Attached files
file | filename |
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EX-32.2 - EX-32.2 - Bluegreen Vacations Holding Corp | bbx-20180930xex32_2.htm |
EX-32.1 - EX-32.1 - Bluegreen Vacations Holding Corp | bbx-20180930xex32_1.htm |
EX-31.2 - EX-31.2 - Bluegreen Vacations Holding Corp | bbx-20180930xex31_2.htm |
EX-31.1 - EX-31.1 - Bluegreen Vacations Holding Corp | bbx-20180930xex31_1.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, 2018
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number
001-09071
BBX Capital Corporation
(Exact name of registrant as specified in its charter)
Florida |
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59‑2022148 |
(State or other jurisdiction of incorporation or organization) |
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(I.R.S Employer Identification No.) |
401 East Las Olas Boulevard, Suite 800 |
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Fort Lauderdale, Florida |
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33301 |
(Address of principal executive office) |
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(Zip Code) |
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(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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
YES [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, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] |
Accelerated filer[X] |
Non-accelerated filer [ ] |
Smaller reporting company [ ] |
Emerging growth company [ ] |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.[ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES [ ]NO [ X ]
The number of shares outstanding of each of the registrant’s classes of common stock as of November 1, 2018 is as follows:
Class A Common Stock of $.01 par value, 79,578,730 shares outstanding.
Class B Common Stock of $.01 par value, 17,461,655 shares outstanding.
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BBX Capital Corporation TABLE OF CONTENTS |
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Part I. |
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Item 1. |
Financial Statements |
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1 | |
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2 | |
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3 | |
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4 | |
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Notes to Condensed Consolidated Financial Statements - Unaudited |
6 |
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Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
43 |
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Item 3. |
74 | |
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Item 4. |
74 | |
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Part II. |
OTHER INFORMATION |
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Item 1. |
75 | |
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Item 1A. |
75 | |
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Item 6. |
75 | |
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76 |
PART I – FINANCIAL INFORMATION
BBX Capital Corporation |
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Condensed Consolidated Statements of Financial Condition - Unaudited |
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(In thousands, except share data) |
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December 31, |
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September 30, 2018 |
2017 |
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ASSETS |
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Cash and cash equivalents |
$ |
369,512 | 362,526 | |
Restricted cash ($17,081 in 2018 and $19,488 in 2017 in variable |
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interest entities ("VIEs")) |
55,710 | 46,721 | ||
Notes receivable, net ($308,221 in 2018 and $279,188 in 2017 in VIEs) |
439,484 | 426,858 | ||
Trade inventory |
21,706 | 23,902 | ||
Vacation ownership interest ("VOI") inventory |
325,532 | 281,291 | ||
Real estate ($20,684 in 2018 and $27,828 in 2017 held for sale) |
52,579 | 68,536 | ||
Investments in unconsolidated real estate joint ventures |
42,550 | 51,234 | ||
Property and equipment, net |
133,267 | 111,929 | ||
Goodwill |
39,482 | 39,482 | ||
Intangible assets, net |
71,609 | 70,449 | ||
Other assets |
126,336 | 122,753 | ||
Total assets |
$ |
1,677,767 | 1,605,681 | |
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LIABILITIES AND EQUITY |
