower VPG.marketing operations and the costs of maintaining certain sales and marketing associates on furlough despite the temporary closure of our VOI sales sites and marketing operations during April and May 2020 as discussed above. During the three and nine months ended September 30, 2020, we incurred $0.1 million and $4.0 million, respectively, in severance and $1.4 million and
$12.3 million, respectively, of payroll and benefits expenses relating to employees on temporary furlough or reduced work hours as a result of the impact of the COVID-19 pandemic. In addition, since reopening activities commenced, we incurred costs associated with the reopening of 87 Bass Pro and Cabela’s stores that were open prior to the COVID-19 pandemic and the commencement of marketing operations at 5 new Cabela’s stores. We utilize these stores to sell mini-vacation packages to customers for future travel which require the customers to attend a timeshare presentation.
Bluegreen’s
Our agreement with Bass Pro previously provided for the payment of a variable commission upon the sale of a VOI to a marketing prospect obtained through the Bass Pro marketing channels.channels. As discussed herein,previously disclosed, pursuant to the settlement agreement and amended marketing arrangement with Bass Pro entered into during June 2019, the settlement paymentspayment and a portion of the ongoing annual marketing fees are fixed costs and/or are subject to annual minimums regardless of the volume of VOI sales produced from the resulting marketing prospects generated from the amended agreement.agreement, including reduced sales as a result of the temporary closure of our sales operations due to the COVID-19 pandemic. If Bluegreen’sour marketing operations pursuant to the amended agreement with Bass Pro doesdo not generate a sufficient number of prospects and leads or is terminated or limited, Bluegreenwe may not be able to successfully market and sell itsour products and services at current sales levels, at anticipated levels or at levels required in order to offset the costs associated with itsour marketing efforts. In addition, the amended arrangement with Bass Pro is expected to resulthas resulted in an annual 9% increase in Bluegreen’sour marketing expensescosts as a percentage of sales from the program, based on the increaseincreases in program fixed costs associated with the program and anticipated VOI sales volumes from this marketing channel. Should Bluegreen’s VOIIn light of the decrease in sales volumes be below expectations,due to the COVID-19 pandemic, the increase in the costscost of this marketing program would be higher than expected, and Bluegreen’shas adversely impacted our results of operations and cash flows wouldflow and may continue to have an adverse impact if sales continue to be adversely impacted.below expected levels.
42
General and Administrative Expenses. Expenses — Sales and Marketing Operations. General and administrative expenses attributable to sales and marketing operations were $29.8$5.9 million and $119.5$19.4 million during the three and nine months ended September 30, 2019,2020, respectively, and $27.5$7.4 million and $81.6$60.8 million during the three and nine months ended September 30, 2018,2019, respectively. As a percentage of system-wide sales of VOIs, general and administrative expenses were 17%attributable to sales and 26%marketing operations was 6% and 8% during the three and nine months ended September 30, 2020, respectively, and 4% and 13% during the three and nine months ended September 30, 2019, and 16% and 17% for the three and nine months ended September 30, 2018, respectively. Generalrespectively, reflecting fixed costs including costs of maintaining certain sales associates on furlough. Included in general and administrative expenses attributable to sales and marketing operations for the nine months ended September 30, 2019 include a charge ofwas approximately $39.1 million related to the settlement of the dispute with Bass Pro in June 2019. See Note 119: Commitments and Contingencies to the Company’s condensedour unaudited consolidated financial statements included in Item 1 of this report for additional information regarding the Bass Pro settlement. In
Resort Operations and Club Management
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||
(in thousands) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||
Resort operations and | $ | 42,234 | $ | 47,338 | $ | 124,859 | $ | 132,856 | ||||||||||||
Resort operations and club management expense | (27,165) | (32,435) | (77,365) | (89,161) | ||||||||||||||||
Operating profit - resort | 15,069 | 36% | 14,903 | 31% | 47,494 | 38% | 43,695 | 33% | ||||||||||||
Add: Depreciation and amortization | 208 | 321 | 588 | 1,050 | ||||||||||||||||
Add: Severance | 114 | 238 | 1,347 | 238 | ||||||||||||||||
Adjusted EBITDA - resort operations | $ | 15,391 | $ | 15,462 | $ | 49,429 | $ | 44,983 | ||||||||||||
Resort Operations and Club Management Revenue. Resort operations and club management revenue decreased 11% and 6% for the three and nine months ended September 30, 2020, compared to the three and nine months ended September 30, 2019, respectively. Cost reimbursement revenue, which primarily consists of payroll and payroll related expenses for management of the HOAs and other services we provide where we are the employer, decreased 12% and 5% during the three and nine months ended September 30, 2020, compared to the three and nine months ended September 30, 2019, respectively, reflecting the temporary closure of many resorts related to the COVID-19 pandemic, as described above. Net of cost reimbursement revenue, resort operations and club management revenues decreased 10% and 7% during the three and nine months ended September 30, 2020 as compared to three and nine months ended September 30, 2019, respectively, primarily as a result of decreases in revenues from our Traveler Plus program, other
owner programs, resort retail operations and third-party rental commissions as a result of the COVID-19 pandemic. We managed 49 resort properties as of both September 30, 2020 and September 30, 2019.
Resort Operations and Club Management Expense. During the three and nine months ended September 30, 2020, resort operations and club management expense decreased 16% and 13%, compared to the three and nine months ended September 30, 2019, respectively. The decreases were primarily due to cost mitigation efforts implemented in the first quarter of 2020 in addition to lower costs related to the Traveler Plus program, other owner programs and resort retail operations in the 2020 periods as compared to the 2019 periods, in each case, as a result of the COVID-19 pandemic.
Corporate and Other
For the Three Months Ended | For the Nine Months Ended | |||||||||||
(dollars in thousands) | 2020 | 2019 | 2020 | 2019 | ||||||||
General and administrative expenses - | $ | (20,254) | $ | (22,149) | $ | (48,603) | $ | (58,603) | ||||
Adjusted EBITDA attributable to the | (2,757) | (2,364) | (4,438) | (9,339) | ||||||||
Other (expense) income, net | (365) | 1,609 | 41 | 3,691 | ||||||||
Franchise taxes | 101 | 112 | 118 | 171 | ||||||||
Loss (gain) on assets held for sale | 283 | (166) | 326 | (2,146) | ||||||||
Add: Depreciation and amortization | 2,278 | 1,757 | 6,645 | 4,826 | ||||||||
Add: Severance | 59 | 1,092 | 1,782 | 1,092 | ||||||||
Less: Employee Retention credit related to severance | — | — | (2,202) | — | ||||||||
Add: COVID-19 incremental costs | 282 | — | 1,756 | — | ||||||||
Adjusted EBITDA - Corporate and other | $ | (20,373) | $ | (20,109) | $ | (44,575) | $ | (60,308) | ||||
General and Administrative Expenses — Corporate and Other. General and administrative expenses attributable to corporate overhead were $20.3 million and $48.6 million during the three and nine months ended September 30, 2020, respectively, and $22.1 million and $58.6 million during the three and nine months ended September 30, 2019, Bluegreen accruedrespectively. The decreases were primarily due to a $6.9 million employee retention credit earned in June 2020 under the CARES Act ($2.2 million of which was earned on severance). This credit was partially offset by $0.1 million and $1.8 million in severance cost for corporate employees during the three and transition expensesnine months ended September 30, 2020, respectively, of $1.9which $0.1 million pursuantand $1.2 million, respectively, was due to agreements entered intoseverance related to cost mitigation efforts attributable to the COVID-19 pandemic.
Adjusted EBITDA Attributable to Non-Controlling Interest in Bluegreen/Big Cedar Vacations. We include in our consolidated financial statements the results of operations and financial condition of Bluegreen/Big Cedar Vacations, our 51% owned subsidiary. The non-controlling interest in Adjusted EBITDA of Bluegreen/Big Cedar Vacations is the portion of Bluegreen/Big Cedar Vacations’ Adjusted EBITDA that is attributable to Big Cedar LLC, which holds the remaining 49% interest in Bluegreen/Big Cedar Vacations. Adjusted EBITDA attributable to the non-controlling interest in Bluegreen/Big Cedar Vacations was $2.8 million and $4.4 million during the three and nine months ended September 30, 2020, respectively, and $2.4 million and $9.3 million during the three and nine months ended September 30, 2019, respectively. The decrease in Adjusted EBITDA attributable to the non-controlling interest in Bluegreen/Big Cedar Vacations for the nine months ended September 30, 2020 was primarily related to the impact of the COVID-19 pandemic, including the temporary closure of our VOI sales centers in connection with certain executivesthe COVID-19 pandemic as described above.
Interest Expense.Interest expense not related to receivable-backed debt was $3.4 million and members$11.9 million during the three and nine months ended September 30, 2020, respectively, and $5.3 million and $14.6 million during the three and nine months ended September 30, 2019, respectively. The decrease in interest expense during the three and nine months ended September 30, 2020 was primarily due to a lower weighted-average cost of managementborrowing, partially offset by higher outstanding debt balances during 2019. the 2020 periods.
Other Income.(Expense) Income, net. Other (expense) income, net was ($0.4) million and $0.1 million during the three and nine months ended September 30, 2020, respectively, and $2.1 million and $4.2 million during the three and nine months ended September 30, 2019, respectively, and $0.4 million and $1.3 million during the three and nine months ended September 30, 2018, respectively. These increases in other income, netdecreases were primarily related to a land sale during June 2019 whichthat resulted in a gain of $2.0 million and the receipt of $1.7 million in Hurricane Irma business interruption insurance proceeds received in July 2019 related to a named hurricane in 2017.2019.
BVH Corporate
BBX Capital Real Estate Reportable Segment
Segment Description
BBX Capital Real Estate (or BBXRE) is engaged in the acquisition, development, construction, ownership, financing, and management of real estate and investments in real estate joint ventures, including investments in multifamily apartment and townhome communities, single-family master-planned communities, and commercial properties located primarily in Florida. In addition, BBXRE owns a 50% equity interest in the Altman Companies, a developer and manager of multifamily apartment communities.
BBXRE also manages the legacy assets acquired in connection with the Company’s sale of BankAtlantic in 2012, including portfolios of loans receivable and real estate properties.
Current Trends and Developments
Beacon Lake Master Planned Development
During the nine months ended September 30, 2019, BBXRE continued its development of the Beacon Lake Community in St. Johns County, Florida and sold to homebuilders the remaining 51 developed lots in Phase I of the project, which is comprised of 302 lots. In addition, BBXRE is currently developing the lots comprising Phase II of the project, which is expected to include approximately 400 single-family homes and 196 townhomes, and 79 lots for single-family homes as part of a future phase of the project. BBXRE anticipates that sales of Phase II lots to homebuilders will commence during the first quarter of 2020.
