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EX-32.1 - EX-32.1 - BBX CAPITAL CORPbbx-20160630xex32_1.htm
EX-32.2 - EX-32.2 - BBX CAPITAL CORPbbx-20160630xex32_2.htm
EX-31.2 - EX-31.2 - BBX CAPITAL CORPbbx-20160630xex31_2.htm
EX-31.1 - EX-31.1 - BBX CAPITAL CORPbbx-20160630xex31_1.htm

 







SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q



[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June  30, 2016

OR

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission files number     001-13133

BBX CAPITAL CORPORATION

(Exact name of registrant as specified in its charter)





 

Florida

(State or other jurisdiction of

incorporation or organization)

65-0507804

(I.R.S. Employer

Identification No.)



401 East Las Olas Boulevard Suite 800

Fort Lauderdale, Florida

(Address of principal executive offices)

33301

(Zip Code)



(954) 940-4000

(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, and (2) has been subject to such filing requirements for the past 90 days.   [X] YES   [   ] 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).   [X] YES   [   ] NO



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





 

Large accelerated filer [  ]

Accelerated filer [    ]

Non-accelerated filer [   ]

Smaller reporting company [ X   ]



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   [   ] YES   [X] NO



Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date.



 

Title of Each Class

Outstanding at August 3, 2016

Class A Common Stock, par value $0.01 per share

16,199,145

Class B Common Stock, par value $0.01 per share

    195,045

 

 


 

 

 



 

 



 

 

TABLE OF CONTENTS



 

Page

Part I.

FINANCIAL INFORMATION

 



 

 

Reference

 

 



 

 

Item 1.

Financial Statements

3-28 



 

 



Condensed Consolidated Statements of Financial Condition - June  30, 2016 and December 31,



    2015 – Unaudited

 



 

 



Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income - For the Three



  and Six Months Ended June  30, 2016 and 2015 - Unaudited

 



 

 



Condensed Consolidated Statements of Total Equity - For the Six Months Ended June 30, 2016 



  and 2015 - Unaudited

 



 

 



Condensed Consolidated Statements of Cash Flows - For the Six Months Ended June  30, 2016



 and 2015 - Unaudited

 



 

 



Notes to Condensed Consolidated Financial Statements - Unaudited

7-28 



 

 

Item 2.

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

29-38 



 

 

Item 4.

Controls and Procedures

38 



 

 

Part II.

OTHER INFORMATION

 



 

 

Item 1.

Legal Proceedings

39 



 

 

Item 1A.

Risk Factors

39 



 

 

Item 6.

Exhibits

39 



 

 



Signatures

40 



 



 

 


 

 

BBX CAPITAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION-UNAUDITED 





 

 

 

 



 

 

 

 



 

June 30,

 

December 31,

(In thousands, except share data)

 

2016

 

2015

ASSETS

 

 

 

 

Cash and cash equivalents

$

96,658 

 

69,040 

Restricted cash and time deposits

 

1,345 

 

2,651 

Loans held-for-sale

 

 -

 

21,354 

Loans receivable, net

 

34,218 

 

34,035 

Trade receivables, net of allowance for bad debts of $187 in 2016 and $404 in 2015

 

14,275 

 

13,732 

Real estate held-for-investment

 

30,046 

 

31,290 

Real estate held-for-sale

 

32,854 

 

46,338 

Investments in unconsolidated real estate joint ventures

 

42,752 

 

42,962 

Investment in Woodbridge Holdings, LLC

 

76,631 

 

75,545 

Properties and equipment

 

24,865 

 

18,083 

Inventories

 

15,454 

 

16,347 

Goodwill

 

7,601 

 

7,601 

Other intangible assets

 

7,443 

 

8,211 

Other assets

 

6,323 

 

6,316 

Total assets

$

390,465 

 

393,505 

LIABILITIES AND EQUITY

 

 

 

 

Liabilities:

 

 

 

 

Accounts payable

$

8,983 

 

11,059 

Notes payable, net of debt issuance costs 

 

21,947 

 

21,385 

Principal and interest advances on residential loans

 

9,984 

 

10,356 

Other liabilities

 

12,145 

 

14,726 

Total liabilities

 

53,059 

 

57,526 

Commitments and contingencies (Note 11)

 

 

 

 

Equity:

 

 

 

 

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

 

 

 

 

none issued and outstanding    

 

 -

 

 -

Class A common stock, $.01 par value, authorized 25,000,000

 

 

 

 

shares; issued and outstanding 16,199,145 and 16,199,145 shares

 

162 

 

162 

Class B common stock, $.01 par value, authorized 1,800,000

 

 

 

 

shares; issued and outstanding 195,045 and 195,045 shares

 

 

Additional paid-in capital

 

354,194 

 

350,878 

Accumulated deficit

 

(19,121)

 

(16,622)

Accumulated other comprehensive income

 

286 

 

384 

Total BBX Capital Corporation shareholders' equity

 

335,523 

 

334,804 

Noncontrolling interest

 

1,883 

 