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Liabilities: |
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Accounts payable |
$ |
26,677 | 31,370 | |
Deferred income |
15,509 | 16,893 | ||
Escrow deposits |
31,957 | 21,079 | ||
Other liabilities |
112,133 | 103,464 | ||
Receivable-backed notes payable - recourse |
97,770 | 84,697 | ||
Receivable-backed notes payable - non-recourse (in VIEs) |
335,680 | 336,421 | ||
Notes payable and other borrowings |
197,177 | 144,114 | ||
Junior subordinated debentures |
136,231 | 135,414 | ||
Deferred income taxes |
68,453 | 47,968 | ||
Redeemable 5% cumulative preferred stock of $.01 par value; authorized 15,000 shares; |
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issued and outstanding 10,000 shares in 2018 and 15,000 shares in 2017 with a stated value of $1,000 per share |
9,390 | 13,974 | ||
Total liabilities |
1,030,977 | 935,394 | ||
Commitments and contingencies (See Note 11) |
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Redeemable noncontrolling interest |
2,844 | 2,765 | ||
Equity: |
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Preferred stock of $.01 par value; authorized 10,000,000 shares |
- |
- |
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Class A Common Stock of $.01 par value; authorized 150,000,000 shares; |
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issued and outstanding 79,417,242 in 2018 and 85,689,163 in 2017 |
794 | 857 | ||
Class B Common Stock of $.01 par value; authorized 20,000,000 shares; |
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issued and outstanding 13,798,718 in 2018 and 13,963,200 in 2017 |
138 | 140 | ||
Additional paid-in capital |
175,896 | 229,379 | ||
Accumulated earnings |
374,405 | 353,384 | ||
Accumulated other comprehensive income |
1,507 | 1,708 | ||
Total shareholders' equity |
552,740 | 585,468 | ||
Noncontrolling interests |
91,206 | 82,054 | ||
Total equity |
643,946 | 667,522 | ||
Total liabilities and equity |
$ |
1,677,767 | 1,605,681 | |
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* See Note 1 for a summary of adjustments. |
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See Notes to Condensed Consolidated Financial Statements - Unaudited |
1
BBX Capital Corporation |
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Condensed Consolidated Statements of Operations and Comprehensive Income - Unaudited |
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(In thousands, except per share data) |
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For the Three Months Ended |
For the Nine Months Ended |
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September 30, |
September 30, |
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2018 |
2017 |
2018 |
2017 |
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Revenues: |
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Sales of VOIs |
$ |
70,698 | 62,453 | 195,412 | 176,094 | |||
Fee-based sales commissions |
61,641 | 69,977 | 167,581 | 179,046 | ||||
Other fee-based services |
31,057 | 27,386 | 89,472 | 83,442 | ||||
Cost reimbursements |
16,900 | 14,097 | 47,157 | 40,660 | ||||
Trade sales |
43,803 | 44,718 | 126,114 | 96,369 | ||||
Sales of real estate inventory |
7,478 |
- |
17,138 |
- |
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Interest income |
21,157 | 21,035 | 63,738 | 63,065 | ||||
Net (losses) gains on sales of real estate assets |
(4) | (18) | 4,798 | 1,668 | ||||
Other revenue |
1,673 | 1,248 | 4,282 | 3,652 | ||||
Total revenues |
254,403 | 240,896 | 715,692 | 643,996 | ||||
Costs and Expenses: |
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Cost of VOIs sold |
11,237 | 6,444 | 19,838 | 11,352 | ||||
Cost of other fee-based services |
19,937 | 17,182 | 53,983 | 48,663 | ||||
Cost reimbursements |
16,900 | 14,097 | 47,157 | 40,660 | ||||
Cost of trade sales |
28,960 | 31,810 | 88,051 | 73,773 | ||||
Cost of real estate inventory sold |
4,655 |
- |
11,283 |
- |
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Interest expense |
11,130 | 9,483 | 30,732 | 27,580 | ||||
Recoveries from loan losses, net |
(443) | (2,005) | (7,236) | (6,098) | ||||
Asset impairments, net |
191 | 1,506 | 527 | 1,551 | ||||
Net gains on cancellation of junior |
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subordinated debentures |
- |
- |
- |
(6,929) | ||||
Reimbursements of litigation costs and penalty |
- |
(2,113) |
- |
(11,719) | ||||
Selling, general and administrative expenses |
