UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DCD.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Sectionx QUARTERLY REPORT PURSUANT TO SECTION 13 orOR 15(d) ofOF THE SECURITIES EXCHANGE ACT OF 1934
For the Securities Exchange Act of 1934quarter ended June 30, 2021
OR
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 2020
[ ] Transition Report Pursuanttransition period from _________ to Section 13 or 15(d) of the Securities Exchange Act of 1934_________
Commission File Number
file number 001-09071
Bluegreen Vacations Holding Corporation
BLUEGREEN VACATIONS HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
Florida | 59-2022148 | |||
(State or other jurisdiction of | (I.R.S. Employer | |||
incorporation or organization) |
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4960 Conference Way North, Suite 100, Boca Raton, Florida33431
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (561) 912-8000
Securities registered pursuant to Section 12(b) of the Act:
Fort Lauderdale, Florida
33301
(Address of principal executive office)
(Zip Code)
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|
Ding | ||
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Class A Common Stock, $.01 par value
| BVH | 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 bebe filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES Yes [X]x No ¨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 Yes [X]x No ¨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 | |||
Non-accelerated filer | Smaller reporting company | |||
Emerging growth company | ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.[ ]¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨No x
YES [ ]NO [ X ]
The number of shares outstanding of each of the registrant’s classes of common stock as of November 4, 2020August 2, 2021 is as follows:follow:
Class A Common Stock of $.01 par value, 15,624,09118,293,575 shares outstanding.outstanding
Class B Common Stock of $.01 par value, 3,693,5963,690,564 shares outstanding.
outstanding
BLUEGREEN VACATIONS HOLDING CORPORATION
FORM 10-Q TABLE OF CONTENTS
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Item 1. | ||||
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3 | ||||
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Consolidated Statements of Operations and Comprehensive Income (Unaudited) | 4-5 | |||
Consolidated Statements of Shareholders’ Equity (Unaudited) | 6 | |||
Consolidated Statements of Cash Flows |
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Notes to |
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Item 2. |
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Item 3. | Quantitative and Qualitative |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 5 | 66 | |||
Item 6. |
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PART I – I—FINANCIAL INFORMATION
Item 1. Financial StatementsStatements.
BLUEGREEN VACATIONS HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share and per share data)
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 | ||||||
June 30, | December 31, | |||||
2021 | 2020 | |||||
ASSETS | ||||||
Cash and cash equivalents | $ | 216,112 | $ | 221,118 | ||
Restricted cash ($17,960 and $20,469 in VIEs at June 30, 2021 | ||||||
and December 31, 2020, respectively) | 46,651 | 35,986 | ||||
Notes receivable | 560,320 | 551,393 | ||||
Less: Allowance for loan losses | (145,718) | (142,044) | ||||
Notes receivable, net ($278,285 and $292,021 in VIEs | ||||||
at June 30, 2021 and December 31, 2020, respectively) | 414,602 | 409,349 | ||||
Vacation ownership interest ("VOI") inventory | 343,362 | 347,122 | ||||
Property and equipment, net | 90,562 | 90,049 | ||||
Intangible assets, net | 61,390 | 61,431 | ||||
Operating lease assets | 37,648 | 34,415 | ||||
Prepaid expenses | 21,525 | 9,367 | ||||
Other assets | 42,401 | 41,282 | ||||
Total assets | $ | 1,274,253 | $ | 1,250,119 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
Liabilities | ||||||
Accounts payable | $ | 17,578 | $ | 10,559 | ||
Deferred income | 15,124 | 15,745 | ||||
Accrued liabilities and other | 119,697 | 93,971 | ||||
Receivable-backed notes payable - recourse | 32,076 | 38,500 | ||||
Receivable-backed notes payable - non-recourse ($322,565 and $341,532 | ||||||
in VIEs at June 30, 2021 and December 31, 2020) | 357,162 | 355,833 | ||||
Note payable to BBX Capital, Inc. | 75,000 | 75,000 | ||||
Other notes payable and borrowings | 110,214 | 138,386 | ||||
Junior subordinated debentures | 134,448 | 138,177 | ||||
Operating lease liabilities | 39,389 | 35,904 | ||||
Deferred income taxes | 81,913 | 85,314 | ||||
Total liabilities | 982,601 | 987,389 | ||||
Commitments and Contingencies - See Note 9 |
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Shareholders' Equity | ||||||
Preferred stock of $0.01 par value; authorized 10,000,000 shares | — | — | ||||
Class A Common Stock of $0.01 par value; authorized 30,000,000 shares; | ||||||
issued and outstanding 18,293,576 in 2021 and 15,624,091 in 2020 | 183 | 156 | ||||
Class B Common Stock of $0.01 par value; authorized 4,000,000 shares; | ||||||
issued and outstanding 3,690,564 in 2021 and 3,693,596 in 2020 | 37 | 37 | ||||
Additional paid-in capital | 200,298 | 177,104 | ||||
Accumulated earnings | 33,061 | 10,586 | ||||
Total Bluegreen Vacations Holding Corporation shareholders' equity | 233,579 | 187,883 | ||||
Non-controlling interest | 58,073 | 74,847 | ||||
Total shareholders' equity | 291,652 | 262,730 | ||||
Total liabilities and shareholders' equity | $ | 1,274,253 | $ | 1,250,119 | ||
See accompanying Notes to 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 | ||||||||||||||||||||||||||||||
BLUEGREEN VACATIONS HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(In thousands, except per share data)
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 | ||||||||||||||||||||||||||||||
For the Three Months Ended | For the Six Months Ended | ||||||||||
June 30, | June 30, | ||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||
Revenue: | |||||||||||
Gross sales of VOIs | $ | 110,300 | $ | 10,900 | $ | 178,550 | $ | 86,381 | |||
Provision for loan losses | (18,488) | (1,846) | (30,807) | (32,199) | |||||||
Sales of VOIs | 91,812 | 9,054 | 147,743 | 54,182 | |||||||
Fee-based sales commission revenue | 35,618 | 1,135 | 61,336 | 42,500 | |||||||
Other fee-based services revenue | 30,442 | 26,413 | 59,339 | 55,727 | |||||||
Cost reimbursements | 15,552 | 11,850 | 32,160 | 30,970 | |||||||
Interest income | 19,595 | 19,418 | 38,856 | 40,618 | |||||||
Other income, net | 439 | 355 | 278 | 525 | |||||||
Total revenues | 193,458 | 68,225 | 339,712 | 224,522 | |||||||
Costs and Expenses: | |||||||||||
Cost of VOIs sold | 7,024 | 1,038 | 12,193 | 5,137 | |||||||
Cost of other fee-based services | 15,647 | 18,535 | 32,732 | 40,246 | |||||||
Cost reimbursements | 15,552 | 11,850 | 32,160 | 30,970 | |||||||
Interest expense | 8,876 | 9,558 | 18,611 | 19,456 | |||||||
Selling, general and administrative expenses | 114,786 | 49,820 | 205,750 | 160,305 | |||||||
Total costs and expenses | 161,885 | 90,801 | 301,446 | 256,114 | |||||||
Income (loss) before income taxes | 31,573 | (22,576) | 38,266 | (31,592) | |||||||
Provision for income taxes | (7,694) | (2,391) | (8,883) | (938) | |||||||
Income (loss) from continuing operations | 23,879 | (24,967) | 29,383 | (32,530) | |||||||
Discontinued operations | |||||||||||
Loss from operations | — | (8,448) | — | (36,077) | |||||||
(Provision) benefit for income taxes | — | (3,236) | — | 1,141 | |||||||
Net loss from discontinued operations | — | (11,684) | — | (34,936) | |||||||
Net income (loss) | 23,879 | (36,651) | 29,383 | (67,466) | |||||||
Less: Income attributable to noncontrolling interests - continuing operations | 4,378 | 5 | 6,908 | 956 | |||||||
Less: Loss attributable to noncontrolling interests - discontinued operations | — | (856) | — | (4,312) | |||||||
Net income (loss) attributable to shareholders | $ | 19,501 | $ | (35,800) | $ | 22,475 | $ | (64,110) | |||
Basic earnings (loss) per share from continuing operations | $ | 0.93 | $ | (1.36) | $ | 1.12 | $ | (1.83) | |||
Basic loss per share from discontinued operations | — | (0.59) | — | (1.67) | |||||||
Basic earnings (loss) per share | $ | 0.93 | $ | (1.95) | $ | 1.12 | $ | (3.50) | |||
Diluted earnings (loss) per share from continuing operations | $ | 0.93 | $ | (1.36) | $ | 1.12 | $ | (1.83) | |||
Diluted loss per share from discontinued operations | — | (0.59) | — | (1.67) | |||||||
Diluted earnings (loss) per share | $ | 0.93 | $ | (1.95) | $ | 1.12 | $ | (3.50) | |||
Basic weighted average number of common shares outstanding | 20,912 | 18,298 | 20,128 | 18,298 | |||||||
Diluted weighted average number of common and common equivalent shares outstanding | 20,912 | 18,298 | 20,128 | 18,298 | |||||||
Cash dividends declared per Class A and B common shares | $ | — | $ | — | $ | — | $ | — | |||
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 | ||||||
Bluegreen Vacations Holding CorporationBLUEGREEN VACATIONS HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED) – (Continued)
(In thousands, except per share data)
N
otes
For the Three Months Ended | For the Six Months Ended | ||||||||||
June 30, | June 30, | ||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||
Net income (loss) | $ | 23,879 | $ | (36,651) | $ | 29,383 | $ | (67,466) | |||
Other comprehensive loss, net of tax: | |||||||||||
Foreign currency translation adjustments | — | 195 | — | (355) | |||||||
Unrealized loss on securities available for sale | — | 41 | — | 4 | |||||||
Other comprehensive loss, net | — | 236 | — | (351) | |||||||
Comprehensive income (loss), net of tax | 23,879 | (36,415) | 29,383 | (67,817) | |||||||
Less: Comprehensive income (loss) attributable to noncontrolling interests | 4,378 | (851) | 6,908 | (3,356) | |||||||
Comprehensive income (loss) attributable to shareholders | $ | 19,501 | $ | (35,564) | $ | 22,475 | $ | (64,461) | |||
See accompanying Notes to Condensed Consolidated Financial Statements - Unaudited
BLUEGREEN VACATIONS HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)
(In thousands, except share data)
Shares of | |||||||||||||||||||||||||||||
Common Stock | Common | Accumulated | |||||||||||||||||||||||||||
Outstanding | Stock | Additional | Other | Total | Non- | ||||||||||||||||||||||||
Class | Class | Paid-in | Accumulated | Comprehensive | Shareholders' | Controlling | Total | ||||||||||||||||||||||
A | B | A | B | Capital | Earnings | Income | Equity | Interests | Equity (Loss) | ||||||||||||||||||||
Balance, December 31, 2020 | 15,624 | 3,694 | $ | 156 | 37 | 177,104 | 10,586 | — | 187,883 | 74,847 | 262,730 | ||||||||||||||||||
Net income | — | — | — | — | — | 2,974 | — | 2,974 | 2,530 | 5,504 | |||||||||||||||||||
Balance, March 31, 2021 | 15,624 | 3,694 | $ | 156 | 37 | 177,104 | 13,560 | — | 190,857 | 77,377 | 268,234 | ||||||||||||||||||
Bluegreen Vacations Corporation short-form merger | 2,666 | — | 27 | — | 23,042 | — | — | 23,069 | (23,682) | (613) | |||||||||||||||||||
Conversion of common stock from Class B to Class A | 3 | (3) | — | — | — | — | — | — | — | — | |||||||||||||||||||
Share-based compensation | — | — | — | — | 152 | — | — | 152 | — | 152 | |||||||||||||||||||
Net income | — | — | — | — | — | 19,501 | — | 19,501 | 4,378 | 23,879 | |||||||||||||||||||
Balance, June 30, 2021 | 18,293 | 3,691 | $ | 183 | 37 | 200,298 | 33,061 | — | 233,579 | 58,073 | 291,652 | ||||||||||||||||||
Shares of | |||||||||||||||||||||||||||||
Common Stock | Common | Accumulated | |||||||||||||||||||||||||||
Outstanding | Stock | Additional | Other | Total | Non- | ||||||||||||||||||||||||
Class | Class | Paid-in | Accumulated | Comprehensive | Shareholders' | Controlling | Total | ||||||||||||||||||||||
A | B | A | B | Capital | Earnings | Income | Equity | Interests | Equity (Loss) | ||||||||||||||||||||
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 $2,743 of loss attributable to redeemable noncontrolling interest | — | — | — | — | — | (28,310) | — | (28,310) | 238 | (28,072) | |||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | (587) | (587) | — | (587) | |||||||||||||||||||
Bluegreen purchase and retirement of common stock | — | — | — | — | (1,167) | — | — | (1,167) | (10,574) | (11,741) | |||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | — | — | — | (923) | (923) | |||||||||||||||||||
Accretion of redeemable noncontrolling interest | — | — | — | — | — | (551) | — | (551) | — | (551) | |||||||||||||||||||
Conversion of common stock from Class B to Class A | 27 | (27) | — | — | — | — | — | — | — | — | |||||||||||||||||||
Share-based compensation | — | — | — | — | 2,731 | — | — | 2,731 | — | 2,731 | |||||||||||||||||||
Balance, March 31, 2020 | 15,133 | 3,165 | $ | 151 | 32 | 155,071 | 365,690 | 967 | 521,911 | 79,016 | 600,927 | ||||||||||||||||||
Net loss excluding $846 of loss attributable to redeemable noncontrolling interest | — | — | — | — | — | (35,800) | — | (35,800) | (5) | (35,805) | |||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | 236 | 236 | — | 236 | |||||||||||||||||||
Accretion of redeemable noncontrolling interest | — | — | — | — | — | (696) | — | (696) | — | (696) | |||||||||||||||||||
Share-based compensation | — | — | — | — | 2,944 | — | — | 2,944 | — | 2,944 | |||||||||||||||||||
Balance, June 30, 2020 | 15,133 | 3,165 | $ | 151 | 32 | 158,015 | 329,194 | 1,203 | 488,595 | 79,011 | 567,606 | ||||||||||||||||||
See accompanying Notes to Consolidated Financial Statements - Unaudited
BLUEGREEN VACATIONS HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
For the Six Months Ended | ||||||
June 30, | ||||||
2021 | 2020 | |||||
Operating activities: | ||||||
Net income (loss) | $ | 29,383 | $ | (67,466) | ||
Adjustment to reconcile net income (loss) to net cash | ||||||
provided by (used in) operating activities: | ||||||
Recoveries from loan losses, net, from discontinued operations | — | (5,037) | ||||
Provision for loan losses | 30,807 | 32,199 | ||||
Depreciation, amortization and accretion, net | 10,116 | 13,632 | ||||
Share-based compensation expense | 152 | 5,675 | ||||
Net losses on sales of real estate and property and equipment | 24 | 77 | ||||
Equity earnings of unconsolidated real estate joint ventures | — | (696) | ||||
Return on investment in unconsolidated real estate joint ventures | — | 3,991 | ||||
Decrease in deferred income tax liability | (3,401) | (2,070) | ||||
Impairment losses | — | 31,588 | ||||
Changes in operating assets and liabilities: | ||||||
Notes receivable | (36,060) | 12,137 | ||||
VOI inventory | 3,760 | (3,333) | ||||
Trade inventory | — | 2,342 | ||||
Real estate inventory | — | (316) | ||||
Prepaids expense and other assets | (13,888) | 11,390 | ||||
Accounts payable, accrued liabilities and other, and | ||||||
deferred income | 32,376 | (50,127) | ||||
Net cash provided by (used in) operating activities | $ | 53,269 | $ | (16,014) | ||
Investing activities: | ||||||
Return of investment in unconsolidated real estate joint ventures | — | 748 | ||||
Investments in unconsolidated real estate joint ventures | — | (12,664) | ||||
Proceeds from repayment of loans receivable | — | 5,260 | ||||
Proceeds from sales of property and equipment | — | 131 | ||||
Additions to real estate | — | (59) | ||||
Purchases of property and equipment | (8,229) | (8,157) | ||||
Decrease in cash from other investing activities | — | (145) | ||||
Net cash used in investing activities | $ | (8,229) | $ | (14,886) | ||
Financing activities: | ||||||
Repayments of notes payable and other borrowings | $ | (100,858) | $ | (123,547) | ||
Proceeds from notes payable and other borrowings | 66,363 | 135,480 | ||||
Redemption of junior subordinated debentures | (4,186) | — | ||||
Payments for debt issuance costs | (87) | (591) | ||||
Purchase and retirement of subsidiary common stock | — | (11,741) | ||||
Payments of merger transaction costs | (613) | — | ||||
Dividends paid on common stock | — | (1,144) | ||||
Distributions to noncontrolling interests | — | (923) | ||||
Net cash used in financing activities | $ | (39,381) | $ | (2,466) | ||
Net increase (decrease) in cash and cash equivalents | ||||||
and restricted cash | 5,659 | (33,366) | ||||
Cash, cash equivalents and restricted cash at beginning of period | 257,104 | 406,870 | ||||
Cash, cash equivalents and restricted cash at end of period | $ | 262,763 | $ | 373,504 | ||
BLUEGREEN VACATIONS HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
Supplemental cash flow information: | ||||||
Interest paid on borrowings, net of amounts capitalized | $ | 16,138 | $ | 18,394 | ||
Income taxes paid | 8,830 | 259 | ||||
Supplementary disclosure of non-cash investing and financing activities: | ||||||
Increase in other assets upon issuance of Community Development District Bonds | — | 827 | ||||
Assumption of Community Development District Bonds by homebuilders | — | 1,987 | ||||
Reconciliation of cash, cash equivalents and restricted cash: | ||||||
Cash and cash equivalents | 216,112 | 323,724 | ||||
Restricted cash | 46,651 | 25,189 | ||||
Discontinued operations cash | — | 24,591 | ||||
Total cash, cash equivalents and restricted cash | $ | 262,763 | $ | 373,504 |
See accompanying Notes to Consolidated Financial Statements - Unaudited
BLUEGREEN VACATIONS HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
1. Organization and Basis of Financial Statement Presentation
Organization
Bluegreen Vacations Holding Corporation, (formerly BBX Capital Corporation) andtogether with its subsidiaries, (the “Company”including Bluegreen Vacations Corporation, are referred herein as “the Company” or unless otherwise indicated“we” or “us” or “our” (unless stated to the contrary or the context otherwise requires, “we,” “us,” or “our”) is a Florida-based holding company. Bluegreen Vacations Holding Corporation as a standalone entity without its subsidiaries is referred to as “BVH.”requires)
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, includingprepared 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 81% and 19%, respectively, at September 30, 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 generally accepted accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, these financial statements doit does not include all of the information and disclosuresfootnotes required by GAAP for complete financial statements.
FinancialIn the Company’s opinion, the financial information furnished herein reflects all adjustments consisting of normal recurring items necessary for a fair presentation of its financial position, results of operations, and cash flows for the interim periods reported in this Quarterly Report on Form 10-Q. The preparation of financial statements prepared in conformity with GAAP require the Companyrequires management to make estimates based onand assumptions about currentthat affect the amounts reported and, for some estimates, future economic and market conditions which affect reported amounts and related disclosures in the Company’s financial statements.accordingly, actual results could differ from those estimates. Due to the unprecedented impact and current anduncertainties related to the Coronavirus Disease 2019 (“COVID-19”) pandemic, including its potential future impact ofand other factors, 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, 2020; the condensed consolidated results of operations and comprehensive income of the Company for the three and ninesix months ended SeptemberJune 30, 2020 and 2019; the condensed consolidated changes in equity of the Company for the three and nine months ended September 30, 2020 and 2019; and the condensed consolidated cash flows of the Company for the nine months ended September 30, 2020 and 2019. Operating results for the three and nine months ended September 30, 20202021 are not necessarily indicative of the results that mayto be expected for the year ending December 31, 20202021 or any other future period.
These unaudited condensed consolidatedinterim or annual periods. The accompanying interim 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 footnotesnotes thereto included in the Company’s Annual Report on Form 10-Kas of and for the year ended December 31, 2019 (the “20192020, included in its Annual Report”)Report on Form 10-K filed with the SECSecurities and Exchange Commission (the “SEC”) on March 13, 2020.1, 2021 (the “2020 Annual Report on Form 10-K”).
Our Business
On September 30, 2020, the Company completed its spin-off of BBX Capital, Inc. (“BBX Capital”). The former wholly owned subsidiary became a separate public company as a result of the spin-off and holds all of the historical business and investments other than the Company’s investment in Bluegreen Vacations Corporation (“Bluegreen”). As a result of the spin-off the Company is a “pure play” holding company whose sole asset is its wholly owned subsidiary Bluegreen.
Prior to May 5, 2021, the Company beneficially owned approximately 93% of Bluegreen’s outstanding common stock. On May 5, 2021, the Company acquired all of the approximately 7% of the outstanding shares of Bluegreen’s common stock not previously beneficially owned by the Company through a statutory short-form merger under Florida law. In connection with the merger, Bluegreen’s shareholders (other than the Company) received 0.51 shares of the Company’s Class A Common Stock for each share of Bluegreen’s common stock that they held at the effective time of the merger (subject to rounding up of fractional shares). The Company issued approximately 2.66 million shares of its Class A Common Stock in connection with the merger. As a result of the completion of the merger, Bluegreen became a wholly owned subsidiary of the Company.
The condensedCompany is a leading vacation ownership company that markets and sells vacation ownership interests (“VOIs”) and manages resorts in popular leisure and urban destinations. Our resorts are primarily located in high-volume, “drive-to” vacation locations, including Orlando, Las Vegas, Myrtle Beach, Charleston and New Orleans, among others. The resorts in which we market, sell, and manage VOIs were either developed or acquired by the Company, or were developed and are owned by third parties. The Company earns fees for providing sales and marketing services to third party developers and also earns fees for providing management services to the Bluegreen Vacation Club and homeowners’ associations (“HOAs”), mortgage servicing, VOI title services, reservation services, and construction design and development services. In addition, the Company provides financing to qualified VOI purchasers, which generates significant interest income.
Basis of Financial Statement Presentation
The Company’s unaudited consolidated financial statements include the accounts of BVH’s wholly-ownedits wholly owned subsidiaries, other entities in which BVHthe Company or its wholly-ownedconsolidated subsidiaries hold controlling financial interests, and any VIEsVariable Interest Entities (“VIEs”) in which BVHthe Company 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.
Business
The 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 vacation ownership interests (“VOIs”) and manages resorts in popular leisure and urban destinations. Bluegreen’s resorts are primarily located in high-volume, “drive-to” vacation locations, including Orlando, Las Vegas, Myrtle Beach, Charleston and New Orleans, among others. The resorts in which Bluegreen markets, sells, and manages VOIs were either developed or acquired by Bluegreen or were developed and are owned by third parties. Bluegreen earns fees for providing sales and marketing services to third party developers. Bluegreen also earns fees for providing management services to the Vacation Club and homeowners’ associations (“HOAs”), mortgage servicing, VOI title services, reservation services, and construction design and development services. In addition, Bluegreen provides financing to qualified VOI purchasers, which has historically generated significant interest income.
During the nine months ended September 30, 2020, Bluegreen repurchased and retired 1,878,400 shares of its common stock for $11.7 million.
Impact of the COVID-19 Pandemicpandemic
Initial response and impact to 2020
The COVID-19 pandemic resulted in,has caused, and continues to cause, an unprecedented disruption in the U.S. economyand global economies and the travel, hospitality and vacation ownership industries in which the Company operates due to, among other things, resort closures,government ordered “shelter in place” and “stay at home” orders and advisories, travel restrictions, and restrictions on business operations, including government guidance and restrictions with respect to travel, public accommodations, social gatherings, and related matters. OnThese disruptions arising from the pandemic and the reaction of the general public to the pandemic had a significant adverse impact on the Company's financial condition and operations during the three and six months ended June 30, 2020 and through 2020. In response to the pandemic, during the last week of March 23, 2020, Bluegreenthe Company temporarily closed all of its VOI sales centers; its retailcenters and marketing operations atand took other measures with a goal of mitigating the impact of the pandemic and positioning Bluegreen to navigate the pandemic successfully. During the second quarter of 2020, we began a phased reopening of resorts and resumption of our business activities under new operating guidelines and with enhanced safety measures and occupancy restrictions. By June 30, 2020, 64 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(out of Bluegreen’s Club and Club Associate Resortsthe 89 that were closedopen in accordance with government mandates and advisories. Beginning in mid-May 2020, Bluegreen started the process of recommencing its sales and marketing operations and its closed resorts began to welcome guests as government mandatesMarch 2020) were lifted. 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, Bluegreenopen, we had reactivated itsour Choice Hotels call transfer program, virtually all of itsour resorts were open, and all but one21 of itsour 26 VOI sales centers were open. Resort occupancyopen for the third quarter of 2020sales to existing owners and one sales center was approximately 70%. Additionally, in October 2020, Bluegreen recommenced marketing activities at 1 additional Bass Bro Shop and commenced marketing operations at 4selling to new Cabela’s stores for a total of 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 event of an increase in COVID-19 cases.prospects.
As a result of the effect ofIn response to the pandemic, Bluegreenwe implemented several cost mitigating activities beginning in March 2020, including reductions in our workforce of over 1,600 positions and the placement of another approximateapproximately 3,200 of itour associates on temporary furlough or reduced work hours. As of SeptemberJune 30, 2020, approximately 3,2002,300 associates had returned to work on a full-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 effect of the COVID-19 pandemic, duringbasis. During the three and ninesix months ended SeptemberJune 30, 2020, Bluegreenwe incurred $0.4$2.2 million and $5.1$6.7 million in severance, respectively, and $1.5$10.7 million and $13.1$11.6 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 condensedunaudited consolidated statement of operations comprehensive income for the three and ninesix months ended SeptemberJune 30, 2020.
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, which is included in other liabilities in our unaudited condensed consolidated statement of financial condition as of September 30, 2020, and employee retention tax credits of $6.9 million, which are included in selling, 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, Also, in March 2020, Bluegreen drew down $60 million under its lines-of-credit and pledged or sold receivables under certain of its various receivable backed facilities to increase its cash position. As of September 30,In June 2020, Bluegreen repaid the $60.0$40 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 insyndicated line-of-credit and amended the future. agreements to modify the definition of certain customary covenants. During the second quarter ofsix months ended June 30, 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, Bluegreenwe recorded an additional allowance for loan losses of $12.0 million, which includes itsincluded our customary estimate of customer defaults as a result of the COVID–19COVID-19 pandemic based on Bluegreen’sour historical experience, forbearance requests received from theirour customers, and other factors, including, but not limited to, the seasoning of the notes receivable and FICO scores of the customers.
Impact to 2021 and outlook
The Company continues to be adversely affected by the economic impact of the COVID-19 pandemic during 2021. The number of reported COVID -19 cases went down during the second quarter and as of June 30, 2021, we were operating marketing kiosks at 112 Bass Pro Shops and Cabela’s stores, including 13 new Cabela’s locations and one Bass Pro location opened during the six months ended June 30, 2021; the Choice Hotels call transfer program was close to pre-pandemic volume; all but two sales centers were operating and all of our resorts, except for one unrelated to COVID-19 in Surfside, FL, were open. Further, resort occupancy rates were approximately 86% at resorts with sales centers in the second quarter of 2021 facilitated by our ‘drive-to’ network of resorts and we sold 56,000 vacation packages in the second quarter of 2021 compared to 8,000 in the second quarter of 2020. Further, during the second quarter of 2021, the Company experienced an increase in sales of VOIs, which we believe was a sign of improvement in general economic conditions. However, current levels of illness are rising and indicate that the pandemic and its impact on the Company are not over. The CDC recently issued new guidance regarding the use of masks and vaccinations are increasingly being required by government agencies and employers. Various state and local
government officials may in the future issue new or revised orders that are different than the ones under which we are currently operating. Accordingly, there remains significant uncertainty as to the probable duration and severity of the pandemic and the likely impact of the pandemic on the Company’s future revenues, net income and other operating results.