The Altman Companies and Related Investments
In 2018, BBXRE acquired a 50% membership interest in the Altman Companies, a joint venture between the Company and Joel Altman (“JA”) engaged in the development, construction, and management of multifamily apartment communities. As of September 30, 2019, BBXRE had investments in nine active developments sponsored by the Altman Companies, comprised of three developments that are stabilized or being leased and expected to be sold over the next two years, four developments that are under construction, and two projects that are currently in predevelopment stages.
During the nine months ended September 30, 2019, BBXRE monetized certain of its investments in real estate joint ventures that were sponsored by the Altman Companies, including the following:
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BBXRE also continued to invest in new real estate joint ventures sponsored by the Altman Companies, which are summarized below:
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During the nine months ended September 30, 2019, the PGA Design Center joint venture sold its remaining commercial buildings located in Palm Beach Gardens, Florida and provided seller financing to the buyer for a portion of the sales price. As a result of the sale, BBXRE recognized $2.8 million of equity earnings and received approximately $2.3 million of distributions from the venture.
In addition, BBXRE invested in two new real estate joint ventures, including The Main Las Olas joint venture, which was formed to invest in the development of The Main Las Olas, a mixed-used project in downtown Fort Lauderdale, Florida that is planned to be comprised of an office tower with approximately 365,000 square feet of leasable area, a residential tower with approximately 341 units, and approximately 45,000 square feet of ground floor retail, and the Sky Cove joint venture, which was formed to develop, construct, and sell 204 single-family homes in Westlake Florida. BBXRE has invested $1.9 million in The Main Las Olas joint venture and $4.2 million in the Sky Cove joint venture and expects to invest an additional $2.1 million in The Main Las Olas joint venture as the development progresses.
Other Real Estate Activity
During the nine months ended September 30, 2019, BBXRE sold other various real estate assets within its portfolio, including RoboVault, a self-storage facility located in Fort Lauderdale, Florida, its remaining land parcels located at PGA Station in Palm Beach Gardens, Florida, and land parcels located in St. Cloud, Florida and Leesburg, Florida. As a result of these sales, BBXRE recognized total net gains on sales of real estate of $11.4 million and received aggregate net proceeds of $32.1 million. In connection with the sale of its remaining land parcels at PGA Station, which were sold to the buyer of the commercial buildings sold by the PGA Design Center joint venture, as described above, BBXRE reinvested $2.1 million of the proceeds in the PGA Lender joint venture, a joint venture formed with the PGA Design Center joint venture to invest in the seller financing provided to the buyer by the PGA Design Center joint venture.
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Results of Operations
Information regarding the results of operations for BBXRE is set forth below (dollars in thousands):
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|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| For the Three Months Ended September 30, |
| For the Nine Months Ended September 30, | ||||||||
|
| 2019 |
| 2018 |
| Change |
| 2019 |
| 2018 |
| Change |
Sales of real estate inventory | $ | 370 |
| 7,478 |
| (7,108) |
| 5,030 |
| 17,138 |
| (12,108) |
Interest income |
| 166 |
| 229 |
| (63) |
| 631 |
| 2,064 |
| (1,433) |
Net gains on sales of real estate assets |
| 399 |
| - |
| 399 |
| 11,395 |
| 4,802 |
| 6,593 |
Other |
| 197 |
| 572 |
| (375) |
| 1,492 |
| 2,020 |
| (528) |
Total revenues |
| 1,132 |
| 8,279 |
| (7,147) |
| 18,548 |
| 26,024 |
| (7,476) |
Cost of real estate inventory sold |
| - |
| 4,655 |
| (4,655) |
| 2,643 |
| 11,283 |
| (8,640) |
Recoveries from loan losses, net |
| (1,821) |
| (443) |
| (1,378) |
| (4,206) |
| (7,258) |
| 3,052 |
Impairment losses |
| 37 |
| 193 |
| (156) |
| 37 |
| 362 |
| (325) |
Selling, general and administrative expenses |
| 2,336 |
| 2,307 |
| 29 |
| 6,709 |
| 7,175 |
| (466) |
Total costs and expenses |
| 552 |
| 6,712 |
| (6,160) |
| 5,183 |
| 11,562 |
| (6,379) |
Equity in net earnings of unconsolidated joint ventures |
| 28,534 |
| 373 |
| 28,161 |
| 37,276 |
| 1,165 |
| 36,111 |
Income before income taxes | $ | 29,114 |
| 1,940 |
| 27,174 |
| 50,641 |
| 15,627 |
| 35,014 |
BBX Capital Real Estate’s income before income taxes for the three months ended September 30, 2019 compared to the same 2018 period increased by $27.2 million primarily due to the following:
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BBX Capital Real Estate’s income before income taxes for the nine months ended September 30, 2019 compared to the same 2018 period increased by $35.0 million primarily due to the following:
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Renin Reportable Segment
Segment Description
Renin is engaged in the design, manufacture, and distribution of sliding doors, door systems and hardware, and home décor products and operates through its headquarters in Canada and two manufacturing and distribution facilities in the United States and Canada. In addition to its own manufacturing, Renin also sources various products and raw materials from China. Renin’s products are sold through three channels in North America: retail, commercial, and direct installation in the greater Toronto area.
45
Current Trends and Developments
During 2019, Renin continued to experience a shift in its customer mix towards retail customers, including big box retailers, while its barn door products have continued to increase as a percentage of its overall product mix. In particular, during the nine months ended September 30, 2019, retail, commercial, and direct installation trade sales as a percentage of total gross trade sales were 64%, 26%, and 10%, respectively, compared to 58%, 32% and 10% during the comparable 2018 period. This shift reflects the addition of Costco as a retail customer of barn doors, the expansion of Renin’s sales program with Lowe’s to include additional stores, and a decrease in commercial sales. As a result, Renin’s sales of barn door products as a percentage of total gross sales increased to 34% during the nine months ended September 30, 2019 from 29% during the same 2018 period.
Results of Operations
Information regarding the results of operations for Renin is set forth below (dollars in thousands):
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| ||||
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| For the Three Months Ended September 30, |
| For the Nine Months Ended September 30, | ||||||||
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| 2019 |
| 2018 |
| Change |
| 2019 |
| 2018 |
| Change |
Trade sales | $ | 16,442 |
| 15,330 |
| 1,112 |
| 51,124 |
| 47,205 |
| 3,919 |
Cost of trade sales |
| (12,983) |
| (12,306) |
| (677) |
| (40,989) |
| (38,454) |
| (2,535) |
Gross margin |
| 3,459 |
| 3,024 |
| 435 |
| 10,135 |
| 8,751 |
| 1,384 |
Selling, general and administrative expenses |
| 2,849 |
| 2,250 |
| 599 |
| 8,326 |
| 7,641 |
| 685 |
Total operating profits |
| 610 |
| 774 |
| (164) |
| 1,809 |
| 1,110 |
| 699 |
Other revenue |
| - |
| - |
| - |
| 152 |
| - |
| 152 |
Interest expense |
| (131) |
| (157) |
| 26 |
| (387) |
| (497) |
| 110 |
Foreign exchange gain (loss) |
| - |
| 76 |
| (76) |
| (24) |
| 91 |
| (115) |
Income before income taxes | $ | 479 |
| 693 |
| (214) |
| 1,550 |
| 704 |
| 846 |
Gross margin percentage | % | 21.04 |
| 19.73 |
| 1.31 |
| 19.82 |
| 18.54 |
| 1.29 |
SG&A as a percent of trade sales | % | 17.33 |
| 14.68 |
| 2.65 |
| 16.29 |
| 16.19 |
| 0.10 |
Renin’s income before income taxes for the three months ended September 30, 2019 was $0.5 million compared to $0.7 million during the same 2018 period. The decrease was primarily due to the following:
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Renin’s income before income taxes for the nine months ended September 30, 2019 was $1.6 million compared to $0.7 million during the same 2018 period. The increase was primarily due to an increase in trade sales and gross margin, partially offset by an increase in selling, general and administrative expenses, primarily related to the factors described above related to the three months ended September 30, 2019 and 2018.
IT’SUGAR Reportable Segment
Segment Description
IT’SUGAR is a specialty candy retailer which operates approximately 100 retail locations in over 25 states and Washington, D.C. Its products include bulk candy, candy in giant packaging, and novelty items that are sold at its retail locations, which include a mix of high-traffic resort and entertainment, lifestyle, mall/outlet, and urban locations across the United States.
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Current Trends and Developments
During 2019, IT’SUGAR continued to invest capital in several new retail locations, including Grand Bazaar, a 6,000 square foot flagship location in Las Vegas, Nevada that was opened in June 2019, and a new retail location in Orlando, Florida that was opened in March 2019. In addition, IT’SUGAR expects to open a 21,000 square foot, three story flagship location at American Dream, a 3 million square foot shopping and entertainment complex in New Jersey, during the fourth quarter of 2019. IT’SUGAR is also continuing to evaluate the lease agreements for its current retail locations where sales volumes may give rise to early lease termination rights and the potential opportunity to renegotiate lease terms and occupancy costs.
IT’SUGAR’s results of operations are subject to seasonal fluctuations, and the third quarter has historically been its most profitable quarter. It is anticipated that IT’SUGAR will incur a loss before income taxes for the year ended December 31, 2019 due primarily to the expected costs of opening new stores and the related depreciation expense. However, IT’SUGAR generated positive cash flows from operations during the nine months ended September 30, 2019 and is expected to continue to do so for the remainder of 2019.
