Attached files

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EX-32.1 - EX-32.1 - Bluegreen Vacations Holding Corpbfcf-20150630xex321.htm
EX-31.1 - EX-31.1 - Bluegreen Vacations Holding Corpbfcf-20150630xex311.htm
EX-31.2 - EX-31.2 - Bluegreen Vacations Holding Corpbfcf-20150630xex312.htm
EX-32.2 - EX-32.2 - Bluegreen Vacations Holding Corpbfcf-20150630xex322.htm

 

 

 

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 June 30, 2015

 

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

 

Commission File Number

001-09071

 

BFC Financial 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 August 3, 2015 is as follows:

 

Class A Common Stock of $.01 par value,  76,982,430 shares outstanding.
Class B Common Stock of $.01 par value, 10,127,860 shares outstanding.

 

 


 

 

 

 

Arch 31, 2013

 

 

 

 

 

BFC Financial Corporation

TABLE OF CONTENTS

 

 

 

Part I.

FINANCIAL INFORMATION

Page

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

Consolidated Statements of Financial Condition as of June 30, 2015 and December 31, 2014 -Unaudited

 

 

 

 

Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2015 and 2014 - Unaudited

 

 

 

 

Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2015 and 2014 - Unaudited

 

 

 

 

Consolidated Statements of Changes in Equity for the Six Months Ended June 30, 2015 and 2014 - Unaudited

 

 

 

 

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014 - Unaudited

 

 

 

 

Notes to Consolidated Financial Statements - Unaudited

 

 

 

Item 2.

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

53 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

89 

 

 

 

Item 4.

Controls and Procedures

90 

 

 

 

Part II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

91 

 

 

 

Item 1A.

Risk Factors

92 

 

 

 

Item 6.

Exhibits

93 

 

 

 

 

Signatures

94 

 

 

 

 

 

 

 

 

 

 

(i)

 

 

 

 


 

 

PART I – FINANCIAL INFORMATION

 

Item 1.  FINANCIAL STATEMENTS

 

 

 

 

 

 

BFC Financial Corporation

Consolidated Statements of Financial Condition - Unaudited

(In thousands, except share data)

 

 

 

 

 

 

 

June 30,

 

December 31,

 

 

2015

 

2014

 

 

 

 

 

ASSETS

 

 

 

 

Cash and interest bearing deposits in banks ($123 in 2015 and $4,993 in 2014

 

 

 

 

held by variable interest entities ("VIEs"))

$

191,817 

 

279,437 

Restricted cash ($29,474 in 2015 and $31,554 in 2014 held by VIEs)

 

66,206 

 

54,620 

Loans held for sale ($0 in 2015 and $35,423 in 2014 held by VIEs)

 

23,480 

 

35,423 

Loans receivable, net of allowance for loan losses of $172 in 2015 and $977 in 2014

 

 

 

 

(including $0 in 2015 and $18,972, net of $977 allowance in 2014 held by VIE)

 

31,275 

 

26,844 

Notes receivable, including net securitized notes held by VIEs of $291,551 in 2015

 

 

 

 

and $293,950 in 2014, net of allowance of $101,899 in 2015 and $102,566 in 2014

 

406,685 

 

424,267 

Inventory

 

233,993 

 

209,893 

Real estate held for investment ($0 in 2015 and $19,945 in 2014 held by VIEs)

 

83,974 

 

76,552 

Real estate held for sale ($0 in 2015 and $13,745 in 2014 held by VIEs)

 

38,626 

 

41,733 

Investments in unconsolidated real estate joint ventures

 

16,524 

 

16,065 

Properties and equipment, net ($0 in 2015 and $7,561 in 2014 held by VIEs)

 

88,148 

 

89,051 

Goodwill and intangible assets, net

 

95,719 

 

79,730 

Other assets ($13 in 2015 and $1,017 in 2014 held by VIEs)

 

78,056 

 

77,681 

Total assets

$

1,354,503 

 

1,411,296 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Liabilities:

 

 

 

 

BB&T preferred interest in FAR, LLC ($0 in 2015 and $12,348 in 2014 held by VIEs)

$

 -

 

12,348 

Receivable-backed notes payable - recourse

 

65,722 

 

92,129 

Receivable-backed notes payable - non-recourse (held by VIEs)

 

340,492 

 

320,275 

Notes and mortgage notes payable and other borrowings

 

104,334 

 

107,984 

Junior subordinated debentures

 

151,236 

 

150,038 

Deferred income taxes

 

11,084 

 

92,609 

Shares subject to mandatory redemption

 

12,902 

 

12,714 

Other liabilities ($32 in 2015 and $12,602 in 2014 held by VIEs)

 

219,059 

 

176,493 

Total liabilities

 

904,829 

 

964,590 

 

 

 

 

 

Commitments and contingencies (See Note 12)

 

 

 

 

 

 

 

 

 

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 73,307,734 in 2015 and 73,307,012 in 2014 

 

733 

 

733 

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

 

 

 

 

issued and outstanding 10,132,184 in 2015 and 10,168,105 in 2014

 

101 

 

102 

Additional paid-in capital

 

143,248 

 

142,058 

Accumulated earnings

 

195,841 

 

109,660 

Accumulated other comprehensive income

 

389 

 

353 

Total  BFC Financial Corporation ("BFC") equity

 

