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EX-31.2 - EX-31.2 - Bluegreen Vacations Holding Corpbfcf-20150930xex312.htm
EX-31.1 - EX-31.1 - Bluegreen Vacations Holding Corpbfcf-20150930xex311.htm
EX-32.1 - EX-32.1 - Bluegreen Vacations Holding Corpbfcf-20150930xex321.htm
EX-32.2 - EX-32.2 - Bluegreen Vacations Holding Corpbfcf-20150930xex322.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 September 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 November 3, 2015 is as follows:

 

Class A Common Stock of $.01 par value, 75,492,819 shares outstanding.
Class B Common Stock of $.01 par value, 13,718,928 shares outstanding.

 

 


 

 

 

 

Arch 31, 2013

 

 

 

 

 

BFC Financial Corporation

TABLE OF CONTENTS

 

 

 

Part I.

FINANCIAL INFORMATION

Page

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

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

 

 

 

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2015 and 2014 - Unaudited

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2015 and 2014 - Unaudited

 

 

 

 

Condensed Consolidated Statements of Changes in Equity for the Nine Months Ended September 30, 2015 and 2014 - Unaudited

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2015 and 2014 - Unaudited

 

 

 

 

Notes to Condensed Consolidated Financial Statements - Unaudited

 

 

 

Item 2.

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

48 

 

 

 

Item 4.

Controls and Procedures

82 

 

 

 

Part II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

83 

 

 

 

Item 1A.

Risk Factors

85 

 

 

 

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

86 

 

 

 

Item 6.

Exhibits

88 

 

 

 

 

Signatures

89 

 

 

 

 

 

 

 

 

 

 

(i)

 

 

 

 


 

 

PART I – FINANCIAL INFORMATION

 

Item 1.  FINANCIAL STATEMENTS

 

 

 

 

 

 

BFC Financial Corporation

Condensed Consolidated Statements of Financial Condition - Unaudited

(In thousands, except share data)

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

2015

 

2014

 

 

 

 

 

ASSETS

 

 

 

 

Cash and cash equivalents ($98 in 2015 and $4,993 in 2014 held by variable

 

 

 

 

interest entities ("VIEs"))

$

176,803 

 

279,437 

Restricted cash ($28,034 in 2015 and $31,554 in 2014 held by VIEs)

 

65,133 

 

54,620 

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

 

22,126 

 

35,423 

Loans receivable, net of allowance for loan losses of $0 in 2015 and $977 in 2014

 

 

 

 

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

 

27,700 

 

26,844 

Notes receivable, including net securitized notes held by VIEs of $287,033 in 2015

 

 

 

 

and $293,950 in 2014, net of allowance of $108,389 in 2015 and $102,566 in 2014

 

416,292 

 

424,267 

Inventory

 

234,215 

 

209,893 

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

 

53,500 

 

76,552 

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

 

72,639 

 

41,733 

Investments in unconsolidated real estate joint ventures

 

17,237 

 

16,065 

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

 

88,964 

 

89,051 

Goodwill and intangible assets, net

 

78,021 

 

79,730 

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

 

96,749 

 

77,681 

Total assets

$

1,349,379 

 

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

 

71,223 

 

92,129 

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

 

332,047 

 

320,275 

Notes and mortgage notes payable and other borrowings

 

115,527 

 

107,984 

Junior subordinated debentures

 

151,747 

 

150,038 

Deferred income taxes

 

15,329 

 

92,609 

Shares subject to mandatory redemption

 

12,999 

 

12,714 

Other liabilities ($7 in 2015 and $12,602 in 2014 held by VIEs)

 

188,020 

 

176,493 

Total liabilities

 

886,892 

 

964,590 

 

 

 

 

 

Commitments and contingencies (See Note 11)

 

 

 

 

 

 

 

 

 

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 73,211,519  in 2015 and 73,307,012 in 2014    

 

732 

 

733 

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

 

 

 

 

issued and outstanding 11,346,336 in 2015 and 10,168,105 in 2014

 

113 

 

102 

Additional paid-in capital

 

140,240 

 

142,058 

Accumulated earnings

 

212,199 

 

109,660 

Accumulated other comprehensive income

 

470 

 

353 

Total  BFC Financial Corporation ("BFC") equity

 

353,754 

 

252,906 

Noncontrolling interests

 

108,733 

 

193,800 

Total equity

 

462,487 

 

446,706 

Total liabilities and equity

$

1,349,379 

 

1,411,296 

 

 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited

 

 

