UNITED STATES

SECURITIES AND EXCHANGE COMMISSION



Washington, DC  20549



FORM 10-Q



[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



For the Quarter Ended March 31, 2017



[   ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



Commission File Number

001-09071



BBX Capital Corporation

(Exact name of registrant as specified in its charter)





 

 

Florida

 

59‑2022148

(State or other jurisdiction of incorporation or organization)

 

(I.R.S Employer Identification No.)







 

 

401 East Las Olas Boulevard, Suite 800

 

 

Fort Lauderdale, Florida

 

33301

(Address of principal executive office)

 

(Zip Code)









(954) 940-4900

(Registrant's telephone number, including area code)



Not Applicable

(Former name, former address and former fiscal year, if changed since last report)



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.



YES [X]NO [   ]



Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).



YES [X]NO [   ]



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.





 

 

 

Large accelerated filer [ ]

Accelerated filer [X]

Non-accelerated filer [ ]

Smaller reporting company [ ]    



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



YES [   ]NO [ X ]



The number of shares outstanding of each of the registrant’s classes of common stock as of May 1, 2017 is as follows:

 

Class A Common Stock of $.01 par value, 84,896,527 shares outstanding.
Class B Common Stock of $.01 par value, 16,754,009 shares outstanding.







 


 

 





 

 



 

 

BBX Capital Corporation

TABLE OF CONTENTS



Part I.



 

 

Item 1.

Financial Statements

 



 

 



Condensed Consolidated Statements of Financial Condition as of March 31, 2017 and December 31, 2016 -Unaudited



 

 



Condensed Consolidated Statements of Operations and Comprehensive Income for the Three Months Ended March 31, 2017 and 2016 - Unaudited



 

 



Condensed Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2017 and 2016 - Unaudited



 

 



Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2016 - Unaudited



 

 



Notes to Condensed Consolidated Financial Statements - Unaudited



 

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

28 



 

 

Item 4.

Controls and Procedures

49 



 

 

Part II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

50 



 

 

Item 1A.

Risk Factors

50 



 

 

Item 6.

Exhibits

51 



 

 



Signatures

52 



  

 

 

 


 

 



PART I – FINANCIAL INFORMATION



Item 1. Financial Statements





 

 

 

 

BBX Capital Corporation

Condensed Consolidated Statements of Financial Condition

(In thousands, except share data)

(Unaudited)



 

 

 

 



 

March 31,

 

December 31,



 

2017

 

2016

ASSETS

 

 

 

 

Cash and cash equivalents

$

262,392 

 

299,861 

Restricted cash ($21,781 in 2017 and $21,894 in 2016 in variable

 

 

 

 

interest entities ("VIEs"))

 

50,495 

 

46,456 

Loans receivable

 

24,023 

 

25,521 

Notes receivable, net ($271,102 in 2017 and $287,111 in 2016 in VIEs)

 

425,002 

 

430,480 

Construction funds receivable

 

19,077 

 

20,744 

Inventory

 

279,542 

 

268,514 

Real estate held-for-sale, net

 

30,288 

 

33,345 

Real estate held-for-investment

 

12,037 

 

12,029 

Investments in unconsolidated real estate joint ventures

 

43,421 

 

43,374 

Property and equipment, net

 

96,149 

 

95,998 

Goodwill and intangible assets, net

 

74,995 

 

75,186 

Other assets

 

97,482 

 

84,560 

Total assets

$

1,414,903 

 

1,436,068 



 

 

 

 



 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Liabilities:

 

 

 

 

Accounts payable

$

28,955 

 

28,855 

Deferred income 

 

36,627 

 

37,015 

Escrow deposits

 

24,407 

 

20,152 

Other liabilities

 

80,301 

 

95,611 

Receivable-backed notes payable - recourse

 

84,312 

 

87,631 

Receivable-backed notes payable - non-recourse

 

308,718 

 

327,358 

Notes and mortgage notes payable and other borrowings

 

127,944 

 

133,790 

Junior subordinated debentures

 

134,398 

 

152,367 

Deferred income taxes

 

54,053 

 

44,318 

Shares subject to mandatory redemption

 

13,627 

 

13,517 

Total liabilities

 

893,342 

 

940,614 



 

 

 

 

Commitments and contingencies (See Note 8)

 

 

 

 



 

 

 

 

Preferred stock of $.01 par value; authorized 10,000,000 shares:

 

 

 

 

Redeemable 5% Cumulative Preferred Stock of $.01 par value; authorized 15,000 shares;

 

 

 

 

issued and outstanding 15,000 shares with a stated value of $1,000 per share

 

 -

 

 -



 

 

 

 

Equity:

 

 

 

 

Class A common stock of $.01 par value, authorized 150,000,000 shares;

 

 

 

 

issued and outstanding 84,878,228 in 2017 and 84,844,439 in 2016 

 

848 

 

848 

Class B common stock of $.01 par value, authorized 20,000,000 shares;

 

 

 

 

issued and outstanding 13,151,000 in 2017 and 13,184,789 in 2016

 

132 

 

132 

Additional paid-in capital

 

196,729 

 

193,347 

Accumulated earnings

 

279,271 

 

259,110 

Accumulated other comprehensive income

 

935 

 

1,167 

Total shareholders' equity

 

477,915 

 

454,604 

Noncontrolling interests

 

43,646 

 

40,850 

Total equity

 

521,561 

 

495,454 

Total liabilities and equity

$

1,414,903 

 

1,436,068 



 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited





 

1

 


 

 







 

 

 

 

BBX Capital Corporation

Condensed Consolidated Statements of Operations and Comprehensive Income - Unaudited