Use of Estimates
Recently Adopted Accounting Pronouncements
The Company’s financial statements are prepared in conformity with GAAP, which requires it to make estimates based on assumptions about current and, for some estimates, future economic and market conditions which affect reported amounts and related disclosures in its financial statements. Although the Company’s current estimates contemplate current and expected future conditions, as applicable, actual conditions could differ from its expectations, which could materially affect its results of operations and financial position. In June 2016,particular, a number of estimates have been and will continue to be affected by the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326)” (“ASU 2016-13”), which introduces an approachongoing COVID-19 pandemic. The severity, magnitude and duration, as well as the economic consequences of estimatingthe COVID-19 pandemic, are uncertain, rapidly changing and difficult to predict. As a result, 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, incremental credit losses on certain types of financial instruments based on expected losses. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan losses. Further, the standard requires that public entities disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination (i.e. by vintage year). This standard became effective for us on January 1, 2020. We adopted this standard on January 1, 2020 using a modified retrospective method. The adoption did not have a material impact on our consolidated financial statements or related disclosures and no cumulative adjustment was recorded primarily due to the fact our VOI notes receivable, are recorded net of an allowance that is calculatedincrease 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,valuation allowances 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 asdeferred tax assets, or expense as incurred. ASU 2018-15 also requires companies to present implementation costs related to a CCAan increase 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 guidanceother obligations as of the datetime 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.relevant measurement event.
2. Recently Issued Accounting Pronouncements
Future Adoption of Recently Issued Accounting Pronouncements
The FASB has issued the following accounting pronouncement and guidance relevant to ourthe Company’s operations which had not yet been adopted as of SeptemberJune 30, 2020:2021:
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 the 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 indexedexposed to LIBOR. Although ourthe Company’s VOIs notes receivable from ourits borrowers are not indexed to LIBOR, we currently have $177.1as of June 30, 2021, the Company had $170.9 million of LIBOR indexed junior subordinated debentures, $88.2$70.9 million of LIBOR indexed receivable-backed notes payable and lines of credit, and $162.0$108.1 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 areThe Company has not yet adopted this standard and is evaluating the potential impact that the eventual replacement of the LIBOR benchmark interest rate could have on ourits results of operations, liquidity and consolidated financial statements.
2. Variable
3. Revenue From Contracts with Customers
The table below sets forth the Company’s disaggregated revenue by category from contracts with customers (in thousands).
For the Three Months Ended | For the Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||
Sales of VOIs (1) | $ | 91,812 | $ | 9,054 | $ | 147,743 | $ | 54,182 | ||||
Fee-based sales commission revenue (1) | 35,618 | 1,135 | 61,336 | 42,500 | ||||||||
Resort and club management revenue (2) | 25,443 | 24,224 | 50,371 | 49,253 | ||||||||
Cost reimbursements (2) | 15,552 | 11,850 | 32,160 | 30,970 | ||||||||
Administrative fees and other (1) | 2,863 | 1,349 | 5,137 | 4,072 | ||||||||
Other revenue (2) | 2,136 | 840 | 3,831 | 2,402 | ||||||||
Revenue from customers | 173,424 | 48,452 | 300,578 | 183,379 | ||||||||
Interest income (3) | 19,595 | 19,418 | 38,856 | 40,618 | ||||||||
Other income, net | 439 | 355 | 278 | 525 | ||||||||
Total revenue | $ | 193,458 | $ | 68,225 | $ | 339,712 | $ | 224,522 | ||||
(1) Included in the Company’s sales of VOIs and financing segment described in Note 14.
(2) Included in the Company’s resort operations and club management segment described in Note 14.
(3) Interest Entitiesincome of $19.5 million and $19.1 million for the three months ended June 30, 2021 and 2020, respectively, and $38.7 million and $39.2 million for the six months ended June 30, 2021 and 2020, respectively, are included in the Company’s sales of VOIs and financing segment described in Note 14.
Bluegreen sellsPlease refer to Note 14: Segment Reporting below for more details related to the Company’s segments.
4. Notes Receivable
The table below provides information relating to the Company’s notes receivable and its allowance for loan losses (dollars in thousands):
As of | ||||||
June 30, | December 31, | |||||
2021 | 2020 | |||||
Notes receivable secured by VOIs: | ||||||
VOI notes receivable - non-securitized | $ | 185,215 | $ | 156,078 | ||
VOI notes receivable - securitized | 375,105 | 395,315 | ||||
Gross VOI notes receivable | 560,320 | 551,393 | ||||
Allowance for loan losses - non-securitized | (48,898) | (38,750) | ||||
Allowance for loan losses - securitized | (96,820) | (103,294) | ||||
Allowance for loan losses | (145,718) | (142,044) | ||||
VOI notes receivable, net | $ | 414,602 | $ | 409,349 | ||
Allowance as a % of Gross VOI notes receivable | 26% | 26% | ||||
The weighted-average interest rate charged on the Company’s notes receivable secured by VOIs was 15.1% and 15.0% at June 30, 2021 and December 31, 2020, respectively. All of the Company’s VOI loans bear interest at fixed rates. the Company’s VOI notes receivable are substantially secured by property located in Florida, Missouri, Nevada, South Carolina, Tennessee, and Wisconsin.
Allowance for Loan Losses
The activity in the Company’s allowance for loan losses was as follows (in thousands):
For the Six Months Ended | ||||||
June 30, | ||||||
2021 | 2020 | |||||
Balance, beginning of period | $ | 142,044 | $ | 140,630 | ||
Provision for loan losses | 30,807 | 32,199 | ||||
Less: Write-offs of uncollectible receivables | (27,133) | (25,200) | ||||
Balance, end of period | $ | 145,718 | $ | 147,629 | ||
The Company monitors the credit quality of its receivables on an ongoing basis. The Company holds large amounts of homogeneous VOI notes receivable and assess uncollectibility based on pools of receivables as we do not believe that there are significant concentrations of credit risk with any individual counterparty or groups of counterparties. In estimating loan losses, we do not use a single primary indicator of credit quality but instead evaluate our 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.
During 2020, and to a lesser extent in 2021, the COVID-19 pandemic had a material adverse impact on unemployment in the United States and economic conditions in general and the impact may continue for some time. During the six months ended June 30, 2020, the Company recorded an additional allowance of $12.0 million which included our estimate at that time of customer defaults as a result of changing economic factors related to the COVID-19 pandemic. We believe that the COVID-19 pandemic may continue to have an impact on the collectability of its VOI notes receivable. We continue to evaluate the impact of the COVID-19 pandemic on our default or delinquency rates as the current situation is rapidly changing and highly uncertain. Our estimate may not prove to be correct and our allowance for loan losses may not prove to be adequate.
Additional information about our VOI notes receivable by year of origination as of June 30, 2021 is as follows (in thousands):
Year of Origination | |||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | 2016 and Prior | Total | |||||||||||||||
701+ | $ | 55,296 | $ | 58,631 | $ | 71,201 | $ | 47,010 | $ | 31,431 | $ | 51,113 | $ | 314,682 | |||||||
601-700 | 37,648 | 38,738 | 39,152 | 29,624 | 20,964 | 47,002 | 213,128 | ||||||||||||||
<601 (1) | 1,803 | 3,542 | 4,079 | 2,705 | 1,767 | 5,018 | 18,914 | ||||||||||||||
Other (2) | — | 1,109 | 1,393 | 3,183 | 2,561 | 5,350 | 13,596 | ||||||||||||||
Total by FICO score | $ | 94,747 | $ | 102,020 | $ | 115,825 | $ | 82,522 | $ | 56,723 | $ | 108,483 | $ | 560,320 | |||||||
(1)Includes VOI notes receivable attributable to borrowers without a FICO score (who are primarily foreign borrowers).
(2)Includes $9.6 million related to VOI notes receivable that, as of June 30, 2021, had defaulted, but the related VOI note receivable balance had not yet been charged off in accordance with the provisions of certain receivable-backed notes payable transactions. These VOI notes receivable have been reflected in the allowance for loan losses.
Additional information about our VOI notes receivable by year of origination as of December 31, 2020 is as follows (in thousands):
Year of Origination | |||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | 2015 and Prior | Total | |||||||||||||||
701+ | $ | 70,874 | $ | 85,294 | $ | 56,490 | $ | 37,371 | $ | 27,638 | $ | 35,693 | $ | 313,360 | |||||||
601-700 | 42,095 | 44,672 | 34,181 | 24,700 | 22,656 | 34,779 | 203,083 | ||||||||||||||
<601 (1) | 3,737 | 4,491 | 3,003 | 2,113 | 2,188 | 3,954 | 19,486 | ||||||||||||||
Other (2) | 29 | 567 | 3,805 | 3,476 | 2,336 | 5,251 | 15,464 | ||||||||||||||
Total by FICO score | $ | 116,735 | $ | 135,024 | $ | 97,479 | $ | 67,660 | $ | 54,818 | $ | 79,677 | $ | 551,393 | |||||||
(1)Includes VOI notes receivable attributable to borrowers without a FICO score (who are primarily foreign borrowers).
(2)Includes $11.4 million related to VOI notes receivable that, as of December 31, 2020, had defaulted, but the related VOI note receivable balance had not yet been charged off in accordance with the provisions of certain receivable-backed notes payable transactions. These VOI notes receivable have been reflected in the allowance for loan losses.
The percentage of gross notes receivable outstanding by FICO score of the borrower at the time of origination were as follows:
June 30, | December 31, | ||||
2021 | 2020 | ||||
FICO Score | |||||
700+ | 58 | % | 59 | % | |
601-699 | 38 | 37 | |||
<600 | 3 | 3 | |||
No Score (1) | 1 | 1 | |||
Total | 100 | % | 100 | % | |
(1)VOI notes receivable attributable to borrowers without a FICO score (who are primarily foreign borrowers).
The Company’s notes receivable are carried at amortized cost less an allowance for loan losses. Interest income is suspended, and previously accrued but unpaid interest income is reversed, on all delinquent notes receivable when principal or interest payments are more than 90 days contractually past due and not resumed until such loans are less than 90 days past due. As of June 30, 2021 and December 31, 2020, $19.7 million and $24.0 million, respectively, of our VOI notes receivable were more than 90 days past due, and accordingly, consistent with our policy, were not accruing interest income. After approximately 127 days past due, VOI notes receivable are generally written off against the allowance for loan loss. Accrued interest was $3.8 million and $3.9 million as of June 30, 2021 and December 31, 2020, respectively, and is included within other assets in the Company’s unaudited consolidated balance sheets herein.
The following table shows the delinquency status of our VOI notes receivable as of June 30, 2021 and December 31, 2020 (in thousands):
As of | ||||||
June 30, | December 31, | |||||
2021 | 2020 | |||||
Current | $ | 532,881 | $ | 517,111 | ||
31-60 days | 4,327 | 5,778 | ||||
61-90 days | 3,451 | 4,541 | ||||
Over 91 days (1) | 19,661 | 23,963 | ||||
Total | $ | 560,320 | $ | 551,393 | ||
(1)Includes $9.6 million and $11.4 million related to VOI notes receivable that, as of June 31, 2021 and December 31, 2020, respectively, had defaulted, but the related VOI note receivable balance had not yet been charged off in accordance with the provisions of certain receivable-backed notes payable transactions. These VOI notes receivable have been reflected in the allowance for loan losses.
5. Variable Interest Entities
We sell VOI notes receivable through special purpose finance entities. These transactions are generally structured as non-recourse to Bluegreenus 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 servicesWe service the securitized notes receivable for a fee pursuant to servicing agreements negotiated with third parties based on market conditions at the time of the securitization.
In these securitizations, Bluegreenthe Company generally retains a portion of the securities and continues to service the securitized notes receivable. Under these arrangements, the cash payments received from obligors on the receivables sold are generally applied monthly to pay fees to service providers, make interest and principal payments to investors, and fund required reserves, if any, with the remaining balance of such cash retained by Bluegreen;the Company; however, to the extent
the portfolio of receivables fails to satisfy specified performance criteria (as may occur due to, among other things, an increase in default rates or credit loss severity) or other trigger events occur, the funds received from obligors are 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. While there is no assurance that compliance will be maintained in the future, asAs of SeptemberJune 30, 2020, Bluegreen was2021, we were in compliance with all material terms under its securitization transactions, and no trigger events had occurred.
In accordance with applicable accounting guidance for the consolidation of VIEs, Bluegreen analyzes itswe analyze our variable interests, which may consist of loans, servicing rights, guarantees, and equity investments, to determine if an entity in which Bluegreen haswe have a variable interest is a VIE. The analysis includes a review of both quantitative and qualitative factors. BluegreenThe Company bases its quantitative analysis on the forecasted cash flows of the entity and it bases its qualitative analysis on the structure of the entity, including its decision-making ability and authority with respect to the entity, and relevant financial agreements. BluegreenWe also uses its qualitative analysis to determine if Bluegreenit must consolidate a VIE as the primary beneficiary. In accordance with applicable accounting guidance, Bluegreenthe Company has determined these securitization entities to be VIEs of which Bluegreenit is the primary beneficiary and, therefore, Bluegreen consolidates the entities are consolidated into itsthe Company’s financial statements.
Under the terms of certain of VOI note sales, Bluegreen haswe have 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 voluntaryVoluntary repurchases and substitutions of defaulted notes for the ninesix months ended SeptemberJune 30, 2021 and 2020 and 2019 were $11.1$8.1 million and $8.4$7.6 million, respectively. Bluegreen’sThe Company’s maximum exposure to loss relating to its non-recourse securitization entities is the difference between the outstanding VOI notes receivable and the notes payable, plus cash reserves and any additional residual interest in future cash flows from collateral.
The table below sets forth information regarding the assets and liabilities of Bluegreen’sthe Company’s consolidated VIEs included in the Company’s condensed consolidated statements of financial conditionare as follows (in thousands):
June 30, | December 31, | |||||
2021 | 2020 | |||||
Restricted cash | $ | 17,960 | $ | 20,469 | ||
Securitized notes receivable, net | 278,285 | 292,021 | ||||
Receivable backed notes payable - non-recourse | 322,565 | 341,532 | ||||
September 30, | December 31, | |||||
2020 | 2019 | |||||
Restricted cash | $ | 15,135 | 22,534 | |||
Securitized notes receivable, net | 271,539 | 292,590 | ||||
Receivable backed notes payable - non-recourse | 303,301 | 334,246 | ||||
The restricted cash and the securitized notes receivable balances set forthdisclosed 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 (dollars in thousands):
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% | ||||
The weighted-average interest rate charged on Bluegreen’s notes receivable secured by VOIs was 14.9% as of September 30, 2020 and December 31, 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 on VOI notes receivable was as follows (in thousands):
For the Nine Months Ended | ||||||
September 30, | ||||||
2020 | 2019 | |||||
Balance, beginning of period | $ | 140,630 | 134,133 | |||
Provision for loan losses | 44,083 | 39,483 | ||||
Write-offs of uncollectible receivables | (34,908) | (38,340) | ||||
Balance, end of period | $ | 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, | |||||
FICO Score | 2020 | 2019 | ||||
700+ | 59.00 | % | 59.00 | % | ||
600-699 | 37.00 | 37.00 | ||||
<601(1) | 4.00 | 4.00 | ||||
Total | 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, | |||||
2020 | 2019 | |||||
Current | $ | 527,469 | 557,849 | |||
31-60 days | 5,606 | 6,794 | ||||
61-90 days | 4,511 | 5,288 | ||||
> 91 days (1) | 22,332 | 19,267 | ||||
Total | $ | 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.
4. VOI6. Inventory
Bluegreen’sOur VOI inventory consistedconsists of the following (in thousands):
As of | ||||||
June 30, | December 31, | |||||
2021 | 2020 | |||||
Completed VOI units | $ | 259,951 | $ | 268,686 | ||
Construction-in-progress | 14,342 | — | ||||
Real estate held for future development | 69,069 | 78,436 | ||||
Total | $ | 343,362 | $ | 347,122 | ||
September 30, | December 31, | |||||
2020 | 2019 | |||||
Completed VOI units | $ | 271,985 | 269,847 | |||
Construction-in-progress | — | 3,946 | ||||
Real estate held for future VOI development | 78,360 | 73,144 | ||||
Total VOI inventory | $ | 350,345 | 346,937 | |||
Construction-in-progress consists primarily of additional VOI units being developed at The Cliffs at Long Creek
5.7. Debt
Lines-of-Credit and Notes Payable and Other Borrowings
BluegreenThe Company has outstanding borrowings with various financial institutions and other lenders. Financial data related to Bluegreen’sour lines of credit and notes payable (other than receivable-backed notes payable, which are discussed below) as of SeptemberJune 30, 20202021 and December 31, 2019, was2020, were 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 | ||||||||||||||
As of | ||||||||||||||||
June 30, 2021 | December 31, 2020 | |||||||||||||||
Balance | Interest | Carrying | Balance | Interest | Carrying | |||||||||||
NBA Éilan Loan | $ | — | — | $ | — | $ | 15,903 | 4.75% | $ | 28,491 | ||||||
Fifth Third Syndicated LOC | 20,000 | 2.25% | 38,616 | 30,000 | 2.25% | 50,822 | ||||||||||
Fifth Third Syndicated Term | 91,250 | 2.25% | 176,184 | 93,750 | 2.25% | 158,817 | ||||||||||
Unamortized debt issuance costs | (1,036) | — | — | (1,267) | — | — | ||||||||||
Total | $ | 110,214 | $ | 214,800 | $ | 138,386 | $ | 238,130 | ||||||||
NBA Éilan Loan. The then-outstanding balance of $15.6 million on the NBA Éilan Loan was repaid in full in March 2021. Accordingly, the related unamortized debt issuance costs of $0.2 million were written off during the six months ended June 30, 2021.
Except as described below,above, there were 0 new debt issuances or significant changes related to the above listed lines-of-credit or notes payable and other borrowings during the ninesix months ended SeptemberJune 30, 2020.2021. See Note 10 to the Company’s Consolidated Financial Statements included in its 2020 Annual Report on Form 10-K for additional information regarding these lines-of-credit and notes payable.
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 effect and uncertainties associated with of the COVID-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 $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 $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. In connection with termination, IberiaBank released the security interest over all collateral granted to the lenders under the facility. NaN amounts were outstanding under the loan agreement at September 30, 2020.
Receivable-Backed Notes Payable
The table below sets forth information regarding Bluegreen’sFinancial data related to our receivable-backed notes payable facilities as of June 30, 2021 and December 31, 2020 was as follows (dollars in thousands):
September 30, 2020 | December 31, 2019 | As of | ||||||||||||||||||||||||||||||||
Principal | Principal | June 30, 2021 | December 31, 2020 | |||||||||||||||||||||||||||||||
Balance of | Balance of | Debt | Interest | Principal | Debt | Interest | Principal | |||||||||||||||||||||||||||
Pledged/ | Pledged/ | |||||||||||||||||||||||||||||||||
Receivable-backed notes | ||||||||||||||||||||||||||||||||||
Liberty Bank Facility | $ | 10,000 | 3.40% | $ | 14,237 | $ | 10,000 | 3.40% | $ | 13,970 | ||||||||||||||||||||||||
NBA Receivables Facility | 12,076 | 3.00% | 16,978 | 19,877 | 3.32% | 26,220 | ||||||||||||||||||||||||||||
Pacific Western Facility | 10,000 | 3.06% | 14,354 | 8,623 | 3.15% | 13,131 | ||||||||||||||||||||||||||||
Total | 32,076 | 45,569 | 38,500 | 53,321 | ||||||||||||||||||||||||||||||
Debt | Interest | Secured | Debt | Interest | Secured | |||||||||||||||||||||||||||||
Balance | Rate | Receivables | Balance | Rate | Receivables | |||||||||||||||||||||||||||||
Receivable-backed notes | ||||||||||||||||||||||||||||||||||
payable - recourse: | ||||||||||||||||||||||||||||||||||
Receivable-backed notes | ||||||||||||||||||||||||||||||||||
Liberty Bank Facility (1) | $ | 19,715 | 3.40% | $ | 26,263 | $ | 25,860 | 4.75% | $ | 31,681 | $ | 2,591 | 3.40% | $ | 3,689 | $ | 2,316 | 3.40% | $ | 3,235 | ||||||||||||||
NBA Receivables Facility(2) | 33,389 | 3.35% | 42,792 | 32,405 | 4.55% | 39,787 | 23,738 | 3.00% | 33,375 | 11,985 | 3.32% | 15,809 | ||||||||||||||||||||||
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: | ||||||||||||||||||||||||||||||||||
Pacific Western Facility (3) | 8,268 | 3.06% | 11,868 | — | — | — | ||||||||||||||||||||||||||||
KeyBank/DZ Purchase Facility | 60,981 | 2.50% | 77,140 | 31,708 | 3.99% | 39,448 | 33,555 | 2.50% | 40,760 | — | — | — | ||||||||||||||||||||||
Quorum Purchase Facility | 34,240 | 4.75-5.50% | 39,876 | 44,525 | 4.75-5.50% | 49,981 | 24,791 | 4.75-5.10% | 28,796 | 29,788 | 4.75-5.10% | 34,651 | ||||||||||||||||||||||
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 | 8,729 | 3.20% | 9,848 | 11,922 | 3.20% | 13,483 | ||||||||||||||||||||||
2015 Term Securitization | 24,302 | 3.02% | 26,998 | 31,188 | 3.02% | 33,765 | 18,281 | 3.02% | 19,341 | 22,560 | 3.02% | 24,475 | ||||||||||||||||||||||
2016 Term Securitization | 37,952 | 3.35% | 43,794 | 48,529 | 3.35% | 54,067 | 29,749 | 3.35% | 33,163 | 35,700 | 3.35% | 40,221 | ||||||||||||||||||||||
2017 Term Securitization | 54,507 | 3.12% | 62,877 | 65,333 | 3.12% | 74,219 | 43,792 | 3.12% | 50,094 | 51,470 | 3.12% | 58,907 | ||||||||||||||||||||||
2018 Term Securitization | 77,148 | 4.02% | 90,088 | 91,231 | 4.02% | 103,974 | 62,433 | 4.02% | 71,443 | 72,486 | 4.02% | 84,454 | ||||||||||||||||||||||
2020 Term Securitization | 106,233 | 2.60% | 121,583 | 123,600 | 2.60% | 139,052 | ||||||||||||||||||||||||||||
Unamortized debt issuance costs | (4,140) | — | — | (5,125) | — | — | (4,998) | --- | — | (5,994) | --- | — | ||||||||||||||||||||||
Total | $ | 303,301 | $ | 362,074 | $ | 334,246 | $ | 385,327 | 357,162 | 423,960 | 355,833 | 414,287 | ||||||||||||||||||||||
Total receivable-backed debt | $ | 380,718 | $ | 462,370 | $ | 422,815 | $ | 494,604 | $ | 389,238 | $ | 469,529 | $ | 394,333 | $ | 467,608 | ||||||||||||||||||
(1)Recourse on these facilitiesthe Liberty Bank Facility is in each case limited to $10$10.0 million, subject to certain exceptions.
(2)Pursuant toRecourse on the September 25, 2020 amendment described below, recourse to Bluegreen/Big Cedar Vacations under this amended facilityNBA Receivables Facility was reduced to $23.8$12.1 million as of June 30, 2021 and will be reduced by $1.3 million per month starting October 31, 2020 until it reaches a floor of $10.0 million.
(3)Recourse on the Pacific Western Facility was limited to $10.0 million as of June 30, 2021, subject to certain exceptions. This amount was subsequently decreased to $7.5 million, subject to certain exceptions, as discussed below.
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. OnIn June 25, 2020,2021, Bluegreen amended the Liberty Bank Facility to extend the revolving credit period from June 20202021 to September 2021. On August 3, 2021, the facility was amended to further extend the revolving credit period to June 2021,2024 and extend the maturity date from March 2023June 2024 to June 2024. In addition,2026. As described in further detail below, the amendment, among other things, also increased the advance rates and decreased the interest rate on future borrowings. The advance rate with respect to Qualified Timeshare Loans is 85% (an increase from 85%the 80% advance rate in place prior to 80%the August amendment) of the unpaid principal balance of the Qualified Timeshare Loans. The advance rate with respectis 70% (an increase from the 60% advance rate in place prior to Nonconforming Qualified Timeshare Loans remained 60%the August amendment) of the unpaid principal balance of Non-Conforming Qualified Timeshare Loans. The amendment also reduced the maximumMaximum permitted outstanding borrowings from $50.0 million toare $40.0 million, subject to
the terms of the facility, and commencing on July 1, 2020, decreased thefacility. The interest rate on outstanding borrowings prior to the Wall Street Journal (“WSJ”)August amendment is the Prime Rate minus 0.10%0.10% with a floor of 3.40% from; provided, however, that pursuant to the August amendment, the interest rate on those borrowings will be the Prime Rate minus 0.50% with a floor of 4.00%3.00% if Bluegreen borrows an additional $15.0 million by December 31, 2021. The interest rate on future borrowings will be the Prime Rate minus 0.50% with a floor of 3.00%. In addition, recourseRecourse to Bluegreen under the amended facility was reducedis limited to $5.0 million (a decrease from $10.0 million prior to the August amendment), 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 atby maturity. See “2020 Term Securitization” below for information regarding repayments under this facility during October 2020.
NBA ReceivablesPacific Western Facility. Bluegreen/Big Cedar VacationsBluegreen has a revolving VOI notes receivable hypothecation facility (the “NBA Receivables“Pacific Western Facility”) with NationalPacific Western Bank, of Arizona (“NBA”) which wasprovides for advances on eligible VOI notes receivable pledged under the facility, subject to specified terms and conditions, during a revolving credit period. In July 2021, Bluegreen amended and restated on September 25, 2020. The Amendedthe facility, which increased the maximum outstanding borrowings from $40.0 million to $50.0 million, subject to eligible collateral and Restated NBA Receivables Facilitycustomary terms and conditions; extended the revolving advance period from September 20202021 to September 2023 and2024; extended the maturity date from March 2025September 2024 to March 2028. In addition, the interest rate on all new advances made underSeptember 2027; and amended certain other terms of 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,including a future decrease in the interest rate on borrowings as described below. Eligible “A” VOI notes receivable that meet certain eligibility and FICO score requirements, which Bluegreen believes are typically consistent with loans originated under its current credit underwriting standards, are subject to an 85% advance rate. The Pacific Western Facility also allows for certain eligible “B” VOI notes receivable (which have less stringent FICO score requirements) to be funded at a 65% (53% advance rate prior to the amendment). Until September 21, 2021, borrowings under the Pacific Western Bank Facility will continue to bear interest at the prevailing rate under the facility, at September 25, 2020,which is the 30-day Libor rate plus 2.75%, subject to a 3.00% floor. Pursuant to the extent then remainingamendment to the Pacific Western Bank Facility, effective September 21, 2021, all borrowings 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 fromwill bear interest at an annual rate equal to the prior30-day Libor rate of 85%)plus 2.50%, subject to eligible collaterala 2.75% floor. Principal and specified terms and conditions, duringinterest under the revolving credit period. The maximum borrowings allowed underPacific Western Bank Facility are paid as cash is collected on the
facility remains at $70.0 million. pledged receivables, with the remaining balance being due upon maturity. In addition, subject to certain exceptions, the amendment reduced Bluegreen’s recourse liability from $10.0 million 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$7.5 million. PSubject to the terms of the facility, principal and interest payments received on pledged receivables are applied to principalrincipal and interest due under the facility,Pacific Western Bank Facility are paid as cash is collected on the pledged receivables, with the remaining outstanding balance being due by maturity.maturity in September 2027.
