bbxi20230630

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the Quarter Ended June 30, 2023

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

Commission File Number

000-56177

BBX Capital, Inc.

(Exact name of registrant as specified in its charter)

Florida		82-4669146
(State or other jurisdiction of incorporation or organization)		(I.R.S Employer Identification No.)

201 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida		33301
(Address of principal executive office)		(Zip Code)

(954) 940-4900

(Registrant's telephone number, including area code)

Securities Registered pursuant to Section 12(b) of the Act:

None

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 ☒ 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 ☒ No ☐

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

Large accelerated filer ☐	Accelerated filer ☒	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 ☒

The number of shares outstanding of each of the registrant’s classes of common stock as of August 4, 2023 is as follows:

Class A Common Stock of $.01 par value, 11,423,543 shares outstanding.
Class B Common Stock of $.01 par value, 3,860,618 shares outstanding.

Table of Contents

BBX Capital, Inc. TABLE OF CONTENTS

Part I.
Item 1.	Financial Statements

	Condensed Consolidated Statements of Financial Condition as of June 30, 2023 and December 31, 2022 - Unaudited	1
	Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the Three and Six Months Ended June 30, 2023 and 2022 - Unaudited	2
	Condensed Consolidated Statements of Changes in Equity for the Three and Six Months Ended June 30, 2023 and 2022 - Unaudited	3
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022 - Unaudited	5
	Notes to Condensed Consolidated Financial Statements - Unaudited	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	60
Item 4.	Controls and Procedures	60

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	60
Item 1A.	Risk Factors	60
Item 6.	Exhibits	61
	Signatures	62

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

BBX Capital, Inc.

Condensed Consolidated Statements of Financial Condition - Unaudited

(In thousands, except share data)

	*June 30,*		*December 31,*
	*2023*		*2022*
ASSETS
Cash and cash equivalents ($7,439 in 2023 in variable interest entities (VIEs))	$	81,469		127,581
Restricted cash ($10,236 in 2023 in VIEs)		16,754		750
Securities available for sale, at fair value		61,436		18,548
Trade accounts receivable, net		20,790		19,665
Construction contracts receivable, net		10,760		—
Trade inventory, net		42,484		48,866
Real estate ($3,874 in 2023 and $4,443 in 2022 held for sale and $37,771 in 2023 in VIEs)		54,323		12,345
Investments in and advances to unconsolidated real estate joint ventures ($44,032 in 2023 in VIEs)		61,189		49,415
Note receivable from Bluegreen Vacations Holding Corporation		35,000		50,000
Property and equipment, net		39,421		35,140
Goodwill		52,291		18,414
Intangible assets, net		28,119		29,405
Operating lease assets		117,751		110,082
Deferred tax asset, net		2,506		4,259
Contract assets		33,598		16,918
Other assets ($1,225 in 2023 in VIEs)		15,835		21,453
Total assets	$	673,726		562,841
LIABILITIES AND EQUITY
Liabilities:
Accounts payable ($33 in 2023 in VIEs)	$	25,518		17,371
Accrued expenses		30,211		34,985
Contract liabilities		36,339		861
Other liabilities		3,277		5,297
Operating lease liabilities		135,686		126,842
Notes payable and other borrowings		37,839		38,543
Total liabilities		268,870		223,899
Commitments and contingencies (See Note 14)
Redeemable noncontrolling interest		9,778		4,414
Equity:
Class A Common Stock of $0.01 par value; authorized 30,000,000 shares; issued and outstanding 10,629,613 in 2023 and 10,629,613 in 2022		106		106
Class B Common Stock of $0.01 par value; authorized 4,000,000 shares; issued and outstanding 3,723,932 in 2023 and 3,723,932 in 2022		37		37
Additional paid-in capital		315,108		312,978
Accumulated earnings		19,864		20,358
Accumulated other comprehensive income		1,201		823
Total shareholders' equity		336,316		334,302
Noncontrolling interests		58,762		226
Total equity		395,078		334,528
Total liabilities and equity	$	673,726		562,841

See Notes to Condensed Consolidated Financial Statements - Unaudited

Table of Contents

BBX Capital, Inc.