(In thousands, except per share data)



 

 

 

 



 

For the Three Months Ended



 

March 31,



 

2017

 

2016

Revenues

 

 

 

 

Sales of vacation ownership interests ("VOIs")

$

54,457 

 

56,370 

Fee-based sales commission revenue

 

45,154 

 

40,147 

Other fee-based services revenue

 

26,120 

 

25,555 

Trade sales

 

23,513 

 

20,962 

Interest income

 

21,155 

 

21,141 

Net gains (losses) on sales of assets

 

295 

 

(46)

Other revenue

 

1,132 

 

1,618 

Total revenues

 

171,826 

 

165,747 



 

 

 

 

Costs and Expenses

 

 

 

 

Cost of sales of VOIs

 

3,318 

 

3,916 

Cost of other fee-based services

 

17,063 

 

15,010 

Cost of trade sales

 

18,073 

 

15,047 

Interest expense

 

8,824 

 

9,067 

Recoveries from loan losses, net

 

(3,094)

 

(1,748)

Asset recoveries, net

 

(13)

 

(37)

Net gains on cancellation of junior subordinated debentures

 

(6,929)

 

 -

Litigation costs and penalty reimbursements

 

(9,606)

 

 -

Selling, general and administrative expenses

 

114,195 

 

112,055 

Total costs and expenses

 

141,831 

 

153,310 



 

 

 

 

Equity in net earnings (losses) of unconsolidated

 

 

 

 

real estate joint ventures

 

3,714 

 

(342)

Foreign exchange gain

 

191 

 

210 

Other (expense) income, net

 

(175)

 

155 

Income before income taxes

 

33,725 

 

12,460 

Provision for income taxes (See Note 9)

 

(13,054)

 

(5,107)

Net income

 

20,671 

 

7,353 

Less: Net income attributable to noncontrolling interests

 

2,796 

 

1,871 

Net income attributable to shareholders

$

17,875 

 

5,482 



 

 

 

 

Basic earnings per share

$

0.18 

 

0.06 

Diluted earnings per share

$

0.17 

 

0.06 

Basic weighted average number of common

 

 

 

 

shares outstanding

 

98,921 

 

86,839 

Diluted weighted average number of common and

 

 

 

 

common equivalent shares outstanding

 

105,866 

 

87,013 



 

 

 

 

Cash dividends declared per Class A common share

$

0.0075 

 

0.00 

Cash dividends declared per Class B common share

$

0.0075 

 

0.00 



 

 

 

 

Net income

$

20,671 

 

7,353 

Other comprehensive income, net of tax:

 

 

 

 

Unrealized gains on securities available for sale

 

23 

 

25 

Foreign currency translation adjustments

 

(255)

 

(148)

Other comprehensive loss, net

 

(232)

 

(123)

Comprehensive income, net of tax

 

20,439 

 

7,230 

Less: Comprehensive income attributable

 

 

 

 

to noncontrolling interests

 

2,796 

 

1,853 

Total comprehensive  income attributable to shareholders

$

17,643 

 

5,377 



 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited





2

 


 

 









 

 

 

 

 

 

 

 

 

 

 

BBX Capital Corporation

Condensed Consolidated Statements of Changes in Equity - Unaudited

For the Three Months Ended March 31, 2017 and 2016

(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, 2015

73,212  11,346 

$

732  113  143,231  232,134  616  376,826  106,080  482,906 

Net income

 -

 -

 

 -

 -

 -

5,482 

 -

5,482  1,871  7,353 

Other comprehensive loss

 -

 -

 

 -

 -

 -

 -

(105) (105) (18) (123)

Subsidiaries' capital transactions

 -

 -

 

 -

 -

1,333 

 -

 -

1,333  309  1,642 

Share-based compensation

 -

 -

 

 -

 -

1,639 

 -

 -

1,639 

 -

1,639 

Balance, March 31, 2016

73,212  11,346 

$

732  113  146,203  237,616  511  385,175  108,242  493,417 



 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2016

84,845  13,185 

$

848  132  193,347  259,110  1,167  454,604  40,850  495,454 

Net income

 -

 -

 

 -

 -

 -

17,875 

 -

17,875  2,796  20,671 

Other comprehensive loss

 -

 -

 

 -

 -

 -

 -

(232) (232)

 -

(232)

Cumulative effect from excess tax benefits on share based compensation associated with the adoption of ASU 2016-09 (See Note 1)

 -

 -

 

 -

 -

 -

3,054 

 -

3,054 

 -

3,054 

Class A common stock cash dividends

 -

 -

 

 -

 -

 -

(642)

 -

(642)

 -

(642)

Class B common stock cash dividends 

 -

 -

 

 -

 -

 -

(126)

 -

(126)

 -

(126)

Conversion of Common Stock from Class B to Class A

34  (34)

 

 -

 -

 -

 -

 -

 -

 -

 -

Share-based compensation

 -

 -

 

 -

 -

3,382 

 -

 -

3,382 

 -

3,382 

Balance, March 31, 2017

84,879  13,151 

$

848  132  196,729  279,271  935  477,915  43,646  521,561 



 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited









3

 


 

 







 

 

 

 

 



 

 

 

 

 

BBX Capital Corporation

Condensed Consolidated Statements of Cash Flows - Unaudited

(In thousands)



 

 

 

 

 



 

For the Three Months Ended 



 

March 31,

 



 

2017

 

2016

 

Operating activities:

 

 

 

 

 

Net income

$

20,671 

 

7,353 

 



 

 

 

 

 