1,175 

Total equity

 

337,406 

 

335,979 

Total liabilities and equity

$

390,465 

 

393,505 



 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited







 

3


 

 









BBX CAPITAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME - UNAUDITED 





 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

For the Three Months

 

For the Six Months



 

Ended June 30,

 

Ended June 30,

(In thousands, except per share data)

 

2016

 

2015

 

2016

 

2015

Revenues:

 

 

 

 

 

 

 

 

Trade sales

$

21,250 

 

19,583 

 

42,212 

 

39,118 

Interest income

 

913 

 

2,090 

 

1,980 

 

2,908 

Net gains on the sales of assets

 

337 

 

15,439 

 

292 

 

15,441 

Income from real estate operations

 

902 

 

1,013 

 

1,966 

 

1,939 

Other

 

637 

 

490 

 

1,261 

 

918 

     Total revenues

 

24,039 

 

38,615 

 

47,711 

 

60,324 

Costs and expenses:

 

 

 

 

 

 

 

 

Cost of goods sold

 

18,959 

 

14,195 

 

34,006 

 

28,030 

Interest expense

 

27 

 

31 

 

128 

 

188 

Real estate operating expenses

 

911 

 

865 

 

1,839 

 

2,045 

Recoveries from loan losses, net

 

(6,287)

 

(6,608)

 

(8,035)

 

(10,429)

Asset impairments (recoveries), net

 

1,759 

 

(810)

 

1,722 

 

(1,873)

Selling, general and administrative expenses

 

17,568 

 

14,455 

 

33,862 

 

30,026 

      Total costs and expenses

 

32,937 

 

22,128 

 

63,522 

 

47,987 

Equity in earnings (losses) of Woodbridge Holdings, LLC

 

5,059 

 

(10,168)

 

11,794 

 

(4,365)

Equity in net earnings (losses) of unconsolidated real estate joint ventures

 

1,655 

 

(291)

 

1,313 

 

(595)

Foreign exchange gain (loss)

 

110 

 

70 

 

320 

 

(399)

(Loss) income before income taxes

 

(2,074)

 

6,098 

 

(2,384)

 

6,978 

Benefit for income taxes

 

 -

 

(222)

 

 -

 

(219)

Net (loss) income

 

(2,074)

 

6,320 

 

(2,384)

 

7,197 

Net (earnings) attributable to noncontrolling interest

 

(112)

 

(2,182)

 

(115)

 

(2,025)

Net (loss) income attributable to BBX Capital Corporation

$

(2,186)

 

4,138 

 

(2,499)

 

5,172 



 

 

 

 

 

 

 

 

Basic (loss) earnings per share

$

(0.13)

 

0.26 

 

(0.15)

 

0.32 

Diluted (loss) earnings per share

$

(0.13)

 

0.25 

 

(0.15)

 

0.31 



 

 

 

 

 

 

 

 

Basic weighted average number of common shares outstanding

 

16,394 

 

16,172 

 

16,394 

 

16,172 



 

 

 

 

 

 

 

 

Diluted weighted average number of common and common

 

 

 

 

 

 

 

 

 equivalent shares outstanding

 

16,394 

 

16,885 

 

16,394 

 

16,810 



 

 

 

 

 

 

 

 

Net (loss) income

$

(2,074)

 

6,320 

 

(2,384)

 

7,197 

Other comprehensive (loss) income, net of tax

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

(42)

 

(32)

 

(190)

 

99 

Unrealized gains on securities available for sale

 

31 

 

 -

 

56 

 

 -

Other comprehensive (loss) income, net of tax

 

(11)

 

(32)

 

(134)

 

99 

Comprehensive (loss) income

 

(2,085)

 

6,288 

 

(2,518)

 

7,296 

Net (earnings) attributable to noncontrolling interest

 

(112)

 

(2,182)

 

(115)

 

(2,025)

Foreign currency translation adjustments attributable

 

 

 

 

 

 

 

 

to noncontrolling interest

 

 

 

36 

 

(19)

Total comprehensive (loss) income attributable to BBX

 

 

 

 

 

 

 

 

 Capital Corporation

$

(2,189)

 

4,112 

 

(2,597)

 

5,252 





See Notes to Condensed Consolidated Financial Statements - Unaudited



 

 

 

 

 

 

 

 

 



 

4


 

 



BBX CAPITAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF TOTAL EQUITY 

FOR THE SIX MONTHS ENDED JUNE 30, 2016 AND 2015 - UNAUDITED 







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



Shares of

 

 

 

 

 

 

 

 



Class A

 

 

 

 

Accumulated

 

 

 



Common

 

 

Additional

 

Other

BBX Capital

Non-

 



Stock

 

Common

Paid-in

(Accumulated

Comprehensive

Corporation

Controlling

Total

(In thousands)

Outstanding

 

Stock

Capital

Deficit)

Income

Equity

Interest

Equity

Balance, December 31, 2014

15,977 

$

162  347,937  (38,396) 85  309,788  1,492  311,280 

Net income

 -

 