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income – Unaudited

(In thousands, except per share data)

	*For the Three Months Ended*						*For the Six Months Ended*
	*June 30,*						*June 30,*
	*2023*			*2022*			*2023*			*2022*
Revenues:
Trade sales	$	61,203			72,585			124,917			138,334
Sales of real estate inventory		4,445			8,737			6,217			15,207
Revenue from construction contracts		36,574			—			61,611			—
Real estate development and property management fees		2,636			—			4,247			—
Interest income		1,674			1,221			4,191			2,370
Net gain on sales of real estate assets		—			—			—			1,329
Other revenue		312			1,150			659			1,929
Total revenues		106,844			83,693			201,842			159,169
Costs and expenses:
Cost of trade sales		44,927			55,598			92,334			106,604
Cost of real estate inventory sold		959			3,878			1,537			6,113
Cost of revenue from construction contracts		38,129			—			62,318			—
Interest expense		700			509			1,435			1,045
Recoveries from loan losses, net		(2,507	)		(3,289	)		(3,107	)		(3,937	)
Impairment losses		—			—			—			64
Selling, general and administrative expenses		34,306			30,061			68,084			57,425
Total costs and expenses		116,514			86,757			222,601			167,314
Operating losses		(9,670	)		(3,064	)		(20,759	)		(8,145	)
Equity in net earnings of unconsolidated real estate joint ventures		728			19,154			1,832			20,686
Gain on the consolidation of The Altman Companies		—			—			6,195			—
Gain on the consolidation of investment in real estate joint ventures		27			—			10,882			—
Other income		716			103			2,887			1,087
Foreign exchange (loss) gain		(488	)		357			(534	)		168
(Loss) income before income taxes		(8,687	)		16,550			503			13,796
Benefit (provision) for income taxes		1,292			(6,161	)		(375	)		(5,333	)
Net (loss) income		(7,395	)		10,389			128			8,463
Net (income) loss attributable to noncontrolling interests		(606	)		66			(226	)		176
Net (loss) income attributable to shareholders	$	(8,001	)		10,455			(98	)		8,639
Basic (loss) earnings per share	$	(0.56	)		0.68			(0.01	)		0.56
Diluted (loss) earnings per share	$	(0.56	)		0.68			(0.01	)		0.56
Basic weighted average number of common shares outstanding		14,354			15,471			14,354			15,473
Diluted weighted average number of common shares outstanding		14,354			15,471			14,354			15,491
Net (loss) income	$	(7,395	)		10,389			128			8,463
Other comprehensive income (loss), net of tax:
Unrealized (loss) gain on securities available for sale		(23	)		(45	)		4			(91	)
Foreign currency translation adjustments		363			(378	)		374			(214	)
Other comprehensive income (loss), net		340			(423	)		378			(305	)
Comprehensive (loss) income, net of tax		(7,055	)		9,966			506			8,158
Comprehensive (income) loss attributable to noncontrolling interests		(606	)		66			(226	)		176
Comprehensive (loss) income attributable to shareholders	$	(7,661	)		10,032			280			8,334

See Notes to Condensed Consolidated Financial Statements – Unaudited

Table of Contents

BBX Capital, Inc.

Condensed Consolidated Statements of Changes in Equity - Unaudited

For the Three Months Ended June 30, 2023 and 2022

(In thousands)

	*Shares of*														*Accumulated*
	*Common Stock*					*Common*									*Other*
	*Outstanding*					*Stock*				*Additional*					*Comprehen-*			*Non-*
	*Class*					*Class*				*Paid-in*		*Accumulated*			*sive*			*controlling*			*Total*
	A			B		A		B		*Capital*		*Earnings*			*Income*			*Interests*			*Equity*
Balance, March 31, 2022		11,808			3,667	$	118		37		311,344		7,357			1,954			898			321,708
Net income excluding $82 of income attributable to redeemable noncontrolling interest		—			—		—		—		—		10,455			—			(148	)		10,307
Other comprehensive loss		—			—		—		—		—		—			(423	)		—			(423	)
Accretion of redeemable noncontrolling interest		—			—		—		—		—		(252	)		—			—			(252	)
Distributions to noncontrolling interests		—			—		—		—		—		—			—			(20	)		(20	)
Purchase and retirement of common stock		(16	)		—		—		—		—		(121	)		—			—			(121	)
Share-based compensation		—			—		—		—		955		—			—			—			955
Balance, June 30, 2022		11,792			3,667	$	118		37		312,299		17,439			1,531			730			332,154