Adjustment to reconcile net income to net cash

 

 

 

 

 

(used in) provided by operating activities:

 

 

 

 

 

Recoveries from loan losses and asset impairments, net

 

(3,043)

 

(2,314)

 

Provision for notes receivable allowances

 

9,350 

 

10,485 

 

Depreciation, amortization and accretion, net

 

3,220 

 

2,599 

 

Share-based compensation expense

 

3,382 

 

1,639 

 

Share-based compensation expense of subsidiaries

 

 -

 

1,642 

 

Net losses on sales of real estate, loans held-for-sale,

 

 

 

 

 

and properties and equipment

 

155 

 

46 

 

Equity in (earnings) losses of unconsolidated real estate

 

 

 

 

 

joint ventures

 

(3,714)

 

342 

 

Return on investment in unconsolidated real estate joint ventures

 

3,009 

 

 -

 

Increase in deferred income tax

 

12,782 

 

9,846 

 

Gain realized on cancellation of junior subordinated debentures

 

(6,929)

 

 -

 

Interest accretion on shares subject to mandatory redemption

 

298 

 

289 

 

Increase in restricted cash

 

(4,039)

 

(1,090)

 

Increase in notes receivable

 

(3,784)

 

(5,257)

 

(Increase) decrease in inventory

 

(7,835)

 

1,864 

 

Increase in other assets

 

(13,227)

 

(4,284)

 

Decrease in other liabilities

 

(11,548)

 

(5,276)

 

Net cash (used in) provided by operating activities

 

(1,252)

 

17,884 

 



 

 

 

 

 

Investing activities:

 

 

 

 

 

Decrease in restricted cash

 

 -

 

1,306 

 

Return of unconsolidated real estate joint venture investments

 

971 

 

 -

 

Investments in unconsolidated real estate joint ventures

 

(313)

 

(301)

 

Repayment of loans receivable, net

 

3,991 

 

4,065 

 

Proceeds from sales of real estate held-for-sale

 

3,636 

 

830 

 

Additions to real estate held-for-sale

 

(176)

 

(169)

 

Additions to real estate held-for-investment

 

(18)

 

(1,558)

 

Purchases of property and equipment, net

 

(3,899)

 

(2,880)

 

Increase from other investing activities

 

(22)

 

(225)

 

Net cash provided by investing activities

 

4,170 

 

1,068 

 



 

 

 

 

 

Financing activities:

 

 

 

 

 

Repayments of notes, mortgage notes payable and other borrowings

 

(39,912)

 

(125,729)

 

Proceeds from notes, mortgage notes payable and other borrowings

 

11,679 

 

136,591 

 

Redemption of junior subordinated debentures

 

(11,438)

 

 -

 

Payments for debt issuance costs

 

(24)

 

(2,322)

 

Payments of interest on shares subject to mandatory redemption

 

(188)

 

(188)

 

Dividends paid on common stock

 

(504)

 

 -

 

Net cash (used in) provided by financing activities

 

(40,387)

 

8,352 

 



 

 

 

 

 

(Decrease) increase in cash and cash equivalents

 

(37,469)

 

27,304 

 

Cash and cash equivalents at beginning of period 

 

299,861 

 

198,905 

 

Cash and cash equivalents at end of period 

$

262,392 

 

226,209 

 



 

 

 

Continued

 

4

 


 

 









 

 

 

 

 



 

 

 

 

 

BBX Capital Corporation

Condensed Consolidated Statements of Cash Flows - Unaudited

(In thousands)



 

 

 

 

 



 

For the Three Months Ended 



 

March 31,

 



 

2017

 

2016

 

Supplemental cash flow information:

 

 

 

 

 

Interest paid on borrowings

$

7,822 

 

8,757 

 

Income taxes paid

 

307 

 

481 

 



 

 

 

 

 

Supplementary disclosure of non-cash investing and financing activities:

 

 

 

 

 

Restricted cash received on securitization, pending

 

 

 

 

 

provision of additional collateral

$

 -

 

13,981 

 

Loans transferred to real estate held-for-sale

 

601 

 

826 

 

Decrease in deferred tax liabilities due to cumulative

 

 

 

 

 

 effect of excess tax benefits

 

3,054 

 

 -

 

Decrease in shareholders' accumulated other comprehensive

 

 

 

 

 

income, net of taxes

 

(232)

 

(105)

 

Net increase in shareholders' equity from

 

 

 

 

 

the effect of subsidiaries' capital transactions, net of taxes

 

 -

 

1,333 

 



 

 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited









 

5

 


 

 

BBX Capital Corporation 

Notes to Condensed Consolidated Financial Statements - Unaudited





1.    Presentation of Interim Financial Statements



Basis of Financial Statement Presentation



BBX Capital Corporation is referred to in this report together with its subsidiaries as the “Company” or, unless otherwise indicated or the context otherwise requires, “we,” “us” or “our” and is referred to in this report without its subsidiaries as “BBX Capital”.     The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information.  Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements.



In management’s opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, which include normal recurring adjustments, as are necessary for a fair statement of the condensed consolidated financial condition of the Company at March 31, 2017; the condensed consolidated results of operations and comprehensive income of the Company for the three months ended March 31, 2017 and 2016; the condensed consolidated changes in equity of the Company for the three months ended March 31, 2017 and 2016; and the condensed consolidated cash flows of the Company for the three months ended March 31, 2017 and 2016.  Operating results for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017 or any other future period. 