 -

 -

5,172 

 -

5,172  2,025  7,197 

Other comprehensive income

 -

 

 -

 -

 -

80  80  19  99 

Noncontrolling interest contributions

 -

 

 -

 -

 -

 -

 -

(2,268) (2,268)

Share based compensation expense

 -

 

 -

2,463 

 -

 -

2,463 

 -

2,463 

Balance, June 30, 2015

15,977 

$

162  350,400  (33,224) 165  317,503  1,268  318,771 



 

 

 

 

 

 

 

 

 

Balance, December 31, 2015

16,199 

$

164  350,878  (16,622) 384  334,804  1,175  335,979 

Net loss

 -

 

 -

 -

(2,499)

 -

(2,499) 115  (2,384)

Other comprehensive loss

 -

 

 -

 -

 -

(98) (98) (36) (134)

Noncontrolling interest contributions

 -

 

 -

 -

 -

 -

 -

664  664 

Transfer of interest in subsidiary

 -

 

 -

35 

 -

 -

35  (35)

 -

Share based compensation expense

 -

 

 -

3,281 

 -

 -

3,281 

 -

3,281 

Balance, June 30, 2016

16,199 

$

164  354,194  (19,121) 286  335,523  1,883  337,406 



See Notes to Condensed Consolidated Financial Statements - Unaudited

 

5


 

 

BBX CAPITAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED



 

 

 

 



 

 

 

 



 

For the Six Months



 

Ended June 30,

(In thousands)

 

2016

 

2015

Net cash used in operating activities

$

(8,602)

 

(12,765)

Investing activities:

 

 

 

 

Proceeds from redemptions and maturities of tax certificates

 

248 

 

132 

Decrease (increase) in restricted cash and time deposits

 

1,306 

 

(2,647)

Investments in securities

 

(571)

 

 -

Net repayments of loans receivable

 

26,360 

 

17,884 

Proceeds from the sale of loans receivable

 

 -

 

89 

Additions to real estate held-for-investment

 

(1,816)

 

(11,488)

Additions to real estate held-for-sale

 

(225)

 

 -

Purchases of real estate held-for-sale

 

 -

 

(10,667)

Proceeds from sales of real estate held-for-sale

 

11,042 

 

34,758 

Purchases of properties and equipment

 

(1,506)

 

(643)

Investment in unconsolidated real estate joint ventures

 

(785)

 

(1,103)

Return of Woodbridge Holdings, LLC investment

 

 -

 

6,165 

Return of unconsolidated real estate joint ventures investment

 

994 

 

 -

Acquisitions of businesses, net of cash acquired

 

 -

 

(9)

Net cash provided by investing activities

 

35,047 

 

32,471 

Financing activities:

 

 

 

 

Repayment of BB&T preferred interest in FAR, LLC

 

 -

 

(12,348)

Proceeds from notes payable 

 

678 

 

93 

Repayment of notes payable

 

(169)

 

(600)

Payments for debt issuance costs

 

 -

 

(15)

Noncontrolling interest contributions

 

664 

 

 -

Noncontrolling interest distributions

 

 -

 

(2,268)

Net cash provided by (used in) financing activities

 

1,173 

 

(15,138)

Increase in cash and cash equivalents

 

27,618 

 

4,568 

Cash and cash equivalents at the beginning of period

 

69,040 

 

58,819 

Cash and cash equivalents at the end of period

$

96,658 

 

63,387 



 

 

 

 

Cash paid for:

 

 

 

 

Interest on borrowings

$

251 

 

526 

Income taxes payments, net

 

 -

 

Supplementary disclosure of non-cash investing and

 

 

 

 

financing activities:

 

 

 

 

Loans receivable transferred to real estate

 

 

 

 

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

 

3,663 

 

2,427 

Change in accumulated other comprehensive income

 

(134)

 

99 

Transfer of real estate-held-for-investment to real estate-held-for-sale

 

3,040 

 

3,572 

Transfer of real estate-held-for-sale to properties and equipment

 

6,557 

 

 -

Transfer of loans held-for-sale to loans receivable, net

 

16,078 

 

7,365 

Fair value of net assets acquired in connection with business acquisitions

 

 -

 

1,404 

Issuance of notes payable to acquire businesses

 

 -

 

1,395 



 



See Notes to Condensed Consolidated Financial Statements - Unaudited



 

6


 

BBX CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

 



1.  Presentation of Interim Financial Statements

Basis of Financial Statement Presentation  BBX Capital Corporation together with its subsidiaries is referred to herein as “BBX Capital”, “we”, “us,” or “our” and is referred to herein without its subsidiaries as “BBX Capital Corporation”. BBX Capital is a Florida-based company involved in the acquisition, development, ownership and management of and investments in real estate and real estate development projects as well as operating businesses.  Prior to the sale of BankAtlantic to BB&T Corporation (“BB&T”) on July 31, 2012, BBX Capital Corporation was a bank holding company and its principal asset was the ownership of BankAtlantic.  The principal assets of BBX Capital currently consist of its 46% equity interest in Woodbridge Holdings, LLC (“Woodbridge”), investments in real estate joint ventures, legacy loans and real estate assets transferred to BBX Capital in connection with the sale of BankAtlantic and its acquired businesses