	*Shares of*
	*Common Stock*				*Common*									*Accumulated*
	*Outstanding*				*Stock*				*Additional*					*Other*		*Non-*
	*Class*				*Class*				*Paid-in*		*Accumulated*			*Comprehensive*		*controlling*		*Total*
	A		B		A		B		*Capital*		*Earnings*			*Income*		*Interests*		*Equity*
Balance, March 31, 2023		10,629		3,724	$	106		37		313,995		27,361			861		56,749		399,109
Net loss excluding $122 of income attributable to redeemable noncontrolling interest		—		—		—		—		—		(8,001	)		—		484		(7,517	)
Other comprehensive income		—		—		—		—		—		—			340		—		340
Reversal of accretion of redeemable noncontrolling interest		—		—		—		—		—		504			—		—		504
Contributions from noncontrolling interests		—		—		—		—		—		—			—		1,390		1,390
Share-based compensation		—		—		—		—		1,113		—			—		139		1,252
Balance, June 30, 2023		10,629		3,724	$	106		37		315,108		19,864			1,201		58,762		395,078

See Notes to Condensed Consolidated Financial Statements - Unaudited

Table of Contents

BBX Capital, Inc.

Condensed Consolidated Statements of Changes in Equity - Unaudited

For the Six Months Ended June 30, 2023 and 2022

(In thousands)

	*Shares of*															*Accumulated*
	*Common Stock*						*Common*									*Other*
	*Outstanding*						*Stock*				*Additional*					*Comprehen-*			*Non-*
	*Class*						*Class*				*Paid-in*		*Accumulated*			*sive*			*controlling*			*Total*
	A			B			A		B		*Capital*		*Earnings*			*Income*			*Interests*			*Equity*
Balance, December 31, 2021		11,804			3,671		$	118		37		310,588		9,226			1,836			1,143			322,948
Net income excluding $11 of income attributable to redeemable noncontrolling interest		—			—			—		—		—		8,639			—			(187	)		8,452
Other comprehensive loss		—			—			—		—		—		—			(305	)		—			(305	)
Accretion of noncontrolling interest		—			—			—		—		—		(305	)		—			—			(305	)
Contributions from noncontrolling interest		—			—			—		—		—		—			—			25			25
Distributions to noncontrolling interests		—			—			—		—		—		—			—			(251	)		(251	)
Purchase and retirement of common stock		(16	)		—			—		—		—		(121	)		—			—			(121	)
Conversion of common stock from Class B to Class A		4			(4	)		—		—		—		—			—			—			—
Share-based compensation		—			—			—		—		1,711		—			—			—			1,711
Balance, June 30, 2022		11,792			3,667		$	118		37		312,299		17,439			1,531			730			332,154

	*Shares of*
	*Common Stock*				*Common*									*Accumulated*
	*Outstanding*				*Stock*				*Additional*					*Other*		*Non-*
	*Class*				*Class*				*Paid-in*		*Accumulated*			*Comprehensive*		*controlling*			*Total*
	A		B		A		B		*Capital*		*Earnings*			*Income*		*Interests*			*Equity*
Balance, At December 31, 2022		10,629		3,724	$	106		37		312,978		20,358			823		226			334,528
Net loss excluding $83 of loss attributable to redeemable noncontrolling interest		—		—		—		—		—		(98	)		—		309			211
Other comprehensive income		—		—		—		—		—		—			378		—			378
Accretion of redeemable noncontrolling interest		—		—		—		—		—		(900	)		—		—			(900	)
Reversal of accretion of redeemable noncontrolling interest		—		—		—		—		—		504			—		—			504
Consolidation of real estate joint venture managing members		—		—		—		—		—		—			—		55,990			55,990
Contributions from noncontrolling interests		—		—		—		—		—		—			—		2,147			2,147
Distributions to noncontrolling interests		—		—		—		—		—		—			—		(159	)		(159	)
Share-based compensation		—		—		—		—		2,130		—			—		249			2,379
Balance, June 30, 2023		10,629		3,724	$	106		37		315,108		19,864			1,201		58,762			395,078

See Notes to Condensed Consolidated Financial Statements - Unaudited

Table of Contents

BBX Capital, Inc.