340,312 

 

252,906 

Noncontrolling interests

 

109,362 

 

193,800 

Total equity

 

449,674 

 

446,706 

Total liabilities and equity

$

1,354,503 

 

1,411,296 

 

 

 

 

 

See Notes to  Consolidated Financial Statements - Unaudited

 

 

 

 

 

1

 


 

 

 

 

 

 

 

 

 

 

 

 

BFC Financial Corporation

Consolidated Statements of Operations - Unaudited

(In thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended June 30,

 

For the Six Months Ended      June 30,

 

 

2015

 

2014

 

2015

 

2014

Revenues

 

 

 

 

 

 

 

 

Sales of VOIs

$

59,732 

 

64,071 

 

112,914 

 

124,315 

Sales, other

 

19,583 

 

15,521 

 

39,118 

 

32,076 

Interest income

 

21,888 

 

21,499 

 

41,601 

 

43,700 

Fee-based sales commission

 

47,974 

 

43,194 

 

80,574 

 

70,309 

Other fee-based services revenue

 

24,948 

 

23,008 

 

48,701 

 

44,933 

Other revenue

 

16,846 

 

5,743 

 

18,103 

 

8,113 

Total revenues

 

190,971 

 

173,036 

 

341,011 

 

323,446 

 

 

 

 

 

 

 

 

 

Costs and Expenses

 

 

 

 

 

 

 

 

Cost of sales of VOIs

 

7,381 

 

8,277 

 

12,247 

 

15,325 

Cost of sales, other

 

14,195 

 

11,445 

 

28,030 

 

23,546 

Cost of other fee-based services

 

16,748 

 

14,770 

 

31,549 

 

28,322 

Interest expense

 

9,903 

 

12,300 

 

20,523 

 

24,977 

Reversals of loan losses

 

(6,608)

 

(2,046)

 

(10,429)

 

(3,294)

(Loss recoveries) impairments of assets

 

(810)

 

(94)

 

(1,873)

 

1,225 

Litigation settlement

 

36,500 

 

 -

 

36,500 

 

 -

Selling, general and administrative expenses

 

114,226 

 

103,016 

 

212,044 

 

193,355 

Total costs and expenses

 

191,535 

 

147,668 

 

328,591 

 

283,456 

 

 

 

 

 

 

 

 

 

Equity losses in unconsolidated real estate joint ventures

 

(291)

 

(26)

 

(595)

 

(32)

Other income

 

1,114 

 

1,004 

 

2,215 

 

1,684 

Income from continuing operations before income taxes

 

259 

 

26,346 

 

14,040 

 

41,642 

Benefit (provision) for income taxes (See Note 11)

 

90,353 

 

(11,511)

 

81,744 

 

(20,265)

Net income

 

90,612 

 

14,835 

 

95,784 

 

21,377 

Less: Net income attributable to noncontrolling interests

 

6,317 

 

5,575 

 

9,603 

 

8,981 

Net income attributable to BFC

$

84,295 

 

9,260 

 

86,181 

 

12,396 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONTINUED

 

 

 

 

 

 

 

 

2

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

BFC Financial Corporation

Consolidated Statements of Operations - Unaudited

(In thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended June 30,

 

For the Six Months Ended June 30,

 

 

2015

 

2014

 

2015

 

2014

Basic and Diluted Earnings Per Common Share

 

 

 

 

 

 

 

 

Attributable to BFC (Note 16):

 

 

 

 

 

 

 

 

Basic Earnings Per Common Share

 

 

 

 

 

 

 

 

Net earnings per common share

$

0.97 

 

0.11 

 

0.99 

 

0.15 

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Common Share

 

 

 

 

 

 

 

 

Net earnings per common share

$

0.97 

 

0.11 

 

0.99 

 

0.15 

 

 

 

 

 

 

 

 

 

Basic weighted average number of

 

 

 

 

 

 

 

 

common shares outstanding

 

87,093 

 

83,513 

 

87,114 

 

83,350 

 

 

 

 

 

 

 

 

 

Diluted weighted average number of common

 

 

 

 

 

 

 

 

and common equivalent shares outstanding

 

87,286 

 

84,698 

 

87,309 

 

84,664 

 

 

 

 

 

 

 

 

 

Amounts attributable to BFC common shareholders:

 

 

 

 

 

 

 

 

Net income available to common shareholders

$

84,295 

 

9,260 

 

86,181 

 

12,396 

 

 

 

 

 

 

 

 

 

See Notes to Consolidated Financial Statements - Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

BFC Financial Corporation

Consolidated Statements of Comprehensive Income - Unaudited

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended June 30,

 

For the Six Months Ended June 30,

 

 

2015

 

2014

 

2015

 

2014

Net income

$

90,612 

 

14,835 

 

95,784 

 

21,377 

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

Unrealized (losses) gains on securities available for sale, net of tax

 

(12)

 

 

(25)

 

18 

 

 

 

 

 

 

 

 

 

Unrealized gains from foreign currency translation

 

(33)

 

13 

 

99 

 

42 

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of tax

$

(45)

 

19 

 

74 

 

60 

 

 

 

 

 

 

 

 

 

Comprehensive income, net of tax

 

90,567 

 

14,854 

 

95,858 

 