In April 2013, BBX Capital acquired a 46% equity interest in Woodbridge Holdings, LLC (“Woodbridge”).  Woodbridge’s principal asset is its ownership of Bluegreen Corporation and its subsidiaries (“Bluegreen”). Bluegreen manages, markets and sells the Bluegreen Vacation Club, a points-based, deeded vacation ownership plan with more than 190,000 owners.  BFC Financial Corporation (“BFC”), the controlling shareholder of BBX Capital, owns the remaining 54% of Woodbridge (see Note 2 - Investment in Woodbridge Holdings, LLC). 

In October 2013, Renin Holdings, LLC (“Renin”), a joint venture owned 81% by BBX Capital and 19% by BFC, acquired substantially all of the assets and certain liabilities of Renin Corp. (“the Renin Transaction”).  Renin manufactures interior closet doors, wall décor, hardware and fabricated glass products. Renin is headquartered in Canada and has two manufacturing, assembly and distribution facilities in Canada and the United States.

In December 2013, a wholly-owned subsidiary of BBX Capital, BBX Sweet Holdings, LLC, acquired Hoffman’s Chocolates (“Hoffman’s”).  Hoffman’s is a manufacturer of gourmet chocolates, with retail locations in South Florida.   



Subsequent to January 2014, BBX Sweet Holdings acquired manufacturers in the chocolate and candy industries serving wholesalers, boutique retailers, big box chains, department stores, national resort properties, corporate customers and private label brands.  The companies acquired were Williams and Bennett, Helen Grace Chocolates (“Helen Grace”), Jer’s Chocolates (“Jer’s”), Anastasia Confections (“Anastasia”) and Kencraft Confections, LLC (“Kencraft”).  In May 2015, BBX Sweet Holdings acquired a controlling interest in Droga Chocolates, LLC.  BBX Sweet Holdings has a 75% equity interest in Droga and Droga products are manufactured at the Kencraft facility.

BBX Capital has two classes of common stock. Holders of the Class A common stock are entitled to one vote per share, which in the aggregate represents 53% of the combined voting power of the Class A common stock and the Class B common stock. Class B common stock represents the remaining 47% of the combined vote. The percentage of total common equity represented by Class A and Class B common stock was 99% and 1%, respectively, at June 30, 2016.  The fixed voting percentages will be eliminated, and shares of Class B common stock will be entitled to only one vote per share from and after the date that BFC or its affiliates no longer own in the aggregate at least 97,523 shares of Class B common stock (which is one-half of the number of shares it now owns). Class B common stock is convertible into Class A common stock on a share for share basis at any time at BFC’s discretion.

   

All significant inter-company balances and transactions have been eliminated in consolidation.  As used in each case in this document, the term “fair value” is an estimate of fair value as discussed herein.



In management's opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) as are necessary for a fair statement of BBX Capital's condensed consolidated statement of financial condition at June 30, 2016, the condensed consolidated statements of operations and comprehensive (loss) income for the three and six months ended June 30, 2016 and 2015, and the condensed consolidated statements of total equity and statements of cash flows for the six months ended June 30, 2016 and 2015. The results of operations for the three and six months ended June 30, 2016 are not necessarily indicative of results of operations that may be expected for the subsequent interim periods during 2016 or for the year ended December 31, 2016.  The condensed consolidated financial statements and related notes are presented as permitted by Form 10-Q and should be read in conjunction with the consolidated financial statements appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 2015.

Basic earnings per share excludes dilution and is computed by dividing net income attributable to BBX Capital 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 units of BBX Capital were to vest. In calculating diluted earnings per share, net income attributable to BBX Capital is divided by the weighted average number of common shares. Options and restricted stock units are included in the weighted average number of common

7


 

BBX CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

 

shares outstanding based on the treasury stock method, if dilutive.  During the three and six months ended June 30, 2016, options to acquire 7,016 shares of Class A common stock and 1,429,152 of restricted stock units were anti-dilutive and excluded from diluted earnings per share.  During the three and six months ended June 30, 2015, options to acquire 15,481 shares of Class A common stock were anti-dilutive and excluded from diluted earnings per share.



Recently Adopted Accounting Pronouncements



As of January 1, 2016, BBX Capital adopted Accounting Standards Update (“ASU”) Number 2015-03 –– Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs as amended by ASU 2015-15.  ASU 2015-03 requires debt issuance costs related to recognized debt liabilities to be presented in the statement of financial condition as a direct deduction from the debt liability rather than an asset. However, ASU 2015-03 also permits presentation of debt issuance costs on line-of-credit arrangements as assets.  Accordingly, as of June 30, 2016, approximately $30,000 of deferred debt issuance costs was presented as a direct deduction within Notes Payable on BBX Capital's Condensed Consolidated Statement of Financial Condition. Additionally, BBX Capital reclassified $36,000 of deferred debt issuance costs from Other Assets to Notes Payable as of December 31, 2015.  Debt issuance costs for line-of-credit arrangements of $264,000 and $306,000 were included in other assets in BBX Capital’s Condensed Consolidated Statement of Financial Condition as of June 30, 2016 and December 31, 2015, respectively.