These unaudited condensed consolidated financial statements and related notes are presented as permitted by Form 10-Q and should be read in conjunction with the Company’s audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (the “2016 Annual Report”).  All significant inter-company balances and transactions have been eliminated in consolidation.  As used throughout this document, the term “fair value” reflects the Company’s estimate of fair value as discussed herein.  Certain amounts for prior periods have been reclassified to conform to the current period’s presentation.



The Company’s core investments include Bluegreen Corporation (“Bluegreen”), real estate and middle market companies.  Bluegreen is a sales, marketing and management company focused on the vacation ownership industry. The Company’s real estate investments include real estate joint ventures and the ownership, financing, acquisition, development and management of real estate. The Company’s investments in middle market operating businesses include Renin Holdings, LLC (“Renin”), a company that manufactures products for the home improvement industry, and the Company’s investments in sugar and confectionery businesses through its wholly-owned subsidiary, BBX Sweet Holdings, LLC (“BBX Sweet Holdings”).



On December 15, 2016 the Company completed the acquisition of all the outstanding shares of the former BBX Capital Corporation (“BCC”) not previously owned by the Company and on January 30, 2017 the Company changed its name from BFC Financial Corporation to BBX Capital Corporation.



Prior to the acquisition of all the outstanding shares of BCC, the Company had an 82% equity interest in BCC and a direct 54% equity interest in Woodbridge Holdings, LLC (“Woodbridge”), the parent company of Bluegreen.  BCC held the remaining 46% interest in Woodbridge.  As a result of the acquisition of the publicly held shares of BCC, BCC (directly) and Bluegreen (indirectly through Woodbridge) are wholly owned subsidiaries of the Company.



BBX Capital has two classes of common stock. Holders of the Class A common stock are entitled to one vote per share, which in the aggregate represents 22% of the combined voting power of the Class A common stock and the Class B common stock. Class B common stock represents the remaining 78% of the combined vote. The percentage of total common equity represented by Class A and Class B common stock was 87% and 13%, respectively, at March 31, 2017.   Class B common stock is convertible into Class A common stock on a share for share basis at any time at the option of the holder.



On September 21, 2009, our board of directors approved a share repurchase program which authorizes the repurchase of up to 20,000,000 shares of Class A common stock and Class B common stock at an aggregate cost of up to $10 million. The share repurchase program authorizes management, at its discretion, to repurchase shares from time to time subject to market conditions and other factors. During April 2017, the Company purchased 1.0 million

 

6

 


 

 

shares of its Class A common stock for approximately $6.2 million.  The share purchases were made under the Company’s share repurchase program.



Recently Adopted Accounting Pronouncements



On January 1, 2017, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-09, Compensation – Stock Compensation (Topic 718), Improvements to Employee Share-based Payment Accounting.  The new standard requires the recognition of excess tax benefits (“windfall”) and tax deficiencies (“Shortfall”) in the income statement when the awards vest or are settled, thus eliminating additional paid in capital pools. The new standard also removes the present requirement to delay recognition of windfall tax benefits until it reduces current taxes payable. The new standard instead requires the recognition of windfall tax benefits at the time of settlement, subject to valuation allowance considerations.  The new standard clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity on the Company’s statement of cash flows and cash flows related to windfall tax benefits will no longer be separately classified as a financing activity apart from other income tax cash flows which are classified as operating activities.  The new standard provides an accounting policy election to account for forfeitures as they occur instead of on an estimated basis and allows for the employer to repurchase more of an employee’s shares for tax withholding purposes up to the maximum statutory rate in the employee’s applicable jurisdictions without triggering liability accounting. The new standard changes the computation of diluted earnings per share as windfall tax benefits will not be included in the calculation of assumed proceeds when applying the treasury stock method. 



The primary impact of the implementation of this standard on the Company’s Consolidated Financial Statements was the recognition of a $3.1 million  windfall tax benefit as a cumulative effect to accumulated earnings associated with windfall tax benefits that were not previously recognized because the related tax deduction had not reduced current taxes payable



Upon adoption of the new standard the Company made an accounting policy election to recognize forfeitures as they occur.  The presentation requirement for cash flows related to employee taxes paid for withheld shares had no impact to any of the periods presented in the Company’s consolidated cash flows statements since these cash flows have historically been presented as a financing activity.



New Accounting Pronouncements



The Financial Accounting Standards Board (“FASB”) has issued the following accounting pronouncements and guidance which may be applicable to the Company but have not yet become effective.  (See the 2016 Annual Report for additional accounting pronouncements and guidance issued relevant to the Company’s operations which have not been adopted as of March 31, 2017)



Accounting Standards Update (ASU) No. 2014-09 –  Revenue Recognition (Topic 606): In May 2014, the FASB issued a new standard related to revenue recognition. Under the new standard, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The FASB has recently issued several amendments to the standard, including identifying performance obligations and other technical corrections and minor improvements affecting a variety of topics and required disclosures in the new standard.  The standard can be adopted using either the full retrospective or the modified retrospective method. The Company is evaluating the available adoption methods. The standard is effective for annual and interim reporting periods beginning after December 15, 2017. The Company anticipates adopting this standard on January 1, 2018.



The initial analysis identifying areas that will be impacted by the new guidance is substantially complete, and the Company is currently analyzing the potential impacts to the consolidated financial statements and related disclosures on a disaggregated basis and evaluating differences in the Company’s current accounting policies and the new standard.  



The Company believes that the new standard will have an impact on the timing of revenue recognition associated with the Company’s sales of real estate.  Specifically, the Company believes the new standard will impact the timing of revenue recognition for contingent profits on real estate sales and on the contribution of real estate to joint ventures in which the Company has an equity interest. 