Results of Operations
Information regarding the results of operations for IT’SUGAR is set forth below (dollars in thousands):
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| For the Three Months Ended September 30, |
| For the Nine Months Ended September 30, | ||||||||
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| 2019 |
| 2018 |
| Change |
| 2019 |
| 2018 |
| Change |
Trade sales | $ | 24,678 |
| 22,663 |
| 2,015 |
| 63,347 |
| 58,967 |
| 4,380 |
Cost of trade sales |
| (13,902) |
| (12,236) |
| (1,666) |
| (37,442) |
| (34,020) |
| (3,422) |
Gross margin |
| 10,776 |
| 10,427 |
| 349 |
| 25,905 |
| 24,947 |
| 958 |
Selling, general and administrative expenses |
| 9,567 |
| 8,962 |
| 605 |
| 26,645 |
| 25,559 |
| 1,086 |
Total operating profits |
| 1,209 |
| 1,465 |
| (256) |
| (740) |
| (612) |
| (128) |
Interest and other income |
| 15 |
| 99 |
| (84) |
| 241 |
| 135 |
| 106 |
Interest expense |
| (24) |
| - |
| (24) |
| (81) |
| - |
| (81) |
Income (loss) before income taxes | $ | 1,200 |
| 1,564 |
| (364) |
| (580) |
| (477) |
| (103) |
Gross margin percentage | % | 43.67 |
| 46.01 |
| (2.34) |
| 40.89 |
| 42.31 |
| (1.42) |
SG&A as a percent of trade sales | % | 38.77 |
| 39.54 |
| (0.78) |
| 42.06 |
| 43.34 |
| (1.28) |
IT’SUGAR’s income before income taxes for the three months ended September 30, 2019 was $1.2 million compared to $1.6 million during the same 2018 period, which reflects the following:
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IT’SUGAR’s loss before income taxes for the nine months ended September 30, 2019 compared to the same 2018 period increased by $103,000 primarily due to the factors described above related to the three months ended September 30, 2019 and 2018.
Other
Other in the Company’s segment information includes its investments in other operating businesses that are in various stages of development and currently generate operating losses. These investments include various companies in the confectionery industry, including Hoffman’s Chocolates, a manufacturer and retailer of gourmet chocolates with retail locations in South Florida, and other manufacturers/wholesalers of confectionery products. In addition to the above investments, the Company also holds various other investments, including a restaurant located in South Florida that was acquired through a loan foreclosure.
47
During the nine months ended September 30, 2019 and 2018, Other also included the operating results of MOD Pizza restaurant locations located throughout Florida. As described in the “Overview” section above, during the third quarter of 2019, the Company entered into an agreement with MOD Pizza to terminate its area development and franchise agreements related to the development of MOD Pizza restaurant locations in Florida and transferred seven of its restaurant locations, including the related assets, operations, and lease obligations, to MOD Pizza. In addition, the Company closed the remaining two locations and terminated the related lease agreements.
Businesses in the Confectionery Industry
The loss before income taxes from the Company’s other businesses in the confectionery industry for the three and nine months ended September 30, 2019 was $1.3 million and $3.7 million, respectively, compared to $1.5 million and $8.1 million for the comparable 2018 periods, respectively. The decrease in losses generated by these operations reflects the impact of various strategic initiatives implemented by the Company during 2018, which included the closure of a manufacturing facility and a reduction in corporate personnel and infrastructure.
Consistent with the Company’s goal of streamlining its investment verticals so the Company can be more easily analyzed and followed by the marketplace, the Company is evaluating strategic alternatives related to certain of its businesses in the confectionery industry, including, but not limited to, the possible sale, spin-off, or exit of these businesses. To the extent that the Company pursues one or more of these strategic alternatives, the Company may recognize impairment charges and incur additional costs in future periods. As of September 30, 2019, the confectionery businesses currently under evaluation had a net book value of approximately $5.0 million.
MOD Pizza Restaurant Operations
The loss before income taxes from the Company’s MOD Pizza restaurant operations for the three and nine months ended September 30, 2019 was $4.8 million and $9.5 million, respectively, compared to $1.4 million and $3.2 million for the comparable 2018 periods, respectively. The increase in losses was primarily attributable to the recognition of impairment losses of $4.0 million and $6.7 million during the three and nine months ended September 30, 2019, respectively, primarily associated with the Company’s exit from its MOD Pizza restaurant operations during the third quarter of 2019.
Reconciling Items and Eliminations
Reconciling items and eliminationsBVH Corporate in the Company’s segment information includes the following:
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BVH’s corporate general and administrative expenses;
Interest expense associated with Woodbridge’s junior subordinated debentures; and
Interest income on interest-bearing cash accounts; and
Corporate General and Administrative Expenses
BBX Capital’sBVH’s corporate general and administrative expenses consist primarily of costs associated with administering the various support functions at its corporate headquarters, including executive compensation, legal, accounting, human resources, investor relations, and executive offices. BBX Capital’sBVH’s corporate general and administrative expenses for the three and nine months ended September 30, 20192020 were $12.0$41.2 million and $36.6$58.5 million, respectively, compared to $13.0$11.9 million and $38.7$36.4 million respectively, for the comparable 20182019 periods. The decreaseincrease in corporate general and administrative expenses for the three and nine months ended September 30, 20192020 periods as compared to the same 20182019 periods primarily reflects lower share-based compensation expenses, reduced headcount,the acceleration of the vesting of unvested restricted stock awards and lower professional feespayments to settle the BVH’s long-term incentive program for 2020 which in the 2019 periods.
Interest Expense
Excluding its note payable to Bluegreen, BBX Capital’s interestaggregate resulted in $32.6 million of compensation expense for the three and nine months ended September 30, 20192020. In addition, included in BVH corporate general and administrative expenses for three and nine months ended September 30, 2020 was $1.3$1.8 million of costs associated with the spin-off.
Interest Expense
BVH’s interest expense (excluding interest expense the $80.0 million note payable to Bluegreen) for the three and nine months ended September 30, 2020 was $0.6 million and $4.2$3.0 million, respectively, compared to $1.7$1.4 million and $4.8$4.3 million respectively, for the comparable 2018 periods.2019 periods. The decrease in interest expense during the three and nine months ended September 30, 20192020 compared to the same 20182019 periods primarily resulted from the repayment of the outstanding balance of $30.0 million on BBX Capital’s $50.0 million revolving line of creditmandatorily redeemable cumulative preferred stock in JanuaryDecember 2019 partially
48
offset by higherand lower interest expense on Woodbridge’s junior subordinated debentures associated with higher rates on thereflecting variable rates of interest on such debt during the 20192020 periods.
BBX Capital’s interest expense on the $80.0 million note payable to Bluegreen was $1.2$0.5 million and $3.6$2.5 million for each of the three and nine months ended September 30, 2020 compared to $1.2 million and $3.6 million for the comparable 2019 and 2018, respectively.periods. The decrease in interest expense reflects repayment of the note in August 2020 from proceeds received from a special cash dividend declared by Bluegreen. The interest expense on this note and the related interest income recognized by Bluegreen are eliminated in the Company’s consolidated statements of operations.
Interest Income
During the three and nine months ended September 30, 2019,2020, the Company recognized $0.8$0.1 million and $1.9$0.8 million, respectively, of interest and investment income from BBX Capital’sBVH’s interest-bearing cash accounts and other investments compared to $0.6$0.7 million and $1.6 million respectively, forduring the comparable 20182019 periods. The decline in interest income reflects lower interest rates on interest earning assets during the 2020 periods
Provision for Income Taxes
The Company estimates its effective annual income tax rate on a quarterly basis based on current and forecasted operating results for the annual period and applies the estimated effective income tax rate to its incomeloss before income taxes reduced by net income attributable to noncontrolling interests in joint ventures taxed as partnerships.
The Company’s effective income tax rate was approximately 38% and 37% duringfor the three and nine months ended September 30, 2019, respectively, compared2020 from continuing operations was different than the expected federal income tax rate of 21% due to anthe impact of the Company’s nondeductible executive compensation. In connection with the spin-off of BBX Capital, the Company accelerated the vesting of outstanding restricted stock awards and paid executive incentive bonuses which amounted to $32.6 million of nondeductible compensation expense.
The Company’s effective income tax rate was different than the expected federal income tax rate of 44%21% due to the impact of nondeductible executive compensation and 36% for the comparable 2018 periods.state income taxes. The effective tax rate for the three and nine months ended September 30, 2019 excludes the tax benefit associated with the $39.1 million Bass Pro litigation settlement, which the Company accounted for as a discrete item at the statutory income tax rate of 26%. The effective
Discontinued Operations
Discontinued operations represent the activities of the Company’s wholly-owned subsidiary, BBX Capital, which was disposed of in the spin-off transaction that was completed on September 30, 2020. BBX Capital’s businesses include all of BVHs previous businesses other than Bluegreen, including BBX Capital Real Estate, BBX Sweet Holdings, and Renin.
Loss from discontinued operations before income tax ratetaxes for the three months ended September 30, 2020 was $5.8 million compared to income from discontinued operations for the three months ended September 30, 2019 of $24.6 million, which primarily reflects a reduction in equity in net earnings from unconsolidated real estate joint ventures of $28.6 million due to sales of real estate by BBX Capital Real Estate’s investments in unconsolidated joint ventures in the 2019 period.
Loss from discontinued operations before income taxes for the nine months ended September 30, 2018 excludes a discrete2020 was $41.6 million compared to income tax expense of $2.8 million related to the recognition of a provisional adjustment associated with the December 2017 Tax Reform Act.
The Company’s effective income tax ratefrom discontinued operations for the three and nine months ended September 30, 2019 of $38.8 million, which reflects the impact of $30.7 million of impairment losses primarily resulting from the impact of the COVID-19 pandemic on BBX Capital’s businesses, including IT’SUGAR, and 2018 was higher than the expected federal income tax ratea reduction in equity in net earnings from unconsolidated real estate joint ventures of 21% primarily$37.2 million due to nondeductible executive compensation and state income taxes. the above mentioned sales in the 2019 period of real estate by BBX Capital Real Estate’s investments in unconsolidated joint ventures.
Net Income or Loss from Continuing Operations Attributable to Noncontrolling Interests
BBX Capital’sBVH’s consolidated financial statements include the results of operations and financial position of various partially-owned subsidiaries in which it holds a controlling financial interest, including Bluegreen and Bluegreen/Big Cedar Vacations, and IT’SUGAR.Vacations. As a result, the Company is required to attribute net income or loss to the noncontrolling interests in these subsidiaries.
Net income from continuing operations attributable to noncontrolling interests was $4.1$3.4 million and $11.3$4.3 million during the three and nine months ended September 30, 2019, respectively,2020 compared to $5.8$4.2 million and $16.3$11.4 million respectively, for the comparable 2018 periods. 2019 period. The decrease in net income from continuing operations attributable to noncontrolling interests for the three months ended September 30, 2020 compared to the same 2019 period was primarily due to lower earnings at the Bluegreen. The decrease in net income attributable to noncontrolling interests for the three and nine months ended September 30, 20192020 compared to the same 2018 periods2019 period was primarily due to a decrease in the net income of Bluegreen and the Bluegreen/Big Cedar Vacations. Vacations joint venture.