Condensed Consolidated Statements of Cash Flows - Unaudited

(In thousands)

	*For the Six Months Ended*
	*June 30,*
	*2023*			*2022*
Operating activities:
Net income	$	128			8,463
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Recoveries from loan losses, net		(3,107	)		(3,937	)
Depreciation, amortization and accretion		6,282			5,201
Net loss (gain) on sales of real estate and property and equipment		91			(2,117	)
Equity in net earnings of unconsolidated real estate joint ventures		(1,832	)		(20,686	)
Return on investment in unconsolidated real estate joint ventures		2,464			22,698
Gain on the consolidation of real estate joint ventures		(10,882	)		—
Gain on the consolidation of The Altman Companies		(6,195	)		—
Impairment losses		—			64
Share-based compensation expense		2,403			1,735
Provision (recovery) for excess and obsolete inventory		271			(967	)
Changes in operating assets and liabilities:
Deferred income tax asset, net		1,753			(470	)
Trade accounts receivable		(416	)		6,006
Construction contracts receivable		4,024			—
Trade inventory		6,111			(13,512	)
Real estate		1,230			2,513
Operating lease assets and operating lease liabilities		821			844
Contract assets		5,514			1,267
Other assets		9,268			(1,041	)
Accounts payable		(13,018	)		2,950
Accrued expenses		(15,276	)		(3,622	)
Contract liabilities		2,991			—
Other liabilities		(569	)		213
Net cash (used in) provided by operating activities		(7,944	)		5,602
Investing activities:
Return of investment in unconsolidated real estate joint ventures		2,353			3,861
Investments in unconsolidated real estate joint ventures		(6,766	)		(4,647	)
Purchases of securities available for sale		(68,862	)		—
Redemptions of securities available for sale		26,800			—
Proceeds from repayment of loans receivable		3,462			4,147
Proceeds from sales of real estate held-for-sale		—			3,937
Proceeds from sales of property and equipment		—			2,741
Proceeds from the repayment of Bluegreen Vacations note receivable		14,070			—
Additions to real estate held-for-sale and held-for-investment		(9,299	)		(167	)
Purchases of property and equipment		(9,060	)		(5,950	)
Cash acquired in the consolidation of real estate joint ventures		29,147			—
Cash paid for The Altman Companies acquisition, net of cash received		(3,945	)		—
Decrease in cash from other investing activities		(9	)		(8	)
Net cash (used in) provided by investing activities		(22,109	)		3,914

(Continued)

Table of Contents

	*For the Six Months Ended*
	*June 30,*
	*2023*			*2022*
Financing activities:
Repayments of notes payable and other borrowings		(7,435	)		(14,336	)
Proceeds from notes payable and other borrowings		5,501			4,990
Purchase and retirement of Class A and Class B Common Stock		—			(121	)
Payments for debt issuance costs		(109	)		—
Contributions from noncontrolling interests		2,147			43
Distribution to noncontrolling interests		(159	)		(251	)
Net cash used in financing activities		(55	)		(9,675	)
Decrease in cash, cash equivalents and restricted cash		(30,108	)		(159	)
Cash, cash equivalents and restricted cash at beginning of period		128,331			119,045
Cash, cash equivalents and restricted cash at end of period	$	98,223			118,886

Supplemental cash flow information:
Interest paid on borrowings, net of amounts capitalized	$	1,359			829
Income taxes paid		7,213			12,560
Supplementary disclosure of non-cash investing and financing activities:
Construction funds receivable transferred to real estate		—			277
Assumption of Community Development District Bonds by homebuilders		954			2,189
Operating lease assets obtained in exchange for new operating lease liabilities		18,688			19,162
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents		81,469			118,136
Restricted cash		16,754			750
Total cash, cash equivalents and restricted cash	$	98,223			118,886

See Notes to Condensed Consolidated Financial Statements - Unaudited

Table of Contents

BBX Capital, Inc.