 

7

 


 

 

The Company believes that the new standard will not materially affect revenue recognition of trade sales. 



The Company expects the recognition of its fee-based sales commission revenue to remain substantially unchanged. However, the Company is continuing its assessment on the accounting for sales of VOIs, collectibility of sales of VOIs, other fee-based services revenue and the presentation of certain revenues on a gross basis based on pending industry guidance anticipated to be issued in 2017. The AICPA’s Financial Reporting Executive Committee ("FINREC") is in the process of reviewing and issuing guidance related to the implementation of ASU 2014-09. Final revenue recognition clarifications are expected to be included in a new revenue recognition guide that the AICPA is developing. The Company anticipates using this guide and the timeshare industry specific guidance in making its assessment after the guide is issued.



Accounting Standards Update (ASU) No. 2016-02 – Leases (Topic 842).  This update requires an entity to recognize a right-of-use asset and a lease liability for virtually all of its leases. The liability will be equal to the present value of lease payments. The asset will generally be based on the liability. For income statement purposes operating leases will result in straight-line expense and finance leases will result in expenses similar to current capital leases. The guidance also requires additional disclosures to enable users of financial statements to understand the amount, timing and uncertainty of cash flows arising from leases.  The guidance will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company anticipates adopting this standard on January 1, 2019. The Company expects that the implementation of this new standard will have an impact on its consolidated financial statements and related disclosures as the Company has aggregate future minimum lease payments of $61.0 million at December 31, 2016 under its current non-cancelable lease agreements with various expirations dates between 2017 and 2026. The Company anticipates recognition of additional assets and corresponding liabilities related to these leases on its consolidated statement of financial condition.



Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.  This update requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. The update introduces an approach based on expected credit losses to estimate credit losses and expands the disclosure requirements regarding a company’s assumptions, models, and methods for estimating the allowance for credit losses. Further, entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination (i.e., by vintage year). This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the requirements of this update and has not yet determined its impact on the Company’s consolidated financial statements.



Accounting Standard Update (ASU) No. 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20).    This update indicates that nonfinancial assets within the scope of Subtopic 610-20 may include nonfinancial assets transferred within a legal entity by transferring ownership in the legal entity to a counterparty.  The update indicates that an entity should identify each distinct nonfinancial asset or in substance nonfinancial asset promised to a counterparty and derecognize each asset when the counterparty obtains control of the asset.  This update supersedes the guidance in Topic 845 and eliminates partial sale accounting associated with the transfer of real estate to a joint venture for a noncontrolling interest in the joint venture.  The ASU is effective upon adoption of ASU 2014-09.  The Company is currently evaluating the requirements of this update and has not yet determined its impact on the Company’s consolidated financial statements.





2.    Consolidated Variable Interest Entities



Bluegreen sells VOI notes receivable through special purpose finance entities. These transactions are generally structured as non-recourse to Bluegreen, and are designed to provide liquidity for Bluegreen and to transfer certain of the economic risks and benefits of the notes receivable to third parties.  In a securitization, various classes of debt securities are issued by the special purpose finance entities that are generally collateralized by a single tranche of transferred assets, which consist of VOI notes receivable.  Bluegreen services the securitized notes receivable for a fee pursuant to servicing agreements negotiated with third parties based on market conditions at the time of the securitization.



In these securitizations, Bluegreen generally retains a portion of the securities and continues to service the securitized notes receivable.  Under these arrangements, the cash payments received from obligors on the receivables sold are generally applied monthly to pay fees to service providers, make interest and principal payments

 

8

 


 

 

to investors, and fund required reserves, if any, with the remaining balance of such cash retained by Bluegreen; however, to the extent the portfolio of receivables fails to satisfy specified performance criteria (as may occur due to, among other things, an increase in default rates or credit loss severity) or other triggering 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.  As of March 31, 2017, Bluegreen was in compliance with all applicable terms under its securitization transactions, and no triggering events had occurred.



In accordance with applicable accounting guidance for the consolidation of VIEs, Bluegreen analyzes its variable interests, which may consist of loans, servicing rights, guarantees, and equity investments, to determine if an entity in which Bluegreen has a variable interest is a variable interest entity.  Bluegreen’s analysis includes a review of both quantitative and qualitative factors.  Bluegreen bases its quantitative analysis on the forecasted cash flows of the entity, and bases its qualitative analysis on the design of the entity, its organizational structure, including decision-making ability, and relevant financial agreements.  Bluegreen also uses its qualitative analysis to determine if Bluegreen must consolidate a variable interest entity as the primary beneficiary.  In accordance with applicable accounting guidance, Bluegreen has determined these securitization entities to be VIEs of which Bluegreen is the primary beneficiary and, therefore, Bluegreen consolidates the entities into its financial statements. 



Under the terms of certain of Bluegreen’s timeshare note sales, Bluegreen has the right to repurchase or substitute a limited amount of defaulted mortgage notes receivable for new notes receivable at the outstanding principal balance plus accrued interest.  Voluntary repurchases and substitutions by Bluegreen of defaulted notes receivable during the three months ended March 31, 2017 and 2016 were $3.3 million and $1.2 million, respectively.  Bluegreen’s maximum exposure to loss relating to its non-recourse securitization entities is the difference between the outstanding VOI notes receivable and the notes payable, plus cash reserves and any additional residual interest in future cash flows from collateral.