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 | ||||||||
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| September 30, | For the Nine Months Ended September 30, | |||||||
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| 2019 |
| 2018 | 2020 | 2019 | ||||
Cash flows provided by operating activities | $ | 60,394 |
| 43,587 | $ | 3,161 | 60,394 | |||
Cash flows provided by investing activities |
| 23,609 |
| 961 | ||||||
Cash flows (used in) provided by investing activities | (12,183) | 23,609 | ||||||||
Cash flows used in financing activities |
| (87,685) |
| (28,573) | (151,066) | (87,685) | ||||
Net (decrease) increase in cash, cash equivalents and restricted cash | $ | (3,682) |
| 15,975 | ||||||
Net decrease in cash, cash equivalents and restricted cash | $ | (160,088) | (3,682) | |||||||
Cash, cash equivalents and restricted cash at beginning of period |
| 421,097 |
| 409,247 | 406,870 | 421,097 | ||||
Cash, cash equivalents and restricted cash at end of period | $ | 417,415 |
| 425,222 | $ | 246,782 | 417,415 | |||
Cash Flows provided by Operating Activities
The Company’s cash provided by operating cash flows increasedactivities decreased by $16.8$57.2 million during the nine months ended September 30, 20192020 compared to the same 2018 period. The increase was2019 period primarily due to an increaseincreased operating losses as a result of the impacts of the COVID-19 pandemic, including decreases in operatingsales of VOIs including cash sales and down payments from customers associated with the temporary closure of VOI sales centers and a decrease in trade sales primarily reflecting the closure of BBX Sweet Holdings’ retail locations and a subsequent decrease in consumer demand, and lower distributions from unconsolidated real estate joint ventures, and decreasedpartially offset by a reduction in spending on the acquisition and development of VOI and real estate inventory partially offsetduring the 2020 period as compared to the 2019 period, an increase in other liabilities for unpaid rent on BBX Sweet Holdings retail locations and a $16.0 million reduction in settlement payments made by the $20.0 million payment madeBluegreen to Bass Pro in June 2019 pursuant to the settlement agreement described above, an increaseentered into in payments for federal income taxes, and a decrease in proceeds from the sale of developed lots at the Beacon Lake Community development. June 2019.
Cash Flows provided byused in Investing Activities
The Company’s cash used in investing cash flowsactivities increased by $22.6$35.8 million during the nine months ended September 30, 20192020 compared to the same 2018 period. The increase reflects the impact of sales activity2019 period primarily due to lower distributions from unconsolidated real estate joint ventures, decreased investments in BBX Capital Real Estate’s portfolio, which resulted in an increase in distributions fromunconsolidated real estate joint ventures and higher netdecreased proceeds from the sale of real estate, held-for-sale, andpartially offset by decreased spending by Bluegreen onfor property and equipment partially offset by a declineand an increase in loan collectionsrecoveries in the legacy asset portfolio and an increase in investments in real estate joint ventures. portfolio.
Cash Flows used in Financing Activities
The Company’s cash used in financing activities increased by $59.1$63.4 million during the nine months ended September 30, 20192020 compared to the same 20182019 period, which was primarily due to an$96.8 million of cash transferred in the spin-off and Bluegreen’s repurchase of $11.7 million of its common stock in a private transaction during the 2020 period partially offset by $8.9 million of purchases of the Company’s Class A common stock in 2019, and a $38.1 million increase in payments, net of borrowings on the Company’s debt, partially offsetnotes payable and other borrowings, which included additional borrowings by Bluegreen on its credit facilities and various receivable-backed facilities in an effort to increase its cash position and ensure adequate liquidity for a net decrease of $51.2 millionprolonged period in payments for the purchase and retirement of the Company’s common stock during 2019 as compared to 2018, as the Company purchased 6.5 million shares of its common stock for $60.1 million in a tender offer in April 2018, and a decrease in distributions to noncontrolling interest, which was primarily attributable to distributionsresponse to the noncontrolling interest in Bluegreen/Big Cedar Vacations during the 2018 period.COVID-19 pandemic.
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. Due to consumer travel patterns, Bluegreen typically experiences an increase inexperienced more tours and higher VOI sales during the second and third quartersquarters. However, due to the impact of the calendar year.
IT'SUGARCOVID-19 pandemic, including the temporary closures of its marketing operations and certainVOI sales centers as described above, Bluegreen experienced significantly decreased sales of the Company’s other operating businesses are subject to seasonal fluctuations in trade sales, which cause fluctuationsVOIs in the Company’s quarterly resultssecond quarter of operations. Historically, IT’SUGAR has generated its strongest retail trade sales during2020 as compared to prior years and currently expect such adverse impact to continue for the months from June through August, as well as during the monthremainder of December. 2020 and into 2021.
Commitments
Commitments
The Company’s material commitments as of September 30, 20192020 included theBluegreen’s required payments due on its receivable-backed debt, notes payable and other borrowings, junior subordinated debentures, commitments to complete certain projects based on its sales contracts with customers, subsidy advances to certain HOAs, and commitments under non-cancelable operating leases.
The following table summarizes the contractual minimum principal and interest payments required on the Company’s outstanding debt, outstanding payments required under the Bass Pro settlement agreement, and payments required on the Company’s non-cancelable operating leases by period due date as of September 30, 20192020 (in thousands):
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| 1 — 3 |
| 4 — 5 |
| After 5 |
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Contractual Obligations |
| 1 year |
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Receivable-backed notes payable | $ | - |
| 14,503 |
| 94,163 |
| 333,609 |
| (5,515) |
| 436,760 | Receivable-backed notes payable | $ | — | — | 118,531 | 266,327 | (4,140) | 380,718 | |||||||||||||||||||
Notes payable and other borrowings |
| 14,273 |
| 111,863 |
| 7,591 |
| 29,202 |
| (1,509) |
| 161,420 | Notes payable and other borrowings | 11,300 | 25,673 | 125,000 | — | (1,302) | 160,671 | ||||||||||||||||||||
Note payable to BBX Capital, Inc. | Note payable to BBX Capital, Inc. | — | — | 75,000 | — | — | 75,000 | ||||||||||||||||||||||||||||||||
Jr. subordinated debentures |
| - |
| - |
| - |
| 177,129 |
| (40,091) |
| 137,038 | Jr. subordinated debentures | — | — | — | 177,129 | (39,192) | 137,937 | ||||||||||||||||||||
Redeemable 5% cumulative preferred stock |
| 5,000 |
| 5,000 |
| - |
| - |
| (270) |
| 9,730 | |||||||||||||||||||||||||||
Noncancelable operating leases |
| 6,735 |
| 50,155 |
| 41,488 |
| 56,736 |
| - |
| 155,114 | Noncancelable operating leases | 6,326 | 9,592 | 2,832 | 11,412 | — | 30,162 | ||||||||||||||||||||
Bass Pro settlement agreement |
| 4,000 |
| 8,000 |
| 8,000 |
| - |
| - |
| 20,000 | Bass Pro settlement agreement | 4,000 | 8,000 | 4,000 | — | — | 16,000 | ||||||||||||||||||||
Total contractual obligations |
| 30,008 |
| 189,521 |
| 151,242 |
| 596,676 |
| (47,385) |
| 920,062 | Total contractual obligations | 21,626 | 43,265 | 325,363 | 454,868 | (44,634) | 800,488 | ||||||||||||||||||||
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Receivable-backed notes payable |
| 17,683 |
| 35,109 |
| 29,603 |
| 93,671 |
| - |
| 176,066 | Receivable-backed notes payable | 13,145 | 26,291 | 23,137 | 64,177 | — | 126,750 | ||||||||||||||||||||
Notes payable and other borrowings |
| 7,736 |
| 10,577 |
| 3,400 |
| 21,643 |
| - |
| 43,356 | Notes payable and other borrowings | 4,047 | 6,991 | 3,162 | — | — | 14,200 | ||||||||||||||||||||
Notes payable to BBX Capital, Inc. | Notes payable to BBX Capital, Inc. | 4,500 | 9,000 | 9,000 | — | — | 22,500 | ||||||||||||||||||||||||||||||||
Jr. subordinated debentures |
| 11,977 |
| 23,954 |
| 23,954 |
| 136,694 |
| - |
| 196,579 | Jr. subordinated debentures | 8,424 | 16,850 | 16,850 | 87,657 | — | 129,781 | ||||||||||||||||||||
Total contractual interest |
| 37,396 |
| 69,640 |
| 56,957 |
| 252,008 |
| - |
| 416,001 | Total contractual interest | 30,116 | 59,132 | 52,149 | 151,834 | — | 293,231 | ||||||||||||||||||||
Total contractual obligations | $ | 67,404 |
| 259,161 |
| 208,199 |
| 848,684 |
| (47,385) |
| 1,336,063 | Total contractual obligations | $ | 51,742 | 102,397 | 377,512 | 606,702 | (44,634) | 1,093,719 | |||||||||||||||||||
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(1)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 September 30, 2020.
In lieu of paying maintenance fees for unsold VOI inventory, Bluegreenwe may enter into subsidy agreements with certain HOAs. During the nine months ended September 30, 20192020 and 2018,2019, Bluegreen made subsidy payments in connection with these arrangementsrelated to such subsidies of $7.7 million and $10.5 million, respectively, which are included in cost of other fee-based services in the unaudited consolidated statements of operations and $2.2 million, respectively.comprehensive income for such periods. As of September 30, 2019, Bluegreen2020, we had $10.1 million accrued $8.0 million for such subsidies, which is reflectedincluded in accrued liabilities and other liabilities in the Company’s condensedunaudited consolidated statementstatements of financial condition. Ascondition as of such date.
In December 31, 2018,2019, Bluegreen’s then-serving President and Chief Executive Officer resigned. In connection with his resignation, Bluegreen had no accrued liabilities for such subsidies.agreed to make payments totaling $3.5 million over a period of 18 months, $1.8 million of which remained payable as of September 30, 2020.
The Company believesWe intend to use 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 existing or future credit facilities in order to satisfy the principal payments required on contractual obligations.
We believe that itsour existing cash, anticipated cash to be 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 itsour anticipated working capital, capital expendituresexpenditure and debt service requirements, including the contractual payment of the obligations set forth above, for the foreseeable future, subject to the success of the Company’sour ongoing business strategy andstrategies, the ongoing availability of credit. The Companycredit and the success of the
actions we have taken in response to the COVID-19 pandemic to mitigate the impact of the pandemic. We will continue itsour efforts to renew, extend or replace any credit and receivables purchase facilities that have expired or that will expire in the near term. The CompanyWe may, in the future, also obtain additional credit facilities and may issue corporate debt or equity securities. Any debt incurred or issued 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 our efforts to renew or replace 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 our cash needs, including debt service obligations. To the extent the Company is
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we are unable to sell notes receivable or borrow under such facilities, or generate sufficient cash from operations, the Company’sour ability to satisfy itsour obligations would be materially adversely affected.affected.