Notes to Condensed Consolidated Financial Statements - Unaudited

1. Organization and Basis of Financial Statement Presentation

Organization

BBX Capital, Inc. and its subsidiaries (the “Company” or, unless otherwise indicated or the context otherwise requires, “we,” “us,” or “our”) is a Florida-based diversified holding company. BBX Capital, Inc. as a standalone entity without its subsidiaries is referred to as “BBX Capital.”

Principal Holdings

BBX Capital’s principal holdings are 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 Real Estate

BBX Capital Real Estate is engaged in the acquisition, development, construction, ownership, financing, and management of real estate and investments in real estate joint ventures, including investments in multifamily rental apartment communities, single-family master-planned for sale housing communities, and commercial properties located primarily in Florida. Since November 2018, BBX Capital Real Estate has owned a 50% equity interest in The Altman Companies, LLC (the “Altman Companies”), a developer and manager of multifamily rental apartment communities. As further described in Note 2, in January 2023, BBX Capital Real Estate acquired the remaining equity interests in the Altman Companies. In addition, BBX Capital Real Estate manages the legacy assets acquired in connection with the Company’s sale of BankAtlantic in 2012, including portfolios of loans receivable, real estate properties, and judgments against past borrowers.

BBX Sweet Holdings

BBX Sweet Holdings is engaged in the ownership and management of operating businesses in the confectionery industry, including (i) IT’SUGAR, a specialty candy retailer whose products include bulk candy, candy in giant packaging, and licensed and novelty items and which operates in retail locations which include a mix of high-traffic resort and entertainment, lifestyle, mall/outlet, and urban locations throughout the United States and Canada, and (ii) Las Olas Confections and Snacks, a manufacturer and wholesaler of chocolate and other confectionery products which also operates several Hoffman’s Chocolates retail locations in South Florida.

Renin

Renin is engaged in the design, manufacture, and distribution of sliding doors, door systems and hardware, and home décor products and operates through its headquarters in Canada and manufacturing and distribution facilities in the United States and Canada. In addition to its own manufacturing activities, Renin also sources various products and raw materials from China, Brazil, and certain other countries.

Other

In addition to its principal holdings, the Company has investments in other operating businesses, including (i) a restaurant located in South Florida that was acquired in 2018 through a loan foreclosure and (ii) an entity which provides risk management advisory services to the Company and its affiliates, including Bluegreen Vacations Holding Corporation ("Bluegreen Vacations"), and which, prior to February 2023, acted as an insurance agent for the Company, its affiliates, and other third parties. In February 2023, substantially all of the assets of its insurance agency business were sold to an unaffiliated third party.

Basis of Financial Statement Presentation

The condensed consolidated financial statements of the Company include the consolidated financial statements of BBX Capital and its wholly-owned subsidiaries, other entities in which BBX Capital or its wholly-owned subsidiaries hold controlling financial interests, and any variable interest entities (“VIEs”) in which BBX Capital or one of its consolidated subsidiaries is deemed the primary beneficiary of the VIE. Inter-company accounts and transactions have been eliminated in consolidation.

Table of Contents

The condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, these financial statements do not include all of the information and disclosures required by GAAP for complete financial statements. Also, 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, 2022 (the “2022 Annual Report”) filed with the SEC on March 15, 2023.

Use of Estimates

The preparation of financial statements prepared in conformity with GAAP require the Company to make estimates and assumptions, including assumptions about current and future economic and market conditions which affect reported amounts and related disclosures in the Company’s financial statements. Due to, among other things, the impact and potential future impact of the current inflationary and geopolitical environment, rising interest rates, labor shortages, supply chain issues, ongoing economic uncertainty, a possible recession, and pandemic and public health issues, actual conditions could materially 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 above conditions 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 changes in, and the impact of, such external factors. Such changes could result in, among other adjustments, future impairments of intangible assets, long-lived assets, and investments in unconsolidated subsidiaries and additional future reserves for inventory and receivables.