As of January 1, 2016, BBX Capital adopted ASU 2015-02 – Amendments to the Consolidation Analysis (Topic 810): ASU 2015-02 update changed the manner in which a reporting entity assesses one of the five characteristics that determines if an entity is a variable interest entity.  In particular, when decision-making over the entity’s most significant activities has been outsourced, the update changes how a reporting entity assesses if the equity holders at risk lack decision making rights.  The update also introduces a separate analysis specific to limited partnerships and similar entities for assessing if the equity holders at risk lack decision making rights.  The adoption of this update on January 1, 2016 did not have a material impact on BBX Capital’s consolidated financial statements.



New Accounting Pronouncements:



The FASB has recently issued the following accounting pronouncements and guidance relevant to the preparation of BBX Capital’s financial statements. (See BBX Capital’s Annual Report on Form 10-K for the year ended December 31, 2015 for accounting pronouncements issued prior to March 31, 2016 relevant to BBX Capital’s operations):



Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements. The ASU changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded.  The ASU sets forth a “current expected credit loss” (CECL) model which requires BBX Capital to measure expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years BBX Capital is currently evaluating the requirements of this update and has not yet determined the impact it may have on its consolidated financial statements.



Accounting Standards Update Number 2016-09 –– Compensation – Stock Compensation (Topic 718) – Improvements to Employee Share-Based Payment Accounting.  This update simplifies various aspects related to how share-based payments are accounted for and presented in the financial statements including income tax consequences, classification of awards as either equity or liabilities and classification in the statement of cash flows. The amendments in this update are effective for annual reporting periods beginning after December 15, 2016 and interim periods within the reporting period.  Early adoption is in any interim or annual 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 2016-07 –– Investments – Equity Method and Joint Ventures (Topic 323) – Simplifying the Transition to the Equity Method of Accounting. This update eliminates retroactive adjustments for an investment that qualifies for the use of the equity method as a result of an increase in the level of ownership interest associated with an existing investment.  The amendment requires that the equity method investor add the cost of acquiring the additional interest to the current investment and adopt the equity method on the date that the investment becomes qualified for equity method accounting. The amendments in this update are effective for fiscal years beginning after December 15, 2016.  Early adoption 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 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

8


 

BBX CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

 

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 contracts with customers.  Further, in March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue Gross versus Net), in April 2016, the FASB issued ASU 2016-10 Revenue from Contracts with Customers – Identifying Performance Obligations and Licensing (Topic 606) and in May 2016 FASB issued ASU 2016-12, Revenue from Contracts with Customers - Narrow-Scope Improvements and Practical Expedients. These updates clarify implementation guidance on the related topic.  The accounting guidance updates will replace most existing revenue recognition guidance in GAAP. The standard is effective for annual and interim reporting periods beginning after December 15, 2017.  Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.  BBX Capital is currently evaluating the requirements of these updates and has not yet determined the impact on its consolidated financial statements. 



 

2.    Investment in Woodbridge Holdings, LLC



On April 2, 2013, BBX Capital invested $71.75 million in Woodbridge in exchange for a 46% equity interest in Woodbridge. The investment was made in connection with Woodbridge’s acquisition on April 2, 2013 of the publicly held shares of Bluegreen. BFC holds the remaining 54% of Woodbridge’s outstanding equity interests and is the majority member of Woodbridge. Since BFC is the majority owner of Woodbridge, BBX Capital’s investment in Woodbridge is accounted for under the equity method. In connection with BBX Capital’s investment in Woodbridge, BBX Capital and BFC entered into an Amended and Restated Operating Agreement of Woodbridge, which sets forth BBX Capital’s and BFC’s respective rights as members of Woodbridge and provides, among other things, for unanimity on certain specified “major decisions” and for distributions to be made on a pro rata basis in accordance with BBX Capital’s and BFC’s percentage equity interests in Woodbridge.