 

 

 

1

 


 

 

 

 

 

 

 

 

 

 

 

 

BFC Financial Corporation

Condensed Consolidated Statements of Operations - Unaudited

(In thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended September 30,

 

For the Nine Months Ended September 30,

 

 

2015

 

2014

 

2015

 

2014

Revenues

 

 

 

 

 

 

 

 

Sales of VOIs

$

78,072 

 

80,172 

 

190,986 

 

204,487 

Trade sales

 

21,537 

 

17,858 

 

60,655 

 

49,934 

Interest income

 

22,695 

 

21,607 

 

64,296 

 

65,307 

Fee-based sales commission

 

51,029 

 

38,665 

 

131,603 

 

108,974 

Other fee-based services revenue

 

24,785 

 

24,096 

 

73,486 

 

69,029 

Other revenue

 

1,173 

 

2,817 

 

19,276 

 

10,930 

Total revenues

 

199,291 

 

185,215 

 

540,302 

 

508,661 

 

 

 

 

 

 

 

 

 

Costs and Expenses

 

 

 

 

 

 

 

 

Cost of sales of VOIs

 

7,039 

 

9,586 

 

19,286 

 

24,911 

Cost of sales

 

16,186 

 

13,060 

 

44,216 

 

36,606 

Cost of other fee-based services

 

14,797 

 

14,906 

 

46,346 

 

43,228 

Interest expense

 

9,261 

 

10,785 

 

29,784 

 

35,762 

(Recoveries from) provision for loan losses

 

(4,427)

 

656 

 

(14,856)

 

(2,638)

Impairments (loss recoveries) of assets

 

274 

 

5,926 

 

(1,599)

 

7,151 

Litigation settlement

 

 -

 

 -

 

36,500 

 

 -

Selling, general and administrative expenses

 

132,324 

 

112,728 

 

344,368 

 

306,083 

Total costs and expenses

 

175,454 

 

167,647 

 

504,045 

 

451,103 

 

 

 

 

 

 

 

 

 

Equity losses in unconsolidated entities

 

(158)

 

(205)

 

(753)

 

(237)

Other income, net

 

1,205 

 

445 

 

3,420 

 

2,129 

Income before income taxes

 

24,884 

 

17,808 

 

38,924 

 

59,450 

(Provision) benefit for income taxes (See Note 10)

 

(4,213)

 

(11,135)

 

77,531 

 

(31,400)

Net income

 

20,671 

 

6,673 

 

116,455 

 

28,050 

Less: Net income attributable to noncontrolling interests

 

4,313 

 

2,845 

 

13,916 

 

11,826 

Net income attributable to BFC

$

16,358 

 

3,828 

 

102,539 

 

16,224 

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

0.19 

 

0.05 

 

1.18 

 

0.19 

Diluted earnings per share

$

0.19 

 

0.05 

 

1.18 

 

0.19 

Basic weighted average number of common

 

 

 

 

 

 

 

 

shares outstanding

 

87,023 

 

84,326 

 

87,083 

 

83,679 

Diluted weighted average number of common and

 

 

 

 

 

 

 

 

common equivalent shares outstanding

 

87,174 

 

84,939 

 

87,228 

 

84,758 

 

 

 

 

 

 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited

 

 

 

 

 

 

 

 

2

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

BFC Financial Corporation

Condensed Consolidated Statements of Comprehensive Income - Unaudited

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended September 30,

 

For the Nine Months Ended September 30,

 

 

2015

 

2014

 

2015

 

2014

Net income

$

20,671 

 

6,673 

 

116,455 

 

28,050 

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

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

 

(22)

 

16 

 

(47)

 

34 

 

 

 

 

 

 

 

 

 

Unrealized gains from foreign currency translation

 

121 

 

14 

 

220 

 

56 

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of tax

$

99 

 

30 

 

173 

 

90 

 

 

 

 

 

 

 

 

 

Comprehensive income, net of tax

 

20,770 

 

6,703 

 

116,628 

 

28,140 

Less: Comprehensive income attributable

 

 

 

 

 

 

 

 

to noncontrolling interests

 

4,331 

 

2,851 

 

13,972 

 

11,848 

Total comprehensive income attributable to BFC

$

16,439 

 

3,852 

 

102,656 

 

16,292 

 

 

 

 

 

 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BFC Financial Corporation

Condensed Consolidated Statements of Changes in Equity - Unaudited

For the Nine Months Ended September 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

 -

 -

 