Significant Accounting Policies

Construction Contracts Receivable

Contracts receivable include billed and unbilled amounts for services provided to customers for which the Company has an unconditional right to payment. Billed and unbilled amounts for which payment is contingent on anything other than the passage of time are included in contract assets and contract liabilities on a contract-by-contract basis. When payment of the retainage is contingent upon the Company fulfilling its obligations under the contract, it does not meet the criteria to be included in contracts receivable until the contingent obligation is satisfied. The Company provides an allowance for doubtful accounts, which is based upon a review of outstanding receivables, historical collection information, and existing economic conditions. The Company generally requires payment from its construction contract customers within a term of 30 days less an amount withheld for retainage. Retainage is paid in accordance with contract terms, which is generally upon reaching significant milestones or upon completion of the contract.

Contract Assets and Contract Liabilities

The timing of when the Company bills its customers on construction and development contracts is generally dependent upon agreed-upon contractual terms, which may include the completion of certain phases of the work, or when services are provided. When billings occur subsequent to revenue recognition as a result of contingencies, such billings are recorded in unbilled revenue, which is included in contract assets. Additionally, the Company may receive advances or deposits from customers before revenue is recognized, resulting in deferred revenue, which is included in contract liabilities. Retainage for which the Company has an unconditional right to payment that is only subject to the passage of time are classified as contracts receivable. Retainage subject to conditions other than the passage of time do not meet the definition of a receivable and are therefore included in contract assets and contract liabilities. Contractor and development fees received from customers, but not yet billed or recognized as revenue are reflected as contract liabilities, and contractor and development fees recognized as revenue and not yet billed are reflected as contract assets. Retainage receivable and retainage payable subject to conditions, such as the completion of the project, are contract assets or contract liabilities. Uninstalled materials and deposits for materials are included in contract assets as the Company receives funds from the customer to purchase materials or to fund a deposit for the purchases of materials.

Revenue from Construction Contracts

Revenue from construction contracts represents revenue earned from providing general contractor services to affiliated joint venture entities for the construction of multifamily apartment communities.

Revenue from construction contracts with these customers is recognized over time as work is completed due to the continuous transfer of control to the customer. The Company measures contract progress using the input method which recognizes revenue based on costs incurred to date relative to total estimated costs to complete the contract, subject to adjustments to exclude certain costs that do not depict progress toward the completion of the contract. These excluded costs include uninstalled materials, deposits for the purchase of materials, and insurance costs. Material costs are included in the measure of contract progress when installed.

Cost of revenue from construction contracts earned include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, and repairs. Costs related to significant uninstalled materials, re-work, or scrap are generally excluded from the cost-to-cost measure of progress, as they are not proportionate to the Company’s progress in satisfying the performance obligation to its customers.

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The Company’s construction contracts generally include retention provisions to provide assurance to customers that the Company will perform in accordance with the terms of the contracts. The amounts billed but not paid by customers pursuant to these retention provisions generally become due upon completion of the project and acceptance by the customers of the completed project. The retention provisions are not considered a significant financing component of the contracts.

The Company’s construction contracts give rise to several types of variable consideration, including contract modifications (unapproved change orders and claims), cost overruns, shared savings, and other terms that can either increase or decrease the transaction price for the contracts. The determination of the transaction price for contracts requires the Company to evaluate and include variable consideration to which the Company has an enforceable right to compensation or an obligation for a reduction in compensation, which can result in increases or decreases to a contract’s transaction price. The Company estimates variable consideration for its construction contracts as the most likely amount to which it expects to be entitled, or to pay in the case of cost overruns. The Company includes variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The estimates of variable consideration and the determination of whether to include estimated amounts in the transaction price are based largely on an assessment of the anticipated performance and all information that is reasonably available to the Company, including historic, current, and forecasted information. The effect of a change in variable consideration on the transaction price related to a performance obligation is recognized as an adjustment to revenue on a cumulative catch-up basis.