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 written off during the fourth quarter of 2020.
ExceptOther than as described above, there were 0no new debt issuances or significant changes related to the above listed facilities during the ninesix months ended SeptemberJune 30, 2020.2021. See Note 1310 to ourthe Company’s Consolidated Financial Statements included in our 2019its 2020 Annual Report on Form 10-K for additional information regarding the 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 regardingFinancial data relating to the Company’s junior subordinated debentures as of June 30, 2021 and December 31, 2020 was as follows (dollars in thousands):
September 30, 2020 | December 31, 2019 | June 30, 2021 | December 31, 2020 | ||||||||||||||||||||
Effective | Effective | Effective | Effective | ||||||||||||||||||||
Carrying | Interest | Carrying | Interest | Carrying | Interest | Carrying | Interest | Maturity | |||||||||||||||
Amounts | Rates (1) | Amounts | Rates (1) | Amounts | Rates (1) | Amounts | Rates (1) | Years (2) | |||||||||||||||
Woodbridge - Levitt Capital Trusts I - IV | $ | 66,302 | 4.11 - 4.16% | $ | 66,302 | 5.74 - 5.95% | $ | 66,302 | 3.99 - 4.05% | $ | 66,302 | 4.01 - 4.04% | 2035 - 2036 | ||||||||||
Bluegreen Statutory Trusts I - VI | 110,827 | 5.07 - 5.21% | 110,827 | 6.74 - 6.86% | 104,596 | 4.99 - 5.10% | 110,827 | 5.01 - 5.12% | 2035 - 2037 | ||||||||||||||
Unamortized debt issuance costs | (1,075) | (1,129) | (1,022) | (1,057) | |||||||||||||||||||
Unamortized purchase discount | (38,117) | (38,746) | (35,428) | (37,895) | |||||||||||||||||||
Total junior subordinated debentures | $ | 137,937 | $ | 137,254 | $ | 134,448 | $ | 138,177 | |||||||||||||||
(1)The Company’s junior subordinated debentures bear interest at 3-monththree-month LIBOR (subject to quarterly adjustment) plus a spread ranging from 3.80% to 4.90%.
(2)
AllAs of June 30, 2021 and December 31, 2020, all of the junior subordinated debentures were eligible for redemption by Woodbridge and Bluegreen, as applicable, astwo wholly owned subsidiaries of September 30, 2020 and December 31, 2019.the Company.
See Note 13During February 2021, Bluegreen purchased approximately $4.0 million of BST II trust preferred securities (par value of $6.1 million) for approximately $4.0 million and delivered such securities to the Company’s consolidated financial statements includedtrust in exchange for the 2019 Annual Report for additional information regarding the Company’scancellation of par value of $6.1 million of Bluegreen’s junior subordinated debentures.debentures held by BST II.
Debt Compliance and Amounts Available under Credit FacilitiesAvailability
As of SeptemberJune 30, 2020, BVH and its subsidiaries were2021, the Company was in compliance with all material financial debt covenants under theirits debt instruments. As of SeptemberJune 30, 2020, Bluegreen2021, we had availability of approximately $182.4$270.0 million under itsour receivable-backed purchase and credit facilities, inventory lines of credit and corporate credit line, subject to eligible collateral and the terms of the facilities, as applicable.
6. Revenue RecognitionNote Payable to BBX Capital
In connection with its spin-off of BBX Capital in September 2020, the Company issued a $75.0 million note payable to BBX Capital that accrues interest at a rate of 6% per annum and requires payments of interest on a quarterly basis. Under the terms of the note, we have the option in our 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 the Company 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 events. As of June 30, 2021 and December 31, 2020, $1.1 million was included in other liabilities in the Company’s unaudited consolidated balance sheet as accrued interest payable in connection with this note payable.
8. Fair Value of Financial Instruments
ASC 820 Fair Value Measurements and Disclosures (Topic 820) defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The inputs used to measure fair value are classified into the following hierarchy:
Level 1: | Unadjusted quoted prices in active markets for identical assets or liabilities |
Level 2: | Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability |
Level 3: | Unobservable inputs for the asset or liability |
The table below sets forthcarrying amounts of financial instruments included in the Company’s revenue disaggregated by categoryconsolidated financial statements and their estimated fair values as of June 30, 2021 and December 31, 2020 were as follows (in thousands):
As of June 30, 2021 | As of December 31, 2020 | |||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||
Cash and cash equivalents | $ | 216,112 | $ | 216,112 | $ | 221,118 | $ | 221,118 | ||||
Restricted cash | 46,651 | 46,651 | 35,986 | 35,986 | ||||||||
Notes receivable, net | 414,602 | 562,194 | 409,349 | 549,819 | ||||||||
Note payable to BBX Capital, Inc. | 75,000 | 77,585 | 75,000 | 78,218 | ||||||||
Lines-of-credit, notes payable, and | ||||||||||||
receivable-backed notes payable | 499,452 | 509,300 | 532,719 | 547,400 | ||||||||
Junior subordinated debentures | 134,448 | 125,500 | 138,177 | 133,500 | ||||||||
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 | ||||||
Cash and cash equivalents. The amounts reported in the unaudited consolidated balance sheets for cash and cash equivalents approximate fair value.
Restricted cash.
7. Income Taxes The amounts reported in the unaudited consolidated balance sheets for restricted cash approximate fair value.
BVHNotes receivable, net. The fair value of the Company’s notes receivable is estimated using Level 3 inputs and its subsidiaries fileis based on estimated future cash flows considering contractual payments and estimates of prepayments and defaults, discounted at a consolidated U.S. federal income tax return and income tax returns in various state and foreign jurisdictions.market rate.
Effective income tax rates for interim periods are based uponNote Payable to BBX Capital. The fair value of the Company’s currentnote payable to BBX Capital was determined using Level 3 inputs by discounting the net cash outflows estimated annual rate, which varies based uponto be used to repay 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.debt.
Lines-of-credit, notes payable, and receivable-backed notes payable.The amounts reported in the Company’s effective income tax rateunaudited consolidated balance sheets for the threelines of credit, notes payable, and nine months ended September 30, 2020 from continuing operations was (0.7)%.receivable-backed notes payable, approximate fair value for indebtedness that provides for variable interest rates. The effective income tax rate was different than the expected federal income tax rate of 21% due to the impactfair value of the Company’s nondeductible executive compensation. In connection withfixed-rate, receivable-backed notes payable was determined using Level 3 inputs by discounting the spin-off of BBX Capital,net cash outflows estimated to be used to repay the Company accelerateddebt. These obligations are to be satisfied using the vesting of outstanding restricted stock awards and paid incentive bonuses which amounted to $32.6 million of nondeductible compensation.proceeds from the consumer loans that secure the obligations.
Junior subordinated debentures.The fair value of the Company’s effective income taxjunior subordinated debentures is estimated using Level 3 inputs based on the contractual cash flows discounted at a market rate foror based on market price quotes from the three and nine months ended September 30, 2019 from continuing operations was 27%. The effective tax rate was different than the expected federal income tax rate of 21% due to the impact of nondeductible executive compensation and 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%.over-the-counter bond market.
The Company’s effective income tax rate for the three and nine months ended September 30, 2020 from discontinued operations reflects a change in the Company’s forecasted operating results for the annual period, which resulted in the additional tax benefits recognized during the three months ended September 30, 2020.
The Company’s effective income tax rate for the three and nine months ended September 30, 2019 from discontinued operations was different than the expected federal income tax rate of 21% due to the impact of state income taxes.
8.9. Commitments and Contingencies
Litigation Matters
In the ordinary course of business, BVHthe Company 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 other individuals and entities, and weit also receivereceives individual consumer complaints as well as complaints received through regulatory and consumer agencies, including Offices of State Attorneys General. The Company takes these matters seriously and attempts to resolve any such issues as they arise. WeThe Company may also become subject to litigation related to the COVID-19 pandemic, including with respect to any actions we takethe Company takes 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.
Management is not at this time able to estimate a range of reasonably possible losses with respect to matters in which it is reasonably possible that a loss will occur. In certain matters, management is unable to estimate the loss or reasonable range of loss until additional developments provide information sufficient to support an assessment of the loss or range of loss. Frequently in these matters, the claims are broad and the plaintiffs have not quantified or factually supported their claim.
As of June 30, 2021, there were no material pending legal proceedings against the Company or its subsidiaries other than those involving Bluegreen as described below.
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.Bluegreen Litigation
The following is a description of certain litigation matters:material pending legal proceedings involving Bluegreen:
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 Vacations Unlimited (“BVU”), Bluegreen’s wholly owned subsidiary, which assertedasserts 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 aboutduring 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 purported class action litigation in San Bernardino Superior Court against Bluegreen Vacations Unlimited, Inc. (“BVU”). The central claims in the complaint, as amended during June 2018, include alleged 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 seek 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 An agreement was subsequently reach to settle all claims, which will include payment to Bluegreen on behalf of all but one Plaintiff. A Joint Notice of Settlement was filed with the matter for an immaterial amount. The parties have executed the settlement documents. Theappellate court issued preliminary approvaladvising of the settlement agreement on September 8, 2020. The final approval hearing is set for January 2021.and that the Plaintiffs have filed a voluntary Dismissal Notice of Appeal.
On June 28, 2018, Melissa S. Landon, Edward P. Landon, Shane Auxier and Mu Hpare, individually and on behalf of all others similarly situated, filed a purported class action lawsuit against Bluegreen and BVU asserting claims for alleged violations of the Wisconsin Timeshare Act, Wisconsin law prohibiting illegal referral selling, and Wisconsin law prohibiting illegal attorney’s fee provisions. PlaintiffsPlaintiffs’ 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 Bluegreenthe
defendants misrepresented who the seller of the real property was; that Bluegreenthe defendants misrepresented the buyer’s right to cancel; that Bluegreenthe defendants included an illegal attorney’s fee provision in the sales document(s); that Bluegreenthe defendants offered an illegal “today only” incentive to purchase; and that Bluegreen utilizesthe defendants utilized 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 BluegreenBVU one or more VOIs within six years prior to the filing of this lawsuit. Plaintiffs seek statutory damages, attorneys’ fees and injunctive relief. Bluegreen hasand BVU moved to dismiss the case, and on November 27, 2019, the Courtcourt issued a ruling granting the motion in part. Bluegreen has answeredPlaintiffs moved for class certification, which the remaining claims. Bluegreendefendants have opposed. The Company believes the lawsuit is without merit and intends tois vigorously defenddefending 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. Plaintiff seeks certification of a class comprised of other persons in the United States who 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.
was stayed pending the United States Supreme Court’s decision in Facebook, Inc. v. Duguid. On January 7, 2019, Debbie Adair and NaN other timeshare purchasers filed a lawsuit against BVU and Bass Pro alleging violationsApril 1, 2021, the Supreme Court issued decision on the Facebook case which was favorable to Bluegreen’s position that an automatic telephone dialing system was not used in this case. Bluegreen believes the ruling disposes of the 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. Bluegreen agreed to indemnify Bass Pro with respect to the claims brought against Bluegreen in this proceedingplaintiff’s claim and filed a motion to dismiss. On April 6, 2020,Notice of Supplemental Authority advising the court granted Bluegreen’s motion to dismiss, and on April 29, 2020,of the court entered final judgment in Bluegreen’s favor.ruling.
On July 18, 2019, Eddie Boyd, et al. filed an action alleging that BVU and co-defendants violated the Missouri Merchandise Practices Act for allegedly making false statements and misrepresentations with respect to the sale of VOIs. Plaintiffs further have filed a purported class action allegation that BVU’s charging of an administrative processing fee constitutes the unauthorized practice of law, and have also asserted that Bluegreen and theirits 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 Judgecourt certified a class regarding the unauthorized practice of law claim and dismissed the claims regarding abuse of process. On January 11, 2021, the Court issued an order that the class members are not entitled to rescission of their contracts because they failed to plead fraud in the inducement. Discovery is ongoing. Bluegreen believes the lawsuit is without merit.merit and intends to move to decertify the class and for summary judgment.
On July 7, 2020, Robert Barban and approximately 172 other plaintiffs filed an action against BluegreenBluegreen’s subsidiaries, Bluegreen Resorts Management, Inc. (“BRM”) and Vacation Trust, Inc. (“VTI”), seeking a financial review. Plaintiffs further allegealleged that the allocation system in place doesdid not allow them to freely and easily use occupy, and enjoy the accommodations and facilities. Finally, theyThey also allege that BRM has unreasonably escalated operating costs and that VTI failed to protect the plaintiffs from these costs. Bluegreen intends to vigorously defendOn April 14, 2021, the action and intend to move to dismisscourt entered an order dismissing the complaint on a number of grounds including the parties’ agreements to arbitrate these issues.case without prejudice.
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”).TCPA. Specifically, the named plaintiff alleges that he received at least ninenumerous telemarketing calls from BVU while he was on the National Do Not Call Registry. He seeks Bluegreenfiledamotionto 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 onSeptember18,2020. On February 18, 2020. Bluegreen2021, plaintiff filed a motion for class certification seeking to dismisscertify a class of thousands of individual proposed class members. On April 15, 2021 a court-ordered mediation was conducted at which time the amended complaint on October 2, 2020, which is fully briefed and pending beforeparties were not able to resolve the Court. Discoverylawsuit. Bluegreen has begunopposed the class certification and is ongoing.vigorouslydefendingtheaction.
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 includesincluded 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. Bluegreen believes this assertion to be erroneous and that the claims against BVU are without merit. Bluegreen has moved to dismiss the complaint.
On March 15, 2018, BVU entered into an Agreement for Purchase and Sale of Assets with T. Park Central, LLC, O. Park Central, LLC, and New York Urban Ownership Management, LLC, (collectively “New York Urban”) (“Purchase and Sale Agreement”), which provided for the purchase of The Manhattan Club inventory over a number of years and the management contract for The Manhattan Club Association, Inc. On October 7, 2019, New York Urban initiated arbitration proceedings against BVU alleging that The Manhattan Club Association, Inc. (of which BVU was a member) was obligated to pay an increased management fee to a New York Urban affiliate and that this higher amount would be the benchmark for BVU’s purchase of the management contract under the parties’ Purchase and Sale Agreement. New York Urban also sought damages in the arbitration proceedings in excess of $10 million for promissory estoppel and tortious interference. On November 19, 2019, the parties participated in mediation but did not resolve the matter. On November 20, 2019, New York Urban sent a letter to BVU advising that it was: (1) withdrawing its arbitration demand; (2) notifying the Board that it was not seeking to execute the proposed amendment to the Management Agreement that was originally sent to Bluegreen on April 24, 2019; and (3) was not going to pay itself a management fee for the 2020 operating year in an amount exceeding the 2019 operating year (i.e., $6.5 million). On November 21, 2019, BVU sent New York Urban a Notice of Termination of the Purchase and Sale Agreement. On November 25, 2019, New York Urban sent its own Notice of Termination and a separate letter containing an offer to compromise if BVU resigned its position on the Board and permitted New York Urban to enforce its rights to the collateral. On November 29, 2019, BVU accepted the offer and on December 18, 2019, BVU provided New York Urban with resignations of its members on the Board of Directors.
On April 2, 2021, New York Urban initiated new arbitration proceedings against BVU, alleging it is owed over $70 million for periodic inventory closings that have not occurred since the Purchase and Sale Agreement was terminated or that will not occur because of the termination. New York Urban also seeks over $50 million because, due to the Purchase and Sale Agreement’s termination, the closing on the management contract will not occur. Bluegreen believes this claim is without merit. Bluegreen is pursuing declaratory relief and breach of the settlement agreement. The parties are discussing submitting the claims for arbitration.
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 iswe are unable to contact the owners unless allowed by law. Bluegreen believesWe believe these exit firms have encouraged such owners to become delinquent and ultimately default on their obligations and that such actions and Bluegreen’sits inability to contact the owners arehave been a primary contributor tomaterial factor in the increase in its annual default rates. Bluegreen’sOur average annual default rates have increased from 6.9% in 2015 to 9.7% to date in 2020. Bluegreen2021. We also estimatedestimate that approximately 13.7%13.1% of the total delinquencies on its VOI notes receivable as of June 30, 20202021 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, BluegreenNovember 13, 2019, we filed a lawsuit against timeshare exit firm Totten FranquiThe Montgomery Law Firm and certain of its affiliates (“TPEs”).affiliates. In the complaint, Bluegreen alleged that the TPEs, through various forms of deceptive advertising, as well as inappropriate direct contact with VOI owners, such firm and its affiliates made false statements about Bluegreen and provided misleading information to the VOI owners. The TPEs haveowners and encouraged nonpayment by consumers and exacted fees for doing so.consumers. Bluegreen believes the consumers are paying fees to the TPEsfirm and its affiliates in exchange for illusory services andservices. 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. During the course of the litigation, the TPEs and Totten Franqui filed for bankruptcy, which resulted in the litigation being stayed. Bluegreen has reached favorable settlements with the
TPE principals and are awaiting formal court approval of a settlement with the bankruptcy trustee. The settlement with the principals includes findings of fact against the defendants regarding their business practices and a permanent injunction prohibiting the principals of the TPE from working again in the timeshare exit space.Defendants’ motion to dismiss was denied. Discovery is ongoing.
On November 13, 2019,2020, Bluegreen filed a lawsuit against timeshare exit firm, Carlsbad Law Group, LLP, and certain of its associated law firms and affiliates. On December 30, 2020, Bluegreen filed a lawsuit against timeshare exit firm, The MontgomeryMolfetta Law Firm, and certain of its associated law firms, affiliates, (also included in “TPEs”and cohorts, including Timeshare Termination (“TTT”). In both of these actions, Bluegreen makes substantially the 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 assertedsame claims against the TPEs under the Lanham Act,timeshare exit firms and its associated law firms and affiliates as well as tortious interference with contractual relations, civil conspiracy to commit tortious interference, and other claims. Defendants havethose made in its action against The Montgomery Law Firm described above. In June 2021, counsel for TTT moved to dismisswithdraw, citing TTT’s insolvency. Discovery is ongoing with respect to the complaint which is pending.Carlsbad matter
Other Commitments, Contingencies and Guarantees
The following is a description of certain commitments, contingencies, and guarantees:
Bluegreen,Company, indirectly through Bluegreen and 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 Bluegreenit with the right to market and sell vacation packages at kiosks in each certainof Bass Pro and Cabela’sPro’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 valuemade 2 annual payments of the settlement, plus attorney’s fees and costs, totaling approximately $39.1 million. The first $4.0 million annual payment was madeto Bass Pro during both January 2020.2020 and 2021. As of SeptemberJune 30, 2021 and December 31, 2020, $14.5$11.0 million and $14.7 million, respectively, was included in accrued liabilities and other in the unaudited consolidated balance sheet, 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.agreement.
During the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, VOI sales to prospects and leads generated by the agreement with Bass Pro accounted for approximately 11%17% and 13%10%, 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 2020,2021, Bluegreen paid $5.2$6.9 million for this fixed fee, of which $1.3$3.6 million was prepaid and is included in the Company’s unaudited condensed consolidated statement of financial conditionbalance sheet as of SeptemberJune 30, 2020.2021. During the three and six months ended June 30, 2021, Bluegreen had marketingincurred $1.6 million and $3.4 million, respectively, for this fixed fee which is included in selling, general and administrative expenses in the Company’s unaudited consolidated statements of operations at 26 Cabela’s stores at Septemberand comprehensive income, compared to $1.1 million and $2.5 million for the three and six months ended June 30, 2020, and is required to begin marketing operations in at least 14 more stores by December 31, 2020.respectively. 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, As of June 30, 2021, Bluegreen resumed its retailhad sales and marketing operations at certaina total of 112 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.Stores.
In lieu of paying maintenance fees for unsold VOI inventory, Bluegreen may enter into subsidy agreements with certain HOAs. During the ninesix months ended SeptemberJune 30, 2021 and 2020, and 2019, Bluegreen paid $7.7made subsidy payments related to such subsidies of $4.7 million and $10.5$4.6 million, respectively, which are included in subsidy paymentscost of other fee-based services in connection with these arrangements.the Company’s unaudited consolidated statements of operations and comprehensive income. As of SeptemberJune 30, 2020,2021, Bluegreen had $8.4 million accrued $10.1 million for such subsidies, which is included in accrued liabilities and other liabilities in the Company’s condensedunaudited consolidated statementbalance sheet as of financial condition.such date. As of December 31, 2019,2020, Bluegreen had 0 accrued liabilities for such subsidies.
In 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 agreements with other executives related to their separation from Bluegreen or change in position. Pursuant to the terms of these agreements, Bluegreen agreed to make payments totaling $2.5 million through September 30, 2020. All payments have been made under these agreements as of September 30, 2020.
9
.10. Common Stock and Cash Incentive Bonuses
Stock Incentive Plans
At the Company’s Annual Meeting of Shareholders held on July 21, 2021, the Company’s shareholders approved the Bluegreen Vacations Holding Corporation 2021 Incentive Plan (the “Plan”), which allows for the issuance of up to 2,000,000 shares of the Company’s Class A Common Stock pursuant to restricted stock awards and options which may be granted under the Plan. The Plan also permits for the grant of performance-based cash awards. On January 21, 2020,June 3, 2021, the compensation committeeCompensation Committee of BVH’sthe Company’s Board of Directors granted awardsapproved the grant of 488,503468,439 restricted shares of BBX Capital’sthe Company’s Class A Common Stock to itscertain executive officers and employees under the BBX Capital Corporation 2014 Incentive Plan. After giving effect to those awards, 1,531,561 shares of Class A Common Stock remained available for grant under the Plan as of June 30, 2021. The Company accounts for compensation cost for unvested restricted stock awards based on the fair value of the award on the measurement date, which is generally the grant date, and is recognized on a straight-line basis over the requisite service period of the award, with forfeitures recognized as incurred. The aggregate grant date fair value of the awards granted in June 2021 was $10.2 million, and$9.7 million. 275,939 of the shares were scheduled togranted cliff vest ratably in annual installments of approximately 122,1254 years, or June 3, 2025, and 192,500 shares over 4 periods beginning on October 1, 2020.
In contemplation 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 accelerationcliff vest in August 2020, BVH recognized compensation expense during10 years, or June 3, 2031. During the three and ninesix months ended SeptemberJune 30, 20202021, the Company recognized $0.2 million of approximately $19.8 million (which represented the unrecognizedshare-based compensation expenses associatedexpense in connection with thethese restricted stock awards and, as of June 30, 2020). The fair value of the2021, restricted stock awards that vested were $16.7 million based on the fair value of BVH’s common stock on the vesting date. There were 0 restricted stock awards outstanding as of September 30, 2020.
Cash Incentive Bonuses
BVH’s Compensation Committee approved the payment, prior to the consummation of the spin-off, of a totalshare expense of approximately $19.5$9.5 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).remained unamortized.
Earnings per Share
During the three and ninesix months ended SeptemberJune 30, 2020, the weighted average2021, 234,220 shares and 58,555 shares, respectively, of unvested restricted stock awards outstanding were not included inexcluded from the computation of diluted earnings per share as the shares were antidilutive due tounder the Company’s recognition of a loss for such periods. treasury stock method. During the three and ninesix months ended SeptemberJune 30, 2019, 3,039,2652020, 1,016,981 shares of unvested restricted stock awards were not included inexcluded from the computation of diluted earnings per share for the period as the shares were antidilutive due to the Company’s recognition of a loss for such periods.the period.
10.11. Noncontrolling Interests and Redeemable Noncontrolling Interest
Noncontrolling interests in the Company’s consolidated subsidiaries consisted of the following (in thousands):
As of | As of | |||||||||||
June 30, | December 31, | |||||||||||
September 30, | December 31, | 2021 | 2020 | |||||||||
2020 | 2019 | |||||||||||
Bluegreen (1) | $ | 22,320 | 39,740 | $ | — | $ | 22,821 | |||||
Bluegreen / Big Cedar Vacations (2) | 53,555 | 49,534 | ||||||||||
Other (3) | — | 1,001 | ||||||||||
Bluegreen/Big Cedar Vacations (2) | 58,073 | 52,026 | ||||||||||
Total noncontrolling interests | $ | 75,875 | 90,275 | $ | 58,073 | $ | 74,847 | |||||
(1)Prior to May 5, 2021, the Company beneficially owned approximately 93% of Bluegreen’s outstanding common stock. As a result of the merger effected on May 5, 2021, Bluegreen is now a wholly owned subsidiary.
(2)Bluegreen owns 51% of Bluegreen/Big Cedar Vacations.
See “Our Business” under Note 1 above for information regarding the statutory short-form merger effected on May 5, 2021, pursuant to which the Company acquired all of the approximately 7% of the outstanding shares of Bluegreen’s common stock that the Company did not previously beneficially own. During the nine2021 period prior to the short-form merger, Bluegreen did not repurchase or retire any shares of its common stock. During the six months ended SeptemberJune 30, 2020, Bluegreen repurchased and retired 1,878,400 shares of its common stock in a private transaction for $11.7 million.million and retired those shares.
Income (loss) attributable to noncontrolling interests from continuing operations including redeemable noncontrolling interests, consisted of the following (in thousands):
For the Three Months Ended | For the Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||
Bluegreen (1) | $ | 713 | 1,962 | 293 | 2,346 | |||||||
Bluegreen / Big Cedar Vacations (2) | 2,644 | 2,248 | 4,021 | 9,095 | ||||||||
Net income (loss) attributable to noncontrolling interests - continuing operations | $ | 3,357 | 4,210 | 4,314 | 11,441 | |||||||
(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 of Financial Instruments12. Income Taxes
ASC 820 Fair Value MeasurementsThe Company and Disclosures (Topic 820) defines fair value asits subsidiaries file a consolidated U.S. federal income tax return and income tax returns in various state and foreign jurisdictions. With certain exceptions, the price that would be receivedCompany is no longer subject to sell an assetU.S. federal, state and local, or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The inputs used to measure fair value are classified into the following hierarchy:non-U.S. income tax examinations by tax authorities for years before 2017 for federal returns and 2016 for state returns.
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The carrying amountsCompany’s effective income tax rate was approximately 28% and 11% during the three months ended June 30, 2021 and 2020, respectively, and 28% and 3% during the six months ended June 30, 2021 and 2020, respectively. Effective income tax rates for interim periods are based upon the Company’s then current estimated annual rate. The effective income tax rate varies based upon the estimate of financial instruments includedtaxable earnings as well as on the mix of taxable earnings in the consolidated financial statementsvarious states in which the Company and their estimated fair values are as follows (in thousands):
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 | ||||||||
Cashits subsidiaries operate. As such, the Company’s effective tax rates for the 2021and 2020 periods reflect an estimate of its annual taxable earnings, state taxes, non-deductible items and cash equivalents.changes in valuation allowance on deferred tax assets for each respective year. The amounts reported in2020 periods include estimates made at the Company’s condensed statementstime related to the full year’s impact of financial condition for cash and cash equivalents approximate fair value.the COVID-19 pandemic.