 -

 -

 -

16,224 

 -

16,224 
11,826 
28,050 

Other comprehensive income

 -

 -

 

 -

 -

 -

 -

68 
68 
22 
90 

Subsidiaries' capital transactions

 -

 -

 

 -

 -

(1,735)

 -

 -

(1,735)
2,211 
476 

Distributions to noncontrolling interest

 -

 -

 

 -

 -

 -

 -

 -

 -

(43)
(43)

Conversion of Common Stock from Class B to Class A

38 
(38)

 

 -

 -

 -

 -

 -

 -

 -

 -

Repurchase and retirement of Class A Common Stock

(1,040)

 -

 

(10)

 -

(4,079)

 -

 -

(4,089)

 -

(4,089)

Issuance of Common Stock from exercise of options

1,216 
212 

 

12 
571 

 -

 -

585 

 -

585 

Issuance of Common Stock from vesting of restricted stock awards

1,389 

 -

 

14 

 -

(14)

 -

 -

 -

 -

 -

Share-based compensation

 -

 -

 

 -

 -

1,295 

 -

 -

1,295 

 -

1,295 

Balance, September 30,  2014

72,868 
7,511 

$

729 
75 
138,623 
112,034 
308 
251,769 
196,991 
448,760 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31,  2014

73,307 
10,168 

$

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

Net income

 -

 -

 

 -

 -

 -

102,539 

 -

102,539 
13,916 
116,455 

Other comprehensive income

 -

 -

 

 -

 -

 -

 -

117 
117 
56 
173 

Subsidiaries' capital transactions

 -

 -

 

 -

 -

570 

 -

 -

570 
734 
1,304 

Distributions to noncontrolling interest

 -

 -

 

 -

 -

 -

 -

 -

 -

(6,188)
(6,188)

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)

Increase in investment in BBX Capital from share exchange agreements

 -

 -

 

 -

 -

822 

 -

 -

822 
(822)

 -

Conversion of Common Stock from Class B to Class A

40 
(40)

 

 -

 -

 -

 -

 -

 -

 -

 -

Repurchase and retirement of Class A Common Stock

(1,549)

 -

 

(15)

 

(4,438)

 -

 -

(4,453)

 -

(4,453)

Issuance of Common Stock from exercise of options

25 

 -

 

 -

 -

10 

 -

 -

10 

 -

10 

Issuance of Common Stock from vesting of restricted stock awards

1,389 

 -

 

14 

 -

(14)

 -

 -

 -

 -

 -

Issuance of Common Stock from share exchange agreement

 -

1,218 

 

 

11 
(11)

 -

 -

 -

Share-based compensation

 -

 -

 

 -

 -

3,904 

 -

 -

3,904 

 -

3,904 

Balance, September 30,  2015

73,212 
11,346 

$

732 
113 
140,240 
212,199 
470 
353,754 
108,733 
462,487 

 

 

 

 

 

 

 

 

 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited

 

 

 

 

 

4

 


 

 

 

 

 

 

 

 

 

 

 

 

 

BFC Financial Corporation

 

Condensed Consolidated Statements of Cash Flows - Unaudited

 

(In thousands)

 

 

 

 

 

 

 

 

 

For the Nine Months Ended September 30,

 

 

 

2015

 

2014

 

Net cash (used in) provided by operating activities

$

(3,558)

 

76,687 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

Increase in restricted cash and cash equivalents

 

(2,649)

 

 -

 

Proceeds from redemption and maturities of tax certificates

 

188 

 

549 

 

Purchase of securities available for sale

 

(5)

 

 -

 

Distributions from unconsolidated entities

 

 -

 

273 

 

Investments in unconsolidated real estate joint ventures

 

(2,690)

 

(4,431)

 

Repayment of loans receivable, net

 

27,035 

 

34,942 

 

Proceeds from the sale of loans receivable

 

89 

 

9,497 

 

Proceeds from sales of real estate held-for-sale

 

35,770 

 

21,662 

 

Proceeds from contribution of real estate to

 

 

 

 

 

unconsolidated real estate joint ventures

 

 -

 

6,966 

 

Improvements in real estate held-for-investment

 

(15,692)

 

(1,128)

 

Purchases of real estate held-for-sale

 

(10,667)

 

 -

 

Purchases of property and equipment

 

(8,619)

 

(15,297)

 

Proceeds from the sale of property and equipment

 

565 

 

53 

 

Cash paid for acquisitions, net of cash received

 

(10)

 

(4,499)

 

Acquisition of BBX Capital Class A shares

 