Bluegreen’s receivables purchase facilities, 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 July 2019, Bluegreen amended the Fifth Third Bank Note Payable, Syndicated Line of Credit, and Term Loan, effective June 28, 2019, to exclude the $39.1 million Bass Pro settlement expense recognized during the nine months ended September 30, 2019 from the calculation of certain financial covenants in the credit facilities enabling it to maintain compliance with such covenants. 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 its ability to raise funds, sell receivables, or satisfy or refinance its obligations, or otherwise adversely affect its financial condition and results of operations, as well as its ability to pay dividends. In addition,April 2020, Bluegreen’s board of directors suspended regular quarterly cash dividends on its common stock due to the impact of the COVID-19 pandemic. While Bluegreen declared a special dividend during July 2020 which is payable on August 21, 2020 to shareholders of record as of the close of trading on August 6, 2020, no regular or any other special cash dividends are currently anticipated, and BVH used the proceeds of the special dividend to repay its outstanding $80.0 million debt owed to Bluegreen. Bluegreen’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 Bluegreen’s control.
As previously described, pursuantPursuant to thea settlement agreement Bluegreen entered into with Bass Pro and its affiliates induring June 2019, Bluegreen paid Bass Pro $20.0 million and agreed to make five annual payments to Bass Pro of $4.0 million, eachwhich commenced in January 1st commencing in 2020. In addition,Additionally, in lieu of the previous commission payablearrangement, Bluegreen agreed to Bass Pro as previously contemplated by its marketing agreement with Bass Pro, Bluegreen will now pay Bass Pro a fixed annual fee of $70,000 for each Bass Pro and Cabela’s retail store that Bluegreen 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 also agreed to contribute to the Wonders 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. The fixed annual fee will be prorated for 2019.Subject to the terms and conditions of the settlement agreement, Bluegreen willis generally be required to pay the fixed annual fee with respect to at least 59 Bass Pro retail stores and a minimum number of Cabela’s retail stores that increases over time to a total of at least 60 Cabela’s retail stores by the end of 2021, provided that2021. In January 2020, Bluegreen paid $5.2 million for this fixed fee, of which $1.3 million was prepaid and is included in the Company’s condensed consolidated statement of financial condition as of September 30, 2020. Bluegreen had marketing operations at 26 Cabela’s stores at September 30, 2020 and is required to begin marketing operations in at least 14 more stores by December 31, 2020. Notwithstanding the foregoing, the minimum number of Bass Pro and Cabela’s retail stores for purposes of the fixed annual fee may be reduced under certain circumstances set forth in the settlement agreement, including as a result of a reduction of traffic in the stores in excess of 25% year-over-year.
Off-balance-sheet Arrangements
BBX Capital guarantees certain obligations of its wholly-owned subsidiaries and unconsolidated real estate joint ventures as described in further detail in Note 11 to the Company’s condensed consolidated financial statements included in Item 1 of this report.
The Company has investments in joint ventures involved in the development of multifamily apartment and townhome communities, as well as single-family master planned communities. The Company’s investments in these joint ventures are accounted for under the equity method of accounting, and In March 2020 as a result of the Company does not recognizeCOVID-19 pandemic, Bluegreen temporarily closed its retail marketing operations at Bass Pro Shops and Cabela’s stores. Beginning in mid-May 2020, Bluegreen started the assetsprocess of recommencing its sales and liabilitiesmarketing operations and by September 30, 2020, Bluegreen recommenced its marketing operations at 87 Bass Pro Shops and Cabela’s stores and commenced marketing operations at 5 new Cabela’s stores. Additionally, in October 2020, Bluegreen recommenced marketing operations in one additional Bass Pro Shop and commenced marketing operations at 4 new Cabela’s stores for a total of these joint ventures in its financial statements. 97 Bass Pro Shops and Cabela’s stores.
Off-balance-sheet Arrangements
As of September 30, 2019 and December 31, 2018, the Company’s investments in these joint ventures totaled $53.7 million and $64.7 million, respectively. These unconsolidated real estate joint ventures generally finance their activities with a combination of debt financing and equity. The Company generally does2020, we did not directly guarantee the financing of these joint ventures, other than as described above and in Note 11 to the Company’s condensed consolidated financial statements included in Item 1 of this report, and the Company’s maximum exposure to losses from these joint ventures is its equity investment. The Company is typically not obligated to fund additional capital to its joint ventures; however, the Company’s interest in a joint venture may be diluted if the Company elects not to fund a joint venture capital call.have any “off-balance sheet” arrangements.
Liquidity and Capital Resources
BBX CapitalBVH and Subsidiaries, excluding Bluegreen
As of September 30, 2019 and December 31, 2018,2020, the Company, excluding Bluegreen, had cash, cash equivalents, and short-term investments of approximately $185.6 million and $146.9 million, respectively. Management$22.3 million. BVH believes that BBX Capital has sufficientits primary source of liquidity from the sources described below to fund operations, including its anticipated working capital, capital expenditure, and debt service requirements, for the foreseeable future subjectwill be its available cash, cash equivalents, and short-term investments and that it has sufficient liquidity to the success of the Company’s ongoing business strategyfund anticipated working capital and the ongoing availability of credit.debt service requirements.
BBX Capital’sBVH’s principal sources of liquidity arehave historically been its available cash and short-term investments, dividends received from Bluegreen, borrowingsand from its $50.0 million IberiaBank revolving lineborrowings. However, as described below, the COVID-19 pandemic has impacted or otherwise resulted in uncertainty regarding many of credit, distributions from unconsolidated real estate joint ventures, proceeds received from lot sales at the Beacon Lake Community development, and sales of real estate.
BBX Capital believes that its current financial condition and credit relationships, together with anticipated cash flows from otherthese sources of funds, including potentialliquidity.
Bluegreen has announced that it has suspended its regular quarterly dividend, and notwithstanding Bluegreen’s recent declaration of a special cash dividend in the third quarter of 2020, as described below, BVH does not expect to receive regular quarterly dividends from Bluegreen (which, as described below, are subject to certain limitations), and, tofor 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 raise 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 Bluegreen.foreseeable future. For the nine months ended September 30, 20192020 and 2018,2019, BBX Capital received regular dividends from Bluegreen dividends totaling $34.3of $8.7 million and $30.3$34.3 million, respectively. In addition,respectively. The resumption of dividends payments by Bluegreen, has indicated that it intends to pay regular quarterly dividends on its common stock subject toas well as the declarationamount and timing of such dividends, by its board of directors. The ultimate payment of such dividends will be based upon factors that Bluegreen’s board of directors deems to be appropriate, including Bluegreen’s operating results, financial condition, cash position, and operating and capital needs. Dividends from Bluegreen are also dependent on restrictions contained in Bluegreen’s debt facilities and may not continue at current or previous levels. On October 30, 2019, Bluegreen’s board of directors declared a quarterly cash dividend of $0.13 per share on its common stock, which represents a $0.04 per share reduction in Bluegreen’s quarterly cash dividend per share as compared to its quarterly dividends declared during the first, second, and third quarters of 2019.facilities. Except as otherwise noted, the debts and obligations of Bluegreen are not direct obligations of BBX CapitalBVH and generally are non-recourse to BBX Capital.BVH. Similarly, the assets of Bluegreen are not available to BBX Capital,BVH, 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 consequence, BBXBVH Capital may not receiveresume receiving dividends from Bluegreen consistent with prior periods, in the time frames or amounts anticipated, or at all.
On July 22, 2020, Bluegreen declared a special cash dividend of $1.19 per share on its common stock, or $86.3 million in the aggregate. The dividend was payable August 21, 2020 to shareholders of record as of the close of trading on August 6, 2020. BVH used the proceeds of the special cash dividend of approximately $80.0 million to repay BVH’s outstanding $80.0 million debt owed to Bluegreen.
BVH previously had a $50.0 million revolving line of credit with IberiaBank. Effective September 30, 2020, the loan agreement was terminated at the request of BVH in connection with the completion of the spin-off of BBX Capital mayCapital. In connection with the termination of the facility, IberiaBank released the security interest over all collateral granted to the lenders under the facility. No amounts were outstanding under the facility when it was terminated on September 30, 2020.
BVH has also receivehistorically received funds from its subsidiaries, including Bluegreen, in connection with itsthe parties’ tax sharing agreement to the extent that thea subsidiary utilizes BBX Capital’sutilized BVH’s tax benefits in BBX Capital’sBVH’s consolidated tax return. During the nine months ended September 30, 2019 and 2018, BBX Capital received $13.0 million and $21.0 million, respectively, ofHowever, BVH did not receive tax sharing payments from Bluegreen.
Anticipated and Potential Liquidity Requirements
BBX Capital expects to use its available funds for operations and general corporate purposes (including working capital, capital expenditures, and debt service requirements and the Company’s other commitments described above), to make additional investments in real estate opportunities, operating businesses, or other opportunities, to declare and pay cash dividends on the Company’s common stock, or to purchase shares of its common stock.
In November 2018, BBXRE acquired a 50% membership interest in the Altman Companies, a joint venture between the Company and JA engaged in the development, construction, and management of multifamily apartment communities. Although the Altman Companies generates revenues from the performance of development, general contractor, leasing, and property management services to the joint ventures that are formed to invest in the development projects that it originates, it is expected to generate profits for BBXRE and JA primarily through the equity distributions that BBXRE and JA receive through their investment in the managing member of such joint
53
ventures. Therefore, as the timing of such distributions to BBXRE and JA is generally contingent upon the sale or refinancing of a completed development project, it is anticipated that BBXRE and JA will be required to contribute capital to the Altman Companies for its ongoing operating costs and predevelopment expenditures, as well as to the managing member of newly formed joint ventures. At the current time, BBXRE anticipates that it will invest approximately $2.5 million to $3.5 million in the Altman Companies and related joint ventures during the remainder of 2019 related to planned predevelopment expenditures, investments in new joint ventures, and ongoing operating costs. In addition, BBXRE currently anticipates that it will contribute an additional $1.0 million to $2.0 million to ABBX Guaranty, LLC, a joint venture between BBXRE and JA that provides guarantees on the indebtedness and construction cost overruns of new real estate joint ventures formed by the Altman Companies.