Restricted cash. The amounts reportedCertain of the Company’s state filings are under routine examination. While there is no assurance as to the results of these audits, the Company does not currently anticipate any material adjustments in the unaudited consolidated balance sheets for restricted cash approximate fair value.connection with these examinations.
Notes receivable, net. The fair valueAs of our notes receivable is estimated using Level 3 inputsJune 30, 2021, the Company did 0t have any significant amounts accrued for interest and is based on estimated future cash flows considering contractual payments and estimates of prepayments and defaults, discounted at a market rate.penalties or recorded for uncertain tax positions.
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 Company’s condensed statements of financial condition for lines of credit, notes payable, and receivable-backed notes payable approximate fair value for indebtedness that provides for variable interest rates. The fair value of fixed-rate, receivable-backed notes payable was determined using Level 3 inputs by discounting the net cash outflows estimated to be used to repay the debt. These obligations are to be satisfied using the proceeds from the consumer loans that secure the obligations.
Junior subordinated debentures. The fair value of our 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.
12. Certain Relationships and13. Related Party Transactions
The Company may be deemed to be controlled by Alan B. Levan, the Company’s Chairman, Chief Executive Officer and President of the Company, John E. Abdo, the Company’s Vice Chairman of the Company, Jarett S. Levan, a director of the Company and its former President of the Company, and Seth M. Wise, a director of the Company and former Executive Vice President.President of the Company. Together, they may be deemed to beneficially own shares of BVH’sthe Company’s Class A Common Stock and Class B Common Stock representing approximately 79%78% of BVH’sthe Company’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, and effective January 1, 2020, Mr. Alan B. Levan also became Bluegreen’s President and 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 serves as Bluegreen’s Chief Financial Officer and Chief Operating Officer. Mr. Alan Levan, Mr. Abdo, and Mr. Lopez and the Company’s other executives receive a significant portion of their compensation from Bluegreen on behalf of the Company and also receive compensation from BVH for their respective services to BVH.Bluegreen. Further, followingin connection with the spin-off of BBX Capital during September 2020, Mr. Jarett Levan became the Chief Executive Officer and President and a director of BBX Capital, Inc., Mr. Alan Levan became the Chairman of the Board of BBX Capital, Inc. Mr. John E. Abdo became Vice Chairman of BBX Capital Inc. and Seth M. Wise became Executive Vice President and a director of BBX Capital. Mr. Alan Levan, Mr. Abdo, Mr. Jarett Levan and Mr. Wise may also be deemed to control BBX Capital Inc.through their ownership of BBX Capital’s Class A Common Stock and Class B Common Stock.
Woodbridge,See “Our Business” under Note 1 above for information regarding the statutory short-form merger effected on May 5, 2021, pursuant to which the Company acquired all of the approximately 7% of the outstanding shares of Bluegreen’s common stock that the Company did not previously beneficially own and Bluegreen became a wholly-ownedwholly owned subsidiary of BVH, owns approximately 93% of Bluegreen’s outstanding common stock as of September 30, 2020.the Company.
BluegreenThe Company paid or reimbursed BBX Capital $0.4 million and $0.7 million during the Companythree and six months ended June 30, 2021, respectively, and $0.3 million and $0.6 million during the three and six months ended June 30, 2020, respectively, for management advisory, risk management, administrative and other services. The Company had $0.1 million in accrued expenses for the services in thedescribed above as of June 30, 2021. There were 0 amounts accrued for such services as 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.December 31, 2020.
In April 2015, pursuant to a Loan Agreement and Promissory Note, a wholly-owned subsidiary of Bluegreen provided an $80.0 million loan to BVH. 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 SeptemberJune 30, 2021 and 2020, the Company paid Abdo Companies, Inc. $38,000 and 2019, BVH recognized $0.5 million$77,000, respectively, and $1.2 million, respectively, of interest expense onduring the loan from Bluegreen. During the ninesix months ended SeptemberJune 30, 2021 and 2020, the Company paid Abdo Companies, Inc. $77,000 and 2019, BVH recognized $2.5 million and $3.6 million,$153,000, respectively, of interest expense on the loan. The loan balance and related interest expense were eliminated in consolidation inexchange for certain management services. John E. Abdo, the Company’s condensed consolidated financial statements.Vice Chairman, is the principal shareholder and Chief Executive Officer of Abdo Companies, Inc.
Excluding 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, 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. Pursuant to the 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 are used by another party to the Consolidated Tax Agreement to offset its tax liability, the party providing the benefit will receive an amount for the tax benefits realized. Under this agreement, Bluegreen did not make or receive any payments to BVH or its affiliated entities during the three months ended September 30, 2019. Bluegreen paid BVH or its affiliated entities $13.0 million during the nine months ended September 30, 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 on September 30, 2020.
In connection with its spin-off of BBX Capital, the spin-off, BVHCompany issued a $75.0 million note payable to BBX Capital, Inc. that accrues interest atCapital. See Note 7 for a ratedescription of 6% per annum and requires payments of interest on a quarterly basis. Under the terms of the Company’s note BVH has the option in its discretionpayable 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.
BBX Capital. In connection with the spin-off, the Company also entered in theinto a Transition Services Agreement, Tax Matters Agreement and Employee Matters Agreement with BBX Capital, Inc.Capital.
The Transition Services Agreement generally sets out the respective rights, responsibilities and obligations of Parentthe Company 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 Capitaleither party 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 note payable to BBX Capital, Inc. that accrues interest at a rate of 6% per annum and requires payments of interest on a quarterly basis.
During each of the three and ninesix months ended SeptemberJune 30, 2020 and 2019,2021, BBX Capital reimbursed 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.$0.2 million under this agreement.
13.14. Segment Reporting
Operating segments are defined as components of an enterprise about which separate financial information is available that is regularly reviewed by the chief operating decision maker (“CODM”) in assessing performance and deciding how to allocate resources. Reportable segments consist of 1one or more operating segments with similar economic characteristics, products and services, production processes, type of customer, distribution system or regulatory environment.
Prior to BVH’sAs a result of the 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’sCompany’s CODM, who is also Bluegreen’s CODM, has determined that he will manage BVH’sthe Company’s operations, including its subsidiaries, 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’sthe Company’s marketing and sales activities related to the VOIs that it owns, Bluegreen’sare owned by the Company, VOIs they acquireacquired under just-in-time and secondary market inventory arrangements, Bluegreen’sor sales of VOIs through fee-for-service arrangements with third-party developers, Bluegreen’sas well as consumer financing activities in connection with sales of VOIs that Bluegreen owns,owned by the Company, and Bluegreen’s title services operations through a wholly-ownedwholly owned subsidiary.
The Resort operations and club management segment includes Bluegreen’s provision of management services activities for Bluegreen’sthe Bluegreen Vacation Club and for a majority of the HOAs of the resorts within Bluegreen’sthe Bluegreen Vacation Club. In connection with those services, Bluegreenthe Company 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 amounts set forth in the column “Corporate and Other” are general and administrative expenses of the Company that 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, including corporate overhead for discontinued operations.
The information provided for segment reporting is obtained from internal reports utilized by the Company’s CODM, and themanagement. The presentation and allocation of results of operations may not reflect the actual economic costs of the segments as standalone businesses. Due to the nature of ourthe Company’s business, assets are not allocated to a particular segment, and therefore management does not evaluate the balance sheet by segment. If a different basis of allocation were utilized, the relative contributions of the segments might differ but the relative trends in the segments’ operating results would, in management’s view, likely not be materially impacted.
The amount 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 corporate headquarters, including executive compensation, legal, accounting, human resources, investor relations, and executive offices including corporate overhead for discontinued operations. Included in BVH Corporate selling and general administrative expenses are spin-off related costs associated with the acceleration of the vesting 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, 2020.
The Company evaluates segment performance based on 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 SeptemberJune 30, 20202021 (in thousands):
Revenue: | Sales of | Resort | Bluegreen Corporate | BVH Corporate | Elimination |
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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):
Revenue: | Sales of | Resort | Bluegreen Corporate | BVH Corporate | Elimination |
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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 nine months ended September 30, 2020 (in thousands):
Revenue: | Sales of | Resort | Bluegreen Corporate | BVH Corporate | Elimination |
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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):
Sales of | Resort | Corporate | Elimination | Total | ||||||||||||||||||||||||||||
Revenue: | Sales of | Resort | Bluegreen Corporate and other | BVH Corporate | Elimination |
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Sales of VOIs | $ | 186,351 | $ | — | $ | — | — | $ | — | $ | 186,351 | $ | 91,812 | $ | — | $ | — | $ | — | $ | 91,812 | |||||||||||
Fee-based sales commission revenue | 161,033 | — | — | — | — | 161,033 | 35,618 | — | — | — | 35,618 | |||||||||||||||||||||
Other fee-based services revenue | 10,092 | 83,923 | — | — | — | 94,015 | 2,863 | 27,579 | — | — | 30,442 | |||||||||||||||||||||
Cost reimbursements | — | 48,933 | — | — | — | 48,933 | — | 15,552 | — | — | 15,552 | |||||||||||||||||||||
Mortgage servicing revenue | 4,621 | — | — | — | (4,621) | — | 1,270 | — | — | (1,270) | — | |||||||||||||||||||||
Interest income | 59,985 | — | 5,979 | 1,605 | (3,600) | 63,969 | 19,538 | — | 57 | — | 19,595 | |||||||||||||||||||||
Other income, net | — | — | — | (127) | 197 | 70 | — | — | 439 | — | 439 | |||||||||||||||||||||
Total revenue | 422,082 | 132,856 | 5,979 | 1,478 | (8,024) | 554,371 | 151,101 | 43,131 | 496 | (1,270) | 193,458 | |||||||||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||||||||
Cost of VOIs sold | 17,541 | — | — | — | — | 17,541 | 7,024 | — | — | — | 7,024 | |||||||||||||||||||||
Net carrying cost of VOI inventory | 18,853 | — | — | — | (18,853) | — | 6,118 | — | — | (6,118) | — | |||||||||||||||||||||
Cost of other fee-based services | 4,832 | 40,228 | — | — | 18,853 | 63,913 | 784 | 8,745 | — | 6,118 | 15,647 | |||||||||||||||||||||
Cost reimbursements | — | 48,933 | — | — | — | 48,933 | — | 15,552 | — | — | 15,552 | |||||||||||||||||||||
Selling, general and administrative expenses | 299,028 | — | 59,145 | 36,417 | (310) | 394,280 | 95,276 | — | 19,678 | (168) | 114,786 | |||||||||||||||||||||
Mortgage servicing expense | 4,114 | — | — | — | (4,114) | — | 1,102 | — | — | (1,102) | — | |||||||||||||||||||||
Interest expense | 15,391 | — | 14,564 | 7,915 | (3,600) | 34,270 | 3,907 | — | 4,969 | — | 8,876 | |||||||||||||||||||||
Total costs and expenses | 359,759 | 89,161 | 73,709 | 44,332 | (8,024) | 558,937 | 114,211 | 24,297 | 24,647 | (1,270) | 161,885 | |||||||||||||||||||||
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) | ||||||||||||||||||||
Income (loss) before non-controlling interest | ||||||||||||||||||||||||||||||||
and provision for income taxes | $ | 36,890 | $ | 18,834 | $ | (24,151) | $ | — | $ | 31,573 | ||||||||||||||||||||||
Add: Depreciation and amortization | 4,577 | 1,050 | 1,430 | 200 | ||||||||||||||||||||||||||||
Add: Severance | 594 | 238 | ||||||||||||||||||||||||||||||
Add: Bass Pro Settlement | 39,121 | — | ||||||||||||||||||||||||||||||
Segment Adjusted EBITDA (1) | $ | 107,152 | 44,983 | $ | 38,320 | $ | 19,034 | |||||||||||||||||||||||||
(1)See Management’s Discussion and Analysis of Financial Condition and Results of Operations for information regarding Adjusted EBITDA, including how we definethe definition of 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 June 30, 2020 (in thousands):
Sales of | Resort | Corporate | Elimination |
| |||||||||||
Revenue: | |||||||||||||||
Sales of VOIs | $ | 9,054 | $ | — | $ | — | $ | — | $ | 9,054 | |||||
Fee-based sales commission revenue | 1,135 | — | — | — | 1,135 | ||||||||||
Other fee-based services revenue | 1,349 | 25,064 | — | — | 26,413 | ||||||||||
Cost reimbursements | — | 11,850 | — | — | 11,850 | ||||||||||
Mortgage servicing revenue | 1,510 | — | — | (1,510) | — | ||||||||||
Interest income | 19,061 | — | 1,228 | (871) | 19,418 | ||||||||||
Other income, net | — | — | 355 | — | 355 | ||||||||||
Total revenue | 32,109 | 36,914 | 1,583 | (2,381) | 68,225 | ||||||||||
Costs and expenses: | |||||||||||||||
Cost of VOIs sold | 1,038 | — | — | — | 1,038 | ||||||||||
Net carrying cost of VOI inventory | 10,913 | — | — | (10,913) | — | ||||||||||
Cost of other fee-based services | 719 | 6,903 | — | 10,913 | 18,535 | ||||||||||
Cost reimbursements | — | 11,850 | — | — | 11,850 | ||||||||||
Selling, general and administrative expenses | 32,329 | — | 18,055 | (564) | 49,820 | ||||||||||
Mortgage servicing expense | 946 | — | — | (946) | — | ||||||||||
Interest expense | 4,171 | — | 6,258 | (871) | 9,558 | ||||||||||
Total costs and expenses | 50,116 | 18,753 | 24,313 | (2,381) | 90,801 | ||||||||||
Income (loss) before non-controlling interest | |||||||||||||||
and provision for income taxes | $ | (18,007) | $ | 18,161 | $ | (22,730) | $ | — | $ | (22,576) | |||||
Add: Depreciation and amortization | 1,483 | 190 | |||||||||||||
Add: Severance | 1,206 | 99 | |||||||||||||
Segment Adjusted EBITDA (1) | $ | (15,318) | $ | 18,450 | |||||||||||
14.(1)See Management’s Discussion and Analysis of Financial Condition and Results of Operations for information regarding Adjusted EBITDA including, the definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income.
The table below sets forth the Company’s segment information for the six months ended June 30, 2021 (in thousands):
Sales of | Resort | Corporate | Elimination | Total | |||||||||||
Revenue: | |||||||||||||||
Sales of VOIs | $ | 147,743 | $ | — | $ | — | $ | — | $ | 147,743 | |||||
Fee-based sales commission revenue | 61,336 | — | — | — | 61,336 | ||||||||||
Other fee-based services revenue | 5,137 | 54,202 | — | — | 59,339 | ||||||||||
Cost reimbursements | — | 32,160 | — | — | 32,160 | ||||||||||
Mortgage servicing revenue | 2,581 | — | — | (2,581) | — | ||||||||||
Interest income | 38,666 | — | 190 | — | 38,856 | ||||||||||
Other income, net | — | — | 278 | — | 278 | ||||||||||
Total revenue | 255,463 | 86,362 | 468 | (2,581) | 339,712 | ||||||||||
Costs and expenses: | |||||||||||||||
Cost of VOIs sold | 12,193 | — | — | — | 12,193 | ||||||||||
Net carrying cost of VOI inventory | 13,891 | — | — | (13,891) | — | ||||||||||
Cost of other fee-based services | 1,503 | 17,338 | — | 13,891 | 32,732 | ||||||||||
Cost reimbursements | — | 32,160 | — | — | 32,160 | ||||||||||
Selling, general and administrative expenses | 160,930 | — | 45,146 | (326) | 205,750 | ||||||||||
Mortgage servicing expense | 2,255 | — | — | (2,255) | — | ||||||||||
Interest expense | 8,070 | — | 10,541 | — | 18,611 | ||||||||||
Total costs and expenses | 198,842 | 49,498 | 55,687 | (2,581) | 301,446 | ||||||||||
Income (loss) before non-controlling interest | |||||||||||||||
and provision for income taxes | $ | 56,621 | $ | 36,864 | $ | (55,219) | $ | — | $ | 38,266 | |||||
Add: Depreciation and amortization | 2,835 | 395 | |||||||||||||
Segment Adjusted EBITDA (1) | $ | 59,456 | $ | 37,259 | |||||||||||
(1)See Management’s Discussion and Analysis of Financial Condition and Results of Operations for information regarding Adjusted EBITDA including, the definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income.
The table below sets forth the Company’s segment information for the six months ended June 30, 2020 (in thousands):
Sales of | Resort | Corporate | Elimination | Total | |||||||||||
Revenue: | |||||||||||||||
Sales of VOIs | $ | 54,182 | $ | — | $ | — | $ | — | $ | 54,182 | |||||
Fee-based sales commission revenue | 42,500 | — | — | — | 42,500 | ||||||||||
Other fee-based services revenue | 4,072 | 51,655 | — | — | 55,727 | ||||||||||
Cost reimbursements | — | 30,970 | — | — | 30,970 | ||||||||||
Mortgage servicing revenue | 3,105 | — | — | (3,105) | — | ||||||||||
Interest income | 39,209 | — | 3,480 | (2,071) | 40,618 | ||||||||||
Other income, net | — | — | 525 | — | 525 | ||||||||||
Total revenue | 143,068 | 82,625 | 4,005 | (5,176) | 224,522 | ||||||||||
Costs and expenses: | |||||||||||||||
Cost of VOIs sold | 5,137 | — | — | — | 5,137 | ||||||||||
Net carrying cost of VOI inventory | 18,827 | — | — | (18,827) | — | ||||||||||
Cost of other fee-based services | 2,189 | 19,230 | — | 18,827 | 40,246 | ||||||||||
Cost reimbursements | — | 30,970 | — | — | 30,970 | ||||||||||
Selling, general and administrative expenses | 115,467 | — | 45,577 | (739) | 160,305 | ||||||||||
Mortgage servicing expense | 2,366 | — | — | (2,366) | — | ||||||||||
Interest expense | 8,835 | — | 12,692 | (2,071) | 19,456 | ||||||||||
Total costs and expenses | 152,821 | 50,200 | 58,269 | (5,176) | 256,114 | ||||||||||
Income (loss) before non-controlling interest | |||||||||||||||
and provision for income taxes | $ | (9,753) | $ | 32,425 | $ | (54,264) | $ | — | $ | (31,592) | |||||
Add: Depreciation and amortization | 3,042 | 380 | |||||||||||||
Add: Severance | 3,769 | 1,233 | |||||||||||||
Segment Adjusted EBITDA (1) | $ | (2,942) | $ | 34,038 | |||||||||||
(1)See Management’s Discussion and Analysis of Financial Condition and Results of Operations for information regarding Adjusted EBITDA including, the definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income.
15. Discontinued Operations
As described in Note 1, onOn September 30, 2020, BVH (formerly BBX Capital Corporation)the Company completed the spin offspin-off its former wholly owned 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. BVHCapital. The Company continues to hold its investment in Bluegreen, andBluegreen. BBX Capital, Inc.which became a separate public company as a result of the spin-off, holds all of the other businesses and investments previously owned by BVH,the Company, including BBX Capital Real Estate, BBX Sweet Holdings, and Renin.The Companyno longer holds any interest in BBX Capital.
BBX Capital Inc. and its subsidiaries’ operations are presented as discontinued operations in the Company’s financial statements.
The 2021 and December 31, 2020, there were no carrying amountamounts of major classes of assets andor liabilities included as part of discontinued operations is as follows (in thousands):operations.
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 arewere as follows (in thousands):
For the Three Months | For the Nine Months | ||||||||||||||||||||||||
Ended September 30, | Ended September 30, | For the Three Months Ended | For the Six Months Ended | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||
Revenues: | |||||||||||||||||||||||||
Trade sales | $ | 35,692 | 47,660 | $ | 99,628 | 138,705 | $ | — | $ | 23,043 | $ | — | $ | 63,920 | |||||||||||
Sales of real estate inventory | 4,970 | 371 | 14,248 | 5,030 | — | 2,839 | — | 9,278 | |||||||||||||||||
Interest income | 366 | 212 | 586 | 762 | — | 81 | — | 197 | |||||||||||||||||
Net gains on sales of real estate assets | 164 | 399 | 130 | 11,395 | |||||||||||||||||||||
Net gain (loss) on sales of real estate assets | — | 12 | — | (34) | |||||||||||||||||||||
Other revenue | 933 | 1,137 | 2,398 | 3,033 | — | 453 | — | 1,051 | |||||||||||||||||
Total revenues | 42,125 | 49,779 | 116,990 | 158,925 | — | 26,428 | — | 74,412 | |||||||||||||||||
Costs and Expenses: | |||||||||||||||||||||||||
Cost of trade sales | 27,981 | 31,860 | 80,154 | 94,978 | — | 22,385 | — | 52,157 | |||||||||||||||||
Cost of real estate inventory sold | 3,367 | — | 9,473 | 2,643 | — | 1,474 | — | 6,106 | |||||||||||||||||
Interest expense | — | 118 | — | 409 | |||||||||||||||||||||
Recoveries from loan losses, net | (807) | (1,821) | (5,844) | (4,206) | — | (1,525) | — | (5,037) | |||||||||||||||||
Impairment losses | — | 4,030 | 31,588 | 6,786 | — | 3,305 | — | 31,588 | |||||||||||||||||
Selling, general and administrative expenses | 13,394 | 19,590 | 40,342 | 57,492 | — | 9,452 | — | 26,755 | |||||||||||||||||
Total costs and expenses | 43,935 | 53,777 | 155,713 | 158,102 | — | 35,091 | — | 111,569 | |||||||||||||||||
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) | — | |||||||||||||||||||||
Equity in net earnings (losses) of unconsolidated real estate joint ventures | — | 145 | — | 696 | |||||||||||||||||||||
Foreign exchanges gain | — | (5) | — | 273 | |||||||||||||||||||||
Other income | 82 | 68 | 192 | 710 | — | 75 | — | 111 | |||||||||||||||||
(Loss) income from discontinued operations before income taxes | $ | (5,759) | 24,603 | $ | (41,593) | 38,785 | |||||||||||||||||||
Loss from discontinued operations before income taxes | $ | — | $ | (8,448) | $ | — | $ | (36,077) | |||||||||||||||||
The following are the major components of the statement of cash flows from discontinued operations were as follows (in thousands):
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 | |||
For the Six Months Ended | ||||||
2021 | 2020 | |||||
Operating activities: | ||||||
Net loss | $ | — | $ | (34,936) | ||
Adjustment to reconcile net loss to net cash used in operating activities: | ||||||
Recoveries from loan losses, net | — | (5,037) | ||||
Depreciation, amortization and accretion, net | — | 3,780 | ||||
Net losses on sales of real estate and property and equipment | — | 34 | ||||
Equity earnings of unconsolidated real estate joint ventures | — | (696) | ||||
Return on investment in unconsolidated real estate joint ventures | — | 3,991 | ||||
Increase in deferred income tax asset | — | (1,144) | ||||
Impairment losses | — | 31,588 | ||||
Decrease in trade inventory | — | 2,342 | ||||
Increase in trade receivables | — | (2,053) | ||||
Decrease in real estate inventory | — | (316) | ||||
Net change in operating lease assets and liabilities | — | (507) | ||||
Increase in other assets | — | (234) | ||||
Decrease in other liabilities | — | 1,840 | ||||
Net cash used in operating activities | $ | — | $ | (1,348) | ||
Investing activities: | ||||||
Return of investment in unconsolidated real estate joint ventures | — | 748 | ||||
Investments in unconsolidated real estate joint ventures | — | (12,664) | ||||
Proceeds from repayment of loans receivable | — | 5,259 | ||||
Additions to real estate | — | (59) | ||||
Purchases of property and equipment | — | (3,574) | ||||
Decrease in cash from other investing activities | — | (34) | ||||
Net cash used in investing activities | $ | — | $ | (10,324) | ||
15.16. 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.
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the Company’s unaudited consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, including the Company’s audited consolidated financial statements and related notes contained therein.
Except as otherwise noted or where the context requires otherwise, requires, the termsreferences in this Quarterly Report on Form 10-Q to, “the Company,” “we,” “us,” or“us” and “our” refersrefer to Bluegreen Vacations Holding Corporation, together with its consolidated subsidiaries, including Bluegreen and its consolidated subsidiaries, and the termreferences to “BVH” refersrefer to Bluegreen Vacations Holding Corporation as a standalone entity.its parent company only level and references to “Bluegreen” refer to Bluegreen Vacations Corporation together with its consolidated subsidiaries.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include all statements that do not relate strictly to historical or current facts and can 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 ourBVH and Bluegreen’s future financial performance, our business prospects strategy and relationships, ourstrategy, anticipated financial position, liquidity and capital needs, economicincluding conditions surrounding, and industry conditions and theirthe impact on our business and future financial performance,of, the Coronavirus Disease of 2019 (“COVID-19”) pandemic, 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 changes in circumstances that are difficult to predict. Our actualActual results may differ materially from those expressed in, or implied by, the forward-looking statements as a result of various factors, including, among others:others, the following:
the Company has limited sources of cash and is dependent upon distributions from its subsidiaries to fund its operations; the Company’s business and liquidity has been adversely impacted by the COVID-19 pandemic and it has suspended dividend payments from its subsidiaries in light of such impact;
risks associated with the Company’s indebtedness, including that the Company will be required to utilize cash flow to service its indebtedness, that indebtedness may make the Company more vulnerable to economic downturns, and that indebtedness may subject the Company to covenants and restrictions on its operations and activities and the payment of dividends;
the Company’s shareholders’ interests will be diluted to the extent additional shares of the Company’s common stock are issued;
the Company has suspended regular payments of quarterly dividends to its shareholders in light of COVID-19 pandemic and there is no assurance that the Company will resume payments of dividends;
the impact of economic conditions on the Company, including the impact of the COVID-19 pandemic, the price and liquidity of the Company’s Class A Common Stock and Class B Common Stock, and the Company’s ability to obtain additional capital, including the risk that if the Company needs or otherwise believes it is advisable to issue debt or equity securities or to incur indebtedness in order to fund the Company’s operations or investments, it may not be able to issue any such securities or obtain such indebtedness on favorable terms, or at all;
if the Company does not maintain compliance with the listing requirements of the NYSE, which includes, among other things, a minimum average closing price, share volume, and market capitalization, the Company’s Class A Common Stock will not remain listed for trading on the NYSE;
adverse conditions in the stock market, the public debt market, and other capital markets and the impact of such conditions on the Company;
risks of cybersecurity threats, including the potential misappropriation of assets or confidential information, corruption of data or operational disruptions;
risks related to potential business expansion or other opportunities, including that they may involve significant costs and the incurrence of significant indebtedness and may not be successful;
the impact on the Company’s consolidated financial statements and internal control over financial reporting of the adoption of new accounting standards;
risks associated with legal proceedings and other regulatory proceedings, including as described herein;
the preparation of financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) involves making estimates, judgments and assumptions, and any changes in estimates, judgments and assumptions used could have a material adverse impact on the financial condition and operating results of the Company or its subsidiaries.