21,437 

Less: Comprehensive income attributable

 

 

 

 

 

 

 

 

to noncontrolling interests

 

6,303 

 

5,579 

 

9,641 

 

8,997 

Total comprehensive income attributable to BFC

$

84,264 

 

9,275 

 

86,217 

 

12,440 

 

 

 

 

 

 

 

 

 

See Notes to Consolidated Financial Statements - Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BFC Financial Corporation

Consolidated Statements of Changes in Equity - Unaudited

For the Six Months Ended June 30, 2015 and 2014

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares of

 

 

 

 

 

Accumulated

 

 

 

 

Common Stock

 

Common

 

 

Other

 

Non-

 

 

Outstanding

 

Stock

Additional

 

Comprehen-

Total

controlling

 

 

Class

 

Class

Paid-in

Accumulated

sive

BFC

Interest in

Total

 

A

B

 

A

B

Capital

Earnings

Income

Equity

Subsidiaries

Equity

Balance, December 31,  2013

71,265 
7,337 

$

713 
73 
142,585 
95,810 
240 
239,421 
182,975 
422,396 

Net income

 -

 -

 

 -

 -

 -

12,396 

 -

12,396 
8,981 
21,377 

Other comprehensive income

 -

 -

 

 -

 -

 -

 -

44 
44 
16 
60 

Subsidiaries' capital transactions attributable to noncontrolling interest

 -

 -

 

 -

 -

 -

 -

 -

 -

1,126 
1,126 

Distributions to noncontrolling interest

 -

 -

 

 -

 -

 -

 -

 -

 -

(43)
(43)

Subsidiaries' capital transactions attributable to BFC

 -

 -

 

 -

 -

550 

 -

 -

550 

 -

550 

Conversion of Common Stock from Class B to Class A

38 
(38)

 

 -

 -

 -

 -

 -

 -

 -

 -

Repurchase and retirement of Class A Common Stock

(255)

 -

 

(3)

 -

(982)

 -

 -

(985)

 -

(985)

Issuance of Common Stock from exercise of options

594 
212 

 

322 

 -

 -

330 

 -

330 

Share-based compensation

 -

 -

 

 -

 -

776 

 -

 -

776 

 -

776 

Balance, June 30,  2014

71,642 
7,511 

$

716 
75 
143,251 
108,206 
284 
252,532 
193,055 
445,587 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31,  2014

73,307 
10,168 

$

733 
102 
142,058 
109,660 
353 
252,906 
193,800 
446,706 

Net income

 -

 -

 

 -

 -

 -

86,181 

 -

86,181 
9,603 
95,784 

Other comprehensive income

 -

 -

 

 -

 -

 -

 -

36 
36 
38 
74 

Subsidiaries' capital transactions attributable to noncontrolling interest

 -

 -

 

 -

 -

 -

 -

 -

 -

952 
952 

Distributions to noncontrolling interest

 -

 -

 

 -

 -

 -

 -

 -

 -

(2,268)
(2,268)

Net effect of BFC's tender offer of BBX Capital attributable to non-controlling interest

 -

 -

 

 -

 -

92,763 

 -

 -

92,763 
(92,763)

 -

Consideration paid in connection with the tender offer of BBX Capital

 

 

 

 

 

(95,424)

 

 

(95,424)

 -

(95,424)

Subsidiaries' capital transactions attributable to BFC

 -

 -

 

 -

 -

1,511 

 -

 -

1,511 

 -

1,511 

Conversion of Common Stock from Class B to Class A

36 
(36)

 

 -

 -

 -

 -

 -

 -

 -

 -

Repurchase and retirement of Class A Common Stock

(60)

 -

 

 -

(1)
(173)

 -

 -

(174)

 -

(174)

Issuance of Common Stock from exercise of options

25 

 -

 

 -

 -

10 

 -

 -

10 

 -

10 

Share-based compensation

 -

 -

 

 -

 -

2,503 

 -

 -

2,503 

 -

2,503 

Balance, June 30,  2015

73,308 
10,132 

$

733 
101 
143,248 
195,841 
389 
340,312 
109,362 
449,674 

 

 

 

 

 

 

 

 

 

 

 

 

See Notes to Consolidated Financial Statements - Unaudited

 

 

 

 

5

 


 

 

 

 

 

 

 

 

 

 

BFC Financial Corporation

 

Consolidated Statements of Cash Flows - Unaudited

 

(In thousands)

 

 

 

 

 

 

 

 

 

For the Six Months Ended June 30,

 

 

 

2015

 

2014

 

Net cash provided by operating activities

$

14,266 

 

39,197 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

Increase in restricted cash and time deposits at financial institutions

 

(2,647)

 

 -

 

Proceeds from redemption and maturities of tax certificates

 

132 

 

462 

 

Purchase of securities available for sale

 

(5)

 

 -

 

Distributions from unconsolidated affiliates

 

 -

 

224 

 

Investments in unconsolidated real estate joint ventures

 

(1,103)

 

(2,595)

 

Repayment of loans receivable, net

 

17,884 

 

30,997 

 

Proceeds from the sale of loans receivable

 

89 

 

 -

 

Proceeds from sales of real estate held-for-sale

 

34,758 

 

13,870 

 

Proceeds from contribution of real estate to

 

 

 

 

 

unconsolidated real estate joint ventures

 