The following is activity related to BBX Capital’s investment in Woodbridge, which is accounted for under the equity method (in thousands):









 

 

 

 

 

 

 

 



 

 

 

 

 

 



 

For the Three Months Ended

 

For the Six Months Ended



 

June 30,

 

June 30,



 

2016

 

2015

 

2016

 

2015



 

 

 

 

 

 

 

 

Investment in Woodbridge - beginning of period

$

78,070 

 

78,829 

 

75,545 

 

73,026 

Equity in earnings (losses) of Woodbridge

 

5,059 

 

(10,168)

 

11,794 

 

(4,365)

Dividends received from Woodbridge

 

(6,498)

 

(6,165)

 

(10,708)

 

(6,165)

Investment in Woodbridge - end of period

$

76,631 

 

62,496 

 

76,631 

 

62,496 



9


 

BBX CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

 

The Condensed Consolidated Statements of Financial Condition as of the dates indicated of Woodbridge were as follows (in thousands):









 

 

 

 



 

 

 

 



 

As of



 

June 30,

 

December 31,



 

2016

 

2015

Assets

 

 

 

 

Cash and restricted cash

$

208,090 

 

172,758 

Notes receivable, net

 

417,820 

 

415,598 

Notes receivable from related parties

 

80,000 

 

80,000 

Inventory of real estate

 

215,788 

 

220,211 

Properties and equipment, net

 

71,805 

 

71,937 

Intangible assets, net

 

61,863 

 

61,977 

Other assets

 

67,422 

 

61,794 

  Total assets

$

1,122,788 

 

1,084,275 

Liabilities and Equity

 

 

 

 

Accounts payable, accrued liabilities and other

$

126,289 

 

113,473 

Deferred tax liabilities, net

 

126,308 

 

110,202 

Notes payable

 

504,902 

 

503,521 

Junior subordinated debentures

 

151,532 

 

150,485 

  Total liabilities

 

909,031 

 

877,681 

  Total Woodbridge members' equity

 

165,757 

 

163,397 

Noncontrolling interest

 

48,000 

 

43,197 

  Total equity

 

213,757 

 

206,594 

  Total liabilities and equity

$

1,122,788 

 

1,084,275 





The Condensed Consolidated Statements of Operations of Woodbridge were as follows (in thousands):











 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

For the Three Months Ended

 

For the Six Months Ended



 

June 30,

 

June 30,



 

2016

 

2015

 

2016

 

2015

Total revenues

$

171,023 

 

154,074 

 

315,091 

 

282,504 

Total costs and expenses

 

150,883 

 

164,556 

 

268,694 

 

270,045 

Other income

 

(17)

 

1,123 

 

149 

 

2,189 

Income before taxes

 

20,123 

 

(9,359)

 

46,546 

 

14,648 

Provision for income taxes

 

6,259 

 

9,921 

 

16,104 

 

18,527 

Net income (loss)

 

13,864 

 

(19,280)

 

30,442 

 

(3,879)

Net income attributable to noncontrolling interest

 

(2,866)

 

(2,825)

 

(4,803)

 

(5,611)

Net income (loss) attributable to Woodbridge

 

10,998 

 

(22,105)

 

25,639 

 

(9,490)

BBX Capital 46% equity in earnings (losses) of Woodbridge

$

5,059 

 

(10,168)

 

11,794 

 

(4,365)









 





10


 

BBX CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

 

3.  Investments in Unconsolidated Real Estate Joint Ventures



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





 

 

 

 



 

 

 

 



 

June 30,

 

December 31,

Investment in unconsolidated real estate joint ventures

 

2016

 

2015

Altis at Kendall Square, LLC

$

701 

 

764 

Altis at Lakeline - Austin Investors LLC

 

5,257 

 

5,210 

New Urban/BBX Development, LLC

 

775 

 

864 

Sunrise and Bayview Partners, LLC

 

1,570 

 

1,577 

Hialeah Communities, LLC

 

4,023 

 

4,569 

PGA Design Center Holdings, LLC

 

1,874 

 

1,911 

CCB Miramar, LLC

 

875 

 

875 

Centra Falls, LLC

 

700 

 

727 

The Addison on Millenia Investment, LLC

 

5,810 

 

5,778 

BBX/S Millenia Blvd Investments, LLC

 

4,933 

 

4,905 

Altis at Bonterra - Hialeah, LLC

 

15,902 

 

15,782 

Altis at Shingle Creek Manager, LLC

 

332 

 

 -

Investments in unconsolidated real estate joint ventures

$

42,752 

 

42,962 



BBX Capital’s investments in unconsolidated real estate joint ventures are variable interest entities.



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 six months ended June  30, 2016 was $211,000 and $333,000, respectively, and for the three and six months ended June 30, 2015 was $132,000 and $228,000, respectively.



The condensed Statements of Operations for the three and six months ended June 30, 2016 and 2015 for all the above listed equity method joint ventures in the aggregate was as follows (in thousands):







 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

For the Three Months Ended

 

For the Six Months Ended



 

June 30,

 

June 30,



 

2016

 

2015

 

2016

 

2015

Total revenues

$

5,063 

 

658 

 

6,254 

 

1,037 

Total costs and expenses

 

(3,171)

 

(1,317)

 

(5,027)

 

(2,388)

Net earnings (loss)

$

1,892 

 

(659)

 

1,227 

 

(1,351)

Equity in net earnings (losses) of unconsolidated real estate joint ventures

$

1,655 

 

(291)

 

1,313 

 

(595)



See Note 6 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 for information on investments in BBX Capital’s unconsolidated real estate joint ventures.