Contract modifications can result from changes in contract specifications or requirements that either creates new or changes existing enforceable rights and obligations of the parties to the contract. The Company considers unapproved change orders to be contract modifications for which customers have agreed to changes in the scope of the contract but have not agreed to the price.

Real Estate Development and Management Fees

Development management fees represent revenue earned from providing oversight and consultation services to affiliated entities related to the development of multifamily apartment communities, while management fees represent revenue earned from the management of multifamily apartment communities for affiliated joint venture entities and third parties.

The Company recognizes development management fees for the performance of oversight and consultation services related to the development and construction of multifamily apartment communities from the inception of the development project to the completion of the construction, including securing construction financing, performing pre-development activities such as sourcing of land for acquisition, permitting and feasibility studies, overseeing construction activities, and managing the costs to complete the construction of the project. The Company’s development contracts are generally each accounted for as a single performance obligation, as the services performed are highly interrelated and not separately identifiable within the context of each contract. Customers simultaneously receive and consume the benefits provided by the Company’s performance as the Company performs under the contracts. Accordingly, the Company recognizes revenue related to development fees over time through the completion of the related development project, and the Company measures contract progress using the input method which results in the recognition of revenue based on the development costs for the project spent to date relative to the total estimated development budget, subject to adjustments to exclude certain development costs that do not depict progress toward the completion of the development project. These excluded costs include marketing costs, property taxes, and unused development contingencies.

The Company recognizes property management fees for the performance of management services related to the day-to-day operations of multifamily apartment communities for affiliated joint venture entities and third parties. The services performed include the leasing of residential units at the communities, collection of rents, arrangement for repairs and maintenance, staffing of on-site personnel, and reporting on the operations of the communities to the customers. The property management agreements pursuant to which such services are provided have terms of one year and are automatically renewed until terminated in writing by either party with thirty days notice. The Company’s property management contracts are generally each accounted for as a single performance obligation, as services provided are highly interrelated and an expected bundled service is to be provided to the Company’s customers. Customers simultaneously receive and consume the benefits provided by the Company’s performance as the Company performs under the contracts. Accordingly, the Company recognized management fees over time, on a daily basis, as services are performed.

Impact of Current Economic Issues

The Company and the industries in which it operates have been impacted by economic trends in the U.S. and global economies, including (i) decreased consumer demand, (ii) disruptions in global supply chains, (iii) a general labor shortage and increases in wages, (iv) increased economic uncertainty, (v) inflationary pressures and higher costs to operate the Company’s businesses, including higher insurance costs, and (vi) rising interest rates. In light of the uncertain duration and impact of current economic trends, the Company has focused on maintaining significant liquidity. As of June 30, 2023, the Company’s consolidated cash and cash equivalent balances were $81.5 million, and its securities available for sale, which are primarily comprised of U.S. Treasury and federal agency securities with maturities of less than one year, were $61.4 million.

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Current inflationary and economic trends have and may continue to adversely impact the Company's results of operations. The Federal Reserve has sought to address inflation through monetary policy, including the wind-down of quantitative easing and by increasing the Federal Funds rate. The Russian invasion of Ukraine and the related embargoes against Russia have worsened supply chain issues with the potential of further exacerbating inflationary trends. The recent bank failures and the banking liquidity crisis have increased the possibility that the United States and/or the global economy generally will experience a recession of an uncertain magnitude and duration. These conditions can negatively affect our operating results by resulting in, among other things: (i) higher interest expense on variable rate debt and any new debt, (ii) lower gross margins due to increased costs of manufactured or purchased inventory and shipping, (iii) a decline in the availability of debt and equity capital for new real estate investments and the number of real estate development projects meeting the Company’s investment criteria, (iv) higher overall operating expenses due to increases in labor and service costs, (v) a reduction in customer demand for our products, (vi) a shift in customer behavior as higher prices affect customer retention and higher consumer borrowing costs, including mortgage borrowings, affect customer demand, and (vii) increased risk of impairments as a result of declining valuations.