 -

 

4,710 

 

Improvements in real estate held-for-investment

 

(11,488)

 

(312)

 

Purchases of real estate held-for-sale

 

(10,667)

 

 -

 

Purchases of property and equipment

 

(4,650)

 

(11,521)

 

Proceeds from the sale of property and equipment

 

257 

 

53 

 

Cash paid for acquisitions, net of cash received

 

(9)

 

(2,000)

 

Acquisition of BBX Capital Class A shares

 

(95,424)

 

 -

 

Net cash (used in) provided by investing activities

$

(72,873)

 

33,888 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

Repayment of BB&T preferred interest in FAR, LLC

 

(12,348)

 

(41,531)

 

Repayments of notes, mortgage notes payable and other borrowings

 

(90,186)

 

(86,556)

 

Proceeds from notes, mortgage notes payable and other borrowings

 

78,490 

 

57,289 

 

Payments for debt issuance costs

 

(2,537)

 

(312)

 

Proceeds from the exercise of BFC stock options

 

10 

 

330 

 

Retirement of Class A common stock

 

(174)

 

(985)

 

Distributions to non-controlling interest

 

(2,268)

 

(43)

 

Net cash used in financing activities

$

(29,013)

 

(71,808)

 

 

 

 

 

 

 

Decrease in cash and cash equivalents

 

(87,620)

 

1,277 

 

Cash and cash equivalents at beginning of period 

 

279,437 

 

217,636 

 

Cash and cash equivalents at end of period 

$

191,817 

 

218,913 

 

 

 

 

 

 

 

 

 

 

 

CONTINUED

 

 

 

 

 

 

 

 

 

6

 


 

 

 

 

 

 

 

 

 

BFC Financial Corporation

 

Consolidated Statements of Cash Flows - Unaudited

 

(In thousands)

 

 

 

 

 

 

 

 

 

For the Six Months Ended June 30,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

Interest paid on borrowings, net of amounts capitalized

$

17,641 

 

22,099 

 

Income taxes paid

 

12,039 

 

10,208 

 

Income tax refunded

 

(317)

 

(77)

 

 

 

 

 

 

 

Supplementary disclosure of non-cash investing and financing activities:

 

 

 

 

 

Loans and tax certificates transferred to real estate

 

 

 

 

 

held-for-sale or real estate held-for-investment

$

2,427 

 

13,229 

 

Real estate held-for-investment transferred to investment

 

 

 

 

 

in joint ventures

 

 -

 

1,920 

 

Real estate held-for-investment transferred to real

 

 

 

 

 

estate held-for-sale

 

3,572 

 

18,916 

 

Receivable from sale of real estate held-for-sale

 

 -

 

5,265 

 

Issuance of notes payable to acquire business

 

1,395 

 

 -

 

Fair value of net assets acquired

 

1,404 

 

 -

 

Increase in BFC accumulated other comprehensive

 

 

 

 

 

income, net of taxes

 

36 

 

44 

 

Net increase in BFC shareholders' equity from

 

 

 

 

 

the effect of subsidiaries' capital transactions, net of taxes

 

1,511 

 

550 

 

 

 

 

 

 

 

 

 

 

 

 

 

See Notes to Consolidated Financial Statements - Unaudited

 

 

 

 

 

 

7

 


 

 

BFC Financial Corporation

Notes to Consolidated Financial Statements - Unaudited

 

 

1.    Presentation of Interim Financial Statements

 

Basis of Financial Statement Presentation

 

The accompanying unaudited consolidated financial statements of BFC Financial Corporation (“BFC” or, unless otherwise indicated or the context otherwise requires, “we,” “us,” “our,” or the “Company”) have been prepared in accordance with generally accepted accounting principles (“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 consolidated financial statements contain all adjustments, which include normal recurring adjustments, as are necessary for a fair statement of the consolidated financial condition of BFC at June 30, 2015; the consolidated results of operations and comprehensive income of BFC for the three and six months ended June 30, 2015 and 2014; changes in consolidated equity of BFC for the six months ended June 30, 2015 and 2014; and the consolidated cash flows of BFC for the six months ended June 30, 2015 and 2014. Operating results for the three and six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015 or any other future period.  These unaudited 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, 2014 (the “2014 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.

 

BFC is a Florida-based holding company whose principal holdings include an approximately 81% equity interest in BBX Capital Corporation (formerly BankAtlantic Bancorp, Inc.) and its subsidiaries (“BBX Capital”) and a direct 54% equity interest in Woodbridge Holdings, LLC (“Woodbridge”). Woodbridge owns 100% of Bluegreen Corporation and its subsidiaries (“Bluegreen”).  Bluegreen is a sales, marketing and management company focused on the vacation ownership industry. BBX Capital is a Florida-based company involved in the ownership, financing, acquisition, development and management of real estate, including through real estate joint ventures, and investments in middle market operating businesses.  BBX Capital holds the remaining 46% equity interest in Woodbridge.  BFC also holds interests in other investments and subsidiaries as described herein.  BFC’s 81% equity interest in BBX Capital includes 4,771,221 shares of BBX Capital’s Class A Common Stock purchased by BFC during April 2015 pursuant to the tender offer described below. The Company currently reports the results of its continuing operations through two reportable segments:  Bluegreen and BBX Capital.