(95,424)

 

 -

 

Net cash (used in) provided by investing activities

$

(72,109)

 

48,587 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

Repayment of BB&T preferred interest in FAR, LLC

 

(12,348)

 

(54,346)

 

Repayments of notes, mortgage notes payable and other borrowings

 

(201,913)

 

(126,312)

 

Proceeds from notes, mortgage notes payable and other borrowings

 

198,194 

 

84,438 

 

Payments for debt issuance costs

 

(2,829)

 

(724)

 

Proceeds from the exercise of BFC stock options

 

10 

 

585 

 

Retirement of BFC's common stock

 

(1,893)

 

 -

 

Distributions to non-controlling interest

 

(6,188)

 

(43)

 

Net cash used in financing activities

$

(26,967)

 

(96,402)

 

 

 

 

 

 

 

(Decrease) increase in cash and cash equivalents

 

(102,634)

 

28,872 

 

Cash and cash equivalents at beginning of period 

 

279,437 

 

217,636 

 

Cash and cash equivalents at end of period 

$

176,803 

 

246,508 

 

 

 

 

 

 

 

 

 

 

 

CONTINUED

 

 

 

 

 

 

 

 

 

5

 


 

 

 

 

 

 

 

 

 

BFC Financial Corporation

 

Condensed Consolidated Statements of Cash Flows - Unaudited

 

(In thousands)

 

 

 

 

 

 

 

 

 

For the Nine Months Ended September 30,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

Interest paid on borrowings

$

25,884 

 

32,230 

 

Income taxes paid

 

19,191 

 

20,335 

 

Income tax refunded

 

(317)

 

(86)

 

 

 

 

 

 

 

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

$

2,987 

 

20,450 

 

Loans receivable transferred to loans held-for-sale

 

 -

 

2,299 

 

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

 

38,707 

 

26,730 

 

Issuance of notes payable to purchase property and equipment

 

 -

 

21 

 

Issuance of notes payable to acquire business

 

(1,389)

 

(714)

 

Fair value of net assets acquired

 

1,683 

 

7,045 

 

Increase in investment in BBX Capital from the issuance of

 

 

 

 

 

BFC's common stock

 

822 

 

 -

 

Increase in BFC accumulated other comprehensive

 

 

 

 

 

income, net of taxes

 

117 

 

68 

 

Net increase (decrease) in BFC shareholders' equity from

 

 

 

 

 

the effect of subsidiaries' capital transactions, net of taxes

 

570 

 

(1,735)

 

Repurchase and retirement of shares of BFC's Class A Common Stock

 

(2,560)

 

(4,089)

 

 

 

 

 

 

 

 

 

 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited

 

 

 

 

 

 

6

 


 

 

BFC Financial Corporation

Notes to Condensed Consolidated Financial Statements - Unaudited

 

 

1.    Presentation of Interim Financial Statements

 

Basis of Financial Statement Presentation

 

The accompanying unaudited condensed 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 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 consolidated financial condition of BFC at September 30, 2015; the consolidated results of operations and comprehensive income of BFC for the three and nine months ended September 30, 2015 and 2014; changes in consolidated equity of BFC for the nine months ended September 30, 2015 and 2014; and the condensed consolidated cash flows of BFC for the nine months ended September 30, 2015 and 2014. Operating results for the three and nine months ended September 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 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 condensed 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.

 

GAAP requires that BFC consolidate the financial results of the entities in which it has controlling financial interests, including BBX Capital Corporation and its subsidiaries (“BBX Capital”), Woodbridge Holdings, LLC (“Woodbridge”) and Bluegreen Corporation and its subsidiaries (“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, Bluegreen’s parent company).   

 

BFC is a Florida-based holding company whose principal holdings include an approximately 81% equity interest in BBX Capital and a direct 54% equity interest in Woodbridge. BBX Capital holds the remaining 46% equity interest in Woodbridge. Woodbridge owns 100% of 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’s principal asset until July 31, 2012 was its ownership of BankAtlantic and its subsidiaries (“BankAtlantic”).  BankAtlantic was a federal savings bank headquartered in Fort Lauderdale, Florida.  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 stock sale and related transactions described herein are collectively referred to as the “BankAtlantic Sale” or the “BB&T Transaction”).  Prior to the closing of the BB&T Transaction, BankAtlantic formed two wholly-owned subsidiaries, BBX Capital Asset Management, LLC (“CAM”) and Florida Asset Resolution Group, LLC (“FAR”). 