Pursuant to the operating agreement of the Altman Companies, BBXRE will also acquire an additional 40% equity interest in the Altman Companies from JA for a purchase price of $9.4 million in January 2023, while JA can also, at his option or in other predefined circumstances, require BBXRE to purchase his remaining 10% equity interest in the Altman Companies for $2.4 million. In addition, in certain circumstances, BBXRE may acquire the 40% membership interests in Altman-Glenewinkel Construction that are not owned by the Altman Companies for a purchase price based on prescribed formulas in the operating agreement of Altman-Glenewinkel Construction.
In addition to BBXRE’s anticipated investments in the Altman Companies and related joint ventures, BBXRE has entered into two real estate joint ventures, CCB Miramar, LLC and L03/212 Partners, LLC, in which the Company expects to contribute additional capital of approximately $9.0 million to $10.0 million during the next twelve to eighteen months based on the current plans and estimates associated with the related development projects.
IT’SUGAR opened two retail storessubsidiaries during the nine months ended September 30, 20192020 and currently expectsdoes not expect to open a flagship location at American Dream in New Jersey in November 2019 and renovate certain existing stores during the remainder of 2019. In connection with the anticipated store opening and renovation of these existing stores, IT’SUGAR expects to incur approximately $3.0 million to $4.0 million of capital expenditures, net of tenant allowance reimbursements,receive any significant payments for the remainder of 2019.
2020 primarily as a result of the impact of COVID-19 on the Company’s operations. BBX Capital has previously indicatedand its intentionsubsidiaries are no longer parties to declarethe tax sharing agreement.
BVH believes that its current financial condition will allow it to meet its anticipated near-term liquidity needs. 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 the sources discussed above would have a material adverse effect on the Company’s business, results of operations, and financial condition.
Anticipated and Potential Liquidity Requirements
BVH in the past declared regular quarterly dividends on its Class A and Class B Common Stock. In March, June,Stock and September of 2019, the Company’s Board of Directors declared a quarterly cash dividend of $0.0125 per share, and the Company indicated that it intends to continue to declare regular quarterly dividends of $0.0125 per quarter$0.25 per share on its Class A and Class B Common Stock, which is an increase fromcommon stock, or $4.8 million in the $0.01 per shareaggregate, during the year ended December 31, 2019. However, in April 2020, BVH suspended its regular quarterly dividend paid bydue to the Company during 2018. However, future declarationsimpacts of the COVID-19 pandemic. Future declaration and paymentspayment of cash dividends with respect to the Company’s common stock, if any, will be determined in light of the Company’s then-current financial condition and results of operations,the Company, its operating and capital needs, its debt covenants, and other factors deemed relevant by the board of directors.
OnIn June 13, 2017, BBX Capital’sBVH’s board of directors approved a share repurchase program which authorizes the purchase of a total of up to 5,000,000 shares of the Company’s Class A Common Stock and Class B Common Stock at an aggregate cost of no more than $35.0 million. This program authorizes management, at its discretion, to purchase shares from time to time subject to market conditions and other factors. During the nine months endedAs of September 30, 2019, BBX Capital2020, BVH had purchased 1,799,5394,750,483 shares of its Class A Common Stock for approximately $8.9 million. As of September 30, 2019, BBX Capital had purchased 3,321,132 shares of its Class A Common Stock for approximately $18.9$25.4 million pursuant to the June 2017 share repurchase program.
In April 2015,connection with the spin-off, BVH issued a $75.0 million note payable to BBX Capital borrowed $80.0 million fromthat accrues interest at a wholly-owned subsidiaryrate of Bluegreen. Payments6% per annum and requires payments of interest are required on a quarterly basis, 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 $80.0 million principaloutstanding balance andthereafter to accrue at a cumulative, compounded rate of 8% per annum until such time as BVH is current on all accrued interest beingpayments under the note, including deferred interest. All outstanding amounts under the note will become due and payable in Aprilfive years or earlier upon certain other events.
BVH through its wholly-owned subsidiary, Woodbridge, had $66.3 million in junior subordinated debentures outstanding as of September 30, 2020. This debt currently accruesWoodbridge’s junior subordinated debentures accrue interest at a per annum rate of 6% with quarterly3-month LIBOR plus a spread ranging from 3.80% to 3.85%, mature between 2035 and 2036, and require interest payments toon a quarterly basis.
BVH is a Bluegreen holding company with limited operations, and it is currently expected that it will incur approximately $700,000 in annual executive compensation expenses, approximately $1.5 - $2.0 million annually in other general and administrative expenses, including costs associated with being a public company, and annual interest expense of $1.2approximately $7.2 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 complianceassociated with debt covenants under its debt instruments.
In addition toWoodbridge’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 September 30, 2020. 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, cash equivalents, as well as dividends from Bluegreen, the Company has other indebtedness which is summarized in Commitments above. The Company’s indebtedness, including any future debt incurred by the Company, may make it more vulnerable to downturns in the economy and may subject the Company to covenants or restrictions onfund its operations and activities.
Credit Facilities with Future Availability
satisfy its debt service requirements and other liabilities, including its note payable to BVH. As of September 30, 2019, BBX Capitaldiscussed above, the COVID-19 pandemic has resulted in Bluegreen suspending its regular quarterly dividend, and certain ofwhile BVH believes that it will have sufficient cash and cash equivalents to fund its subsidiaries hadoperations for approximately two years following the following credit facilities with future availability, subject to eligible collateral and the terms of the facilities, as applicable.
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IberiaBank $50.0 million Revolving Line of Credit. In March 2018, BBX Capital and certain of its wholly-owned subsidiaries entered into a Loan and Security Agreement and related agreements with IberiaBank (“Iberia”), as administrative agent and lender, and City National Bank of Florida, as lender, which provide for a $50.0 million revolving line of credit. Amounts borrowed under the facility accrue interest at a floating rate of 30-day LIBOR plus a margin of 3.0% to 3.75% or the Prime Rate plus a margin of 1.50% to 2.25%. The applicable margin is based on BBX Capital’s debt to EBITDA ratio. Payments of interest only are payable monthly. The facility matures, and all outstanding principal and interestspin-off, it will be payable,dependent on June 30, 2021,the resumption of dividends from Bluegreen to fund its operations in future periods. There is no assurance that Bluegreen will resume the payment of dividends consistent with twelve-month renewal options at BBX Capital’s request, subject to satisfaction of certain conditions. The facility is secured by a pledge of a percentage of BBX Capital’s membership interests in Woodbridge having a value of not less than $100.0 million. Borrowings under the facility may be used for business acquisitions, real estate investments, stock repurchases, letters of credit, and general corporate purposes.
Under the terms and conditions of the Loan and Security Agreement, BBX Capital is required to comply with certain financial covenants, including maintaining minimum unencumbered liquidity and complying with debt to EBITDA financial ratios. The Loan and Security Agreement also contains customary affirmative and negative covenants, including those that, among other things, limit the ability of BBX Capital and the other borrowers to incur additional indebtedness and to make certain loans and investments. As of September 30, 2019, there were no borrowings outstanding under the credit facility.
Toronto-Dominion Commercial Bank. In May 2017, Renin entered into a credit facility with TD Bank that was subsequently renewed in September 2019 and 2018. Under the terms and conditions of the 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 subject to certain terms and conditions. As of September 30, 2019, the outstanding amounts under the term loan and revolving credit facility were $0.8 million and $7.5 million, respectively, with effective interest rates of 5.92% and 5.30%, respectively.
Bank of America Revolving Line of Credit. In August 2018, IT’SUGAR entered into a revolving credit facility with Bank of America. Under the terms and conditions of the credit facility, Bank of America has agreed to provide a revolving line of credit to IT’SUGAR for up to $4.0 million based on available collateral as defined by the credit facility and subject to IT’SUGAR’s compliance with the terms and conditions of the credit facility, including certain specific financial covenants. The revolving credit facility matures in August 2021, and amounts outstanding bear interest at a LIBOR daily floating rate plus 1.50% or a monthly LIBOR rate subject to the terms and conditions of the credit facility. Payments of interest only are payable monthly. As of September 30, 2019, there were no borrowings outstanding under the credit facility.
Banc of America Leasing & Capital Equipment Note. In September 2018, IT’SUGAR entered into a Master Loan and Security Agreement with Banc of America Leasing & Capital, LLC which sets forth the terms and conditions pursuant to which IT’SUGAR may borrow funds to purchase equipment under one or more equipment security notes. The Agreement contains customary representations and covenants. Each equipment note constitutes a separate, distinct and independent financing of equipment and is secured by a security interestprior periods, in the purchased equipment and is an unconditional contractual obligation of IT’SUGAR. As of September 30, 2019, there was one equipment note outstanding with a balance of $0.4 million. time frames or amounts previously paid, or at all.
As of September 30, 2019, BBX Capital and its subsidiaries (other than Bluegreen) had availability of approximately $57.7 million under the above revolving lines of credit, subject to eligible collateral and the terms of the facilities, as applicable.Bluegreen
Bluegreen
Bluegreen believes that it has sufficient liquidity from the sources described below to fund operations, including its anticipated working capital, capital expenditure, and debt service requirementsand impacts associated with the COVID-19 pandemic challenges for the foreseeable future, subject to the success of its ongoing business strategy mitigating measures to manage through current challenges caused by the COVID-19 pandemic, as discussed in this report, including cost and capital expenditure reductions 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 which are financed; (iii) proceeds from the sale of, or borrowings collateralized by, VOI 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 fee-based services, including resort management operations.
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While the vacation ownership business has historically been capital intensive and Bluegreen may from time to time pursuehas pursued transactions or activities which may require significant capital investment and adversely impact near term cash flows, including VOI development or acquisition, Bluegreen has generallyalso 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 less up-front capital investment and have the potential to produce incremental cash flows; and (v) more recently, by selling VOIs obtained through secondary market or JIT arrangements. Bluegreen considers free cash flow to be a measure of cash generated by operating activities that can be used for future investing and financing activities, however, there is no assurance that Bluegreen will generate free cash flow or that any cash flow generated will be used for such purposes. While Bluegreen intends to remain flexible with its sales of different categories of VOI inventory in the future, Bluegreen currently expects that its mix of fee-based inventory will decrease over time.
VOI sales are generally dependent upon providing financingBluegreen had $21.3 million of required contractual obligations coming due within one year, as well as one facility with an advance period that will expire at the end of 2020. While there is no assurance that Bluegreen will be successful, Bluegreen intends to buyers. seek to renew or extend its debt.