143,558 | 146,842 | 410,490 | 395,489 | ||||
Total costs and expenses |
236,125 | 223,246 | 654,825 | 574,322 | ||||
Equity in net earnings of unconsolidated |
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real estate joint ventures |
373 | 2,105 | 1,165 | 8,428 | ||||
Foreign exchange gain (loss) |
76 | (105) | 91 | (312) | ||||
Income before income taxes |
18,727 | 19,650 | 62,123 | 77,790 | ||||
Provision for income taxes |
(6,742) | (8,126) | (21,997) | (30,021) | ||||
Net income |
11,985 | 11,524 | 40,126 | 47,769 | ||||
Less: Net income attributable to noncontrolling interests |
5,806 | 3,398 | 16,324 | 9,488 | ||||
Net income attributable to shareholders |
$ |
6,179 | 8,126 | 23,802 | 38,281 | |||
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Basic earnings per share |
$ |
0.07 | 0.08 | 0.25 | 0.39 | |||
Diluted earnings per share |
$ |
0.06 | 0.08 | 0.24 | 0.36 | |||
Basic weighted average number of common |
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shares outstanding |
93,193 | 98,073 | 95,722 | 98,408 | ||||
Diluted weighted average number of common and |
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common equivalent shares outstanding |
96,576 | 106,021 | 98,971 | 105,802 | ||||
Cash dividends declared per Class A common share |
$ |
0.010 | 0.0075 | 0.030 | 0.0225 | |||
Cash dividends declared per Class B common share |
$ |
0.010 | 0.0075 | 0.030 | 0.0225 | |||
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Net income |
$ |
11,985 | 11,524 | 40,126 | 47,769 | |||
Other comprehensive income, net of tax: |
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Unrealized (losses) gains on securities available for sale |
(11) | 16 | (11) | 62 | ||||
Foreign currency translation adjustments |
65 | 418 | 62 | 301 | ||||
Other comprehensive income, net |
54 | 434 | 51 | 363 | ||||
Comprehensive income, net of tax |
12,039 | 11,958 | 40,177 | 48,132 | ||||
Less: Comprehensive income attributable |
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to noncontrolling interests |
5,806 | 3,398 | 16,324 | 9,488 | ||||
Comprehensive income attributable to shareholders |
$ |
6,233 | 8,560 | 23,853 | 38,644 | |||
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* See Note 1 for a summary of adjustments. |
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See Notes to Condensed Consolidated Financial Statements - Unaudited |
2
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BBX Capital Corporation |
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Condensed Consolidated Statement of Changes in Equity - Unaudited |
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For the Nine Months Ended September 30, 2018 |
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(In thousands) |
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Shares of |
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Common Stock |
Common Stock |
Accumulated |
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Outstanding |
Amount |
Additional |
Other |
Total |
Non- |
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Class |
Class |
Paid-in |
Accumulated |
Comprehensive |
Shareholders' |
controlling |
Total |
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A |
B |
A |
B |
Capital |
Earnings |
Income |
Equity |
Interests |
Equity |
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As adjusted balance, December 31, 2017 * |
85,689 | 13,963 |
$ |
857 | 140 | 229,379 | 353,384 | 1,708 | 585,468 | 82,054 | 667,522 | ||||||
Cumulative effect from the adoption of ASU 2016-01 |
- |
- |
- |
- |
- |
252 | (252) |
- |
- |
- |
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Net income excluding $58 of loss attributable to redeemable noncontrolling interest |
- |
- |
- |
- |
- |
23,802 |
- |
23,802 | 16,382 | 40,184 | |||||||
Other comprehensive income |
- |
- |
- |
- |
- |
- |
51 | 51 |
- |
51 | |||||||
Distributions to noncontrolling interests |
- |
- |
- |
- |
- |
- |
- |
- |
(8,263) | (8,263) | |||||||
Increase in noncontrolling interest from loan foreclosure |
- |
- |
- |
- |
- |
- |
- |
- |
704 | 704 | |||||||
Purchase of noncontrolling interest |
- |
- |
- |
- |
(587) |
- |
- |
(587) | 329 | (258) | |||||||
Class A Common Stock cash dividends declared |
- |
- |
- |
- |
- |
(2,492) |
- |
(2,492) |
- |
(2,492) | |||||||
Class B Common Stock cash dividends declared |
- |
- |
- |
- |
- |
(541) |
- |
(541) |
- |
(541) | |||||||
Repurchase and retirement of Common Stock from tender offer |
(6,486) |
- |
(65) |
- |
(60,076) |
- |
- |
(60,141) |