Information related to the assets and liabilities of Bluegreen’s consolidated VIEs included in the Company’s Condensed Consolidated Statements of Financial Condition is set forth below (in thousands):







 

 

 

 



 

 

 

 



 

March 31,

 

December 31,



 

2017

 

2016

Restricted cash

$

21,781 

 

21,894 

Securitized notes receivable, net

 

271,102 

 

287,111 

Receivable backed notes payable - non-recourse

 

308,718 

 

327,358 



The restricted cash and the securitized notes receivable balances disclosed in the table above are restricted to satisfy obligations of the VIEs.





3.    Loans Receivable 



The loans receivable portfolio consisted of the following components (in thousands):





 

 

 

 



 

 

 

 



 

March 31, 2017

 

December 31,  2016

Commercial non-real estate

$

818 

 

1,169 

Commercial real estate

 

5,808 

 

5,880 

Small business

 

2,439 

 

2,506 

Consumer

 

1,446 

 

1,799 

Residential

 

13,512 

 

14,167 

         Loans receivable

$

24,023 

 

25,521 



As of March 31, 2017, foreclosure proceedings were in process on $9.1 million of residential loans.



The total discount on loans receivable was $3.0 million and $3.3 million as of March 31, 2017 and December 31, 2016, respectively.



 

9

 


 

 

Credit Quality Information



The Company assesses loan credit quality by monitoring delinquencies and current loan to value ratios. 



The unpaid principal balance less charge-offs and discounts of non-accrual loans receivable was as follows (in thousands):



 

 

 

 



 

 

 

 



 

March 31,

 

December 31,

Loan Class

 

2017

 

2016

Commercial non-real estate

$

818 

 

1,169 

Commercial real estate

5,808 

 

5,880 

Small business

 

2,439 

 

2,506 

Consumer

 

1,348 

 

1,701 

Residential

 

12,128 

 

12,762 

Total nonaccrual loans

$

22,541 

 

24,018 



An age analysis of the past due recorded investment in loans receivable as of March 31, 2017 and December 31, 2016 was as follows (in thousands):



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

Total



 

31-59 Days

 

60-89 Days

 

90 Days

 

Total

 

 

 

Loans

March 31, 2017

 

Past Due

 

Past Due

 

or More (1)

 

Past Due

 

Current

 

Receivable

Commercial non-real estate

$

 -

 

 -

 

 -

 

 -

 

818 

 

818 

Commercial real estate

 

 -

 

 -

 

3,986 

 

3,986 

 

1,822 

 

5,808 

Small business

 

 -

 

252 

 

 -

 

252 

 

2,187 

 

2,439 

Consumer

 

 -

 

100 

 

386 

 

486 

 

960 

 

1,446 

Residential

 

670 

 

 -

 

9,124 

 

9,794 

 

3,718 

 

13,512 

Total

$

670 

 

352 

 

13,496 

 

14,518 

 

9,505 

 

24,023 







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

Total



 

31-59 Days

 

60-89 Days

 

90 Days

 

Total

 

 

 

Loans

December 31, 2016

 

Past Due

 

Past Due

 

or More (1)

 

Past Due

 

Current

 

Receivable

Commercial non-real estate

$

 -

 

 -

 

330 

 

330 

 

839 

 

1,169 

Commercial real estate

 

 -

 

 -

 

3,986 

 

3,986 

 

1,894 

 

5,880 

Small business:

 

 -

 

 -

 

 -

 

 -

 

2,506 

 

2,506 

Consumer

 

23 

 

 -

 

467 

 

490 

 

1,309 

 

1,799 

Residential

 

609 

 

231 

 

9,541 

 

10,381 

 

3,786 

 

14,167 

Total

$

632 

 

231 

 

14,324 

 

15,187 

 

10,334 

 

25,521 



1)

There were no loans that were 90 days or more past due and still accruing interest as of March 31, 2017 or December 31, 2016.



 

10

 


 

 

The activity in the allowance for loan losses for the three months ended March 31, 2017 and 2016 was as follows (in thousands): 





 

 

 

 



 

 

 

 



 

For the Three Months



 

Ended March 31,

Allowance for Loan Losses:

2017

 

2016

Beginning balance

$

 -

 

 -

    Charge-offs :

 

(34)

 

(30)

     Recoveries :

 

3,128 

 

1,778 

     Recoveries from loan losses, net

 

(3,094)

 

(1,748)

Ending balance

$

 -

 

 -

Ending balance individually evaluated for impairment

$

 -

 

 -

Ending balance collectively evaluated for impairment

 

 -

 

 -

Total

$

 -

 

 -

Loans receivable:

 

 

 

 

Ending balance individually evaluated for impairment

$

20,037 

 

12,924 

Ending balance collectively evaluated for impairment

 

3,986 

 

20,357 

Total

$

24,023 

 

33,281 





Impaired Loans



Loans are considered impaired when, based on current information and events, management believes it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impairment is evaluated based on past due status for consumer and residential loans. Impairment is evaluated for commercial and small business loans based on payment history, financial strength of the borrower or guarantors and cash flow associated with the collateral or business. Collateral dependent impaired loans are charged down to the fair value of collateral less cost to sell. Interest payments on impaired loans are recognized on a cash basis as interest income. Impaired loans, or portions thereof, are charged off when deemed uncollectible.    