4.  Loans Held-for-Sale



Loans held-for-sale were as follows (in thousands):



 

 

 

 



 

 

 

 



 

June 30,

 

December 31,



 

2016

 

2015

Residential 

$

 -

 

21,354 



Loans held-for-sale are reported at the lower of cost or fair value measured on an aggregate basis.  As of December 31, 2015 the lower of cost or fair value adjustment on loans held-for-sale was $1.6 million. BBX Capital transfers loans

11


 

BBX CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

 

from held-for-sale to loans receivable when, based on the current economic environment and related market conditions, it has the intent to hold those loans for the foreseeable future. Based on current market conditions and an evaluation of the residential loan portfolio, management decided to hold the residential loans for the foreseeable future.  As of June 30, 2016, BBX Capital transferred residential loans with aggregate unpaid principal balances, net of charge-offs, of $17.3 million from held-for-sale to loans receivable.    The lower of cost or fair value of the residential loans on the transfer date was $16.1 million. Any difference between the lower of cost or fair value of the loan and the unpaid principal balance net of charge-offs was recognized as a discount. Such loans were included in loans receivable, net of a $1.2 million discount on BBX Capital’s Condensed Consolidated Statements of Financial Condition as of June 30, 2016.





5.  Loans Receivable



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



 

 

 

 



 

 

 

 



 

June 30,

 

December 31,



 

2016

 

2015

Commercial non-real estate

$

1,211 

 

11,250 

Commercial real estate

 

11,292 

 

16,294 

Small business

 

3,360 

 

4,054 

Consumer

 

2,124 

 

2,368 

Residential

 

16,231 

 

69 

         Loans receivable, net

$

34,218 

 

34,035 



As of June 30, 2016, foreclosure proceedings were in-process on $11.3 million of residential loans, $0.3 million of consumer loans and $64,000 of small business loans.  



The total discount on loans receivable was $4.1 million and $3.3 million as of June 30, 2016 and December 31, 2015, respectively.  As of June 30, 2016, $16.1 million of residential loans, net of a $1.2 million discount were transferred from loans held-for-sale to loans receivable.



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





 

 

 

 



 

 

 

 



 

June 30,

 

December 31,

Loan Class

 

2016

 

2015

Commercial non-real estate

$

1,211 

 

1,250 

Commercial real estate

9,351 

 

9,639 

Small business

 

3,360 

 

4,054 

Consumer

 

2,025 

 

2,368 

Residential

 

14,722 

 

69 

Total nonaccrual loans

$

30,669 

 

17,380 



12


 

BBX CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

 

An age analysis of the past due recorded investment in loans receivable as of June  30, 2016 and December 31, 2015 was as follows (in thousands):



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

Total



 

31-59 Days

 

60-89 Days

 

90 Days

 

Total

 

 

 

Loans

June 30, 2016

 

Past Due

 

Past Due

 

or More (1)

 

Past Due

 

Current

 

Receivable

Commercial non-real estate

$

 -

 

 -

 

330 

 

330 

 

881 

 

1,211 

Commercial real estate

 

 -

 

 -

 

3,986 

 

3,986 

 

7,306 

 

11,292 

Small business

 

 -

 

64 

 

27 

 

91 

 

3,269 

 

3,360 

Consumer

 

122 

 

28 

 

527 

 

677 

 

1,447 

 

2,124 

Residential

 

22 

 

276 

 

11,285 

 

11,583 

 

4,648 

 

16,231 

Total

$

144 

 

368 

 

16,155 

 

16,667 

 

17,551 

 

34,218 







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

Total



 

31-59 Days

 

60-89 Days

 

90 Days

 

Total

 

 

 

Loans

December 31, 2015

 

Past Due

 

Past Due

 

or More (1)

 

Past Due

 

Current

 

Receivable

Commercial non-real estate

$

 -

 

 -

 

329 

 

329 

 

10,921 

 

11,250 

Commercial real estate

 

 -

 

 -

 

3,986 

 

3,986 

 

12,308 

 

16,294 

Small business:

 

 -

 

205 

 

 -

 

205 

 

3,849 

 

4,054 

Consumer

 

316 

 

138 

 

562 

 

1,016 

 

1,352 

 

2,368 

Residential

 

 -

 

24 

 

42 

 

66 

 

 

69 

Total

$

316 

 

367 

 

4,919 

 

5,602 

 

28,433 

 

34,035 



 (1)  BBX Capital had no loans that were 90 days or more past due and still accruing interest as of June 30, 2016 and December 31, 2015.