The ability to sell and/or borrow against notes receivable from VOI buyers has been a critical factor into Bluegreen’s continued liquidity. A financed VOI buyer is generally only required to providepay a minimum of 10% to 20% of the purchase price in cash or equity 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 Bluegreen’s VOI notes receivable has been critical to Bluegreen’s 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 its ability to sell receivables in the term securitization market in order to generate liquidity and create capacity in itsBluegreen’s receivable facilities. In addition, maintaining adequate VOI inventory to sell and pursue growth into new marketsBluegreen has historically requiredfinanced a majority of its sales of VOIs, and accordingly, are subject to the risk of defaults by its customers. While it is still too early to know the full impact of COVID-19 on Bluegreen’s default or delinquency rates, Bluegreen believes that the COVID-19 pandemic will have a significant impact on the performance of its VOI notes receivable. Accordingly, in March 2020, Bluegreen recorded an allowance for loan losses of $12.0 million, which included its estimate of customer defaults as a result of the COVID-19 pandemic based on Bluegreen’s historical experience, forbearance requests received from Bluegreen’s customers, and other factors, including, but not limited to, incur debt for the acquisition, construction,seasoning of the notes receivable and developmentFICO scores of new resorts. Development expenditures during the remaindercustomers. The impact of 2019 are expectedthe COVID-19 pandemic is rapidly changing and highly uncertain. Accordingly, and due to other risks and uncertainties associated with assumptions and changing market conditions, Bluegreen’s allowance may not prove to be accurate and may be increased in future periods, which would adversely impact Bluegreen’s operating results for those periods.
Further, the COVID-19 pandemic has resulted in instability and volatility in the financial markets. As described above, Bluegreen’s ability to borrow against or sell its VOI notes receivable has historically been a rangecritical factor in its liquidity. If Bluegreen is unable to renew credit facilities or obtain new credit facilities, its business, results of $10.0 million to $15.0 million, which primarily relate to development at one of the Bluegreen/Big Cedar Vacations’ resorts, refurbishments at Bluegreen’s Blue Ridge Village Resort in Banner Elk, North Carolina and refurbishments at certain other resorts. operations, liquidity, or financial condition may be materially, adversely impacted.
In connection with its capital-light business activities, Bluegreen has entered into agreements with third-party developers that allow Bluegreen to buy VOI inventory, typically on a non-committed basis, prior to when Bluegreen intends to sell such VOIs.VOIs, although there is no assurance that these third party developers will be in a position to deliver that inventory in the future. Bluegreen’s capital-light business strategy also includes secondary market sales, pursuant to which Bluegreen enters into secondary market arrangements with certain HOAs and others 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. Acquisitions of JIT and secondary market inventory during the remainder of 2019 are expected to range from $1.0 million to $5.0 million.
In addition, capital expenditures in connection with sales and marketing facilities as well as for information technology capital expenditures2020 are expected to be between $5.0$1.0 million to $3.0 million.
In October 2020, Bluegreen completed the 2020-A Term Securitization, a private offering and $10.0sale of approximately $131.0 million duringof investment-grade, VOI receivable backed notes (the “Notes”), including approximately $48.6 million of Class A Notes, approximately $47.9 million of Class B Notes and approximately $34.5 million of Class C Notes with interest rates of 1.55%, 2.49%, and 4.22%, respectively, which blends to an overall interest rate of approximately 2.60%. The gross advance rate for this transaction was 88.0%. The Notes mature in February 2036. KeyBanc Capital Markets Inc. (“KeyCM”) and Barclays Capital Inc. acted as co-lead managers and were the remainderinitial purchasers of 2019.the Notes. KeyCM also acted as structuring agent for the transaction.
Available funds may also be usedSubject to acquire other businessesperformance of the collateral, Bluegreen will receive any excess cash flows generated by the receivables transferred under the 2020-A Term Securitization (excess meaning after payments of customary fees, interest, and principal under the 2020-A Term Securitization) on a pro-rata basis as borrowers make payments on their VOI loans.
While ownership of the VOI receivables included in the 2020-A 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 assets, invest in other real estate based opportunities, pay dividends to its shareholders, or to fund loans to affiliates or others.loss was recognized as a result of this transaction.
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.
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Bluegreen maintains various credit facilities with financial institutions which allow Bluegreen to borrow against or sell its VOI notes receivable. As of September 30, 2019,2020, Bluegreen had the following credit facilities with future availability, all 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 in each case to compliance with covenants, eligible collateral and applicable terms and conditions during the advance period (dollars in thousands):
Borrowing | Outstanding | Availability | Advance Period | Borrowing Rate; | ||||||||||||||
Liberty Bank Facility (4) | $ | 40,000 | $ | 19,715 | $ | 20,285 | June 2021; | Prime Rate - 0.10%; floor of 3.40%; 3.40% | ||||||||||
NBA Receivables Facility | 70,000 | 33,389 | 36,611 | September 2023; | 30 day LIBOR+2.25% to 2.75%; floor of 3.00% to 3.50%; 3.35% (1) | |||||||||||||
Pacific Western Facility (4) | 40,000 | 24,313 | 15,687 | September 2021; | 30 day LIBOR+2.75% to 3.00%; 3.03% | |||||||||||||
KeyBank/DZ Purchase Facility (4) | 80,000 | 60,981 | 19,019 | December 2022; | 30 day LIBOR or CP +2.25%; 2.50% (2) | |||||||||||||
Quorum Purchase Facility | 50,000 | 34,240 | 15,760 | December 2020; | (3) | |||||||||||||
$ | 280,000 | $ | 172,638 | $ | 107,362 | |||||||||||||
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| Borrowing Limit as of September 30, 2019 |
| Outstanding Balance as of September 30, 2019 |
| Availability as of September 30, 2019 |
| Advance Period Expiration; Borrowing Maturity as of September 30, 2019 |
| Borrowing Rate; Rate as of September 30, 2019 | |
Liberty Bank Facility | $ | 50,000 | $ | 28,247 | $ | 21,753 |
| March 2020; March 2023 |
| Prime Rate; floor of 4.00%; 5.25% | |
NBA Receivables Facility |
| 70,000 |
| 35,809 |
| 34,191 |
| September 2020; March 2025 |
| 30 day LIBOR + 2.75%; floor of 3.50%; 4.79% | |
Pacific Western Facility |
| 40,000 |
| 30,848 |
| 9,152 |
| September 2021; September 2024 |
| 30 day LIBOR+2.75% to 3.00%; 4.92% | |
KeyBank/DZ Purchase Facility |
| 80,000 |
| 19,035 |
| 60,965 |
| December 2019; December 2022 |
| 30 day LIBOR+2.75%; 4.84% (1) | |
Quorum Purchase Facility |
| 50,000 |
| 44,865 |
| 5,135 |
| June 2020; December 2032 |
| (2) | |
| $ | 290,000 | $ | 158,804 | $ | 131,196 |
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(1)As described in further detail below, borrowings prior to September 25, 2020 accrue interest at a rate equal to one month LIBOR plus 2.75% (with an interest rate floor of 3.50%), provided that the rate shall decrease to one-month LIBOR plus 2.25% (with an interest rate floor of 3.00%) on the then remaining balance of borrowing prior to September 25,2020 if new advances subsequent to September 25,2020 are at least $25.0 million by June 30, 2021. Borrowings after September 25, 2020 accrue interest at one-month LIBOR plus 2.25% (with an interest rate floor of 3.00%).
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(2)Borrowings accrue interest at a rate equal to either LIBOR, a “Cost of Funds” rate or commercial paper (“CP”) rates plus 2.25%. As described in further detail below, the interest rate will increase to the applicable rate plus 3.25% upon the expiration of the advance period.
(3)Of the amounts outstanding under the Quorum Purchase Facility at September 30, 2020, $2.4 million accrues interest at a rate per annum of 4.75%, $16.4 million accrues interest at a fixed rate of 4.95%, $1.3 million accrues interest at a fixed rate of 5.00%, $13.2 million accrues interest at a fixed rate of 5.10%, and $0.8 million accrues interest at a fixed rate of 5.50%.
(4)Balance and availability indicated above is prior to giving effect to October repayments in connection with the 2020 Term Securitization.
See Note 85 under Item 1 included in this report and Note 13 to the Company’s consolidated financial statements included in the 20182019 Annual Report for additional information with respect to Bluegreen’s receivable-backed notes payable facilities.
Other Credit Facilities and Outstanding Notes Payable
Fifth Third Syndicated Line-of-Credit and Fifth Third Syndicated Term Loan. In December 2016, Bluegreen entered into a $100.0 million syndicated credit facility with Fifth Third Bank, as administrative agent and lead arranger, and certain other bank participants as lenders. In October 2019, Bluegreen amended and restated the facility and increased the facility to $225.0 million. The amended facility includes a $100.0 million term loan (the “Fifth Third Syndicated Term Loan”) with quarterly amortization requirements and a $125.0 million revolving line of credit (the “Fifth Third Syndicated Line of Credit”Line-of-Credit”). Amounts borrowedBorrowings under the amended facility generally bear interest at LIBOR plus 2.00% - 2.50%, depending on Bluegreen’s leverage ratio, are collateralized by certain of Bluegreen’s VOI inventory, sales center buildings, management fees, short-term receivables and cash flows from residual interests relating to certain term securitizations, and will mature in October 2024. At closing, Bluegreen borrowedOn June 29, 2020, the entire $100.0 million term loan and $30.0 million under the revolving line of credit. Proceeds were usedfacility was amended to repay the outstanding balance on the existing syndicated credit facility, repay $3.6 million on the existing Fifth Third Bank Note Payable, and pay expenses and fees associated with the amendment, with the remainder to be used for general corporate purposes.
modify certain customary covenants. As of September 30, 2019,2020, outstanding borrowings under the facility (prior to the October 2019 amendment and repayment) totaled $96.1$145.0 million, including $21.1$95.0 million under the Fifth Third Syndicated Term Loan with an interest rate of 5.08%2.56%, and $75.0$50.0 million under the Fifth Third Syndicated Line of Credit with an interest rate of 4.88%2.39%.
Bluegreen also has outstanding obligations under various credit facilities and securitizations that have no remaining future availability as the advance periods have expired.