Individually impaired loans as of March 31, 2017 and December 31, 2016 were as follows (in thousands):







 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

As of March 31, 2017

 

As of December 31, 2016



 

 

Unpaid

 

 

 

Unpaid

 



 

Recorded

Principal

Related

 

Recorded

Principal

Related



 

Investment

Balance

Allowance

 

Investment

Balance

Allowance



 

 

 

 

 

 

 

 

Total with allowance recorded

$

 -

 -

 -

 

 -

 -

 -

Total with no allowance recorded

 

22,708  37,097 

 -

 

24,188  39,901 

 -

Total

$

22,708  37,097 

 -

 

24,188  39,901 

 -





Average recorded investment and interest income recognized on impaired loans for the three months ended March 31, 2017 and 2016 were as follows (in thousands):







 

 

 

 

 

 



 

 

 

 

 

 



 

For the Three Months Ended

 

For the Three Months Ended



 

March 31, 2017

 

March 31, 2016



 

Average Recorded

Interest Income

 

Average Recorded

Interest Income



 

Investment

Recognized

 

Investment

Recognized

Total with allowance recorded

$

 -

 -

 

 -

 -

Total with no allowance recorded

 

22,762  219 

 

16,797  337 

Total

$

22,762  219 

 

16,797  337 





 

11

 


 

 

Impaired loans with no valuation allowances recorded represent loans that were written-down to the fair value of the collateral less cost to sell, loans in which the collateral value less cost to sell was greater than the carrying value of the loan, loans in which the present value of the cash flows discounted at the loans’ effective interest rate was equal to or greater than the carrying value of the loans, or loans that were collectively measured for impairment.



There were no commitments to lend additional funds on impaired loans as of March 31, 2017.





4.    Notes Receivable



The table below provides information relating to Bluegreen’s notes receivable and related allowance for credit losses as of March 31, 2017 and December 31, 2016 (in thousands):







 

 

 

 



 

 

 

 



 

March 31,

 

December 31,



 

2017

 

2016

Notes receivable :

 

 

 

 

VOI notes receivable - non-securitized

$

189,011 

 

175,123 

VOI notes receivable - securitized

 

347,964 

 

369,259 

Other notes receivable (1)

 

1,604 

 

1,688 

Gross notes receivable

 

538,579 

 

546,070 

Allowance for credit losses

 

(113,577)

 

(115,590)

Notes receivable, net

$

425,002 

 

430,480 

Allowance as a % of gross notes receivable

 

21% 

 

21% 



(1)

Notes receivable secured by homesites were originated through a business, substantially all of the assets of which were sold by Bluegreen in 2012.    





The weighted-average interest rate on Bluegreen’s notes receivable was 15.6%, and 15.7% at March 31, 2017 and December 31, 2016, respectively.  Bluegreen’s notes receivable bear interest at fixed rates. 



Bluegreen’s notes receivable are carried at amortized cost less an allowance for credit losses.  Interest income is suspended, and previously accrued but unpaid interest income is reversed on all delinquent notes receivable when principal or interest payments are more than three months contractually past due and not resumed until such loans are less than three months past due.  As of March 31, 2017 and December 31, 2016, $11.0 million and $11.4 million, respectively, of Bluegreen’s VOI notes receivable were more than 90 days past due, and accordingly, consistent with Bluegreen’s policy, were not accruing interest income.  After 120 days, Bluegreen’s VOI notes receivable are generally written off against the allowance for credit loss.



Credit Quality of Notes Receivable and the Allowance for Credit Losses



Bluegreen holds large amounts of homogeneous VOI notes receivable and assesses uncollectibility based on pools of receivables.  In estimating future credit losses, Bluegreen’s management does not use a single primary indicator of credit quality but instead evaluates its VOI notes receivable based upon a static pool analysis that incorporates the aging of the respective receivables, default trends and prepayment rates by origination year, as well as the FICO® scores of the borrowers at the time of origination.



 

12

 


 

 

The activity in Bluegreen’s allowance for loan losses (including with respect to notes receivable secured by homesites) was as follows (in thousands):







 

 

 

 



 

 

 

 



 

For the Three Months Ended



 

March 31,



 

2017

 

2016

Balance, beginning of period

$

115,590 

 

110,714 

Provision for credit losses

 

9,350 

 

10,485 

Write-offs of uncollectible receivables

 

(11,363)

 

(11,023)

Balance, end of period

$

113,577 

 

110,176 





The following table shows the delinquency status of Bluegreen’s VOI notes receivable as of March 31, 2017 and December 31, 2016 (in thousands):







 

 

 

 



 

 

 

 



 

March 31,

 

December 31,



 

2017

 

2016

Current

$

515,233 

 

521,536 

31-60 days

 

6,092 

 

6,378 

61-90 days

 

4,662 

 

5,082 

> 90 days (1)

 

10,988 

 

11,386 

Total

$

536,975 

 

544,382 





(1)

Includes $6.3 million and $5.3 million as of March 31, 2017 and December 31,  2016, respectively, related to VOI notes receivable that, as of such dates, had defaulted but the related VOI notes 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 credit losses    





5.     Inventory



Inventory consisted of the following (in thousands):



 

 

 

 



 

March 31,

 

December 31,



 

2017

 

2016

Completed VOI units

$

160,330 

 

163,581 

Construction-in-progress

 

17,611 

 

13,396 

Real estate held for future VOI development

 

102,622 

 

98,453 

Land held for development

 

16,649 

 

15,254 

Purchase accounting adjustment

 

(35,365)

 

(36,896)

Total real estate inventory

 

261,847 

 

253,788 

Trade inventory

 

17,695 

 

14,726 

Total Inventory

$

279,542 

 

268,514 





The Company’s inventory as of March 31, 2017 and December 31, 2016 includes trade inventory manufactured by Renin and BBX Sweet Holdings consisting of the following (in thousands):





 

 

 

 



 

 

 

 



 

March 31,

 

December 31,



 

2017

 

2016

Raw materials

$

4,613 

 

5,059 

Paper goods and packaging materials

 

2,171 

 

2,090 

Finished goods

 

10,911 

 

7,577 

Total

$

17,695 

 

14,726 





Trade inventories are stated at the lower of cost or market value. Cost is determined by the first-in, first out method.  In valuing inventory, the Company makes assumptions regarding the write-downs required for excess and obsolete

 

13

 


 

 

inventory based on judgments and estimates formulated from available information. The Company estimates for excess and obsolete inventory are based on historical and forecasted usage. Inventory is also examined for upcoming expiration and is written down where appropriate. Included in costs of goods sold for the three months ended March 31, 2017 were $0.4 million of trade inventory write-downs.  There were no trade inventory write-downs during the three months ended March 31, 2016.