 

GAAP requires that BFC consolidate the financial results of the entities in which it has controlling interests, including BBX Capital, Woodbridge and Bluegreen.  As a consequence, the assets and liabilities of all such entities are presented on a consolidated basis in BFC’s financial statements. However, except as otherwise noted, the debts and obligations of the consolidated entities, including BBX Capital, Woodbridge, and Bluegreen, are not direct obligations of BFC and are non-recourse to BFC.  Similarly, the assets of those entities are not available to BFC absent a dividend or distribution from those entities (and, in the case of Bluegreen, a subsequent dividend or distribution by Woodbridge).  The recognition by BFC of income from controlled entities is determined based on the total percent of economic ownership in those entities, as described above.

 

 

Strategic Transactions and Other Recent Events 

 

Tender Offer for Shares of BBX Capital’s Class A Common Stock

 

On April 30, 2015, the Company completed a cash tender offer pursuant to which it purchased from the shareholders of BBX Capital a total of 4,771,221 shares of BBX Capital’s Class A Common Stock at a purchase price of $20.00 per share, for an aggregate purchase price of approximately $95.4 million.  Prior to the tender offer, the Company

 

8

 


 

 

owned approximately 51% of the issued and outstanding shares of BBX Capital’s Class A Common Stock and all of the issued and outstanding shares of BBX Capital’s Class B Common Stock.  Collectively, these shares represented an approximately 51% equity interest and 74% voting interest in BBX Capital. As a result of the closing of the tender offer, the Company currently owns approximately 81% of the issued and outstanding shares of BBX Capital’s Class A Common Stock, which together with the shares of BBX Capital’s Class B Common Stock owned by the Company, represents an approximately 81% equity interest and 90% voting interest in BBX Capital.  

 

On April 17, 2015, BFC entered into a Loan Agreement and Promissory Note with Bluegreen Specialty Finance, LLC, a wholly owned subsidiary of Bluegreen (“BSF”), pursuant to which BSF provided an $80 million loan to BFC.  BFC used the proceeds of the loan and approximately $15.4 million in cash on hand to fund the purchase of shares in the tender offer. Amounts outstanding on the loan bear interest at a rate of 10% per annum.  Payments of interest only are required on a quarterly basis, with all outstanding amounts due and payable at the end of five years.  BFC is permitted to prepay the loan in whole or in part at any time, and prepayments are required, to the extent necessary, in order for Bluegreen or its subsidiaries to remain in compliance with covenants under their outstanding indebtedness.

 

Reversal of Valuation Allowance

 

At December 31, 2014, BFC had a valuation allowance against its consolidated net deferred tax assets of approximately $258 million, which was mainly attributable to federal and state net operating loss carry forwards. A valuation allowance on BFC’s net deferred tax assets was required until sufficient evidence exists to support the reversal of all or some portion of this allowance. As a result of the increase in BFC’s ownership interest in BBX Capital due to the purchase of additional shares of BBX Capital’s Class A Common Stock in the above-described tender offer, BFC will be filing a consolidated group tax return which will include the operations the BBX Capital, Woodbridge and Bluegreen. Based on filing a consolidated group tax return, BFC believes that there is sufficient positive evidence to allow BFC to reach a conclusion that a significant portion of its deferred tax valuation allowance is no longer required. As a result, a portion of BFC valuation allowance was released during the quarter ended June 30, 2015 and, in connection therewith, the Company recognized a benefit of $92.3 million during the quarter for the expected realization of its net deferred tax assets in future years.  In addition, the Company’s combined estimated annual effective tax rate has been reduced to reflect the expected realization of its deferred tax assets in the current year. See Note 11 for additional information regarding the Company’s income taxes.

 

Termination of BFC-BBX Capital Merger Agreement

 

During May 2013, BFC and BBX Capital entered into a merger agreement which provided for BBX Capital to be merged into and become a wholly owned subsidiary of BFC.   The merger agreement was terminated during December 2014 as a result of the inability to obtain the listing of BFC’s Class A Common Stock on a national securities exchange, which was a condition to closing the merger.

 

Woodbridge Acquisition of Bluegreen; Settlement of Litigation

 

On April 2, 2013, Bluegreen merged with a wholly-owned subsidiary of Woodbridge in a cash merger transaction (sometimes hereinafter referred to as the “Bluegreen merger” or the “Bluegreen cash merger”).  Pursuant to the terms of the merger agreement, Bluegreen’s shareholders (other than Woodbridge) received consideration of $10.00 in cash for each share of Bluegreen’s common stock that they held at the effective time of the merger, including unvested restricted securities. In addition, each option to acquire shares of Bluegreen’s common stock that was outstanding at the effective time of the merger, whether vested or unvested, was canceled in exchange for a cash payment to the holder in an amount equal to the excess, if any, of the $10.00 per share merger consideration over the exercise price per share of the option. The aggregate merger consideration was approximately $149.2 million.  As a result of the merger, Bluegreen, which was the surviving corporation of the merger, became a wholly-owned subsidiary of Woodbridge.  Prior to the merger, the Company indirectly through Woodbridge owned approximately 54% of Bluegreen’s outstanding common stock.