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See Note 85 under Item 1 included in this report and Note 13 to the Company’s consolidated financial statements included in the 20182019 Annual Report for additional information with respect to Bluegreen’s other credit facilities and outstanding notes payable.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company isWe are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate risk and equity price risk. The Company’srisks relating to inflation and changing prices. In addition, instability or volatility in the financial markets which restricts the availability of credit, including in connection with the COVID-19 pandemic, may adversely impact our ability to borrow against or sell our VOI receivables, which has historically been a critical factor in our liquidity, or otherwise adversely impact our business, operating results, liquidity or financial condition. Our exposure to market risk for continuing operations has not materially changed from what waswe previously disclosed in our 2018 Annual Report. on Form 10-K for the year ended December 31, 2019. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” of our Annual Report on Form 10-K for the year ended December 31, 2019.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, our management evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, 20192020 to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
ThereOther than changes reflecting the disposal of BBX Capital, Inc. and its subsidiaries as a result of the spin-off transaction completed on September 30, 2020, there were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 20192020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ExceptEddie Boyd et al. v. Bluegreen Vacations Unlimited, Inc. et al., Case No. 19CT-CC00126, Circuit Court of Christian County, Missouri
On July 18, 2019, Eddie Boyd, et al. filed an action alleging that BVU and co-defendants violated the Missouri Merchandise Practices Act for the litigationallegedly 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 we and our 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 Judge certified a class regarding the unauthorized practice of law claim and dismissed the claims regarding abuse of process. We believe the lawsuit is without merit.
Charles Acklin, et al. v. Bluegreen described below, thereVacations Unlimited, Inc. et al., Case No. 1:20-cv-07402, United States District Court, Southern District of New York
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 includes claims arising out of alleged misrepresentations made during the sale of VOIs at TMC and certain post-sale operational practices, including allegedly charging owners excessive annual maintenance fees and implementing reservation policies that the 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. We believe this assertion to be erroneous and that the claims against BVU are without merit. Accordingly, we have moved to dismiss the claims against BVU.
There have been no material changes in our material legal proceedings from those disclosed in the “Legal Proceedings” section of our Annual Report on Form 10-K for the year ended December 31, 2018, as updated in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2019 and June 30, 2019.
Stephen Potje, Tamela Potje, Sharon Davis, Beafus Davis, Matthew Baldwin, Tammy Baldwin, Arnor Lee, Angela Lee, Gretchen Brown, Paul Brown, Jeremey Estrada, Emily Estrada, Michael Oliver, Carrie Oliver, Russel Walters, elaine Walters, and Mike Ericson v. Bluegreen Corporation, Case No.: 2018CA004782, 15 Judicial Circuit Court, Palm Beach County, Florida
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, Michael Oliver, Carrie Oliver, Russell Walters, Elaine Walters, and Mike Ericson, individually and on behalf of all other similarly situated, filed a purported class action lawsuit against Bluegreen which asserted claims for alleged violations of the Florida Deceptive and Unfair Trade Practices Act and the Florida False Advertising Law. In the complaint, the plaintiffs alleged the making of false representations in connection with Bluegreen’s sales of VOIs. The purported class action lawsuit was dismissed without prejudice after mediation. However, on or about April 24, 2018, plaintiffs re-filed their individual claims in Palm Beach County Circuit Court. Subsequently, on October 15, 2019, the Court entered an order granting Bluegreen’s summary judgment and dismissed all claims.
On March 15, 2018, Bluegreen Vacations Unlimited (“BVU”), Bluegreen’s wholly-owned subsidiary, 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”) (the “Purchase and Sale Agreement”), which
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provides for the purchase of The Manhattan Club inventory over a number of years and the assumption of the management contract with The Manhattan Club HOAanticipated to occur in 2021. On October 7, 2019, New York Urban initiated arbitration proceedings against BVU alleging that the The Manhattan Club HOA (of which BVU is a member) is 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 is also seeking damages in the arbitration proceedings in excess of $10.0 million for promissory estoppel and tortious interference. BVU has denied New York Urban’s claims and has declared New York Urban in default under the Purchase and Sale Agreement for, among other things, initiating arbitration in violation of the Purchase and Sale Agreement. BVU has informed New York Urban that it would not proceed with its inventory purchases until New York Urban’s defaults are cured. The Purchase and Sale Agreement provides that, in the event of a breach, the nonbreaching party may either waive the breach or terminate the Purchase and Sale Agreement as its sole and exclusive remedy.
There have been no material changes in the risks and uncertainties that we face from those disclosed in the “Risk Factors” sectionsections of our 20182019 Annual Report.
Item 2. Unregistered Sales of Equity SecuritiesReport and Use of Proceeds
Information regarding the Company’s purchase of its Class A Common Stock under itsQuarterly Report on Form 10-Q for the quarter ended June 2017 repurchase program is30, 2020.
The information presented below updates the related risk factor set forth in our Annual Report on Form 10-K for the table below:year ended December 31, 2019 and our Quarterly Reports on Form 10-Q for the quarter ended June 30, 2020, and is in addition to other risk factors and other risks and uncertainties disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.
The COVID-19 pandemic has had, and the current and uncertain future outlook of the pandemic may continue to have, a significant adverse effect on our business, financial condition, liquidity and results of operations.
The COVID-19 pandemic has resulted in, and continues to be, an unprecedented disruption in the U.S. economy and its rapid spread, as well as the escalating measures governments and private organizations have implemented in order to stem the spread of this pandemic, have had, and are expected to continue to have, a material adverse impact on our business, operating results and financial condition, including, without limitation, due to government ordered travel restrictions, restrictions on business operations, and stay at home orders and guidelines. Moreover, additional currently unknown restrictions or other events adversely impacting the vacation ownership industry may occur and the adverse effects of the COVID-19 pandemic on our business, operating results and financial condition may otherwise be lengthened or exacerbated.
The COVID-19 pandemic has resulted in, an unprecedented disruption in the U.S. economy and the travel, hospitality and vacation ownership industries due to, among other things, resort closures, travel restrictions and restrictions on business operations, including government guidance and restrictions with respect to travel, public accommodations, social gatherings and related matters. On March 23, 2020 we temporarily closed all of our VOI sales centers; our retail marketing operations at Bass Pro Shops and Cabela’s stores and outlet malls; and our Choice Hotels call transfer
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Period | (a) Total Number of Shares Purchased | (b) Average Price Paid per Share | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (1) |
July 1 – July 31, 2019 | - | - | - | 3,077,229 shares (or approximately $23,147,000) |
August 1 – August 31, 2019 | - | - | - | 3,077,229 shares (or approximately $23,147,000) |
September 1 - September 30, 2019 | 1,398,361 | $5.00 | 1,398,361 | 1,678,868 shares (or approximately $16,143,000) |
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Total | 1,398,361 | $5.00 | 1,398,361 | 1,678,868 shares (or approximately $16,143,000) |
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program. In connection with these actions we canceled existing owner reservations through May 15, 2020 and new prospect guest tours through June 30, 2020. Further, some of our Club and Club Associate Resorts were closed in accordance with government mandates and advisories. Beginning in mid-May 2020, we started the process of recommencing our sales and marketing operations and our closed resorts began to welcome guests as government mandates were lifted. By September 30, 2020, we recommenced marketing operations at 87 Bass Pro Shops and Cabela’s stores and commenced marketing operations at 5 new Cabela’s stores, we reactivated our Choice Hotels call transfer program, all of our resorts were open, and all but one of our VOI sales centers were open. Additionally, in October 2020, we recommenced marketing operations in one additional Bass Pro Shop and commenced marketing operations at 4 new Cabela’s stores for a total of 97 Bass Pro Shops and Cabela’s stores. However, there is no assurance that our marketing operations at Bass Pro or Cabela’s stores or that our VOI sales centers will remain open, including in the event of an increase in COVID-19 cases.
As a result of the effect of the pandemic, we implemented several cost mitigating activities, including reductions in workforce of over 1,600 positions and placed another approximate 3,200 of our associates on temporary furlough or reduced work hours. As of September 30, 2020, approximately 3,200 associates previously on temporary furlough or reduced work hours have returned to full time to support reopening activities. We also suspended the payment of regular quarterly cash dividends, reduced our new inventory acquisition and development expenditures and drew down $60 million under our lines-of-credit, all of which was repaid as of September 30, 2020.
While these steps were implemented to mitigate the effects of the pandemic on our business, the measures themselves had and may continue to have negative consequences with respect to our business and operations, including by reducing sales. In addition, cost savings from these measures were not recognized immediately and will not completely offset the decrease in revenues and other adverse impacts of the pandemic. Further, the increase in our debt position will, among other things, increase our vulnerability to adverse economic conditions and require us to meet increased debt service obligations.
In addition, we have historically financed a majority of our sales of VOIs, and accordingly, are subject to the risk of defaults by our customers. While the full impact of COVID- 19 pandemic through September 30, 2020 had not yet been reflected in our default or delinquency rates, we believe that the COVID-19 pandemic will have a significant impact on our VOI notes receivable. Accordingly, in March 2020, we recorded an additional allowance for loan losses of $12.0 million, which includes our estimate of customer defaults as a result of the COVID-19 pandemic based on our historical experience, forbearance requests received from our customers, and other factors, including but not limited to, the seasoning of the notes receivable and FICO scores of the customers. The impact of the COVID-19 pandemic is rapidly changing and highly uncertain. Accordingly, and due to other risks and uncertainties associated with assumptions and changing market conditions, our allowance may not prove to be accurate and may be increased in future periods, which will adversely impact our operating results for those periods.
Further, the COVID-19 pandemic has resulted in instability and volatility in the financial markets. Our ability to borrow against or sell our VOI notes receivable has historically been a critical factor in our liquidity. If we are unable to renew credit facilities or obtain new credit facilities, our business, results of operations, liquidity, or financial condition may be materially, adversely impacted.
Our operations could also be negatively affected further if our employees are quarantined or sickened as a result of exposure to COVID-19, or if they are subject to governmental COVID-19 curfews or “shelter in place” health orders. Measures restricting the ability of employees to come to work may impair our service or operations, all of which could negatively affect our business.
We are unable to predict how long these conditions will persist, what additional measures may be introduced by governments or private parties or what effect any such additional measures may have on our business. Furthermore, not only is the duration of the pandemic and combative measures unknown, the overall situation is extremely fluid, and it is impossible to predict the timing of future changes in the situation and what their impact may be on our business. At this time we are also not able to predict whether the COVID-19 pandemic will result in permanent changes to our customers' behavior, which may include, without limitation, continued or permanent decreases in discretionary spending and reductions in travel or vacation ownership stays or purchases, each of which would have a material adverse impact on our business, operating results and financial condition.
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Item 6. Exhibits
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Exhibit 31.1Principal Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2Principal Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1*Principal Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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
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| Principal Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
Principal Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
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 | ||
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 Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
* Exhibits furnished and not filed with this Form 10-Q.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Bluegreen Vacations Holding Corporation | ||
November 9, 2020 | By: /s/ Alan B. Levan | |
Alan B. Levan, Chairman of the Board | ||
and Chief Executive Officer | ||
November 9, 2020 | By: /s/ Raymond S. Lopez | |
Raymond S. Lopez, Chief Financial Officer |