- |
(60,141) | |||||||
Repurchase and retirement of Common Stock from vesting of restricted awards |
(375) | (137) | (4) | (1) | (3,777) |
- |
- |
(3,782) |
- |
(3,782) | |||||||
Conversion of Common Stock from Class B to Class A |
27 | (27) | 1 | (1) |
- |
- |
- |
- |
- |
- |
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Issuance of Common Stock from vesting of restricted stock awards |
535 |
- |
5 |
- |
(5) |
- |
- |
- |
- |
- |
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Issuance of Common Stock from exercise of options |
27 |
- |
- |
- |
245 |
- |
- |
245 |
- |
245 | |||||||
Share-based compensation |
- |
- |
- |
- |
10,717 |
- |
- |
10,717 |
- |
10,717 | |||||||
Balance, September 30, 2018 |
79,417 | 13,799 |
$ |
794 | 138 | 175,896 | 374,405 | 1,507 | 552,740 | 91,206 | 643,946 | ||||||
*See Note 1 for a summary of adjustments. |
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See Notes to Condensed Consolidated Financial Statements - Unaudited |
3
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BBX Capital Corporation |
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Condensed Consolidated Statements of Cash Flows - Unaudited |
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(In thousands) |
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For the Nine Months Ended |
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September 30, |
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2018 |
2017 |
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Operating activities: |
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Net income |
$ |
40,126 | 47,769 | |
Adjustment to reconcile net income to net cash |
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provided by operating activities: |
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Recoveries from loan losses and asset impairments, net |
(6,709) | (4,547) | ||
Provision for notes receivable allowances |
35,866 | 32,066 | ||
Depreciation, amortization and accretion, net |
18,550 | 15,066 | ||
Share-based compensation expense |
10,717 | 10,119 | ||
Net gains on sales of real estate held-for-sale |
(4,798) | (1,668) | ||
Equity in earnings of unconsolidated real estate joint ventures |
(1,165) | (8,428) | ||
Return on investment in unconsolidated real estate joint ventures |
5,233 | 11,465 | ||
Increase in deferred income tax |
20,465 | 30,279 | ||
Net gains on cancellation of junior subordinated debentures |
- |
(6,929) | ||
Interest accretion on redeemable 5% cumulative preferred stock |
854 | 901 | ||
Increase in notes receivable |
(48,492) | (29,526) | ||
Increase in VOI inventory |
(23,405) | (30,707) | ||
Decrease (increase) in trade inventory |
2,286 | (5,613) | ||
Decrease (increase) in real estate inventory |
9,990 | (7,733) | ||
Increase in other assets |
(24,705) | (12,657) | ||
Increase in other liabilities |
8,774 | 13,323 | ||
Net cash provided by operating activities |
43,587 | 53,180 | ||
Investing activities: |
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Return of investment in unconsolidated real estate joint ventures |
6,586 | 888 | ||
Investments in unconsolidated real estate joint ventures |
(1,755) | (2,645) | ||
Repayment of loans receivable |
17,930 | 9,522 | ||
Proceeds from sales of real estate held-for-sale |
17,121 | 10,601 | ||
Additions to real estate held-for-sale and held-for-investment |
(1,102) | (933) | ||
Purchases of property and equipment |
(33,316) | (14,158) | ||
Proceeds from the sale of property and equipment |
569 |
- |
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Cash paid for acquisition, net of cash received |
- |
(58,418) | ||
Decrease in cash from other investing activities |
(5,072) | (373) | ||
Net cash provided by (used in) investing activities |
961 | (55,516) | ||
Financing activities: |
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Repayments of notes payable and other borrowings |
(152,204) | (197,581) | ||
Proceeds from notes payable and other borrowings |
196,439 | 206,884 | ||
Redemption of junior subordinated debentures |
- |
(11,438) | ||
Payments for debt issuance costs |
(1,131) | (3,217) | ||
Payments of interest on redeemable 5% cumulative preferred stock |
(438) | (563) | ||
Repurchase and retirement of Class A common stock |
(60,141) | (6,213) | ||
Purchase of noncontrolling interest |
(258) |
- |
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Proceeds from the exercise of stock options |
245 | 62 | ||
Dividends paid on common stock |
(2,822) | (2,136) | ||