BBXRE has experienced a significant increase in commodity and labor prices, which has resulted in higher development and construction costs, and disruptions in the supply chain for certain commodities and equipment have resulted in ongoing supply shortages of building materials, equipment, and appliances. These factors have impacted the timing of certain projects currently under construction and the commencement of construction of new projects. Furthermore, homebuilders have seen a general softening of demand, and the increase in mortgage rates have had an adverse impact on residential home sales. In addition, rising interest rates have increased the cost of the Company’s outstanding indebtedness and financing for new development projects. Increased rates have had an adverse impact on the availability of financing and the anticipated profitability of development projects, as (i) a majority of development costs are financed with third party debt and (ii) capitalization rates related to multifamily apartment communities are generally impacted by interest rates. BBXRE has also recently observed a decline in the number of potential investors interested in providing equity or debt financing for the development of new multifamily apartment developments and the acquisition of stabilized multifamily apartment communities. Such factors have begun to impact BBXRE’s results of operations, and we expect that they could continue to have an adverse impact on its operating results in future periods.

Similarly, as a result of inflationary pressures and ongoing disruptions in global supply chains, IT’SUGAR was experiencing significant increases in the cost of inventory and freight, as well as delays in its supply chain that were impacting its ability to maintain historical inventory levels at its retail locations. While IT’SUGAR was previously able to partially mitigate the impact of increased costs through increases in the prices of its products, IT’SUGAR has been required to slow the pace of increases in the prices of its products due to the recent decline in consumer demand, which has resulted in declines in its selling margins. Further, as a result of issues relating to maintaining appropriate inventory levels, IT’SUGAR increased the inventory levels at its retail locations in an effort to ensure that it can meet consumer demand. However, in light of current economic conditions, including a slowdown in consumer demand, increased inventory levels have increased the risk that IT’SUGAR may be unable to sell the products timely and the risk of inventory writedowns. IT’SUGAR has also experienced an increase in payroll costs as a result of shortages in available labor at certain of its retail locations.

Global supply chain disruptions and increases in commodity prices have also contributed to a significant increase in Renin’s costs related to shipping and raw materials, as well as delays in its supply chains, which have: (i) negatively impacted Renin’s product costs and gross margin, (ii) increased the risk that Renin will be unable to fulfill customer orders, and (iii) negatively impacted Renin’s working capital and cash flow due to increased inventory in transit, a prolonged period between when it is required to pay its suppliers and when it is paid by its customers, and an overall decline in its gross margin. While Renin has increased the price of many of its products, Renin’s gross margin has nonetheless been negatively impacted by these cost pressures. Additionally, the negotiation of increased prices with customers increases the risk that customers will pursue alternative sources for Renin’s products, which may result in Renin losing customers or require it to lower prices in an effort to retain customers. Increases in interest rates are also adversely impacting Renin’s results. In addition, as a result of issues relating to maintaining appropriate inventory levels, Renin increased its inventory levels in an effort to ensure that it can meet consumer demand. However, current economic conditions, including a slowdown in consumer demand, have increased the risk that Renin may be unable to timely sell such products and the risk of inventory writedowns. In addition, the impacts of these factors have negatively impacted Renin’s ability to comply with covenants under its credit facility with TD Bank, and based on its operating results, Renin is again not in compliance with certain of the financial covenants under the facility. Renin is currently in discussions with TD Bank to update or waive certain of the loan covenants under the credit facility. As a result of its noncompliance, Renin could lose availability under its revolving line of credit, be required to provide additional collateral, or be required to repay all or a portion of its borrowings with TD Bank, any of which would have a material adverse effect on the Company’s liquidity, financial position, and results of operations.

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Recently Adopted and Future Adoption of Recently Issued Accounting Pronouncements

The Financial Accounting Standards Board ("FASB") has issued the following accounting pronouncements and guidance relevant to the Company's operations which were adopted as of January 1, 2023:

ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This standard is an update to Topic 805 requiring an acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination as if the acquirer had originated the contracts. Generally, this should result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements. This statement was effective for the Company on January 1, 2023, and interim periods within that fiscal year. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements.

There were no recent Standards Updates issued by the Financial Accounting Standards Board (“FASB”) that are relevant to the Company's operations. The Company has adopted all relevant FASB pronouncements and guidance as of June 30, 2023.