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 risks 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 ourthe Company’s ability to operate successfully resume full business operations thereafter;during and after the pandemic, governmental and agency orders, mandates and guidance in response to the COVID-19 pandemic and the duration thereof, which is uncertain and willmay impact ourthe Company’s ability to fully utilize resorts, sales centers and other marketing activities;activities, and the pace of recovery following the COVID-19 pandemic; other risks including competitive conditions; our liquidity and the availability of capital; ourthe Company’s ability to successfully implement ourits strategic plans and initiatives to navigate the COVID-19 pandemic; risks that ourthe Company’s current or future marketing alliances may not be available to usit in the future; risks that default rates may increase and exceed ourthe Company’s expectations; risks related to ourthe Company’s 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 towardsregarding travel and the vacation ownership industries; and the risk that ourBluegreen’s 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;all
;
adverse changes to, expirations or terminations of, or interruptions in, and other risks relating to Bluegreen’sthe Company’s business and strategic relationships, management contracts, exchange networks or other strategic marketing alliances, and the risk that our the Company’s business relationship with Bass Pro under the revised terms of our the parties’ marketing agreement and our its relationship with Choice Hotels may not be as profitable as anticipated, or at all, or otherwise not 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 the Company’s network are located, including weather-related events and adverse conditions related to the COVID-19 pandemic;
decreased demand from prospective purchasers of vacation ownership interests (“VOIs”);
our the Company’s ability to maintain adequate/sufficient/desired amounts of inventory of VOIs for sale;
the availability of financing, our the Company’s ability to sell, securitize or borrow against ourits VOI notes receivable aton acceptable terms; and our the Company’s ability to successfully increase our its credit facility capacity or enter into capital market transactions or other alternatives to provide for sufficient available cash for a sustained period of time;
our the Company’s indebtedness may impact our its financial condition and results of operations, and the terms of our the Company’s indebtedness may limit, among other things, our the Company’s activities and ability to pay dividends, and we the Company may not comply with the terms of ourits indebtedness;
changes in the Company’s senior management;
our the Company’s ability to comply with regulations applicable to the vacation ownership industry or our other activities,regulations, and the costs of compliance efforts or a failure to comply;
our the Company’s ability to successfully implement our marketing strategiesits growth strategy and plans and the impact they may have on our its results and financial condition,conditions, including that efforts to increase ourany increased developed VOI sales to the extent pursued,efforts may not be successful and may adversely impact our the Company’s cash flow;
flows;
our the Company’s ability to compete effectively in the highly competitive vacation ownership industry and against hotel and providers of other hospitality and lodging alternatives;
our the Company’s ability to offer or further enhance the Vacation Club experience for our the Bluegreen Vacation Club owners and risks related to our the Company’s efforts and expenses in connection therewith, including that theythe efforts may not result in the benefits anticipated and that expenses may be greater than anticipated;
our the Company’s customers’ compliance with their payment obligations under financing provided by us,the Company, the increased presence and efforts of “timeshare-exit” firms and the success of actions which we the Company may take in connection therewith, and the impact of defaults on ourits operating results and liquidity position;
the ratings of third-party rating agencies, including the impact of any downgrade on our the Company’s ability to obtain, renew or extend credit facilities, or otherwise raise funds;
changes in our the Company’s business model and marketing efforts, plans or strategies, which may cause marketing expenses to increase or adversely impact our revenue,its operating results and financial condition, and such expenses as well as our the Company’s investments, including investments in new and expanded sales centers,offices, and other sales and marketing initiatives, including screening methods and data driven analysis, may not achieve the desired results;
technology and other changes and factors which may impact our the Company’s telemarketing efforts, including new cell phone technologies that identify or block marketing vendor calls;
the impact of the resale market for VOIs on our the Company’s business, operating results and financial condition;
risks associated with our the Company’s relationships with third-party developers, including that third-party developers who provide VOIs to be sold by us the Company 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 the Company or to the homeowners associations that maintain the resorts they developed;
risks associated with legal proceedings and regulatory proceedings, examinations or audits of our the Company’s operations, including claims of noncompliance with applicable regulations or for development related defects, and the impact they may have on our its financial condition and operating results;
audits of our the Company or ourits 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 its financial condition and operating results;
risks that natural disasters, including hurricanes, earthquakes, fires, floods and windstorms, may adversely impact our businessits financial condition and operating results, including due to any damage to physical assets or interruption of access to physical assets or operations resulting therefrom, and the frequency andor severity of natural disasters may increase due to climate change or other factors;
our the Company’s ability to maintain the integrity of internal or customer data, the failure of which could result in damage to ourits reputation and/or subject us the Company to costs, fines or lawsuits;
risks related to potential business expansion orthe risk that the Company’s marketing operations at Cabela’s stores and other opportunities that we may pursue, including that they may involve significant costs and the incurrence of significant indebtedness andinitiatives may not be successful;
offset the reduction in mini-vacation package sales due to the elimination of certain programs; and
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 the Company’s operations or competitive position, and the risk that our Company’s information technology expenditures may not result in the expected benefits;benefits.
Reference is also made to 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 inherent to our business,described in the vacation ownership industry and ownership of our common stock,Company’s reports filed with the SEC, including, without limitation, those discussed in the “Risk Factors” section of and elsewhere in, ourthe Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and the “Risk Factors” section of this2020. The foregoing factors are not exclusive.
Non-GAAP Financial Measures
This Quarterly Report on Form 10-Q.10-Q includes discussions of terms that are not recognized terms under GAAP, and financial measures that are not calculated in accordance with GAAP, including Bluegreen’s system-wide sales of
VOIs, guest tours, sale to tour conversion ratio, average sales volume per guest, EBITDA, Segment Adjusted EBITDA, Adjusted EBITDA, and Adjusted EBITDA Attributable to Shareholders. EBITDA is defined as earnings, or net income, before taking into account interest income (excluding interest earned on VOI notes receivable), interest expense (excluding interest expense incurred on debt secured by VOI notes receivable), income and franchise taxes and depreciation and amortization. Adjusted EBITDA is defined as its EBITDA, adjusted to exclude loss (gain) on assets held for sale, share-based compensation expense, and other items that the Company believes are not representative of ongoing operating results. Accordingly, certain items such as severance charges net of employee retention tax credits and incremental costs associated with the COVID-19 pandemic are excluded in the computation of Adjusted EBITDA. For purposes of the calculation of EBITDA and Adjusted EBITDA for each period presented, no adjustments were made for interest income earned on VOI notes receivable or the interest expense incurred on debt that is secured by such notes receivable because they are both considered to be part of the ordinary operations of our business. References to “Adjusted EBITDA Attributable to Shareholders” means Adjusted EBITDA excluding amounts attributable to the non-controlling interest in Bluegreen/Big Cedar Vacations (in which Bluegreen owns a 51% interest) and Bluegreen (in which it owns a 93% until May 5, 2021 when the Company acquired all of the 7% of the outstanding shares of Bluegreen’s common stock that the Company did not previously beneficially owned pursuant to a short-form merger). For a discussion of such metrics, see “Key Business and Financial Metrics Used by Management” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. In addition, see “Results of Operations” below for a reconciliation of Adjusted EBITDA to net income and Bluegreen’s system-wide sales of VOIs to gross sales of VOIs.
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 2019 Annual Report forFor a discussion of critical accounting policies, see “Significant Accounting Policies” in the Company’s critical accounting policies.Annual Report on Form 10-K for the year ended December 31, 2020.
New Accounting Pronouncements
See Note 12 to the Company’s condensedunaudited consolidated financial statements included in Item 1 of this report for a discussion of new accounting pronouncements applicable to the Company.
Company Overview
On September 30, 2020, the Company completed its spin-off of BBX Capital, Inc. (“BBX Capital”). The former wholly owned subsidiary became a separate public company as a result of the spin-off and holds all of the historical business and investments other than the Company’s investment in Bluegreen, Vacations Holding Corporationa leading vacation ownership company that markets and sells VOIs and manages resorts in popular leisure and urban destinations. As a result of the spin-off the Company is a Florida-based“pure play” holding company which ownswhose sole asset is its wholly owned subsidiary Bluegreen.
Prior to May 5, 2021, the Company beneficially owned approximately 93% of Bluegreen’s outstanding common stock. On May 5, 2021, the Company acquired all of the approximately 7% of the outstanding shares of Bluegreen’s common stock not previously beneficially owned by the Company through a statutory short-form merger under Florida law. In connection with the merger, Bluegreen’s shareholders (other than the Company) received 0.51 shares of the Company’s Class A Common Stock for each share of Bluegreen’s common stock that they held at the effective time of the merger (subject to rounding up of fractional shares). The Company issued approximately 2.66 million shares of its Class A Common Stock in connection with the merger. As a result of the completion of the merger, Bluegreen Vacations Corporation (“Bluegreen Vacations” or “Bluegreen”)became a wholly owned subsidiary of the Company.
The Company’s goal is to build long-term shareholder value. The Company’s objective is long-term growth as measured by increases in book value and intrinsic value over time. As described below, the Company consummated the spin-off of all of its assets and businesses other than the assets and activities related to Bluegreen Vacations. Further, the Company from time to time considers repurchases of its outstanding securities and the outstanding securities of its subsidiaries subject to market conditions and other factors.
As of SeptemberJune 30, 2020,2021, the Company had total consolidated assets of approximately $1.2$1.3 billion and shareholders’ equity of approximately $177.3$291.7 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 and six months ended SeptemberJune 30, 20202021 compared to the same 2019 period:three and six months ended June 30, 2020:
Total consolidated revenues of $144.2$193.5 million, a 27.9% decrease184% increase compared to the same 2019 period.three months ended June 30, 2020. Total consolidated revenues of $339.7 million, a 51% increase compared to the six months ended June 30, 2020.
LossIncome before income taxes from continuing operations of $25.1$31.6 million compared to incomea loss of $16.6$22.6 million during the same 2019 period.three months ended June 30, 2020. Income before income taxes from continuing operations of $38.3 million compared to a loss of $31.6 million during the six months ended June 30, 2020.
Net income attributable to shareholders of $19.5 million compared to net loss attributable to common shareholders of $25.3$35.8 million during the three months ended June 30, 2020. Net income attributable to shareholders of $22.5 million compared to incomenet loss attributable to shareholders of $22.4$64.1 million during the same 2019 period. six months ended June 30, 2020.
Diluted earnings per share from continuing operations of $0.93 compared to a diluted loss per share from continuing operations of $1.53 compared to a diluted earnings per share of $0.23 for$1.36 during the same 2019 period.
The following summarizes key financial highlights for the ninethree months ended SeptemberJune 30, 2020 compared to the same 2019 period:
Total 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.
2020. Diluted lossearnings per share from continuing operations of $3.35$1.12 compared to a diluted loss per share of $0.88 for$1.83 during the same 2019 period.six months ended June 30, 2020.
The comparison of the Company’s consolidated results from continuing operations for the three and six months ended SeptemberJune 30, 2020 compared2021 to the same 2019 periodthree and six months ended June 30, 2020 were significantly impacted by the following:timing of, and the Companies response to the COVID-19 Pandemic. See below for further details:
A decreaseAn increase 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 implementedBluegreen’s operations in the 2020 period and improved conditions in response to the COVID-19 pandemic, including permanent and temporary reductions in workforce.
In addition to the items discussed above for the three months ended September, 30, 2020, the Company’s consolidated results for the nine months ended September 30, 2020 compared to the same 2019 period were significantly impacted by the following:
2021 periods.
An increase in Bluegreen’s allowanceprovision for loan losses induring the 2020 period as a result of the estimated impact of the COVID-19 pandemic on customer defaults.defaults at that time.
The recognition of a $39.1 million chargeAn increase in Bluegreen’s selling, general and administrative expenses primarily attributable to improved conditions in the 20192021 period. In addition, the 2020 period associated with Bluegreen’s settlement agreement with Bass Proreflects the steps taken to mitigate costs implemented by Bluegreen during the period in June 2019.response to the COVID-19 pandemic.
Segment Results
BVHAs a result of the spin-off of its non-Bluegreen assets and businesses on September 30, 2020, the Company currently reports the results of its business activities through the following reportable segments: Sales of VOIs and financingFinancing; and Resort Operations and Club Management.
Information regarding income before income taxes by reportable segment is set forth in the table below (in thousands):below:
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) | |||||||||||
For the Three Months Ended | For the Six Months Ended | ||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||
(in thousands) | |||||||||||
Sales of VOIs and financing | $ | 36,890 | $ | (18,007) | $ | 56,621 | $ | (9,753) | |||
Resort operations and club management | 18,834 | 18,161 | 36,864 | 32,425 | |||||||
Bluegreen corporate and other | (21,742) | (12,164) | (50,288) | (33,701) | |||||||
BVH corporate | (2,409) | (10,566) | (4,931) | (20,563) | |||||||
Income (loss) before income taxes from continuing operations | 31,573 | (22,576) | 38,266 | (31,592) | |||||||
Provision for income taxes | (7,694) | (2,391) | (8,883) | (938) | |||||||
Net income (loss) from continuing operations | 23,879 | (24,967) | 29,383 | (32,530) | |||||||
Discontinued operations | — | (11,684) | — | (34,936) | |||||||
Net income (loss) | 23,879 | (36,651) | 29,383 | (67,466) | |||||||
Less: Net income attributable to noncontrolling | |||||||||||
interest - continued operations | 4,378 | 5 | 6,908 | 956 | |||||||
Less: Net loss attributable to noncontrolling | |||||||||||
interest - discontinued operations | — | (856) | — | (4,312) | |||||||
Net income (loss) attributable to shareholders | $ | 19,501 | $ | (35,800) | $ | 22,475 | $ | (64,110) | |||
Executive Overview
The Company is a Florida corporation that, as a result of its spin-off of its non-Bluegreen investments and businesses on September 30, 2020 owns substantially all of the Company’s operations and activities relating to the operations and activities of its wholly owned subsidiary, Bluegreen. Prior to May 5, 2021, the Company owned approximately 93% of Bluegreen’s common stock. On May 5, 2021, the remaining 7% of Bluegreen’s common stock was acquired through a statutory short-form merger and Bluegreen became a wholly owned subsidiary of the Company. Bluegreen is a leading vacation ownership company that markets and sells VOIs and manages resorts in popular leisure and urban destinations. OurBluegreen’s resort network includes 45 Club Resorts (resorts in which owners in ourits Vacation Club have the right to use most of the units in connection with their VOI ownership) and 23 Club Associate Resorts (resorts in which owners in ourits Vacation Club have the right to use a limited number of units in connection with their VOI ownership). OurThese Club Resorts and Club Associate Resorts are primarily located in popular, high-volume, “drive-to” vacation locations, including Orlando, Las Vegas, Myrtle Beach, Charleston and Charleston,New Orleans, among others. Through ourBluegreen’s points-based system, the approximately 218,000216,000 ownersin ourBluegreen’s Vacation Club have the flexibility subject to availability to stay at ourunits available at any of Bluegreen’s resorts and have access to nearlyover 11,300 other hotels and resorts through partnerships and exchange networks. We also have aBluegreen’s sales and marketing platform is supported by marketing relationships with nationally-recognized consumer brands, such as with Bass Pro and Choice Hotels. TheseThe Company believes these marketing relationships have historically generatedhelp generate sales within ourits core demographic.
Impact of the COVID-19 Pandemicon our Business
Initial Response and impact to 2020
The COVID-19 pandemic has resulted incaused, and continues to cause, an unprecedented disruption in the U.S. economyand global economies and the travel, hospitality and vacation ownership industries in which the Company operates due to, among other things, resort closures,government ordered “shelter in place” and “stay at home” orders and advisories, travel restrictions, and restrictions on business operations, including government guidance and restrictions with respect to travel, public accommodations, social gatherings, and related matters. OnThese disruptions and the reaction of the general public to the pandemic had a significant adverse impact on the Company's financial condition and operations during the three and six months ended June 30, 2020 and through 2020. In response to the pandemic, during the last week of March 23, 2020, we temporarily closed all of our VOI sales centers; our retailcenters and marketing operations atand took other measures with a goal of mitigating the impact of the pandemic and
positioning the Company to navigate the pandemic successfully. During the second quarter of 2020, we began a phased reopening of resorts and resumption of our business activities under new operating guidelines and with enhanced safety measures and occupancy restrictions. By June 30, 2020, 64 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(out of our Club and Club Associate Resortsthe 89 that were closedopen 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 mandatesMarch 2020) 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,open, we reactivated our Choice Hotels call transfer program, virtually all of our resorts were open, and all but one21 of our 26 VOI sales centers were open. Resort occupancyopen for the third quarter of 2020sales to existing owners and one sales center was approximately 70%. Additionally, in October 2020, we recommenced marketing operations in one additional Bass Pro Shop and commenced marketing operations at 4selling to 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.prospects.
As a result of the effect ofIn response to the pandemic, we implemented several cost mitigating activities beginning in March 2020, including reductions in our workforce of over 1,600 positions and the placement of another approximateapproximately 3,200 of our associates on temporary furlough or reduced work hours. As of SeptemberJune 30, 2020, approximately 3,2002,300 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, duringbasis. During the three and ninesix months ended SeptemberJune 30, 2020, we incurred $0.4$2.2 million and $5.1$6.7 million in severance, respectively, and $1.5$10.7 million and $13.1$11.6 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 ourthe unaudited consolidated statement of operations and comprehensive income for the three and ninesix months ended SeptemberJune 30, 2020.
As a precautionary measure to provide additional liquidity if needed, Also, in March 2020, Bluegreen drew down $60 million under its lines-of-credit and pledged or sold receivables under certain of its various receivable backed facilities to increase its cash position. As of September 30,In June 2020, Bluegreen repaid the $60.0$40 million borrowed under its lines-of-credit. While Bluegreen paid a special cash dividendsyndicated line-of-credit and amended the agreements to modify the definition 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. certain customary covenants. 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 Septembersix months ended June 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 additional allowance for loan losses of $12.0 million, which includesincluded our customary estimate of customer defaults as a result of the COVID–19COVID-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,Impact to 2021 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.outlook
The Company continues to be adversely affected by the economic impact of the COVID-19 pandemic during 2021. The number of reported COVID -19 cases went down during the second quarter and as of June 30, 2021, we were operating marketing kiosks at 112 Bass Pro Shops and Cabela’s stores, including 13 new Cabela’s locations and one new Bass Pro location opened during the six months ended June 30, 2021; the Choice Hotels call transfer program was close to pre-pandemic volume; all but two sales centers were operating and all of our resorts, except for one unrelated to COVID-19 in Surfside, FL, were open. Further, resort occupancy rates were approximately 86% at resorts with sales centers in the second quarter of 2021 facilitated by our ‘drive-to’ network of resorts and we sold 56,000 vacation packages in the second quarter of 2021 compared to 8,000 in the second quarter of 2020. Further, during the second quarter of 2021, the Company experienced an increase in sales of VOIs, which we believe was a sign of improvement in general economic conditions. However, current levels of illness are rising and indicate that the pandemic and its impact on the Company are not over. The CDC recently issued new guidance regarding the use of masks and vaccinations are increasingly being required by government agencies and employers. Various state and local government officials may in the future issue new or revised orders that are different than the ones under which we are currently operating. Accordingly, there remains significant uncertainty as to the probable duration and severity of the pandemic and the likely impact of the pandemic on the Company’s future revenues, net income and other operating results.
VOI Sales and Financing
OurThe Company’s primary business is the marketing and selling of deeded VOIs, developed either by usinternally or by third parties. Customers who purchase these VOIs receive an annual allotment of points, which can be redeemed for stays at one of ourthe Company’s resorts or at nearly 11,300 other hotels and resorts available through partnerships and exchange networks. Historically, VOI companies have funded the majorityThe Company’s goal is to employ a flexible model with a mix of the capital investment in connection with resort development with internal resourcessales of our owned, acquired or developed VOIs and acquisition and development financing. In 2009, we began sellingsales of 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 enableenables 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 driveresult in recurring, incremental and long-term fee streams by adding owners to ourthe Bluegreen Vacation Club and new resort management contracts. Fee-based sales of VOIs comprised 32%33% and 38%17% of system-wide sales of VOIs during the three month and nine months ended September 30,June 31, 2021 and 2020, respectively, and 51% for each34% and 43% of system-wide sales of VOIs during the three and ninesix months ended September 30, 2019.June 31, 2021 and 2020, respectively. While we intendBluegreen intends to remain flexible with respect to ourits sales of the different categories of ourits VOI inventory in the future based on economic conditions, business initiatives and other considerations, weBluegreen currently expectexpects that ourits percentage of fee-based sales will continue to decrease over time as it continues to reflecting our recentincrease its focus on developed VOI sales and secondary market sales. In conjunction with our VOI sales we also generateof VOIs, the Company generates interest income by originating loansproviding financing 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 approximately 18% per annum. As of SeptemberJune 30, 2020,2021, the weighted-average interest rate on ourthe Company’s VOI notes receivable was 14.9%15.1%. In addition, we earnthe Company earns 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 enterThe Company enters into management agreements with the HOAs that maintain most of the resorts in ourBluegreen’s Vacation Club and earn fees for providing management services to those HOAs and ourthe Company’s approximately 218,000216,000 Vacation Club owners. These resort management services include oversight of housekeeping services, maintenance, and certain accounting and administration functions. OurBluegreen’s 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. OurBluegreen’s 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 managethe Company manages the reservation system and provideprovides owner, billing and collection services. In addition to resort and club management services, we earnthe Company earns 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 ourBluegreen’s Club Resorts and Club Associate Resorts were closed during Marchthe second quarter of 2020 in response to the COVID-19 pandemic, all were subsequently reopened by December 31, 2020 and remained open as of September 30, 2020.currently remain open.
Key Business and Financial Metrics 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 2019 Annual Report, we use certainManagement uses several key business and financial metrics that are specific to the vacation ownership industry. For a discussion of such metrics, see “Key Business and terms to discuss our results of operations, including certain terms which are not recognizedFinancial Metrics Used by GAAP, which are described below.Management” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
Sales of VOIs.
Represent sales of our owned VOIs, including developed VOIs and those acquired through JIT and secondary market arrangements, reduced by equity trade allowances and 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-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 us or a third party immediately prior to the sale. Sales of VOIs owned by third parties are transacted as sales of VOIs in our Vacation Club through the same selling and marketing process we use to sell our VOI inventory. We consider system-wide sales of VOIs to be an important operating measure because it reflects all sales of VOIs by our sales and marketing operations without regard to whether we 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 our results as reported under GAAP.
Guest Tours. Represents the number of sales presentations given at our 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 guest tours by the number of VOI sales transactions.
Average Sales Volume Per Guest (“VPG”). Represents the sales attributable to tours at our sales locationsEBITDA and is calculated by dividing VOI sales by guest tours. We consider VPG to be an important operating measure because it measures the effectiveness of our sales process, combining the average transaction price with the sale-to-tour conversion ratio.Adjusted EBITDA
EBIDTAEBITDA, Adjusted EBITDA and Adjusted EBITDA. EBITDA Attributable to Shareholders.We define EBITDA is defined as earnings, or net income, before taking into account interest income (excluding interest earned on VOI notes receivable), interest expense (excluding interest expense incurred on debt secured by our VOI notes receivable), income and franchise taxes and depreciation and amortization. We define Adjusted EBITDA is defined as our EBITDA, adjusted to exclude amounts of loss (gain) on assets held for sale, share-based compensation expense, and other items that the Company believes are not representative of ongoing operating results. Accordingly, the Company excludes certain items such as severance charges net of employee retention tax credits and incremental costs associated with the COVID-19 pandemic. Adjusted EBITDA Attributable to Shareholders is Adjusted EBITDA excluding amounts attributable to the non-controlling interest in Bluegreen/Big Cedar Vacations (in which we ownBluegreen owns a 51% interest), loss (gain) on assets held for sale, and other itemsBluegreen (in which it owns a 93% until May 5, 2021 when the Company acquired all of the 7% of the outstanding shares of Bluegreen’s common stock that we believe arethe Company did 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.previously beneficially owned pursuant to a short-form merger). For purposes of the calculation of EBITDA, Adjusted EBITDA and Adjusted EBITDA calculationsAttributable to Shareholders for each period presented, no adjustments were 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 ourthe Company’s business.
We consider ourThe Company considers EBITDA, Adjusted EBITDA, Adjusted EBITDA Attributable to Shareholders and Segment Adjusted EBITDA to be indicators of Bluegreen’s operating performance, and they are used by usthe Company to measure Bluegreen’sits ability to service debt, fund capital expenditures and expand its business. EBITDA and Adjusted EBITDA are also used by companies, lenders, investors and others because they exclude certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company’s capital structure, debt levels and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provision for income taxes can vary considerably among companies. EBITDA, Adjusted EBITDA and Adjusted EBITDA Attributable to Shareholders also exclude depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.
EBITDA, Adjusted EBITDA and Adjusted EBITDA Attributable to Shareholders are not recognized terms under GAAP and should not be considered as an alternative to net income (loss) or any other measure of financial performance or liquidity, including cash flow, derived in accordance with GAAP, or to any other method or analyzing our results as reported under GAAP. The limitations of using EBITDA, Adjusted EBITDA or Adjusted EBITDA Attributable to Shareholders as an analytical tool include, without limitation, that EBITDA, Adjusted EBITDA and Adjusted EBITDA Attributable to Shareholders do not reflect (i) changes in, or cash requirements for, our working capital needs; (ii) our interest expense, or the cash requirements necessary to service interest or principal payments on ourits 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 we considerthe Company does not believe to be indicative of our 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, Adjusted EBITDA and Adjusted EBITDA Attributable to Shareholders do not reflect any cash requirementsthat may be required for such replacements. In addition, ourthe definition of Adjusted EBITDA or Adjusted EBITDA Attributable to Shareholders may not be comparable to
definitions of Adjusted EBITDA, Adjusted EBITDA Attributable to Shareholders or other similarly titled measures used by other companies.
Reportable Segments Results of Operations
Adjusted EBITDA Attributable to Shareholdersfor the three and ninesix months ended SeptemberJune 30, 20202021 and 2019:2020:
We considerThe Company considers Segment Adjusted EBITDA in connection with ourits evaluation of the operating performance of Bluegreen’sits business segments as described in Note 1314: Segment Reporting to our condensedthe Company’s unaudited consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q. See above for a discussion of ourthe definition of Adjusted EBITDA and related measures, how management uses it to manage Bluegreen’sits business and material limitations on its usefulness. The following tables set forth our Segment Adjusted EBITDA, total Adjusted EBITDA, Adjusted EBITDA Attributable to Shareholders, EBITDA and a reconciliation of EBITDA, Adjusted EBITDA, and Adjusted EBITDA Attributable to Shareholders to net income, the most closely related comparable GAAP financial measure:
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 | ||||
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||
(in thousands) | ||||||||||||
Adjusted EBITDA - sales of VOIs and financing | $ | 38,320 | $ | (15,318) | $ | 59,456 | $ | (2,942) | ||||
Adjusted EBITDA - resort operations | ||||||||||||
and club management | 19,034 | 18,450 | 37,259 | 34,038 | ||||||||
Total Segment Adjusted EBITDA | 57,354 | 3,132 | 96,715 | 31,096 | ||||||||
Less: Bluegreen's Corporate and other | (16,242) | (6,448) | (38,800) | (22,521) | ||||||||
Less: BVH Corporate and other | (563) | (8,858) | (1,352) | (17,109) | ||||||||
Adjusted EBITDA | 40,549 | (12,174) | 56,563 | (8,534) | ||||||||
Less: Adjusted EBITDA attributable to non-controlling interest | (4,782) | (403) | (8,029) | (1,987) | ||||||||
Total Adjusted EBITDA attributable | $ | 35,767 | $ | (12,577) | $ | 48,534 | $ | (10,521) | ||||
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||
(in thousands) | ||||||||||||
Net income (loss) attributable to shareholders | $ | 19,501 | $ | (24,972) | $ | 22,475 | $ | (33,486) | ||||
Net income attributable to the non-controlling interest continuing operations | 4,378 | 5 | 6,908 | 956 | ||||||||
Net Income (loss) | 23,879 | (24,967) | 29,383 | (32,530) | ||||||||
Add: Depreciation and amortization | 3,884 | 3,890 | 7,735 | 7,789 | ||||||||
Less: Interest income (other than interest earned on | ||||||||||||
VOI notes receivable) | (57) | (1,228) | (190) | (3,480) | ||||||||
Add: Interest expense - corporate and other | 4,969 | 6,258 | 10,541 | 12,692 | ||||||||
Add: Franchise taxes | 40 | — | 96 | 17 | ||||||||
Add: Provision for income taxes | 7,694 | 2,391 | 8,883 | 938 | ||||||||
EBITDA | 40,409 | (13,656) | 56,448 | (14,574) | ||||||||
Add: Shared-based compensation expense (1) | 152 | — | 152 | — | ||||||||
(Gain) loss on assets held for sale | (12) | 87 | (37) | 43 | ||||||||
Add: Severance and other (2) | — | 1,395 | — | 5,997 | ||||||||
Adjusted EBITDA | 40,549 | (12,174) | 56,563 | (8,534) | ||||||||
Adjusted EBITDA attributable to the non-controlling interest | (4,782) | (403) | (8,029) | (1,987) | ||||||||
Adjusted EBITDA attributable to shareholders | $ | 35,767 | $ | (12,577) | $ | 48,534 | $ | (10,521) | ||||
(1)Share-based compensation expense for the three and six months ended June 30, 2021 consisted of $0.2 million related to restricted stock awards granted in June 2021.