6.     Investments in Unconsolidated Real Estate Joint Ventures



As of March 31, 2017, the Company had equity interests in 13 unconsolidated real estate joint ventures that develop single-family master planned communities, multifamily apartment facilities and retail centers.  Investments in unconsolidated real estate joint ventures are unconsolidated variable interest entities.  See Note 2 for information regarding the Company’s investments in consolidated variable interest entities.



The Company had the following investments in unconsolidated real estate joint ventures (in thousands):





 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

March 31,

 

December 31,

 

BBX Capital

 

Investment in unconsolidated real estate joint ventures

 

2017

 

2016

 

% Ownership

 

Altis at Kendall Square, LLC

$

145 

 

154 

 

20.24

%

Altis at Lakeline - Austin Investors LLC

 

4,908 

 

5,165 

 

33.74

 

New Urban/BBX Development, LLC

 

795 

 

907 

 

50.00

 

Sunrise and Bayview Partners, LLC

 

1,499 

 

1,574 

 

50.00

 

Hialeah Communities, LLC

 

3,326 

 

2,641 

 

57.00

 

PGA Design Center Holdings, LLC

 

1,887 

 

1,904 

 

40.00

 

CCB Miramar, LLC

 

875 

 

875 

 

35.00

 

Centra Falls, LLC

 

358 

 

595 

 

7.14

 

The Addison on Millenia Investment, LLC

 

6,004 

 

5,935 

 

48.00

 

BBX/S Millenia Blvd Investments, LLC

 

5,079 

 

5,095 

 

90.00

 

Altis at Bonterra - Hialeah, LLC

 

17,644 

 

17,626 

 

95.00

 

Altis at Shingle Creek Manager, LLC

 

332 

 

332 

 

2.50

 

Centra Falls II, LLC

 

569 

 

571 

 

7.14

 

Investments in unconsolidated real estate joint ventures

$

43,421 

 

43,374 

 

 

 





In certain joint ventures the Company transferred land to the joint venture as an initial capital contribution resulting in deferred gains and joint venture basis adjustments.  The Company accounted for the contribution of land to the joint ventures on the cost recovery method.  Included in other liabilities in the Company’s Condensed Consolidated Statements of Financial Condition as of March 31, 2017 and December 31, 2016 was $0.4 million and $0.9 million, respectively, of deferred gains.  During the three months ended March 31, 2017, the Company recognized $0.5 million of deferred gains upon sales by joint ventures of single-family homes. 



Differences between the net investments in unconsolidated real estate joint ventures and the underlying equity in the net assets of the joint ventures result from basis adjustments and the capitalization of interest. 



The aggregate amount of real estate joint venture basis adjustments was $7.1 million and $7.6 million as of March 31, 2017 and December 31, 2016.  Included in the Company’s Condensed Consolidated Statement of Operations and Comprehensive Income for the three months ended March 31, 2017 was $0.5 million of equity earnings associated with basis adjustments from joint ventures arising from sales by joint ventures of single-family homes. There were no real estate joint venture basis adjustments in equity losses for the three months ended March 31, 2016.  



The amount of interest capitalized in investments in unconsolidated real estate joint ventures associated with joint venture real estate development for the three months ended March 31, 2017 and 2016 was $182,000 and $121,000, respectively.

 

14

 


 

 



The equity earnings of unconsolidated real estate joint ventures was $3.7 million for the three months ended March 31, 2017, substantially all of which was equity earnings from the Hialeah Communities, LLC real estate joint venture.  The condensed Statements of Operations for the three months ended March 31, 2017 and 2016, for the Hialeah Communities, LLC joint venture was as follows (in thousands):







 

 

 

 



 

 

 

 



 

For the Three Months Ended



 

March 31,



 

2017

 

2016

Total revenues

$

28,152 

 

 -

Costs of sales

 

(19,725)

 

 -

Other expenses

 

(1,322)

 

(424)

Net earnings (loss)

$

7,105 

 

(424)

Equity in net earnings (losses) of unconsolidated real estate joint venture - Hialeah Communities, LLC

$

3,695 

 

(242)





See Note 9 to the Consolidated Financial Statements included in the 2016 Annual Report for additional information on BBX Capital’s investments in unconsolidated real estate joint ventures.



 

15

 


 

 

7.     Debt



Notes and Mortgage Notes Payable and Other Borrowings



The table below sets forth information regarding the lines-of-credit and notes payable facilities (other than receivable-backed notes payable) of the Company as of March 31, 2017 and December 31, 2016 (dollars in thousands):







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

March 31, 2017

 

December 31, 2016



 

 

 

 

 

Carrying

 

 

 

 

 

Carrying



 

 

 

 

 

Amount of

 

 

 

 

 

Amount of



 

Debt

 

Interest

 

Pledged

 

Debt

 

Interest

 

Pledged



 

Balance

 

Rate

 

Assets