 

In connection with the financing of the merger, BFC and Woodbridge entered into a Purchase Agreement with BBX Capital on April 2, 2013 (the “Purchase Agreement”).  Pursuant to the terms of the Purchase Agreement, BBX Capital invested $71.75 million in Woodbridge contemporaneously with the closing of the merger in exchange for a

 

9

 


 

 

46% equity interest in Woodbridge. BFC continues to hold the remaining 54% of Woodbridge’s outstanding equity interests. BBX Capital’s investment in Woodbridge consisted of $60 million in cash, which was utilized to pay a portion of the aggregate merger consideration, and a promissory note in Woodbridge’s favor in the principal amount of $11.75 million (the “Note”). The Note initially had a term of five years, with interest payable at a rate of 5% per annum and provided for payments of interest only on a quarterly basis during the term of the Note, with all outstanding amounts due and payable at the end of the five-year term. During the six months ended June 30, 2015  and the year ended December 31, 2014, BBX Capital paid to Woodbridge a total of approximately $294,000 and $587,000, respectively, of interest on the Note.  BBX Capital’s Board of Directors has approved the repayment in full of the Note in connection with the settlement of the merger-related litigation described below. In connection with BBX Capital’s investment in Woodbridge, BFC and BBX Capital entered into an Amended and Restated Operating Agreement of Woodbridge, which sets forth BFC’s and BBX Capital’s respective rights as members of Woodbridge and provides for, among other things, unanimity on certain specified “major decisions” and for distributions by Woodbridge to be made on a pro rata basis in accordance with BFC’s and BBX Capital’s respective percentage equity interests in Woodbridge. During April and July, 2015, Bluegreen paid a total of $14.0 million and $10.0 million, respectively, in cash dividends to Woodbridge, and Woodbridge declared and paid cash dividends totaling $13.4 million and $9.9 million, respectively, which were allocated pro rata to BFC and BBX Capital based on their percentage ownership interests in Woodbridge. During 2014, Bluegreen paid cash dividends totaling $71.5 million to Woodbridge, and Woodbridge declared and paid cash dividends totaling $69.1 million, which was allocated pro rata to BFC and BBX Capital based on their percentage ownership interests in Woodbridge.

 

On March 26, 2013, Bluegreen issued $75 million of senior secured notes (the “2013 Notes Payable”) in a private transaction, the proceeds of which, together with approximately $14 million of Bluegreen’s unrestricted cash, were utilized in connection with the funding of the $149.2 million merger consideration indicated above. See Note 15 to the Consolidated Financial Statements included in the 2014 Annual Report for additional information regarding the 2013 Notes Payable.

 

Two consolidated class action lawsuits relating to the Bluegreen merger were filed.  The plaintiffs in these actions asserted that the consideration received by Bluegreen’s minority shareholders in the transaction was inadequate and unfair, and were seeking to recover damages in connection with the transaction. On June 5, 2015, the parties agreed to the settlement of the litigation. Pursuant to the settlement, Woodbridge or its affiliates will pay $36.5 million, which amounts to approximately $2.50 per share, into a “Settlement Fund” for the benefit of former shareholders of Bluegreen whose shares were acquired in connection with the Bluegreen cash merger.  The amount to be received by such former Bluegreen shareholders will be reduced by administrative costs and attorneys’ fees and costs. It is anticipated that Woodbridge will fund the Settlement Fund with proceeds from BBX Capital’s repayment of its $11.75 million promissory note to Woodbridge and from additional capital contributions from BFC and BBX Capital of $13.4 million and $11.4 million, respectively, based on their respective 54% and 46% ownership interests in Woodbridge.  The settlement remains subject to final approval by the Court and dismissal with prejudice of all litigation arising from or relating to the merger, together with a full release of BFC, Bluegreen, Woodbridge, BBX Capital and others.   BFC, Bluegreen, Woodbridge, BBX Capital and all of the defendants in the action denied and continue to deny that any of them violated any laws or breached any duties to the plaintiffs or Bluegreen’s former shareholders. 

 

Sale of BankAtlantic    

 

On July 31, 2012, BBX Capital completed the sale to BB&T Corporation (“BB&T”) of all of the issued and outstanding shares of capital stock of BankAtlantic, the former wholly-owned banking subsidiary of BBX Capital (the stock sale and related transactions are referred to in this report as the “BankAtlantic Sale” or the “BB&T Transaction”).  The BankAtlantic Sale was consummated pursuant to the terms of a definitive agreement, dated November 1, 2011, between BBX Capital and BB&T, as amended on March 13, 2012 (the “BB&T Agreement”). The March 13, 2012 amendment amended the previously contemplated terms of the transaction to, among other things, provide for the assumption by BB&T of BBX Capital’s $285.4 million in principal amount of then-outstanding trust preferred securities (“TruPS”) obligations. 