The activity in the allowance for loan losses for the three and six months ended June  30, 2016 and 2015 was as follows (in thousands): 



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

For the Three Months

 

For the Six Months



 

Ended June 30,

 

Ended June 30,

Allowance for Loan Losses:

2016

 

2015

 

2016

 

2015

Beginning balance

$

 -

 

381 

 

 -

 

977 

    Charge-offs :

 

(66)

 

(221)

 

(96)

 

(896)

     Recoveries :

 

6,353 

 

6,620 

 

8,131 

 

10,520 

     Provision :

 

(6,287)

 

(6,608)

 

(8,035)

 

(10,429)

Ending balance

$

 -

 

172 

 

 -

 

172 

Ending balance individually evaluated for impairment

$

 -

 

 -

 

 -

 

 -

Ending balance collectively evaluated for impairment

 

 -

 

172 

 

 -

 

172 

Total

$

 -

 

172 

 

 -

 

172 

Loans receivable:

 

 

 

 

 

 

 

 

Ending balance individually evaluated for impairment

$

26,986 

 

15,862 

 

26,986 

 

15,862 

Ending balance collectively evaluated for impairment

 

7,232 

 

15,585 

 

7,232 

 

15,585 

Total

$

34,218 

 

31,447 

 

34,218 

 

31,447 

Proceeds from loan sales

$

 -

 

 -

 

 -

 

89 

Transfer from loans held-for-sale

$

16,078 

 

7,365 

 

16,078 

 

7,365 



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



13


 

BBX CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

 

Impaired loans as of June 30, 2016 and December 31, 2015 were as follows (in thousands):





 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

As of June 30, 2016

 

As of December 31, 2015



 

 

Unpaid

 

 

 

Unpaid

 



 

Recorded

Principal

Related

 

Recorded

Principal

Related



 

Investment

Balance

Allowance

 

Investment

Balance

Allowance



 

 

 

 

 

 

 

 

Total with allowance recorded

$

 -

 -

 -

 

 -

 -

 -

Total with no allowance recorded

 

30,846  53,528 

 -

 

17,380  30,212 

 -

Total

$

30,846  53,528 

 -

 

17,380  30,212 

 -



Average recorded investment and interest income recognized on impaired loans for the three and six months ended June 30, 2016 were as follows (in thousands):







 

 

 

 

 

 



 

 

 

 

 

 



 

For the Three Months Ended

 

For the Six Months Ended



 

June 30, 2016

 

June 30, 2016



 

Average Recorded

Interest Income

 

Average Recorded

Interest Income



 

Investment

Recognized

 

Investment

Recognized

Total with allowance recorded

$

 -

 -

 

 -

 -

Total with no allowance recorded

 

31,192  305 

 

23,995  642 

Total

$

31,192  305 

 

23,995  642 



Average recorded investment and interest income recognized on impaired loans for the three and six months ended June 30, 2015 were as follows (in thousands):





 

 

 

 

 

 



 

 

 

 

 

 



 

For the Three Months Ended

 

For the Six Months Ended



 

June 30, 2015

 

June 30, 2015



 

Average Recorded

Interest Income

 

Average Recorded

Interest Income



 

Investment

Recognized

 

Investment

Recognized

Total with allowance recorded

$

68 

 

68 

Total with no allowance recorded

 

23,082  357 

 

24,543  712 

Total

$

23,150  359 

 

24,611  715 

Impaired loans without valuation allowances represent loans that were written-down to the fair value of the collateral less cost to sell, loans in which the collateral value less cost to sell was greater than the carrying value of the loan, loans in which the present value of the cash flows discounted at the loans’ effective interest rate was equal to or greater than the carrying value of the loans, or loans that were collectively measured for impairment.



BBX Capital had no commitments to lend additional funds on impaired loans as of June  30, 2016.







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



BBX Capital’s real estate has been acquired through foreclosures, settlements, or deeds in lieu of foreclosure.  Upon acquisition, real estate is classified as real estate held-for-sale or real estate held-for-investment. Real estate is classified as held-for-sale when the property is available for immediate sale in its present condition, management commits to a plan to sell the property, an active program to locate a buyer has been initiated, the property is being marketed at a price that is reasonable in relation to its current fair value and it is likely that a sale will be completed within one year. When the property does not meet the real estate held-for-sale criteria, the real estate is classified as held-for-investment.



14


 

BBX CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

 

The following table presents real estate held-for-sale grouped in the following classifications (in thousands):





 

 

 

 



 

 

 

 



 

As of



 

June 30, 2016

 

December 31, 2015

Real estate held-for-sale

 

 

 

 

Land

$

25,678 

 

25,994 

Rental properties

 

1,748 

 

17,162 

Residential single-family

 

5,404 

 

2,924 

Other

 

24 

 

258 

Total real estate held-for-sale

$

32,854 

 

46,338 



The following table presents real estate held-for-investment grouped in the following classifications (in thousands):





 

 

 

 



 

 

 

 



 

As of



 

June 30, 2016

 

December 31, 2015

Real estate held-for-investment

 

 

 

 

Land

$

29,146 

 

30,369 

Other

 

900 

 

921 

Total real estate held-for-investment

$

30,046 

 

31,290 





The amount of interest capitalized to land held-for-investment associated with real estate development improvements for the three and six months ended June 30, 2015 was $245,000 and $431,000, respectively.  There was no interest capitalized to land held-for-investment for the three and six months ended June 30, 2016.



The following table presents the activity in real estate held-for-sale and held-for-investment for the three and six months ended June 30, 2016 (in thousands):