Distributions to noncontrolling interest |
(8,263) | (3,920) | ||
Net cash used in financing activities |
(28,573) | (18,122) | ||
Increase (decrease) in cash, cash equivalents and restricted cash |
15,975 | (20,458) | ||
Cash, cash equivalents and restricted cash at beginning of period |
409,247 | 346,317 | ||
Cash, cash equivalents and restricted cash at end of period |
$ |
425,222 | 325,859 |
Continued
4
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BBX Capital Corporation |
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Condensed Consolidated Statements of Cash Flows -- Unaudited |
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(In thousands) |
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For the Nine Months Ended |
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September 30, |
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2018 |
2017 |
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Supplemental cash flow information: |
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Interest paid on borrowings |
$ |
27,807 | 21,392 | |
Income taxes paid |
3,103 | 2,570 | ||
Supplementary disclosure of non-cash investing and financing activities: |
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Construction funds receivable transferred to real estate |
8,716 | 8,259 | ||
Acquisition of VOI inventory, property and equipment for notes payable |
24,258 |
- |
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Reduction in redeemable 5% cumulative preferred stock |
4,862 |
- |
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Reduction in note receivable from holder of |
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redeemable 5% cumulative preferred stock |
(5,000) |
- |
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Property and equipment transferred to real estate |
- |
6,181 | ||
Decrease in deferred tax liabilities due to cumulative effect of excess |
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tax benefits |
- |
3,054 | ||
Repurchase and retirement of shares of common stock in connection |
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with share based compensation withholding tax obligations |
3,782 | 4,028 | ||
Reconciliation of cash, cash equivalents and restricted cash: |
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Cash and cash equivalents |
369,512 | 264,380 | ||
Restricted cash |
55,710 | 61,479 | ||
Total cash, cash equivalents, and restricted cash |
$ |
425,222 | 325,859 | |
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See Notes to Condensed Consolidated Financial Statements -- Unaudited |
5
BBX Capital Corporation
Notes to Condensed Consolidated Financial Statements - Unaudited
1. Basis of Financial Statement Presentation
BBX Capital Corporation and its subsidiaries (the “Company” or, unless otherwise indicated or the context otherwise requires, “we,” “us,” or “our”) is a Florida-based diversified holding company. BBX Capital Corporation as a standalone entity without its subsidiaries is referred to as “BBX Capital.” The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, these financial statements 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, that are necessary for a fair statement of the condensed consolidated financial condition of the Company at September 30, 2018; the condensed consolidated results of operations and comprehensive income of the Company for the three and nine months ended September 30, 2018 and 2017; the condensed consolidated changes in equity of the Company for the nine months ended September 30, 2018; and the condensed consolidated cash flows of the Company for the nine months ended September 30, 2018 and 2017. Operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018 or any other future period.
These unaudited condensed consolidated financial statements and related notes are presented as permitted by Form 10-Q and should be read in conjunction with the Company’s audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 (the “2017 Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on March 9, 2018.
The consolidated financial statements include the accounts of all of BBX Capital’s wholly-owned subsidiaries, other entities in which BBX Capital or its subsidiaries hold controlling financial interests, and any VIEs in which BBX Capital or one of its consolidated subsidiaries is deemed the primary beneficiary of the VIE. All significant inter-company accounts and transactions have been eliminated in consolidation.