 

Pursuant to the BB&T Agreement, prior to the closing of the BankAtlantic Sale, BankAtlantic formed two subsidiaries, BBX Capital Asset Management, LLC (“CAM”) and Florida Asset Resolution Group, LLC (“FAR”).  BankAtlantic contributed to FAR certain performing and non-performing loans, tax certificates, and real estate

 

10

 


 

 

owned that had an aggregate carrying value on BankAtlantic’s Consolidated Statement of Financial Condition of approximately $346 million as of July 31, 2012 (the date the BB&T Transaction was consummated).  FAR assumed all liabilities related to these assets. BankAtlantic also contributed approximately $50 million in cash to FAR on July 31, 2012 and thereafter distributed all of the membership interests in FAR to BBX Capital.  At the closing of the BankAtlantic Sale, BBX Capital transferred 95% of the outstanding preferred membership interests in FAR to BB&T in connection with BB&T’s assumption of BBX Capital’s then-outstanding approximately $285 million of TruPS obligations, with BBX Capital continuing to hold the remaining 5% of FAR’s preferred membership interests. BB&T was entitled to hold its 95% preferred interest in the net cash flows of FAR until it recovered $285 million in preference amount plus a priority return of LIBOR + 2.00% per annum on any unpaid preference amount. BBX Capital entered into an incremental $35 million guarantee in BB&T’s favor to further assure BB&T’s recovery of the $285 million preferred interest within seven years.    On May 6, 2015, BB&T’s preferred interest in FAR was paid in full and redeemed, and BBX Capital now owns 100% of FAR.

 

Prior to the closing of the BankAtlantic Sale, BankAtlantic contributed to CAM certain commercial loans, commercial real estate owned and previously written off assets that had an aggregate carrying value on BankAtlantic’s Consolidated Statement of Financial Condition of $125 million as of July 31, 2012. CAM assumed all liabilities related to these assets.  BankAtlantic also contributed $82 million of cash to CAM on July 31, 2012.  Prior to the closing of the BankAtlantic Sale, BankAtlantic distributed all of the membership interests in CAM to BBX Capital.  CAM remains a wholly-owned subsidiary of BBX Capital.

 

 

2.    Fair Value Measurement 

 

Assets and liabilities on a recurring basis

 

There were no significant assets or liabilities measured at fair value on a recurring basis in the Company’s financial statements as of June 30, 2015 or December 31, 2014. 

 

Assets on a non-recurring basis

 

The following table presents major categories of assets measured at fair value on a non-recurring basis as of June 30, 2015 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

 

 

Quoted prices in

Significant

 

Total

 

 

 

 

Active Markets

Other

Significant

Impairments (1)

 

 

As of

 

for Identical

Observable

Unobservable

For the Six

 

 

June 30,

 

Assets

Inputs

Inputs

Months Ended

Description

 

2015

 

(Level 1)

(Level 2)

(Level 3)

June 30, 2015

Loans measured for impairment

 

 

 

 

 

 

 

using the fair value of the

 

 

 

 

 

 

 

underlying collateral

$

110 

 

 -

 -

110 
117 

Impaired real estate held-for-sale

 

 

 

 

 

 

 

and held-for-investment

 

2,525 

 

 -

 -

2,525 
522 

Total

$

2,635 

 

 -

 -

2,635 
639 

 

 

(1)

Total impairments represent the amount of losses recognized during the six months ended June 30, 2015 on assets that were held and measured at fair value as of June 30, 2015.

 

 

11

 


 

 

Quantitative information about significant unobservable inputs within Level 3 on major categories of assets measured at fair-value on a non-recurring basis as of June 30, 2015 is as follows (Fair Value in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2015

 

Fair

 

Valuation

Unobservable

 

Description

 

Value

 

Technique

Inputs

Range (Average)(1)(2)

Loans measured for impairment

 

 

 

 

 

 

using the fair value of the

 

 

 

Fair Value of

Discounted Rates and Appraised

 

underlying collateral

$

110 

 

Collateral

Value less Cost to Sell

 $0.3 million ($0.3 million)

Impaired real estate held-for-sale

 

 

 

Fair Value of

Discounted Rates and Appraised

 

and held-for-investment

 

2,525 

 

Property

Value less Cost to Sell

$0.2 - $1.0 million ($0.5 million)

Total

$

2,635 

 

 

 

 

 

 

(1)

Range and average appraised values were reduced by costs to sell.

(2)

Average was computed by dividing the aggregate appraisal amounts by the number of appraisals.

 

The following table presents major categories of assets measured at fair value on a non-recurring basis as of June 30, 2014 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

 

 

Quoted prices in

Significant

 

Total

 

 

 

 

Active Markets

Other

Significant

Impairments (1)

 

 

As of

 

for Identical

Observable

Unobservable

For the Six

 

 

June 30,

 

Assets

Inputs

Inputs

Months Ended

Description

 

2014

 

(Level 1)

(Level 2)

(Level 3)

June 30, 2014

Loans measured for impairment

 

 

 

 

 

 

 

using the fair value of the

 

 

 

 

 

 

 

underlying collateral

$

126 

 

 -

 -

126 
245 

Impaired real estate held-for-sale

 

 

 

 

 

 

 

and held-for-investment

 

11,604 

 

 -

 -

11,604 
2,428 

Impaired loans held for sale

 

5,292 

 

 -

 -

5,292 
404 

Total

$

17,022 

 

 -

 -

17,022 
3,077 

 

 

(1)

Total impairments represent the amount of losses recognized during the six months ended June 30, 2014 on assets that were held and measured at fair value as of June 30, 2014.