(2)Severance and other for the three months ended June 30, 2020 consisted of $1.4 million of COVID-19 incremental costs. Severance and other for the six months ended June 30, 2020 consisted of severance of $4.5 million and COVID-19 incremental costs of $1.5 million.
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||
(in thousands) | 2020 | 2019 | 2020 | 2019 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
Gross sales of VOIs | $ | 71,149 | $ | 82,729 | $ | 157,530 | $ | 225,834 | $ | 110,300 | $ | 10,900 | $ | 178,550 | $ | 86,381 | ||||||||
Add: Fee-Based sales | 33,159 | 87,646 | 97,266 | 237,793 | 53,142 | 2,199 | 91,939 | 64,107 | ||||||||||||||||
System-wide sales of VOIs | $ | 104,308 | $ | 170,375 | $ | 254,796 | $ | 463,627 | $ | 163,442 | $ | 13,099 | $ | 270,489 | $ | 150,488 | ||||||||
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 | ||||
For the three and nine months ended SeptemberJune 30, 20202021 compared to the three and nine months ended SeptemberJune 30, 20192020
Sales of VOIs and Financing
For the Three Months Ended September 30, | For the Three Months Ended June 30, | |||||||||||||||||||
2020 | 2019 | 2021 | 2020 | |||||||||||||||||
Amount | % of | Amount | % of | Amount | % of | Amount | % of | |||||||||||||
(in thousands) | ||||||||||||||||||||
Developed VOI sales (1) | $ | 37,314 | 36% | $ | 87,863 | 52% | $ | 63,272 | 39% | $ | 3,505 | 27% | ||||||||
Secondary Market sales | 24,076 | 23 | 72,081 | 42 | 41,393 | 25 | 5,626 | 43 | ||||||||||||
Fee-Based sales | 33,159 | 32 | 87,646 | 51 | 53,142 | 32 | 2,199 | 17 | ||||||||||||
JIT sales | 14,845 | 14 | 4,505 | 3 | 9,293 | 6 | 2,441 | 18 | ||||||||||||
Less: Equity trade allowances (6) | (5,086) | (5) | (81,720) | (48) | (3,658) | (2) | (672) | (5) | ||||||||||||
System-wide sales of VOIs | 104,308 | 100% | 170,375 | 100% | 163,442 | 100% | 13,099 | 100% | ||||||||||||
Less: Fee-Based sales | (33,159) | (32) | (87,646) | (51) | (53,142) | (33) | (2,199) | (17) | ||||||||||||
Gross sales of VOIs | 71,149 | 68 | 82,729 | 49 | 110,300 | 67 | 10,900 | 83 | ||||||||||||
Provision for loan losses (2) | (11,884) | (17) | (16,411) | (20) | (18,488) | (17) | (1,846) | (17) | ||||||||||||
Sales of VOIs | 59,265 | 57 | 66,318 | 39 | 91,812 | 56 | 9,054 | 69 | ||||||||||||
Cost of VOIs sold (3) | (3,597) | (6) | (3,121) | (5) | (7,024) | (8) | (1,038) | (11) | ||||||||||||
Gross profit (3) | 55,668 | 94 | 63,197 | 95 | 84,788 | 92 | 8,016 | 89 | ||||||||||||
Fee-Based sales commission revenue (4) | 22,119 | 67 | 60,478 | 69 | 35,618 | 67 | 1,135 | 52 | ||||||||||||
Financing revenue, net of financing expense | 15,545 | 15 | 15,008 | 9 | 15,799 | 10 | 15,454 | 118 | ||||||||||||
Other income, net | — | 0 | 537 | (1) | ||||||||||||||||
Other fee-based services, title operations and other, net | 481 | 0 | 1,847 | 1 | 2,079 | 1 | 630 | 5 | ||||||||||||
Net carrying cost of VOI inventory | (8,580) | (8) | (5,878) | (3) | (6,118) | (4) | (10,913) | (83) | ||||||||||||
Selling and marketing expenses | (53,613) | (51) | (88,232) | (52) | (87,130) | (53) | (26,844) | (205) | ||||||||||||
General and administrative expenses - sales and | (5,889) | (6) | (7,440) | (4) | (8,146) | (5) | (5,485) | (42) | ||||||||||||
Operating profit - sales of VOIs and financing | 25,731 | 25% | 39,517 | 23% | 36,890 | 23% | (18,007) | -137% | ||||||||||||
Add: Depreciation and amortization | 1,405 | 1,507 | 1,430 | 1,483 | ||||||||||||||||
Add: Severance | 208 | 594 | ||||||||||||||||||
Adjusted EBITDA - sales of VOI and financing | $ | 27,344 | $ | 41,618 | ||||||||||||||||
Add: Severance and other | — | 1,206 | ||||||||||||||||||
Adjusted EBITDA - sales of VOIs and financing | $ | 38,320 | $ | (15,318) | ||||||||||||||||
For the six months ended June 30, 2021 compared to the six months ended June 30, 2020
Sales of VOIs and Financing
For the Six Months Ended June 30, | ||||||||||
2021 | 2020 | |||||||||
Amount | % of | Amount | % of | |||||||
(in thousands) | ||||||||||
Developed VOI sales (1) | $ | 104,654 | 39% | $ | 91,082 | 60% | ||||
Secondary Market sales | 69,418 | 25 | 69,397 | 45 | ||||||
Fee-Based sales | 91,939 | 34 | 64,107 | 43 | ||||||
JIT sales | 13,166 | 5 | 5,382 | 5 | ||||||
Less: Equity trade allowances (6) | (8,688) | (3) | (79,480) | (53) | ||||||
System-wide sales of VOIs | 270,489 | 100% | 150,488 | 100% | ||||||
Less: Fee-Based sales | (91,939) | (34) | (64,107) | (43) | ||||||
Gross sales of VOIs | 178,550 | 66 | 86,381 | 57 | ||||||
Provision for loan losses (2) | (30,807) | (17) | (32,199) | (37) | ||||||
Sales of VOIs | 147,743 | 55 | 54,182 | 36 | ||||||
Cost of VOIs sold (3) | (12,193) | (8) | (5,137) | (9) | ||||||
Gross profit (3) | 135,550 | 92 | 49,045 | 91 | ||||||
Fee-Based sales commission revenue (4) | 61,336 | 67 | 42,500 | 66 | ||||||
Financing revenue, net of financing expense | 30,922 | 11 | 31,113 | 21 | ||||||
Other fee-based services, title operations and other, net | 3,634 | 1 | 1,883 | 1 | ||||||
Net carrying cost of VOI inventory | (13,891) | (5) | (18,827) | (13) | ||||||
Selling and marketing expenses | (145,131) | (54) | (101,984) | (68) | ||||||
General and administrative expenses - sales and | (15,799) | (6) | (13,483) | (9) | ||||||
Operating profit - sales of VOIs and financing | 56,621 | 21% | (9,753) | -6% | ||||||
Add: Depreciation and amortization | 2,835 | 3,042 | ||||||||
Add: Severance and other | — | 3,769 | ||||||||
Adjusted EBITDA - sales of VOIs and financing | $ | 59,456 | $ | (2,942) | ||||||
(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.Bluegreen. 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. 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 $44.1 million during the three and nine months ended September 30, 2020, respectively, and $16.4 million and $39.5 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. Our provision for loan losses as a percentage of gross sales of VOIs was 17% and 28% during the three and nine months ended September 30, 2020, respectively, and 20% and 17% for the three and nine months ended September 30, 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 nine months ended September 30, 2020 and September 30, 2019, respectively.
We believe that the decrease in the provision for loan losses during the three months ended September 30, 2020 as compared to the same period in 2019 was primarily due to an increase in sales 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 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. 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 June 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 during the nine months ended September 30, 2020, decreased by 4% compared to the same period of 2019. See Note 8: Commitments and Contingencies to the Company’s condensed 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 timeshare exit firms will be successful. As a result, actual defaults may differ from our estimates and the allowance for loan losses may not prove to be adequate.
In addition to the factors described which 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 our VOI notes receivable were as follows:
For the Twelve Months Ended September 30, | ||||
2020 | 2019 | |||
Average annual default rates | 9.71% | 8.59% | ||
As of September 30, | ||||
2020 | 2019 | |||
Delinquency rates | 3.23% | 3.31% | ||
System-wide sales of VOIs. System-wide sales of VOIs were $104.3$163.4 million and $254.8$13.1 million during the three and nine months ended SeptemberJune 30, 2021 and 2020, respectively, and $170.4$270.5 million and $463.6$150.5 million during the three and ninesix months ended SeptemberJune 30, 2019,2021 and 2020, respectively. System-wide sales of VOIs increasedare driven by 16.5% through February 29, 2020 comparedguest attendance at a timeshare sale presentation (a “guest tour”) that decide to purchase a VOI. The number of guest tours reflect the same period in 2019. However, as previously described, on March 23, 2020, asnumber of existing owner guests Bluegreen has staying at a resultresort with a sales center and the number of the COVID-19 pandemic, 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. Beginning in mid-May 2020, we started the process of recommencing our sales and marketing operations, except for marketing operations at outlet malls duenew guest arrivals who agree to our determination that trafficattend a sale presentation. Due 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 impactsBluegreen’s decision to temporarily cease marketing activities beginning in March 2020 and the resulting decrease in the vacation package pipeline, the number of guests and owners at resorts in the first half of 2021 was lower than historical levels prior to the pandemic.Further,
the COVID-19 pandemic significantly impacted, system-wide sales of VOIs during the three and nine months ended September 30, 2020 and is expected tomay continue to significantly adverselyimpact, system-wide sales of VOIs for the foreseeable future, including the remainder of 2020. However, theVOIs. The ultimate impact, including the extent and duration of the impact, cannot be predicted at this time.
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. We manage whichThe individual VOIs
are sold is based on several factors, including the needs of fee-based clients, our Bluegreen’s debt service requirements and default resale requirements under term securitizations and similar transactions. These factors and business initiatives contribute to fluctuations in the amount of sales by category from period to period. Fee-Based
Sales comprised 32%of VOIs. Sales of VOIs were $91.8 million and 38%$9.1 million during the three months ended June 30, 2021 and 2020, respectively, and $147.7 million and $54.2 million during the six months ended June 30, 2021 and 2020, respectively. Sales of VOIs were impacted by the factors described below in system-wide sales of VOIs, primarily the adverse impact of the COVID-19 pandemic in the 2020 periods. Gross sales of VOIs were reduced by $18.5 million and $1.8 million during the three months ended June 30, 2021 and 2020, respectively, and $30.8 million and $32.2 million for the six months ended June 30, 2021 and 2020, 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 Bluegreen’s estimates of future notes receivable performance for existing and newly originated loans. Bluegreen’s provision for loan losses as a percentage of gross sales of VOIs was 17% during both the three months ended June 30, 2021 and 2020, and 17% and 37% during the six months ended June 30, 2021 and 2020, respectively. The percentage of Bluegreen’s sales which were realized in cash within 30 days from sale was 45% during the three months ended June 30, 2021, 33% during the three months ended June 30, 2020, 45% during the six months ended June 30, 2021 and 40% during the six months ended June 30, 2020.
In March 2020, Bluegreen recorded an additional allowance of $12.0 million which included Bluegreen’s estimate at that time of customer defaults as a result of changing economic factors related to the COVID-19 pandemic. Bluegreen believes that the COVID-19 pandemic may continue to have an impact on the collectibility of its VOI notes receivable. In addition to the COVID-19 pandemic, the provision for loan losses continues to be impacted by defaults which Bluegreen believes 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. Bluegreen’s defaults associated with such letters during the six months ended June 30, 2021 were approximately the same as during the six months ended June 30, 2020. See Note 9: Commitments and Contingencies to the Company’s unaudited consolidated financial statements included in Item 1 of this report for additional information regarding such letters and actions Bluegreen has taken in connection with such letters. The impact of the COVID-19 pandemic and the continued impact of actions taken by timeshare exit firms are highly uncertain and there is no assurance that Bluegreen’s steps taken to mitigate the impact of the pandemic or actions taken by timeshare exit firms will be successful. As a result, actual defaults may differ from Bluegreen’s estimates and the allowance for loan losses may not prove to be adequate.
The average annual default rates and delinquency rates (more than 30 days past due) on Bluegreen’s VOI notes receivable were as follows:
For the Twelve Months Ended June 30, | ||||
2021 | 2020 | |||
Average annual default rates (1) | 9.73% | 9.50% | ||
As of June 30, | ||||
2021 | 2020 | |||
Delinquency rates (1) | 2.56% | 3.36% | ||
(1)The average annual default rates in the table above include VOIs which have been defaulted but had not yet been charged off due to the provisions of certain of Bluegreen’s receivable-backed notes payable transactions, as well as certain third-party and attorney represented cease and desist loans over 127 days delinquent. Accordingly, these have been removed from the Delinquency rates above.
In addition to the factors described below impacting system-wide sales of VOIs, sales of VOIs are impacted by the proportion of system-wide sales of VOIs during the three and nine months ended September 30, 2020, respectively, and 51% during bothsold on behalf of the three and nine months ended September 30, 2019, respectively. The decreasethird parties on a commission basis, which are not included 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.VOIs.
The following table sets forth certain information for system-wide sales of VOIs for the three and ninesix months ended SeptemberJune 30, 20202021 and 2019:
2020:
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
For the Three Months Ended | For the Nine Months Ended | 2021 | 2020 | Change | 2021 | 2020 | Change | |||||||||||||||||||||||||||||
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 | — | % | ||||||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||||||||||
Number of sales centers open at period-end (1) | 24 | 26 | (8) | % | 24 | 26 | (8) | % | ||||||||||||||||||||||||||||
Number of active sales arrangements | 12 | 12 | — | % | 12 | 12 | — | % | ||||||||||||||||||||||||||||
Total number of VOI sales transactions | 6,130 | 11,613 | (47) | % | 15,657 | 30,530 | (49) | % | 9,677 | 841 | 1,051 | % | 15,874 | 9,527 | 67 | % | ||||||||||||||||||||
Average sales price per transaction | $ | 17,094 | $ | 14,799 | 16 | % | $ | 16,324 | $ | 15,290 | 7 | % | $ | 17,004 | $ | 15,367 | 11 | % | $ | 17,121 | $ | 15,829 | 8 | % | ||||||||||||
Number of total guest tours | 36,268 | 65,875 | (45) | % | 83,022 | 179,180 | (54) | % | 58,533 | 6,089 | 861 | % | 93,354 | 46,754 | 100 | % | ||||||||||||||||||||
Sale-to-tour conversion ratio– | 16.9% | 17.6% | (70) | bp | 18.9% | 17.0% | 190 | bp | 16.5% | 13.8% | 270 | bp | 17.0% | 20.4% | (340) | bp | ||||||||||||||||||||
Number of existing owner guest tours | 25,686 | 5,046 | 409 | % | 44,018 | 23,575 | 87 | % | ||||||||||||||||||||||||||||
Sale-to-tour conversion ratio– | 20.0% | 13.7% | 630 | bp | 20.3% | 23.6% | (330) | bp | ||||||||||||||||||||||||||||
Number of new guest tours | 17,583 | 40,914 | (57) | % | 40,762 | 109,451 | (63) | % | 32,847 | 1,043 | 3,049 | % | 49,336 | 23,179 | 113 | % | ||||||||||||||||||||
Sale-to-tour conversion ratio– | 12.4% | 14.4% | (200) | bp | 15.1% | 14.0% | 110 | bp | 13.8% | 14.2% | (40) | bp | 14.1% | 17.1% | (300) | bp | ||||||||||||||||||||
Percentage of sales to existing owners | 66.8% | 52.5% | 1,430 | bp | 63.9% | 53.9% | 1,000 | bp | 55.0% | 85.8% | (3,080) | bp | 58.4% | 61.9% | (350) | bp | ||||||||||||||||||||
Average sales volume per guest | $ | 2,889 | $ | 2,609 | 11 | % | $ | 3,079 | $ | 2,605 | 18 | % | $ | 2,811 | $ | 2,122 | 32 | % | $ | 2,911 | $ | 3,225 | (10) | % | ||||||||||||
(1)During the last week of March 2020, Bluegreen temporarily closed all of its VOI sales centers in response to the COVID- 19 pandemic. All were subsequently reopened in 2020 with the exception of two sales centers that were consolidated and one additional sales center that has not reopened.
Cost of VOIs Sold. During the three months ended SeptemberJune 30, 20202021 and 2019,2020, cost of VOIs sold was $3.6$7.0 million and $3.1$1.0 million, respectively, and represented 6% and 5%, respectively, of sales of VOIs. During the nine months ended September 30, 2020 and 2019, cost of VOIs sold was $8.7$12.2 million and $17.5$5.1 million respectively,during the six months ended June 30, 2021 and represented2020, respectively. Cost of VOIs sold was 8% and 9%, respectively,11% of sales of VOIs.VOIs during the three months ended June 30, 2021 and 2020, respectively, and 8% and 9% of sales of VOIs during the six months ended June 30, 2021 and 2020, respectively. Cost of VOIs sold as a percentage of sales of VOIs varies between periods based on the relative costs of the specific VOIs sold in each period and the size of the point packages of the VOIs sold (due to offered volume discounts) and discounts including consideration of cumulative sales to existing owners).owners. Additionally, the effect of changes in estimates under the relative sales value method, including estimates of total 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 where a significant amount of Secondary Market VOI inventory is acquired or actual defaults and equity trades are higher than anticipated and the resulting change in estimate is recognized. Cost of VOIs sold as a percentage of sales of VOIs increased duringdecreased for both the three and six months ended SeptemberJune 30, 2020, as2021 compared to the prior year period,same periods in 2020 primarily due to salessale of relatively higherlower cost VOIs and lowerincreased secondary market inventory 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 SeptemberJune 30, 2021 and 2020, and 2019, weBluegreen sold $33.2$53.1 million and $87.6$2.2 million, respectively, and during the six months ended June 30, 2021 and 2020, Bluegreen sold $91.9 million and $64.1 million, respectively, of third-party VOI inventory under commission arrangements and earned salesarrangements. Sales and marketing commissions of $22.1$35.6 million and $60.5$1.1 million during the three months ended June 30, 2021 and 2020,
respectively, and $61.3 million and $42.5 million during the six months ended June 30, 2021 and 2020, respectively, was earned in connection with those sales. During the nine months ended September 30, 2020 and 2019, we sold $97.3 million and $237.8 million,
respectively, of third-party VOI inventory under commission arrangements and earned sales and marketing commissions of $64.6 million and $161.0 million, respectively, in connection with those sales. The decreases in sales of third-party developer inventory on a commission basis during the 20202021 periods was due primarily to the temporary closure of VOI sales centersan increase in new guest tours as a result of the impact of the COVID-19 pandemic on Bluegreen’s operations in the 2020 periods and other factors described above. WeBluegreen earned an average sales and marketing commission of 67% and 52% during the three months ended June 30, 2021 and 2020, respectively, and 67% and 66% during the three and ninesix months ended SeptemberJune 30, 2020, respectively,2021 and 69% and 68% during the three and nine months ended September 30, 2019,2020, respectively, which is net of a reserve for commission refunds in connection with early defaults and cancellations pursuant to the terms of certain of ourBluegreen’s fee-based service arrangements. The decrease in sales and marketing commissions as a percentage of fee-based sales for the three months ended SeptemberJune 30, 2020 as compared to the three months ended September 30, 2019 was primarily related tonegatively impacted by an increase in ourBluegreen’s reserve for cancellations coupled with a decrease inperiod of lower fee-based sales. Bluegreen typically recognizes a sales and marketing commission between 65% and 68% on sales of third-party VOI inventory.
Financing Revenue, Net of Financing Expense — Sales of VOIs. Interest income on VOIVOIs notes receivable was $19.0$19.5 million and $20.0$19.1 million during the three months ended SeptemberJune 30, 20202021 and 2019,2020, respectively, which was partially offset by interest expense on receivable-backed debt of $3.9 million and $5.1$4.2 million, respectively. Interest income on VOIVOIs notes receivable was $58.3$38.7 million and $60.0$39.2 million during the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, respectively, which was partially offset by interest expense on receivable-backed debt of $12.7$8.1 million and $15.4$8.8 million, respectively. The increasechange in finance revenue, net of finance expense duringfor the 20202021 periods as compared to the 20192020 periods is primarily due to higher notes receivable balances as a result of higher system-wide sales of VOIs in the 2021 periods due to the impact of the COVID-19 pandemic on Bluegreen’s operations in the 2020 periods and other factors described above, lower outstanding receivable-backed debt balances and a lower weighted-average cost of borrowings dueborrowing attributable to the lower interest rates partially offset by lower notes receivable balances primarily due toin the temporary closure of VOI sales centers as a result of the COVID-19 pandemic and other factors described above.2021 periods. Revenues from mortgage servicing of $1.4$1.3 million and $4.5$2.6 million during the three months and six months ended June 30, 2021, respectively, and $1.5 million and $3.1 million during the three and ninesix months ended SeptemberJune 30, 2020, respectively, and $1.6 million and $4.6 million during the three and nine months ended September 30, 2019, respectively, are included in financing revenue, net of mortgage servicing expenses of $1.0$1.1 million and $3.4$2.3 million during the three and ninesix months ended SeptemberJune 30, 2020,2021, respectively, and $1.6$0.9 million and $4.1$2.4 million during the three and ninesix months ended SeptemberJune 30, 2019,2020, respectively.
Other Fee-Based Services — Title Operations, net. During the three months ended SeptemberJune 30, 20202021 and 2019,2020, revenue from ourthe Company’s title operations was $1.3$2.9 million and $4.3$1.3 million, respectively, which was partially offset by expenses directly related to ourBluegreen’s title operations of $0.8 million and $2.4$0.7 million, respectively. During the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, revenue from our title operations was $5.4$5.1 million and $10.1$4.1 million, respectively, which was partially offset by expenses directly related to our title operations of $3.0$1.5 million and $4.8$2.2 million, respectively. Resort title feeTitle operations revenue varies based on VOI sales volumes as well as the relative title costs in the jurisdictions where the inventory being sold is located. The decreasechange in the 2021 periods compared to the 2020 periods is primarily due to higher system-wide sales of VOIs due to the impact of the COVID-19 pandemic on Bluegreen’s operations in the 2020 periods is due to the temporary closure of VOI sales centers as a result of the COVID-19 pandemic and other factors described above.
Net Carrying Cost of VOI Inventory. The carrying cost of our VOIBluegreen’s inventory was $10.4$11.6 million and $9.2$10.7 million during the three months ended SeptemberJune 30, 2021 and 2020, respectively. During the 2021 period, the carrying cost of Bluegreen’s inventory was partially offset by rental and 2019,sampler revenues of $5.5 million. During the 2020 period, rental and sampler expense was $0.2 million. The carrying cost of Bluegreen’s inventory was $22.5 million and $20.5 million during the six months ended June 30, 2021 and 2020, respectively, which was partially offset by rental and sampler revenues of $1.8$8.6 million and $3.4$1.7 million, respectively. The carrying cost of our VOI inventory was $30.9 million and $26.6 million during the nine months ended September 30, 2020 and 2019, respectively, which was partially offset by rental and sampler revenues of $3.5 million and $7.8 million, respectively. The increasedecrease in net carrying costs of VOI inventory was primarily related to decreasedincreased rentals of developer inventory and decreasedincreased 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 COVID-19 pandemic as well aspartially offset by increased maintenance fees and developer subsidies associated with ourthe increase in Bluegreen’s VOI inventory. In certain circumstances, we offsetBluegreen offsets marketing costs by using inventory for marketing guest stays.
Selling and Marketing Expenses. Selling and marketing expenses were $53.6$87.1 million and $155.6$145.1 million during the three and ninesix months ended SeptemberJune 30, 2020,2021, respectively, and $88.2$26.8 million and $238.2$102.0 million during the three and ninesix months ended SeptemberJune 30, 2019,2020, respectively. As a percentage of system-wide sales of VOIs, selling and marketing expenses were 51%decreased to 53% and 61%54% during the three and ninesix months ended SeptemberJune 30, 2020,2021, respectively, compared to 52%from 205% and 51%68% during the three and ninesix months ended SeptemberJune 30, 2019,2020, respectively. The decrease in selling and marketing expenses as a percentage of system-wide sales of VOIs during the three months ended September 30, 20202021 periods 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, periods is primarily attributable to certain fixed costs inherent in Bluegreen’s sales and marketing operations and the costs of maintaining certain sales and marketing associates on furlough in the 2020 periods despite the temporary closure of our Bluegreen’s VOI sales sites and marketing operations during April and May 2020in connection with the COVID-
19 pandemic as discussed above. above. During the three and ninesix months ended SeptemberJune 30, 2020, weBluegreen incurred $0.1$1.2 million and $4.0$3.8 million, respectively, in severance and $1.4$10.2 million and
$12.3 $10.9 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 associatedThere were no such severance or furlough expenses during the 2021 periods. All but two of the sales offices which were closed during March 2020 in connection with the reopening of 87 Bass Pro and Cabela’s stores that were open prior to the COVID-19 pandemic and have subsequently reopened. The 2021 periods were also impacted by costs incurred associated with the commencement of marketing operations at 5 new13 additional Cabela’s stores. We utilizestores and one additional Bass Pro store during the six months ended June 30, 2021. Bluegreen utilizes these stores to sell mini-vacation packages to customers for future travel which require the customers to attend a timeshare presentation.
Our agreement Additionally, during the 2021 periods, Bluegreen incurred costs associated with Bass Pro previously provided for the payment of a variable commission upon the sale of a VOIredesigning its sales and marketing platform, including updating its sales offices, refreshing its marketing material, and adding new sales and marketing senior leadership positions. Further, Bluegreen has invested in various local and national marketing programs in an effort to a marketing prospect obtained through the Bass Pro marketing channels. As previously disclosed, pursuant to the settlement agreement and amended marketing arrangement with Bass Pro entered into during June 2019, the settlement payment and a portion of the ongoing annual marketing fees are fixed costs and/attract new customers. These programs may not be successful or are subject to annual minimums regardless of the volume of VOI sales produced from the resulting marketing prospects generated from the amended agreement, including reduced sales as a result of the temporary closure of our sales operations due to the COVID-19 pandemic. If our marketing operations pursuant to the amended agreement with Bass Pro do not generate a sufficient number of prospects and leads or is terminated or limited, we may not be able to successfully market and sell our products and services at anticipated levels or at levels required in order to offset the program costs associated with ourincurred.