 

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

 

7

 


 

 

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. The purchase of BBX Capital’s Class A Common Stock in the tender offer increased the Company’s ownership interest to approximately 81% of the issued and outstanding shares of BBX Capital’s Class A Common Stock. The shares of BBX Capital’s Class A Common Stock and Class B Common Stock owned by the Company currently represent an approximately 81% equity interest and 90% voting interest in BBX Capital.  

 

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 tender offer, BFC will be filing a consolidated group tax return which will include the operations of BBX Capital, Woodbridge and Bluegreen.  See Note 10 for additional information regarding the Company’s income taxes.

 

Share-based Compensation

 

On September 1, 2015, the Company granted 2,372,592 restricted shares of the Company’s Class B Common Stock to the Company’s executive officers under the Company’s 2014 Stock Incentive Plan.  The restricted Class B common shares had an aggregate fair value of $7.5 million on the grant date. The restricted shares granted to each executive officer are scheduled to vest ratably in annual installments over four years beginning in October 2016.  The Company recognizes the compensation costs based on the straight-line method over the vesting period.

 

On September 16, 2015, a total of 1,532,975 shares of restricted Class A common stock granted to executive officers in September 2011 vested.  The executive officers surrendered a total of 574,934 shares of BFC Class A common stock to satisfy the $1.8 million tax withholding obligation associated with the vesting of these shares.  BFC retired the surrendered shares.

 

On September 30, 2015, a total of 1,389,072 shares of restricted Class A common stock and 773,206 shares of restricted Class B common stock granted to executive officers in November 2012 and October 2014, respectively, vested.  The executive officers surrendered a total of 914,677 shares of BFC’s Class A common stock to BFC to satisfy the $2.6 million tax withholding obligation associated with the vesting of these shares. BFC retired the surrendered shares.

 

On September 1, 2015, BFC’s Board of Directors approved (a) the exercise in full of BFC’s options with respect to all of the BBX Capital RSUs held by the BBX Capital Executives which vested on September 30, 2015 and (b) the issuance of shares of BFC’s Class B Common Stock in exchange therefor.  In connection with this option exercise, on September 30, 2015, BFC issued a total of 1,218,476 shares of its Class B Common Stock to the BBX Capital Executives and received a total of 221,821 shares of BBX Capital’s Class A Common Stock in exchange therefor.  The share exchanges were effected simultaneously with the vesting of the applicable BBX Capital RSUs on September 30, 2015 and were based on the closing prices of BFC’s Class B Common Stock and BBX Capital’s Class A Common Stock on September 29, 2015 of $2.88 per share and $15.82 per share, respectively.

 

Earnings Per Share

 

Basic earnings per share excludes dilution and is computed by dividing net income attributable to the Company by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if options to issue common shares were exercised or restricted stock awards of the Company were to vest.  In calculating diluted earnings per share, net income attributable to the Company is divided by the weighted average number of common shares. Options and certain restricted stock awards are included in the weighted average number of common shares outstanding based on the treasury stock method, if dilutive. 

 

New Accounting Pronouncements

 

The Financial Accounting Standards Board (“FASB”) has issued the following accounting pronouncements and guidance relevant to the Company’s operations during 2015. (See the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 for accounting pronouncements issued prior to March 16, 2015 relevant to the Company’s operations.

 

8

 


 

 

 

Accounting Standards Update Number 2015-16 –– Business Combinations – Imputation of Interest (Topic 805) – Simplifying the Accounting Measurement-Period Adjustments.  This update requires that an acquirer in a business combination recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined.  The acquirer is required to record, in the same period’s financial statements, the effect on earnings, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date.  The amendments in this update are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years.  The amendments in this update should be applied prospectively to adjustments to provisional amounts that occur after the effective date of this update with earlier application permitted for financial statements that have not been issued.  The adoption of this update is not expected to have a material impact on the Company’s consolidated financial statements.

 

Accounting Standards Update Number 2015-15 –– Interest – Imputation of Interest (Topic 835-30) – Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements.  This update amends ASU 2015-03 and permits presentation of line of credit debt issuance costs as an asset with amortization over the term of the line of credit, regardless if there are any outstanding borrowings on the line of credit.  This update was effective upon the issuance of the standard and may be applied prospectively.  The adoption of this update is not expected to have a material impact on the Company’s consolidated financial statements.