 

Quantitative information about significant unobservable inputs within Level 3 on major categories of assets measured at fair value on a non-recurring basis as of June 30, 2014 was as follows (Fair Value in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2014

 

Fair

 

Valuation

Unobservable

 

Description

 

Value

 

Technique

Inputs

Range (Average)(1)(2)

Loans measured for impairment

 

 

 

 

 

 

using the fair value of the

 

 

 

Fair Value of

Discounted Rates and Appraised

 

underlying collateral

$

126 

 

Collateral

Value less Cost to Sell

$0.1 - $0.4 million ($0.2 million)

Impaired real estate held-for-sale

 

 

 

Fair Value of

Discounted Rates and Appraised

 

and held-for-investment

 

11,604 

 

Property

Value less Cost to Sell

$0.1 - $9.0 million ($1.7 million)

 

 

 

 

Fair Value of

Discounted Rates and Appraised

 

Impaired loans held for sale

 

5,292 

 

Collateral

Value less Cost to Sell

$0.1 - $0.7 million ($0.1 million)

Total

$

17,022 

 

 

 

 

 

 

(1)

Range and average appraised values were reduced by costs to sell.

(2)

Average was computed by dividing the aggregate appraisal amounts by the number of appraisals.

 

 

12

 


 

 

Liabilities on a non-recurring basis

 

There were no significant liabilities measured at fair value on a non-recurring basis in the Company’s financial statements as of June 30, 2015 or December 31, 2014. 

 

Loans Measured For Impairment

 

Impaired loans are generally valued based on the fair value of the underlying collateral less cost to sell as the majority of BBX Capital’s loans are collateral dependent.  The fair value of BBX Capital’s loans may significantly increase or decrease based on changes in property values as its loans are primarily secured by real estate.  BBX Capital primarily uses third party appraisals to assist in measuring non-homogenous impaired loans and broker price opinions to assist in measuring homogeneous impaired loans. The appraisals generally use the market or income approach valuation technique and use market observable data to formulate an estimate of the fair value of the loan’s collateral.  However, the appraiser uses professional judgment in determining the fair value of the collateral, and BBX Capital may also adjust these values for changes in market conditions subsequent to the appraisal date.  When current appraisals are not available for certain loans, BBX Capital uses its judgment on market conditions to adjust the most current appraisal. As a consequence, the calculation of the fair value of the collateral is considered a  Level 3 input.  BBX Capital generally recognizes impairment losses based on third party broker price opinions when impaired homogeneous loans become 120 days delinquent.  These third party valuations from real estate professionals also use Level 3 inputs in determining fair values.  The observable market inputs used to fair value loans include comparable property sales, rent rolls, market capitalization rates on income producing properties, risk adjusted discount rates and foreclosure time frames and exposure periods. 

 

Real Estate Held-for-Sale and Held-for-Investment

 

Real estate is generally valued using third party appraisals or broker price opinions.  These appraisals generally use the market approach valuation technique and use market observable data to formulate an estimate of the fair value of the properties.  The market observable data typically consists of comparable property sales, rent rolls, market capitalization rates on income producing properties and risk adjusted discount rates.  However, the appraisers or brokers use professional judgment in determining the fair value of the properties and BBX Capital may also adjust these values for changes in market conditions subsequent to the valuation date.  As a consequence of using appraisals, broker price opinions and adjustments to appraisals, the calculation of the fair values of the properties is considered a Level 3 input.    

 

Loans Held for Sale

 

Loans held for sale are valued using an income approach with Level 3 inputs as market quotes or sale transactions of similar loans are generally not available.  The fair value is estimated by discounting forecasted cash flows, using a discount rate that reflects the risks inherent in the loans held for sale portfolio.  For non-performing loans held for sale, the forecasted cash flows are based on the estimated fair value of the collateral less cost to sell adjusted for foreclosure expenses and other operating expenses of the underlying collateral until foreclosure or sale. 

 

 

13

 


 

 

Financial Disclosures about Fair Value of Financial Instruments

 

The following tables present information for financial instruments at June 30, 2015 and December 31, 2014 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

 

 

Quoted prices

 

 

 

 

Carrying

 

 

in Active

Significant

 

 

 

Amount

 

Fair Value

Markets

Other

Significant

 

 

As of

 

As of

for Identical

Observable

Unobservable

 

 

June 30,

 

June 30,

Assets

Inputs

Inputs

 

 

2015

 

2015

(Level 1)

(Level 2)

(Level 3)

Financial assets:

 

 

 

 

 

 

 

Loans receivable including loans held-

 

 

 

 

 

 

 

for-sale, net

$

54,755 

 

66,338 

 -

 -

66,338 

Vacation ownership notes receivable, net

 

406,685 

 

500,000 

 -

 -

500,000 

Notes receivable from preferred shareholders (1)

 

5,000 

 

4,400 

 -

 -

4,400 

 

 

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

 

Receivable-backed notes payable

$

406,214 

 

405,700 

 -

 -

405,700 

Notes and mortgage notes payable and

 

 

 

 

 

 

 

other borrowings

 

104,334 

 

106,089 

 -

 -

106,089 

Junior subordinated debentures

 

151,236 

 

143,500 

 -

 -

143,500 

Shares subject to mandatory redemption

 

12,902 

 

12,215 

 -

 -

12,215 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

 

 

Quoted prices

 

 

 

 

Carrying

 

 

in Active

Significant

 

 

 

Amount

 

Fair Value

Markets

Other

Significant

 

 

As of

 

As of

for Identical

Observable