The following table sets forth certain new customer marketing efforts. In addition,information, excluding sampler and other returning owner vacation packages, for the amended arrangement withthree and six months ended June 30, 2021 and 2020:
For the Three Months Ended | For the Six Months Ended | ||||||||||||||||
2021 | 2020 | % Change | 2021 | 2020 | % Change | ||||||||||||
Number of Bass Pro and Cabela's marketing (1) | 112 | 89 | 26 | 112 | 89 | 26 | |||||||||||
Number of vacation packages outstanding, | 132,142 | 172,828 | (24) | 121,915 | 169,294 | (28) | |||||||||||
Number of vacation packages sold | 56,256 | 8,129 | 592 | 105,630 | 51,046 | 107 | |||||||||||
Number of vacation packages outstanding, | 163,738 | 149,620 | 9 | 163,738 | 149,620 | 9 | |||||||||||
% of Bass Pro vacation packages at period end | 51% | 46% | 11 | 51% | 46% | 11 | |||||||||||
% of Cabela's vacation packages at period end | 18% | 6% | 200 | 18% | 6% | 200 | |||||||||||
% of Choice Hotel vacation packages at period end | 21% | 25% | (16) | 21% | 25% | (16) | |||||||||||
% of Other vacation packages at period end | 9% | 23% | (61) | 9% | 23% | (61) | |||||||||||
(1)During the last week of March 2020, Bluegreen temporarily closed all of its Bass Pro and Cabela’s marketing locations in response to the COVID-19 pandemic. By June 30, 2020, 64 of the 89 Bass Pro and Cabela marketing locations were open.
(2)Excludes vacation packages sold to customers more than one year prior to the period presented and vacation packages sold to customers who had already toured but purchased an additional vacation package.
During 2020, Bluegreen eliminated certain of its lower performing mini-vacation programs, including a lead generation operation at various malls. While the elimination of these programs has resulted in an increaselower sales of mini-vacation packages, Bluegreen believes its expansion into Cabela’s and other local and national marketing programs will in our marketing costs as a percentage of sales from the program, based on increases in program fixed costs and anticipated VOI sales volumes fromfuture address this marketing channel. In light of the decrease in sales duemini-vacation packages. Additionally, Choice vacation packages outstanding at June 30, 2021 declined 8% compared to the COVID-19 pandemic,six months ended June 30, 2020 period, reflecting lower call activity at Choice through the increase in costChoice call transfer program.
In addition to vacation packages sold to new prospects, Bluegreen also sells vacation packages to customers who have already toured, some of this marketing program has adversely impacted our resultswhom purchased a VOI, and have indicated they would tour again. As of operations and cash flow and may continueJune 30, 2021, the pipeline of such packages was approximately 18,000. There is no assurance that such packages will convert to have an adverse impact if sales continue to be belowat historical or expected levels.
General and Administrative Expenses — Sales and Marketing Operations.General and administrative expenses, representing expenses directly attributable to sales and marketing operations, were $5.9$8.1 million and $19.4$15.8 million during the three and ninesix months ended SeptemberJune 30, 2020,2021, respectively, and $7.4$5.5 million and $60.8$13.5 million during the three and ninesix months ended SeptemberJune 30, 2019,2020, respectively.As a percentage of system-wide sales of VOIs, general and administrative expenses attributable to sales and marketing operations was 6%5% and 8%6% during the three and ninesix months ended SeptemberJune 30, 2020,2021, respectively, and 4%42% and 13%9% during the three and ninesix months ended SeptemberJune 30, 2019, respectively, reflecting2020, respectively. The decrease as a percentage of sales in the 2021 periods compared to the 2020 periods was primarily due to the fixed nature of certain costs, includingthe 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 was approximately $39.1 million relatedtemporary paid furlough due to the settlementimpact of the dispute with Bass ProCOVID-19 pandemic and lower VOI system-wide sales of VOIs in June 2019. See Note 9: Commitments and Contingencies to our unaudited consolidated financial statements included in Item 1 of this report for additional information regarding the Bass Pro settlement.2020 periods.
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 | ||||||||||||
For the Three Months Ended | For the Six Months Ended | ||||||||||||||||||||||
(dollars in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
Resort operations and club management revenue | $ | 43,131 | $ | 36,914 | $ | 86,362 | $ | 82,625 | |||||||||||||||
Resort operations and club management expense | (24,297) | (18,753) | (49,498) | (50,200) | |||||||||||||||||||
Operating profit - resort operations and club | 18,834 | 44% | 18,161 | 49% | 36,864 | 43% | 32,425 | 39% | |||||||||||||||
Add: Depreciation and amortization | 200 | 190 | 395 | 380 | |||||||||||||||||||
Add: Severance | — | 99 | — | 1,233 | |||||||||||||||||||
Adjusted EBITDA - resort operations and | $ | 19,034 | $ | 18,450 | $ | 37,259 | $ | 34,038 | |||||||||||||||
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%increased 17% and 5% during the three and ninesix months ended SeptemberJune 30, 2020,2021, respectively, as compared to the three and ninesix months ended SeptemberJune 30, 2019, respectively, reflecting the temporary closure2020. Cost reimbursement revenue, which consists of many resorts relatedpayroll and other operating expenses which Bluegreen incurs and passes through to the HOAs, increased 4% and 31% during the three and six months ended June 30, 2021, respectively, as compared to the three and six months ended June 30, 2020. The increase in cost reimbursement revenue was primarily attributable to the reduction in headcount in the three and six months ended June 30, 2020 due to actions taken in connection with the COVID-19 pandemic, as described above. Net ofpandemic. Excluding cost reimbursement revenue, resort operations and club management revenues decreasedrevenue increased 10% and 7%5% during the three and ninesix months ended SeptemberJune 30, 20202021, respectively, as compared to the three and ninesix months ended SeptemberJune 30, 2019, respectively,2020. This increase was primarily as a result of decreases in revenues from our Traveler Plus program, other
owner programs,attributable to increased resort retail operations and third-party rental commissions as a result of the impact of the COVID-19 pandemic. Wepandemic on the 2020 periods. Bluegreen’s resort network includes 68 Club and Club Associate Resorts as of both June 30, 2021 and 2020. Bluegreen managed 49 resort properties as of both SeptemberJune 30, 20202021 and September 30, 2019.2020.
Resort Operations and Club Management Expense. During the three and ninesix months ended SeptemberJune 30, 2020,2021, resort operations and club management expense increased 29% and decreased 16%1%, respectively, compared to three and 13%,six months ended June 30, 2020, respectively. The increase during the three months ended June 30, 2021 compared to the three and nine months ended SeptemberJune 30, 2019, respectively. The decreases were2020 was primarily due to cost mitigation efforts implementeddecreased expenses 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 ofconnection with the COVID-19 pandemic.pandemic as discussed above.
Bluegreen Corporate and Other
For the Three Months Ended | For the Six Months Ended | |||||||||||
(dollars in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||
General and administrative expenses - | $ | (19,086) | $ | (9,115) | $ | (43,742) | $ | (28,349) | ||||
Other income, net | 418 | 273 | 204 | 406 | ||||||||
Franchise taxes | 33 | — | 119 | 17 | ||||||||
(Gain) loss on assets held for sale | (12) | 87 | (37) | 43 | ||||||||
Add: Depreciation and amortization | 2,253 | 2,217 | 4,504 | 4,367 | ||||||||
Add: Severance and other | — | 90 | — | 995 | ||||||||
Add: Share - based compensation expense | 152 | — | 152 | — | ||||||||
Adjusted EBITDA - Corporate and other | $ | (16,242) | $ | (6,448) | $ | (38,800) | $ | (22,521) | ||||
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 directly attributable to corporate overhead were $20.3$19.1 million and $48.6$43.7 million during the three and ninesix months ended SeptemberJune 30, 2020,2021, respectively, and $22.1$9.1 million and $58.6$28.3 million during the three and ninesix months ended SeptemberJune 30, 2019,2020, respectively. The decreases wereincrease was primarily due to a $6.9 millionincreased 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 millionbenefits and $1.8 million in severance cost for corporate employeeshigher executive and management incentive compensation during the three and ninesix months ended SeptemberJune 30, 2021 as compared to the three and six months ended June 30, 2020.
Other Income, net. Other income, net was $0.4 million and $0.2 million during the three and six months ended June 30, 2021, respectively, and $0.3 million and $0.4 million during the three and six months ended June 30, 2020, respectively, of which $0.1respectively.
Interest Expense. Interest expense not related to Bluegreen’s receivable-backed debt was $3.2 million and $1.2$6.9 million during the three and six months ended June 30, 2021, respectively, and $4.4 million and $8.5 million during the three and six months ended June 30, 2020, respectively. The decrease in such interest expense during the three and six months ended June 30, 2021 was primarily due to severance related tolower outstanding debt balances and lower weighted-average cost mitigation efforts attributableof borrowing, as compared to the COVID-19 pandemic.three and six months ended June 30, 2020. The weighted average cost of borrowing as of June 30, 2021 was approximately 4.9%, compared to approximately 5.1% as of June 30, 2020.
Adjusted EBITDA Attributable to Non-Controlling Interest in Bluegreen/Big Cedar Vacations. We includeThe Company includes in ourits consolidated financial statements the results of operations and financial condition of Bluegreen/Big Cedar Vacations, ourBluegreen’s 51% owned-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$3.9 million and $4.4$6.1 million during the three and ninesix months ended SeptemberJune 30, 2020,2021, respectively, and $2.4($0.7) million and $9.3($1.5) million during the three and ninesix months ended SeptemberJune 30, 2019,2020, respectively. The decreaseincrease in Adjusted EBITDA attributable to the non-controlling interest in Bluegreen/Big Cedar Vacations for the nine months ended September 30,2021 periods compared to the 2020 wasperiods primarily related toreflects the impact of the COVID-19 pandemic including the temporary closure of our VOI sales centers in connection with the COVID-19 pandemic as described above.on 2020 results.
Interest Expense.
Interest expense not related to receivable-backed debt was $3.4 million and $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 borrowing, partially offset by higher outstanding debt balances during the 2020 periods.
Other (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. These decreases were primarily related to a land sale during June 2019 that resulted in a gain of $2.0 million and $1.7 million in Hurricane Irma business interruption insurance proceeds received in July 2019.Parent Company
BVH Corporate
BVHThe Parent Company Corporate in the Company’s segment information primarily includes the following:
BVH’s corporate general and administrative expenses;
Interest expense associated with Woodbridge’s junior subordinated debentures;debentures and the $75.0 million note payable to BBX Capital; and
Interest income on interest-bearing cash accounts; andaccounts.
Corporate General and Administrative Expenses
BVH’sThe Parent Company’s corporate general and administrative expenses were $0.6 million and $1.4 million during the three and six months ended June 30, 2021, and $8.9 million and $17.2 million during the three and six months ended June 20, 2020, respectively. The Parent Company’s corporate general and administrative expenses during periods subsequent to the September 2020 spin-off of BBX Capital, consist primarily of costs associated with administering the various support functions at its corporate headquarters, including executiveParent Company being a publicly traded enterprise (including, but not limited to compensation, shareholder relations, legal, accounting, human resources, investor relations, and executive offices. BVH’s corporate general and administrative expenses for the three and nine months ended September 30, 2020 were $41.2 million and $58.5 million, respectively, compared to $11.9 million and $36.4 million for the comparable 2019 periods.etc). The increase in corporate general and administrative expenses for the 2020 periods as comparedreflect the proportion of corporate overhead cost attributed to the same 2019 periods primarily reflectsParent Company from operations prior to the accelerationspin-off of the vesting of unvested restricted stock awards and payments to settle the BVH’s long-term incentive program forBBX Capital during September 2020, which in the aggregate resulted in $32.6 million of compensation expense for the three and nine months ended September 30, 2020. In addition, included in BVH corporate general and administrative expenses for three and nine months ended September 30, 2020 was $1.8 million of costs associated with the spin-off.were substantially greater.
Interest Expense
BVH’sThe Parent Company’s interest expense (excluding interest expense the $80.0was $1.8 million note payable to Bluegreen)and $3.6 million, respectively, for the three and ninesix months ended SeptemberJune 30, 2020 was $0.62021 and $1.9 million and $3.0 million, respectively, compared to $1.4 million and $4.3$4.2 million for the comparable 2019 periods.three and six months ended June 30, 2020, respectively. The decrease in interest expense during the three and nine months ended September 30, 20202021 periods compared to the same 20192020 periods primarily resulted from the repayment of BBX Capital’s mandatorily redeemable cumulative preferred stock in December 2019 and lower interest expense on Woodbridge’s junior subordinated debentures reflecting variable rates of interest on suchdebt during the 2021 periods and BVH’s repayment in full during August 2020 periods.
BBX Capital’sof its $80.0 million note payable to Bluegreen. The interest expense on the $80.0 million note payable to Bluegreen was $0.5 million and $2.5 million for the three and nine months ended September 30, 2020 compared to $1.2 million and $3.6 million for the comparable 2019 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
Duringoperations for the 2020 periods. Additionally, the three and ninesix months ended SeptemberJune 30, 2020, the Company recognized $0.12021 include $1.1 million and $0.8$2.2 million, respectively, of interest and investment income from BVH’s interest-bearing cash accounts and other investments comparedexpense on the $75.0 million Note Payable to $0.7 million and $1.6 million during the comparable 2019 periods. The declineBBX Capital, which was issued 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 loss before income taxes reduced by net income attributable to noncontrolling interests in joint ventures taxed as partnerships.
The Company’s effective income tax rate for the three and nine months ended September 30, 2020 from continuing operations 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 paid executive incentive bonuses which amounted to $32.6 million of nondeductible compensation expense.in September 2020.
Provision for Income Taxes from continuing operations
The provision for income taxes was $7.7 million and $8.9 million for the three and six months ended June 30, 2021 compared to $2.4 million and $0.9 million during the three and six months ended June 30, 2020. The Company’s effective income tax rate was different thanapproximately 28% and 3% for the expected federalsix months ended June 30, 2021 and 2020, respectively. Effective income tax rates for interim periods are based upon the Company’s then current estimated annual rate. The effective income tax rate varies based upon the estimate of 21% due totaxable earnings as well as on the impactmix of nondeductible executive compensation and state income taxes. The effective tax rate fortaxable earnings in the three and nine months ended September 30, 2019 excludes the tax benefit associated with the $39.1 million Bass Pro litigation settlement,various states in which the Company accountedand its subsidiaries operate. As such, the Company’s effective tax rates for as a discrete itemthe 2021 and 2020 periods reflect an estimate of its annual taxable earnings, state taxes, non-deductible items and changes in valuation allowance on deferred tax assets for each respective year. The 2020 periods include estimates made at the statutory income tax ratetime related to the full year’s impact of 26%.the COVID-19 pandemic
Discontinued Operations
Discontinued operations represent the activities and results of BBX Capital, the former wholly owned subsidiary of the Company’s wholly-owned subsidiary, BBX Capital,Company, which was disposed of in the spin-off transaction that was completedspun off on September 30, 2020. BBX Capital’s businesses include all of BVHs previousthe continuing businesses other than Bluegreen, including BBX Capital Real Estate, BBX Sweet Holdings, and Renin.
LossThe loss from discontinued operations before income taxes for the three and six months ended SeptemberJune 30, 2020 was $5.8$8.4 million comparedand $36.1 million, respectively. The losses were due primary 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, 2020 was $41.6 million compared to income from discontinued operations for the nine months ended September 30, 2019 of $38.8 million, which reflects the impact of $30.7$31.6 million of impairment losses primarily resulting from the impact of the COVID-19 pandemic on BBX Capital’s businesses, including IT’SUGAR, and a reduction in IT’SUGAR.
equity in net earnings from unconsolidated real estate joint ventures of $37.2 million due to 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
BVH’sThe Company’s consolidated financial statements include the results of operations and financial position of various partially-ownedpartially owned subsidiaries in which it holds a controlling financial interest, including Bluegreen and Bluegreen/Big Cedar Vacations.Vacations (which is owned 51% by Bluegreen). In addition, prior to the May 5, 2021 statutory short-form merger pursuant to which Bluegreen became a wholly owned subsidiary of the Company, the Company owned an approximate 93% interest in Bluegreen. As a result, the Company is required to attribute net income or loss to the noncontrolling interests in these subsidiaries.subsidiaries, including for Bluegreen, during the periods in which it held partial ownership of Bluegreen.
Net income from continuing operations attributable to noncontrolling interests during the three and six months ended June 30, 2021 was $3.4$4.4 million and $4.3$6.9 million, respectively, and was $0 million and $1.0 million during the three and ninesix months ended SeptemberJune 30, 2020, compared to $4.2 million and $11.4 million for the comparable 2019 period. respectively. 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 decreaseincrease in net income attributable to noncontrolling interests for the ninethree and six months ended SeptemberJune 30, 20202021 compared to the same 2019 periodthree and six months ended June 30, 2020 was primarily due to a decreasean increase in the net income of Bluegreen and the Bluegreen/Big Cedar Vacations joint venture.as discussed above.
Consolidated Cash FlowsChanges in Financial Condition
A summary of our consolidatedThe following table summarizes the Company’s cash flows is set forth belowfor the periods indicated (in thousands):
For the Nine Months Ended September 30, | ||||||
2020 | 2019 | |||||
Cash flows provided by operating activities | $ | 3,161 | 60,394 | |||
Cash flows (used in) provided by investing activities | (12,183) | 23,609 | ||||
Cash flows used in financing activities | (151,066) | (87,685) | ||||
Net 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 | |||
For the Six Months Ended | ||||||
2021 | 2020 | |||||
Net cash provided by (used in) operating activities | $ | 53,269 | $ | (16,014) | ||
Net cash used in investing activities | (8,229) | (14,886) | ||||
Net cash used in financing activities | (39,381) | (2,466) | ||||
Net increase (decrease) in cash, cash equivalents, and restricted cash | $ | 5,659 | $ | (33,366) | ||
Cash Flows provided byfrom Operating Activities
The Company’s operating cash provided by operating activities decreased by $57.2flow increased $69.3 million during the ninesix months ended SeptemberJune 30, 20202021 compared to the same 2019 periodsix months ended June 30, 2020 primarily due to reflect the following:
increased operating lossesprofit in 2021 as a result of the impactssignificant impact of the COVID-19 pandemic including decreaseson operations in the 2020 period;
a higher portion of sales of VOIs includingin cash sales and(including down payments from customers associated with customers);
the temporary closureelimination of VOI sales centers and a decreasecertain activities related to BBX Capital, the former wholly owned subsidiary of the Company which was spun off in trade sales primarily reflecting the closure of BBX Sweet Holdings’ retail locations and a subsequent decreaseSeptember 2020;
lower 2020 incentive compensation paid in consumer demand, and lower distributions from unconsolidated real estate joint ventures, 2021 to certain associates;
partially offset by a reduction inincreased payments of income taxes and increased spending on the acquisition and development of VOI and real estate inventory during 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 Bluegreen to Bass Pro pursuant to the settlement agreement entered into in June 2019.inventory.
Cash Flows used infrom Investing Activities
The Company’s cashCash used in investing activities increased by $35.8decreased $6.7 million during the ninesix months ended SeptemberJune 30, 20202021 compared to the same 2019 period in 2020, primarily due to lower distributions from unconsolidated real estate joint ventures, decreased investments in unconsolidated real estate joint ventures and decreased proceeds from the sale of real estate, partially offset by decreased spendingincreased expenditures by Bluegreen for property and equipment and an increase in loan recoveries in the legacy asset portfolio.2021 period and certain activities related to BBX Capital, the former wholly owned subsidiary of the Company which was spun off on September 30, 2020.
Cash Flows used infrom Financing Activities
Cash used in financing activities increased $36.9 million during the six months ended June 30, 2021 compared to the same period of 2020, primarily due to a $50.6 million decrease in net borrowings. The Company’s2020 periods include borrowings by Bluegreen on its lines-of-credit and notes payable in connection with the initial impact of the COVID-19 pandemic. This increase in cash used in financing activities increasedwas partially offset by $63.4decreased dividend payments
of $1.1 million during the nine months ended September 30, 20202021 period as compared to the same 20192020 period which was primarily due to $96.8 million of cash transferred in the spin-off and Bluegreen’s repurchase of $11.7 millionrepurchases by Bluegreen of its common stock for $11.7 million 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 net borrowingsperiod.
For additional information on the Company’s notes payable and other borrowings, which included additional borrowings by Bluegreen on itsavailability of cash from existing credit facilities, as well as repayment obligations, see “Liquidity and various receivable-backed facilities in an effort to increase its cash position and ensure adequate liquidity for a prolonged period in response to the COVID-19 pandemic.Capital Resources” below.
Seasonality
BluegreenThe Company 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, Bluegreenwe typically experienced more tours and higher VOI sales during the second and third quarters. However, due to the impact of the COVID-19 pandemic, including the temporary closures of its marketing operations and VOI sales centers as described above, Bluegreen experienced significantlywe may continue to experience decreased sales of VOIs in the third quarter of 2021 as compared to historical levels prior to the pandemic and such adverse impacts may continue in the near-term and possibly longer.
Liquidity and Capital Resources
The Company, excluding Bluegreen
As of June 30, 2021, the Company, excluding its subsidiaries, had cash, cash equivalents, and short-term investments of approximately $24.2 million. Its primary sources of liquidity for the future are expected to be its available cash, cash equivalents, short-term investments and distributions from Bluegreen.
The Company’s principal sources of liquidity have historically been its available cash and short-term investments, dividends received from Bluegreen, and borrowings. However, as described below, the COVID-19 pandemic has impacted and created uncertainty regarding many of these sources of liquidity.
In connection with our spin-off of BBX Capital, we 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, we have the option in our discretion to defer interest payments under the note, with interest on the entire outstanding balance thereafter to accrue at a cumulative, compounded rate of 8% per annum until such time; as all accrued payments under the note are brought current, including deferred interest. All outstanding amounts under the note will become due and payable in five years or earlier upon certain events.
The Company’s wholly owned subsidiary, Woodbridge, had $65.3 million in junior subordinated debentures outstanding as of June 30, 2021. Woodbridge’s junior subordinated debentures accrue interest at a rate of 3-month LIBOR plus a spread ranging from 3.99% to 4.05%, mature between 2035 and 2036, and require interest payments on a quarterly basis.
The Company, on the parent company level, is a holding company with limited operations, and it is currently expected that it will incur approximately $2.0 million annually in executive compensation expenses and public company costs as well as annual interest expense of approximately $7.2 million associated with Woodbridge’s junior subordinated debentures and the note payable to BBX Capital. These amounts are based on current expectations and assumptions, currently available information and, with respect to interest expense on Woodbridge’s junior subordinated debentures, interest rates as of June 30, 2021. Such assumptions and expectations may not prove to be accurate, interest rates may increase and, accordingly or otherwise, actual expenses may exceed the amounts expected. BVH will rely primarily on cash on hand and cash equivalents, as well as distributions, if any, that may be paid by Bluegreen in the future, to fund its operations and satisfy its debt service requirements and other liabilities, including its note payable to BBX Capital. As discussed above, the COVID-19 pandemic has adversely impacted Bluegreen including its cash flow, and, accordingly, Bluegreen suspended its payments of dividends during the second quarter of 2020 (at which time Bluegreen was a separate public company). While BVH believes that it will have sufficient cash and cash equivalents to fund its operations for at least two years, it will be dependent on the payment of dividends from Bluegreen to fund its operations in future periods. There is no assurance that Bluegreen will pay dividends in the amounts required to fund BVH’s needs or at all.
BVH did not receive dividends from Bluegreen during the three and six months ended June 30, 2021. As a result of the short-form statutory merger on May 5, 2021, Bluegreen became a wholly owned subsidiary of BVH. We received $8.7 million of dividends from Bluegreen for the three months ended June 30, 2020. The payment of dividends by Bluegreen is not assured and will depend on, among other factors, the recovery from the COVID-19 pandemic following its cessation (the timing of which is highly uncertain), Bluegreen’s operating results, financial condition, cash position, and operating and capital needs. Except as comparedotherwise noted, the debts and obligations of Bluegreen are not direct obligations of BVH and generally are non-recourse to prior yearsBVH. Similarly, the assets of Bluegreen are not available to BVH absent a distribution. Furthermore, certain of Bluegreen’s credit facilities contain terms which could limit the payment of distributions without the lender’s consent or waiver. BVH may also seek additional liquidity in the future from outside sources, including traditional bank financing, secured or unsecured indebtedness, or the issuance of equity and/or debt securities. However, these alternatives may not be available to BVH on attractive terms, or at all. The inability to raise funds through such sources when or to the extent needed would have a material adverse effect on the Company’s business, results of operations, and financial condition.
We also historically received funds from other subsidiaries as well as Bluegreen, in connection with the parties’ tax sharing agreement to the extent that a subsidiary utilized our tax benefits in our consolidated tax return. We received $11.2 million in tax sharing payments during the six months ended June 30, 2021, with no such tax sharing payments during the six months ended June 30, 2020 due to the impact of COVID-19 on the Company’s operations. BBX Capital and its subsidiaries are no longer parties to the tax sharing agreement as a result of the spin-off of BBX Capital on September 30, 2020.
In June 2017, the Company’s board of directors approved a share repurchase program which authorizes the repurchase of up to 1,000,000 shares of the Company’s Class A Common Stock and Class B Common Stock at an aggregate cost of up to $35.0 million. There were no share repurchases during the three and six months ended June 30, 2021 or 2020. As of June 30, 2021, subject to the dollar cap on repurchases, 49,903 shares of the Company’s Class A or Class B Common Stock remained available for repurchase under the share repurchase program.
Bluegreen
Bluegreen believes that it has sufficient liquidity from the sources described below to fund its operations, including its anticipated working capital, capital expenditure, debt service requirements and impacts associated with the COVID-19 pandemic challenges for the foreseeable future, subject to the success of its operations and ongoing mitigating measures to manage challenges associated with 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, 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.
While the vacation ownership business has historically been capital intensive and Bluegreen has in the past and may in the future pursue transactions or activities which may require significant capital investment, Bluegreen has focused on the generation of “free cash flow” (defined as cash flow from operating activities, less capital expenditures) by: (i) incentivizing Bluegreen’s 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 Bluegreen’s capital and inventory expenditures; (iv) utilizing sales and marketing, mortgage servicing, resort management services, title and construction expertise to pursue fee-based-service business relationships that generally require minimal up-front capital investment and have the potential to produce incremental cash flows; and (v) 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, Bluegreen may use excess cash flows for other purposes. While Bluegreen intends to remain flexible with its sales of different categories of VOI inventory in the future, Bluegreen currently expect such adverse impactexpects that its sale of fee-based inventory will decrease over time.
Bluegreen has $15.9 million of required contractual obligations due to continuebe paid within one year, as well as one financing facility with an advance period that is scheduled to expire in 2021. While there is no assurance that Bluegreen will be successful, Bluegreen intends to seek to renew or extend its debt and extend its advance periods on certain facilities.