 

Accounting Standards Update Number 2015-11 –– Inventory (Topic 330) – Simplifying the Measurement of Inventory. This update requires that an entity measure inventory at the lower of cost and net realizable value.  Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.   The update is intended to more clearly articulate the requirements for the measurement and disclosure of inventory and not to change current practices.   The update is effective for annual and interim reporting periods beginning after December 15, 2016.  The update should be applied prospectively with early application permitted at the beginning of an interim or annual reporting period.  The adoption of this update is not expected to have a material impact on the Company’s consolidated financial statements.

 

Accounting Standards Update Number 2015-05 –– Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.  This update provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract.  The standard is effective for annual and interim reporting periods beginning after December 15, 2015.  Early application is permitted.  The adoption of this update is not expected to have a material impact on the Company’s consolidated financial statements.

 

Accounting Standards Update Number 2015-03  – Interest – Imputation of Interest (Subtopic 835-30):  Simplifying the Presentation of Debt Issuance Costs.   This update requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount.  This standard will be effective for annual and interim reporting periods beginning after December 15, 2015.  The Company’s adoption of ASU 2015-03 is not expected to have a material impact on its consolidated financial statements.

 

Accounting Standards Update Number 2015-02  – Consolidation (Subtopic 810):  Amendments to Consolidation Analysis.  This new guidance makes targeted amendments to the current consolidation guidance and ends the deferral granted to investment companies from applying the VIE guidance.  This standard will be effective for annual and interim reporting periods beginning after December 15, 2015.  The Company is currently evaluating the impact that ASU 2015-02 may have on its consolidated financial statements.

 

Accounting Standards Update Number 2014-09 –  Revenue Recognition (Topic 606): Revenue from Contracts with Customers. This guidance is intended to improve the financial reporting requirements for revenue from contracts with customers by providing a principle based approach.  It also requires disclosures designed to enable readers of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from

 

9

 


 

 

contracts with customers.  This accounting guidance update will replace most existing revenue recognition guidance in GAAP.  The standard was to be effective for annual and interim reporting periods beginning after December 15, 2016.  AU 2015-14 deferred the effective date of this update for all entities by one year.   Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.  The Company is currently evaluating the requirements of this update and has not yet determined the impact it may have on the Company's consolidated financial statements.

 

 

2.    Variable Interest Entities

 

Bluegreen

 

Bluegreen sells VOI notes receivable through special purpose finance entities. These transactions are generally structured as non-recourse to Bluegreen, and are designed to provide liquidity for Bluegreen and to transfer the economic risks and certain 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.

 

With each securitization, Bluegreen generally retains a portion of the securities and continues to service the securitized notes receivable.  Under these arrangements, the cash payments received from obligors on the receivables sold are generally applied monthly to pay fees to service providers, make interest and principal payments to investors, and fund required reserves, if any, with the remaining balance of such cash retained by Bluegreen; however, to the extent the portfolio of receivables fails to satisfy specified performance criteria (as may occur due to, among other things, an increase in default rates or credit loss severity) or other trigger events occur, the funds received from obligors are 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 September 30, 2015, 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 both quantitative and qualitative reviews.  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.  As previously described, BFC consolidates Bluegreen and its consolidated subsidiaries and VIEs into BFC’s 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 or, in certain facilities, at 24% of the original sale price associated with the VOI which collateralizes the defaulted mortgage note receivable.  Voluntary repurchases and substitutions by Bluegreen of defaulted notes receivable during the nine months ended September 30, 2015 and 2014 were $2.3 million and $4.1 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 associated notes payable, plus cash reserves and any additional residual interest in future cash flows from collateral.

 

 

10

 


 

 

Information related to the assets and liabilities of Bluegreen’s consolidated VIEs included in the Company’s consolidated statements of financial condition is set forth below (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

2015

 

2014

Restricted cash

$

28,034 

$

31,554 

Securitized notes receivable, net

 

287,033 

 

293,950 

Receivable backed notes payable - non-recourse

 

332,047 

 

320,275 

 

 

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

 

BBX Capital

 

FAR

 

BB&T’s preferred equity interest in FAR, which was represented by FAR’s Class A Units, entitled it to a $285.0 million preference amount plus the related priority return.  Based on FAR’s amended and restated limited liability company agreement, FAR was required to make distributions quarterly, or more frequently as approved by FAR’s Board of Managers, of excess cash flows from its operations and the orderly disposition of its assets to redeem the preferred membership interests.  As such, the Class A units previously were considered mandatorily redeemable and were reflected as debt obligations in the consolidated statement of financial condition at December 31, 2014 and the priority return was considered interest expense in the consolidated statements of operations. 

 

The activities of FAR are governed by an amended and restated limited liability company agreement, which grants the Board of Managers decision-making authority over FAR.  Prior to May 6, 2015, the Board had four members, two members elected by the BBX Capital and two members elected by BB&T.  Upon redemption of BB&T’s preferred interest in FAR on May 6, 2015, FAR became a wholly owned subsidiary of BBX Capital and the two Board members designated by BB&T resigned.  FAR was no longer a variable interest entity as of May 6, 2015.

 

The carrying amount of the remaining assets and liabilities of FAR and the classification of these assets and liabilities in BFC’s consolidated statements of financial condition at December 31, 2014 was as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

2014

Cash and cash equivalents

 $

4,976 

Restricted cash

 

 -

Loans held-for-sale

 

35,423 

Loans receivable, net

 

18,972 

Real estate held-for-investment

 

19,129 

Real estate held-for-sale

 

13,745 

Properties and equipment, net

 

7,561 

Other assets

 

638 

Total assets

 $

100,444 

BB&T preferred interest in FAR, LLC

 $

12,348 

Other liabilities

 

12,486 

Total liabilities

 $

24,834 

 

 

 

 

 

11

 


 

 

3.     Investments in Unconsolidated Real Estate Joint Ventures 

 

BBX Capital had the following investments in unconsolidated real estate joint ventures (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

2015

 

2014

Altis at Kendall Square, LLC

$

1,247 

 

1,264 

Altis at Lakeline - Austin Investors LLC

 

5,151 

 

5,000 

New Urban/BBX Development, LLC

 

930 

 

996 

Sunrise and Bayview Partners, LLC

 

1,602 

 

1,723 

Hialeah Communities, LLC

 

4,793 

 

5,091 

PGA Design Center Holdings, LLC

 

1,900 

 

1,991 

CCB Miramar, LLC

 

875 

 

 -

BBX Centra, LLC

 

739 

 

 -

Investments in unconsolidated real estate joint ventures

$

17,237 

 

16,065 

 

 

The amount of interest capitalized in investments in unconsolidated real estate joint ventures associated with joint venture real estate development activities for the three and nine months ended September 30, 2015 was $131,000 and $359,000, respectively.  There was no interest capitalized in investments in unconsolidated real estate joint ventures for the three or nine months ended September 30, 2014.  

 

The condensed statements of operations for the three and nine months ended September 30, 2015 and 2014 for all of the above listed equity method joint ventures in the aggregate were as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

For the Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2015

 

2014

 

2015

 

2014

Total revenues

$

1,051 

 

254 

 

2,088 

 

481 

Total costs and expenses

 

(1,075)

 

(758)

 

(3,463)

 

(1,128)

Net loss

$

(24)

 

(504)

 

(1,375)

 

(647)

 

 

Information regarding BBX Capital’s investments in unconsolidated real estate joint ventures entered into during the nine months ended September 30, 2015 are listed below.  See Note 10 to the Consolidated Financial Statements included in the 2014 Annual Report for information on BBX Capital’s investments in other unconsolidated real estate joint ventures entered into before December 31, 2014.  

 

CCB Miramar, LLC

 

In May 2015, BBX Capital entered into a joint venture agreement with two separate unaffiliated developers for the acquisition of real estate  in Miramar, Florida to construct single-family homes.  BBX Capital contributed $875,000 for a 35% interest in the joint venture and one of the developers contributed to the joint venture a contract to purchase real estate. The purchase of the real estate is subject to certain closing conditions, including receipt of all necessary entitlements and completion of due diligence by the joint venture.    

 

BBX Centra, LLC 

 

In August 2015, BBX Capital and other investors invested in a joint venture with a developer for the development and sale of 89 townhomes in Pembroke Pines, Florida.  BBX Capital contributed $750,000 and is entitled to receive

 

12

 


 

 

7.143% of the joint venture distributions until a 12% return on its investment has been attained and then BBX Capital will be entitled to 3.175% of the joint venture distributions thereafter.