The ability to sell and/or borrow against notes receivable from VOI buyers has been critical to Bluegreen’s continued liquidity. A financed VOI buyer is generally only required to pay a minimum of 10% to 20% of the purchase price in cash at the time of sale; however, selling, marketing and administrative expenses attributable to the sale are primarily cash expenses that generally exceed a buyer’s minimum required down payment. Accordingly, having financing facilities available for the hypothecation, sale or transfer of Bluegreen’s VOI notes receivable has been critical to its ability to meet its short and long-term cash needs. Bluegreen has attempted to maintain a number of diverse financing facilities. Historically, Bluegreen has relied on its ability to sell receivables in the term securitization market in order to generate liquidity and create capacity in its receivable facilities. In addition, maintaining adequate VOI inventory to sell and pursue growth into new markets has historically required Bluegreen to incur debt for the acquisition, construction and development of new resorts. Development expenditures during the remainder of 20202021 are expected to range between $20.0 million to $25.0 million, which primarily relate to development at one of the Bluegreen/Big Cedar Vacations resorts. Bluegreen has historically financed a majority of its sales of VOIs, and accordingly, is subject to the risk of defaults by its customers. The full impact of COVID – 19 continues to be uncertain, but Bluegreen currently expects that the COVID-19 pandemic will continue to have an impact on the collectability of its VOI notes receivable.
As described above, Bluegreen’s ability to borrow against or sell its VOI notes receivable has historically been a critical factor in Bluegreen’s liquidity. If Bluegreen is unable to renew credit facilities or obtain new credit facilities, Bluegreen’s business, results of operations, liquidity, or financial condition would be materially, adversely impacted.
In connection with Bluegreen’s capital-light business activities, Bluegreen has entered into 2021.agreements with third-party developers that allow Bluegreen to buy VOI inventory, typically on a non-committed basis, prior to when it intends to sell such VOIs. Bluegreen’s capital-light business strategy also includes secondary market sales, pursuant to which Bluegreen enters into secondary market arrangements with certain HOAs and others generally on a non-committed basis, which allows Bluegreen to acquire VOIs generally at a significant discount, as such VOIs are typically obtained by the HOAs through foreclosure in connection with maintenance fee defaults. Bluegreen currently expects to acquire JIT and secondary market inventory during the remainder of 2021 at a cost of $5.0 million to $10.0 million.
Bluegreen’s level of debt and debt service requirements have several important effects on its operations and in turn on the Company, including that: (i) significant debt service cash requirements reduce the funds available for operations and future business opportunities and increase Bluegreen’s vulnerability to adverse economic and industry conditions, as well as conditions in the credit markets, generally; (ii) Bluegreen’s leverage position increases its vulnerability to economic and competitive pressures; (iii) the financial covenants and other restrictions contained in indentures, credit agreements and other agreements relating to its indebtedness require Bluegreen to meet certain financial tests and may restrict Bluegreen’s ability to, among other things, pay dividends, borrow additional funds, dispose of assets or make investments; and (iv) Bluegreen’s leverage position may limit funds available for acquisitions, working capital, capital expenditures, dividends and other general corporate purposes. Certain of Bluegreen’s competitors operate on a less leveraged basis and have greater operating and financial flexibility than Bluegreen does.
Credit Facilities for Receivables with Future Availability
Bluegreen maintains various credit facilities with financial institutions which allow Bluegreen to borrow against or sell its VOI notes receivable. As of June 30, 2021, 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 | $ | 40,000 | $ | 12,591 | $ | 27,409 | June 2024; | Prime Rate - 0.10 to 0.50%; floor of 3.00% to 3.40%; 3.40% (1) | |||||
NBA Receivables Facility | 70,000 | 35,814 | 34,186 | September 2023; | 30 day LIBOR+2.25%; floor of 3.00% ; 3.00% (2) | ||||||||
Pacific Western Facility | 50,000 | 18,268 | 31,732 | September 2024; | 30 day LIBOR+2.50% to floor of 2.75% (3); 3.06% | ||||||||
KeyBank/DZ Purchase Facility | 80,000 | 33,555 | 46,445 | December 2022; | 30 day LIBOR or CP +2.25%; 2.50% (4) | ||||||||
Quorum Purchase Facility | 50,000 | 24,791 | 25,209 | December 2022; | (5) | ||||||||
$ | 290,000 | $ | 125,019 | $ | 164,981 | ||||||||
(1)Prior to the August amendment described below, the borrowing rate was Prime – 0.10% (with an interest rate floor of 3.40%).
(2)Borrowings after September 25, 2020 accrue interest at one-month LIBOR plus 2.25% (with an interest rate floor of 3.00%).
(3)Prior to the July amendment described below, the borrowing rate was 30 day LIBOR + 2.75% to 3.00%.
(4)Borrowings accrue interest at a rate equal to either LIBOR, a “Cost of Funds” rate or commercial paper (“CP”) rates plus 2.25%. The interest rate will increase to the applicable rate plus 3.25% upon the expiration of the advance period.
(5)Of the amounts outstanding under the Quorum Purchase Facility at June 30, 2021, $1.8 million accrues interest at a rate per annum of 4.75%, $12.6 million accrues interest at a fixed rate of 4.95%, and $10.3 million accrues interest at a fixed rate of 5.10%.
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. In June 2021, Bluegreen amended the Liberty Bank Facility to extend the revolving credit period from June 2021 to September 2021. On August 3, 2021, the facility was amended to further extend the revolving credit period to June 2024 and extend the maturity date from June 2024 to June 2026. As described in further detail below, the amendment, among other things, also increased the advance rates and decreased the interest rate on future borrowings. The advance rate with respect to Qualified Timeshare Loans is 85% (an increase from the 80% advance rate in place prior to the August amendment) of the unpaid principal balance of the Qualified Timeshare Loans. The advance rate is 70% (an increase from the 60% advance rate in place prior to the August amendment) of the unpaid principal balance of Non-Conforming Qualified Timeshare Loans. Maximum permitted outstanding borrowings are $40.0 million, subject to the terms of the facility. The interest rate on outstanding borrowings prior to the August amendment is the Prime Rate minus 0.10% with a floor of 3.40%; provided, however, that pursuant to the August amendment, the interest rate on those borrowings will be the Prime Rate minus 0.50% with a floor of 3.00% if Bluegreen borrows an additional $15.0 million by December 31, 2021. The interest rate on future borrowings will be the Prime Rate minus 0.50% with a floor of 3.00%. Recourse to Bluegreen under the amended facility is limited to $5.0 million (a decrease from $10.0 million prior to the August amendment), 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 by maturity.
Pacific Western Facility. Bluegreen has a revolving VOI notes receivable hypothecation facility (the “Pacific Western Facility”) with Pacific Western Bank, which provides for advances on eligible VOI notes receivable pledged under the facility, subject to specified terms and conditions, during a revolving credit period. In July 2021, Bluegreen
amended and restated the facility, which increased the maximum outstanding borrowings from $40.0 million to $50.0 million, subject to eligible collateral and customary terms and conditions; extended the revolving advance period from September 2021 to September 2024; extended the maturity from September 2024 to September 2027; and amended certain other terms of the facility, including a future decrease in the interest rate on borrowings as described below. Eligible “A” VOI notes receivable that meet certain eligibility and FICO score requirements, which Bluegreen believes are typically consistent with loans originated under its current credit underwriting standards, are subject to an 85% advance rate. The Pacific Western Facility also allows for certain eligible “B” VOI notes receivable (which have less stringent FICO score requirements) to be funded at a 65% advance (53% advance rate prior to the amendment). Until September 21, 2021 borrowings under the Pacific Western Bank Facility will continue to bear interest at the prevailing rate under the facility, which is the 30-day Libor rate plus 2.75%, subject to a 3.00% floor. Pursuant to the amendment to the Pacific Western Bank Facility, effective September 21, 2021, all borrowings outstanding under the facility will bear interest at an annual rate equal to the 30-day Libor rate plus 2.50%, subject to a 2.75% floor. Principal and interest under the Pacific Western Bank Facility are paid as cash is collected on the pledged receivables, with the remaining balance being due upon maturity. In addition, subject to certain exceptions, the amendment reduced Bluegreen’s recourse liability from $10.0 million to $7.5 million. After giving effect to the amendment of the facility, availability under the Pacific Western Bank Facility was $31.7 million. Principal and interest due under the Pacific Western Bank Facility are paid as cash is collected on the pledged receivables, with the remaining balance being due by maturity in September 2027.
See Note 10 to the Company’s Consolidated Financial Statements included in its Annual Report on Form 10-K for the year ended December 31, 2020 for additional information with respect to Bluegreen’s receivable-backed notes payable facilities.
Other Credit Facilities
Fifth Third Syndicated Line-of-Credit and Fifth Third Syndicated Term Loan. 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 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”). Borrowings under the amended facility generally bear interest at LIBOR plus 2.00% - 2.50% (with a LIBOR floor of 0.25%), depending on our 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. As of June 30, 2021, outstanding borrowings under the facility totaled $111.3 million, including $91.3 million under the Fifth Third Syndicated Term Loan with an interest rate of 2.25%, and $20.0 million under the Fifth Third Syndicated Line of Credit with an interest rate of 2.25%.
Bluegreen also has outstanding obligations under various credit facilities and securitizations that have no remaining future availability as the advance periods have expired.
Commitments
The Company’s material commitments as of SeptemberJune 30, 20202021 included Bluegreen’sthe required payments due on receivable-backed debt, Bluegreen’s lines-of-credit and other notes payable, and other borrowings,BVH’s note payable to BBX Capital, 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 all of 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 and inventory purchase commitments by period due date, as of SeptemberJune 30, 20202021 (in thousands):
Payments Due by Period | |||||||||||||||||||||||||||||||||||||||||||||
Unamortized | |||||||||||||||||||||||||||||||||||||||||||||
Debt | |||||||||||||||||||||||||||||||||||||||||||||
Less than | 1 — 3 | 4 — 5 | After 5 | Issuance | Payments Due by Period | ||||||||||||||||||||||||||||||||||||||||
Contractual Obligations | 1 year | Years | Years | Years | Costs | Total | Less than | 1 – 3 | 4 – 5 | After 5 | Unamortized | Total | |||||||||||||||||||||||||||||||||
Receivable-backed notes payable | Receivable-backed notes payable | $ | — | — | 118,531 | 266,327 | (4,140) | 380,718 | $ | — | $ | 12,591 | $ | 66,328 | $ | 315,317 | $ | (4,998) | $ | 389,238 | |||||||||||||||||||||||||
Notes payable and other borrowings | 11,300 | 25,673 | 125,000 | — | (1,302) | 160,671 | |||||||||||||||||||||||||||||||||||||||
Note payable to BBX Capital, Inc. | — | — | 75,000 | — | — | 75,000 | |||||||||||||||||||||||||||||||||||||||
Jr. subordinated debentures | — | — | — | 177,129 | (39,192) | 137,937 | |||||||||||||||||||||||||||||||||||||||
Noncancelable operating leases | 6,326 | 9,592 | 2,832 | 11,412 | — | 30,162 | |||||||||||||||||||||||||||||||||||||||
Bass Pro settlement agreement | 4,000 | 8,000 | 4,000 | — | — | 16,000 | |||||||||||||||||||||||||||||||||||||||
Bluegreen's notes payable and other borrowings | 6,875 | 16,875 | 87,500 | — | (1,036) | 110,214 | |||||||||||||||||||||||||||||||||||||||
BVH's note payable to BBX Capital, Inc. | — | — | 75,000 | — | — | 75,000 | |||||||||||||||||||||||||||||||||||||||
Jr. subordinated debentures (1) | — | — | — | 170,897 | (1,036) | 169,861 | |||||||||||||||||||||||||||||||||||||||
Noncancelable operating leases (2) | 5,029 | 13,930 | 7,625 | 24,392 | — | 50,976 | |||||||||||||||||||||||||||||||||||||||
Bass Pro Settlement (3) | 4,000 | 8,000 | — | — | — | 12,000 | |||||||||||||||||||||||||||||||||||||||
Total contractual obligations | Total contractual obligations | 21,626 | 43,265 | 325,363 | 454,868 | (44,634) | 800,488 | 15,904 | 51,396 | 236,453 | 510,606 | (7,070) | 807,289 | ||||||||||||||||||||||||||||||||
Interest Obligations (1) | |||||||||||||||||||||||||||||||||||||||||||||
Interest Obligations (4) | |||||||||||||||||||||||||||||||||||||||||||||
Receivable-backed notes payable | Receivable-backed notes payable | 13,145 | 26,291 | 23,137 | 64,177 | — | 126,750 | 12,605 | 24,997 | 21,604 | 73,457 | — | 132,663 | ||||||||||||||||||||||||||||||||
Notes payable and other borrowings | 4,047 | 6,991 | 3,162 | — | — | 14,200 | |||||||||||||||||||||||||||||||||||||||
Notes payable to BBX Capital, Inc. | 4,500 | 9,000 | 9,000 | — | — | 22,500 | |||||||||||||||||||||||||||||||||||||||
Bluegreen's notes payable and other borrowings | 2,426 | 4,338 | 604 | — | — | 7,368 | |||||||||||||||||||||||||||||||||||||||
BVH's note payable to BBX Capital, Inc. | 4,500 | 9,000 | 5,613 | — | — | 19,113 | |||||||||||||||||||||||||||||||||||||||
Jr. subordinated debentures | Jr. subordinated debentures | 8,424 | 16,850 | 16,850 | 87,657 | — | 129,781 | 7,938 | 15,878 | 15,878 | 76,606 | — | 116,300 | ||||||||||||||||||||||||||||||||
Total contractual interest | Total contractual interest | 30,116 | 59,132 | 52,149 | 151,834 | — | 293,231 | 27,469 | 54,213 | 43,699 | 150,063 | — | 275,444 | ||||||||||||||||||||||||||||||||
Total contractual obligations | Total contractual obligations | $ | 51,742 | 102,397 | 377,512 | 606,702 | (44,634) | 1,093,719 | $ | 43,373 | $ | 105,609 | $ | 280,152 | $ | 660,669 | $ | (7,070) | $ | 1,082,733 | |||||||||||||||||||||||||
(1)Amounts do not include purchase accounting adjustments for junior subordinated debentures of $35.4 million.
(2)Amounts represent the cash payment for leases and includes interest of $11.6 million
(3)Amounts represent the three remaining $4.0 million annual cash payments to Bass Pro to be made during 2022, 2023, and 2024 pursuant to the June 2019 settlement agreement and includes imputed interest of $2.7 million.
(4)Assumes that the scheduled minimum principal payments are made in accordance with the table above and the interest rate on variable rate debt remains the same as the rate at SeptemberJune 30, 2020.2021.
The future commitments of the Company, excluding Bluegreen, relate to Woodbridge’s junior subordinated debentures and the note payable to BBX Capital, including interest thereon. The Company will rely primarily on cash on hand and cash equivalents, as well as distributions, if any, that may be paid by Bluegreen in the future, in order to satisfy the principal payments required on its contractual obligations. As discussed above, the COVID-19 pandemic has adversely impacted Bluegreen, and while the Company believes that it will have sufficient cash and cash equivalents to fund its operations for at least two years, it will be dependent on the payment of dividends by Bluegreen to fund its operations in future periods. There is no assurance that Bluegreen will pay dividends in amounts required to fund BVH’s needs or at all.
In lieu of paying maintenance fees for unsold VOI inventory, weBluegreen may enter into subsidy agreements with certain HOAs. During the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, Bluegreen made payments related to such subsidies of $7.7$4.7 million and $10.5$4.6 million, respectively, which are included inwithin cost of other fee-based services in the Company’s unaudited consolidated statements of operations and comprehensive income for such periods.income. As of SeptemberJune 30, 2020, we2021, Bluegreen had $10.1$8.4 million accrued for such subsidies, which is included in accrued liabilities and other in the unaudited consolidated statements of financial conditionbalance sheet as of such date. As of December 31, 2020, Bluegreen had no accrued liabilities for such subsidies.
In 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.
We intendintends 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 and interest payments required on contractual obligations.
We believeBluegreen believes that ourits existing cash, anticipated cash generated from operations, anticipated future permitted borrowings under existing or future credit facilities, and anticipated future sales of notes receivable under existing, future or replacement purchase facilities will be sufficient to meet ourits anticipated working capital, capital expenditure and debt service requirements, including the contractual payment of the Bluegreen obligations set forth above, for the foreseeable future subject to the success of ourits ongoing business strategies, the ongoing availability of credit and the impact of the COVID-19 pandemic and success of the
actions we haveBluegreen has taken in response to the COVID-19 pandemic to mitigate the impact of the pandemic. Wethereto. Bluegreen will continue ourits efforts to renew, extend or replace any credit and receivables purchase facilities that have expired or that will expire in the near term. WeBluegreen may, in the future, also obtain additional credit facilities and may issue corporate debt or equity securities.debt. 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 and management believes acceptable. There can be no assurance that ourBluegreen’s efforts to renew or replace credit facilities or receivables purchase facilities which have expired or which are scheduled to expire in the near term will be successful or that sufficient funds will be available from operations or under existing, proposed or future revolving credit or other borrowing arrangements or receivables purchase facilities to meet ourBluegreen’s cash needs, including debt service obligations. To the extent we areBluegreen is unable to sell notes receivable or borrow under such facilities, ourits ability to satisfy ourits obligations would be materially adversely 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 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 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.distributions. 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’sits control.
Pursuant toAs previously disclosed, Bluegreen entered into a settlement agreement Bluegreen entered into with Bass Pro and its affiliates during June 2019,2019. Pursuant to the Settlement Agreement Bluegreen paid Bass Pro $20.0 million and agreed to make five annual payments to Bass Pro of $4.0 million, which commenced in January 2020. Additionally, in lieu of the previous commission arrangement, Bluegreen agreed to pay to 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 $32.00accessed and an amount for each per net vacation package sold (less cancellations or refunds within 45 dayssold. As of sale).June 30, 2021, Bluegreen also agreed to contribute to the Wonders of Wildlife Foundation $5.00 per net package sold (less certain cancellationshad sales and refunds within 45 days of sale), subject to an annual minimum of $700,000. Subject to the terms and conditions of the settlement agreement, Bluegreen is generally required to pay the fixed annual fee with respect tomarketing operations 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 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. In March 2020 as a result of the COVID-19 pandemic, Bluegreen temporarily closed its retail marketing operations at112 Bass Pro Shops and Cabela’s stores. BeginningStores and in mid-May 2020,January 2021, Bluegreen started the process of recommencing its sales and marketing operations and by September 30, 2020, Bluegreen recommenced its marketing operations at 87paid Bass Pro Shops and Cabela’s stores and commenced marketing operations at 5 new Cabela’s stores. Additionally,$6.9 million of which $3.4 million is included in October 2020, Bluegreen recommenced marketing operationsprepaid expenses in one additional Bass Pro Shop and commenced marketing operations at 4 new Cabela’s stores for a totalthe Company’s unaudited consolidated balance sheet as of 97 Bass Pro Shops and Cabela’s stores.June 30, 2021.
Off-balance-sheet Arrangements
As of SeptemberJune 30, 2020, we2021, the Company did not have any “off-balance sheet” arrangements.
Liquidity and Capital Resources
BVH and Subsidiaries, excluding Bluegreen
As of September 30, 2020, the Company, excluding Bluegreen, had cash, cash equivalents, and short-term investments of approximately $22.3 million. BVH believes that its primary source of liquidity for the foreseeable future will be its available cash, cash equivalents, and short-term investments and that it has sufficient liquidity to fund anticipated working capital and debt service requirements.
BVH’s principal sources of liquidity have historically been its available cash and short-term investments, dividends received from Bluegreen, and from borrowings. However, as described below, the COVID-19 pandemic has impacted or otherwise resulted in uncertainty regarding many of these sources of liquidity.
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 for the foreseeable future. For the nine months ended September 30, 2020 and 2019, BBX Capital received regular dividends from Bluegreen of $8.7 million and $34.3 million, respectively. The resumption of dividends payments by Bluegreen, as well as the amount and timing 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. Except as otherwise noted, the debts and obligations of Bluegreen are not direct obligations of BVH and generally are non-recourse to BVH. Similarly, the assets of Bluegreen are not available to BVH, absent a 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, BVH Capital may not resume 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. 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 historically received funds from its subsidiaries, including Bluegreen, in connection with the parties’ tax sharing agreement to the extent that a subsidiary utilized BVH’s tax benefits in BVH’s consolidated tax return. However, BVH did not receive tax sharing payments from its subsidiaries during the nine months ended September 30, 2020 and does not expect to receive any significant payments for the remainder of 2020 primarily as a result of the impact of COVID-19 on the Company’s operations. BBX Capital and its subsidiaries are no longer parties to the 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 and declared cash dividends of $0.25 per share on its common stock, or $4.8 million in the aggregate, during the year ended December 31, 2019. However, in April 2020, BVH suspended its regular quarterly dividend due to the impacts of the COVID-19 pandemic. Future declaration and payment of cash dividends with respect to the Company’s common stock, if any, will be determined in light of the then-current financial condition of the Company, its operating and capital needs, its debt covenants, and other factors deemed relevant by the board of directors.
In June 2017, BVH’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. As of September 30, 2020, BVH had purchased 4,750,483 shares of its Class A Common Stock for approximately $25.4 million pursuant to the June 2017 share repurchase program.
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.
BVH through its wholly-owned subsidiary, Woodbridge, had $66.3 million in junior subordinated debentures outstanding as of September 30, 2020. Woodbridge’s junior subordinated debentures accrue interest at a rate of 3-month LIBOR plus a spread ranging from 3.80% to 3.85%, mature between 2035 and 2036, and require interest payments on 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 approximately $7.2 million associated with Woodbridge’s junior subordinated debentures and the note payable to BBX Capital. These amounts are based on current expectations and assumptions, currently available information and, with respect to interest expense on Woodbridge’s junior subordinated debentures, interest rates as of 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, to fund its operations and satisfy its debt service requirements and other liabilities, including its note payable to BVH. As discussed above, the COVID-19 pandemic has resulted in Bluegreen suspending its regular quarterly dividend, and while BVH believes that it will have sufficient cash and cash equivalents to fund its operations for approximately two years following the spin-off, it will be dependent on 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 prior periods, in the time frames or amounts previously paid, or at all.
Bluegreen
Bluegreen believes that it has sufficient liquidity from the sources described below to fund operations, including its anticipated working capital, capital expenditure, debt service requirements and impacts associated with the COVID-19 pandemic challenges for the foreseeable future, subject to the success of its ongoing 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.
While the vacation ownership business has historically been capital intensive and Bluegreen has pursued transactions or activities which require significant capital investment and adversely impact cash flows, including VOI development or acquisition, Bluegreen has also 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.
Bluegreen 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 seek to renew or extend its debt.
The ability to sell and/or borrow against notes receivable from VOI buyers has been critical to Bluegreen’s continued liquidity. A financed VOI buyer is generally only required to pay a minimum of 10% to 20% of the purchase price in cash at the time of sale; however, selling, marketing and administrative expenses attributable to the sale are primarily cash expenses that generally exceed a buyer’s minimum required down payment. Accordingly, having financing facilities available for the hypothecation, sale or transfer of 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 Bluegreen’s receivable facilities. Bluegreen has historically financed 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, 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, 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 critical factor in its liquidity. If Bluegreen is unable to renew credit facilities or obtain new credit facilities, its business, results of 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, 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 2020 are expected to be between $1.0 million to $3.0 million.
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.
Subject to performance 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 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.
Bluegreen maintains various credit facilities with financial institutions which allow Bluegreen to borrow against or sell its VOI notes receivable. As of September 30, 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 | |||||||||||||
(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%).
(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 5 under Item 1 included in this report and Note 13 to the Company’s consolidated financial statements included in the 2019 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 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”). Borrowings 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. On June 29, 2020, the facility was amended to modify 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 $50.0 million under the Fifth Third Syndicated Line of Credit with an interest rate of 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.
See Note 5 under Item 1 included in this report and Note 13 to the Company’s consolidated financial statements included in the 2019 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.
We areThe Company is exposed to market risks in the ordinary course of ourits business. These risks primarily include interest rate risk and risks 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 ourthe ability to borrow against or sell ourBluegreen’s VOI receivables, which has historically been a critical factor in ourBluegreen’s liquidity, or otherwiseas well as adversely impact ourits business, operating results, liquidity or financial condition. OurThe Company’s exposure to market risk for continuing operations has not materially changed from what wewas previously disclosed in ourits Annual Report on Form 10-K for the year ended December 31, 2019.2020. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” of ourthe Company’s Annual Report on Form 10-K for the year ended December 31, 2019.2020.
Item 4. Controls and ProceduresProcedures.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, ourThe Company’s management, evaluated, with the participation of our principal executive officerits Chief Executive Officer and principal financial officer,its Chief Financial Officer, conducted an evaluation of the effectiveness of ourits disclosure controls and procedures (as such term is defined in RuleRules 13a-15(e) and 15d-15(e) under the Exchange Act)., as of June 30, 2021. Based uponon that evaluation, our principal executive officerthe Company’s Chief Executive Officer and principal financial officerChief Financial Officer concluded that, ouras of June 30, 2021, the Company’s disclosure controls and procedures were effective as of September 30, 2020 to ensurein ensuring that information required to be disclosed by usthe Company in the reports that we fileit files or submitsubmits under the Exchange Act (i) ishas been recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) ishas been accumulated and communicated to ourits management, including our principal executive officerthe Chief Executive Officer and principal financial officer,Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
Other than changes reflectingDuring the disposal of BBX Capital, Inc. and its subsidiaries as a result of the spin-off transaction completed on Septemberthree months ended June 30, 2020, there2021, there were no changes in ourthe Company’s internal control over financial reporting that occurred during the quarter ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, ourits internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. LLegalegal Proceedings
Eddie 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 allegedly making false statements and misrepresentations with respect to the sale of VOIs. Plaintiffs further have filed a purported class action allegation that BVU’s charging of an administrative processing fee constitutes the unauthorized practice of law, and have also asserted that 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 Vacations 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. Proceedings.
There have been no material changes in ourthe Company’s material legal proceedings from those disclosed in the “Legal Proceedings” section of ourits Annual Report on Form 10-K for the year ended December 31, 2019.2020, other than those described in Note 9 to the unaudited consolidated financial statements included in Part I of this Quarterly Report on Form 10-Q, which are incorporated into this Item by reference.
Item 1A. Risk FactorsFactors.
There have been no material changes into the risks and uncertainties that we face from thoserisk factors disclosed in the “Risk Factors” sectionssection of our 2019 Annual Report and the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.
The information presented below updates the related risk factor set forth in our Annual Report on Form 10-K for the 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
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.
.
Item 5. Other information
The description of the August 3, 2021 amendment to Bluegreen’s Liberty Bank Facility set forth in Note 7: Debt to the unaudited consolidated financial statements included in Part I, Item 1 of this report is incorporated by reference into this Item 5. Such description is a summary only, does not purport to be complete, and is qualified in its entirety by reference to the full text of the amendment, a copy of which is filed as Exhibit 10.1 to this report and is incorporated herein by reference
Item 6. 6. ExhibitsExhibits.
EXHIBIT INDEX
Exhibit | Description | |
Liberty Bank Facility amended and restated loan agreement | ||
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101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Labels | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
* Exhibits† Exhibit is furnished, and not filed, with this Form 10-Q.
report.
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.
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| August 4, 2021 | By: |
Alan B. Levan, Chairman of the Board, | ||
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| August 4, 2021 | By: |
Raymond S. Lopez | ||
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