 

 

4.  BBX Capital’s Loans Held-For-Sale

 

BBX Capital’s loans-held-for-sale are as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

2015

 

2014

Residential 

$

22,126 

 

27,331 

Second-lien consumer

 

 -

 

2,351 

Small business

 

 -

 

5,741 

Total loans held-for-sale

$

22,126 

 

35,423 

 

 

Loans held-for-sale are reported at the lower of cost or fair value.  BBX Capital transfers loans to held-for-sale when, based on the current economic environment and related market conditions, it does not have the intent to hold those loans for the foreseeable future.  BBX Capital transfers loans previously held-for-sale to loans held-for-investment at the lower of cost or fair value on the transfer date.  In June 2015, BBX Capital transferred its small business, residential and second-lien consumer loans from held-for-sale to held-for-investment based on its decision to hold these loans for the foreseeable future as a result of the recent appreciation of real estate values and the forecasted improving economic environment.  As a consequence, $2.4 million,  $70,000 and $4.9 million of second-lien consumer, residential and small business loans, respectively, were transferred from loans held-for-sale to loans receivable measured at the lower of cost or fair value on the transfer date.  Any difference between the carrying amount of the loan and its outstanding principal balance was recognized as a discount.   Such loans are included in loans receivable, net of the discount on the statement of financial condition as of September 30, 2015.    

 

As of September 30, 2015, foreclosure proceedings were in process on  $14.3  million of BBX Capital’s residential loans held-for-sale.

 

 

5.    BBX Capital’s Loans Receivable 

 

BBX Capital’s loans receivable portfolio consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

2015

 

2014

Commercial non-real estate

$

1,270 

 

1,326 

Commercial real estate

 

18,626 

 

24,189 

Small business

 

4,488 

 

 -

Consumer

 

3,247 

 

2,306 

Residential

 

69 

 

 -

         Total loans, net of discount

 

27,700 

 

27,821 

 Allowance for loan  losses

 

 -

 

(977)

         Loans receivable -- net

$

27,700 

 

26,844 

 

 

As of September 30, 2015, foreclosure proceedings were in process on $1.2 million of BBX Capital’s consumer loans.

 

The total discount on loans receivable was $3.5 million and $0 as of September 30, 2015 and December 31, 2014, respectively.

 

13

 


 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

Loan Class

 

2015

 

2014

Commercial non-real estate

$

1,270 

 

1,326 

Commercial real estate

11,881 

 

14,464 

Small business

 

4,488 

 

 -

Consumer

 

3,247 

 

1,990 

Residential

 

69 

 

 -

Total nonaccrual loans

$

20,955 

 

17,780 

 

 

An age analysis of the past due recorded investment in BBX Capital’s loans receivable as of September 30, 2015 and December 31, 2014 was as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

31-59 Days

 

60-89 Days

 

90 Days

 

Total

 

 

 

Loans

September 30, 2015

 

Past Due

 

Past Due

 

or More (1)

 

Past Due

 

Current

 

Receivable

Commercial non-real estate

$

 -

 

 -

 

330 

 

330 

 

940 

 

1,270 

Commercial real estate

 

 -

 

 -

 

3,986 

 

3,986 

 

14,640 

 

18,626 

Small business

 

26 

 

 -

 

 -

 

26 

 

4,462 

 

4,488 

Consumer

 

13 

 

63 

 

1,298 

 

1,374 

 

1,873 

 

3,247 

Residential

 

24 

 

 -

 

42 

 

66 

 

 

69 

Total

$

63 

 

63 

 

5,656 

 

5,782 

 

21,918 

 

27,700 

 

 

1)

BBX Capital had no loans that were 90 days or more past due and still accruing interest as of September 30, 2015.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

31-59 Days

 

60-89 Days

 

90 Days

 

Total

 

 

 

Loans

December 31, 2014

 

Past Due

 

Past Due

 

or More (1)

 

Past Due

 

Current

 

Receivable

Commercial non-real estate

$

 -

 

 -

 

330 

 

330 

 

996 

 

1,326 

Commercial real estate

 

 -

 

 -

 

5,458 

 

5,458 

 

18,731 

 

24,189 

Consumer

 

 -

 

227 

 

1,703 

 

1,930 

 

376 

 

2,306 

Residential

 

 -

 

 -

 

 -

 

 -

 

 -

 

 -

Total

$

 -

 

227 

 

7,491 

 

7,718 

 

20,103 

 

27,821 

 

 

1)

BBX Capital had no loans that were 90 days or more past due and still accruing interest as of December 31, 2014.

 

 

 

14

 


 

 

The activity in BBX Capital’s allowance for loan losses for the three and nine months ended September 30, 2015 and 2014 was as follows (in thousands): 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months

 

For the Nine Months

 

 

Ended September 30,

 

Ended September 30,

 

 

2015

2014

 

2015

2014

Allowance for Loan Losses:

 

 

 

 

 

Beginning balance

$

172 
1,881