Certain amounts for prior periods have been reclassified to conform to the current period’s presentation. The Company’s adoption of the new revenue recognition accounting standard on a full retrospective basis required the Company to restate certain previously reported results. For further details regarding the impact of adopting new accounting pronouncements, see “Recently Adopted Accounting Pronouncements” section below. In addition, the Company also reclassified $19.5 million of loans receivable to other assets in its condensed consolidated statement of financial condition as of December 31, 2017.
The Company’s principal investments include Bluegreen Vacations Corporation (“Bluegreen” or “Bluegreen Vacations”), real estate and real estate joint ventures, and middle market operating businesses.
Bluegreen is a leading vacation ownership company that markets and sells VOIs and manages resorts in leisure and urban destinations. Bluegreen’s resort network includes 45 Club Resorts (resorts in which owners in the Bluegreen Vacation Club (“Vacation Club”) have the right to use most of the units in connection with their VOI ownership) and 24 Club Associate Resorts (resorts in which owners in Bluegreen’s Vacation Club have the right to use a limited number of units in connection with their VOI ownership). Bluegreen’s Club Resorts and Club Associate Resorts are primarily located in popular, high-volume, “drive-to” vacation locations, including Orlando, Las Vegas, Myrtle Beach and Charleston, among others. Through Bluegreen’s points-based system, the approximately 216,000 owners in Bluegreen’s Vacation Club have the flexibility to stay at units available at any of its resorts and have access to approximately 11,100 other hotels and resorts through partnerships and exchange networks. Bluegreen’s sales and marketing platform is supported by exclusive marketing relationships with nationally-recognized consumer brands, such as Bass Pro and Choice Hotels. These marketing relationships drive sales within Bluegreen’s core demographic.
Prior to 2009, Bluegreen’s vacation ownership business consisted solely of the sale of VOIs in resorts that it developed or acquired. While it continues to conduct such sales and development activities, Bluegreen now also derives a
6
significant portion of its revenue from its capital-light business model, which utilizes Bluegreen’s expertise and infrastructure to generate both VOI sales and recurring revenue from third parties without the significant capital investment generally associated with the development and acquisition of resorts. Bluegreen’s capital-light business activities include sales of VOIs owned by third-party developers pursuant to which Bluegreen is paid a commission (“fee-based sales”) and sales of VOIs that it purchases under just-in-time (“JIT”) arrangements with third-party developers or from secondary market sources. In addition, Bluegreen provides resorts and resort developers with other fee-based services, including resort management, mortgage servicing, title services and construction management. Bluegreen also offers financing to qualified VOI purchasers, which generates significant interest income.
Prior to the fourth quarter of 2017, Woodbridge Holdings, LLC (“Woodbridge”), a wholly-owned subsidiary of BBX Capital, owned 100% of Bluegreen’s common stock. During the fourth quarter of 2017, Bluegreen completed an initial public offering (“IPO”) of its common stock in which Bluegreen sold to the public 3,736,723 shares of its common stock and Woodbridge, as a selling shareholder, sold to the public 3,736,722 shares of Bluegreen’s common stock. As a result of Bluegreen’s IPO, BBX Capital currently owns 90% of Bluegreen’s common stock through Woodbridge.
The Company’s real estate investments include real estate joint ventures and the acquisition, development, ownership, financing, and management of real estate. The Company’s investments in middle market operating businesses include Renin Holdings, LLC (“Renin”), a company that manufactures products for the home improvement industry, and investments in confectionery businesses through its wholly-owned subsidiary, BBX Sweet Holdings, LLC (“BBX Sweet Holdings”). The Company’s investments in confectionery businesses include IT’SUGAR, LLC (“IT’SUGAR”), a specialty candy retailer with over 90 retail locations in 26 states and Washington, D.C. that was acquired by BBX Sweet Holdings in June 2017.
BBX Capital has two classes of common stock. Holders of the Class A common stock are entitled to one vote per share, which in the aggregate represents 22% of the combined voting power of the Class A common stock and the Class B common stock. Class B common stock represents the remaining 78% of the combined vote. The percentage of total common equity represented by Class A and Class B common stock was 85% and 15%, respectively, at September 30, 2018. Class B common stock is convertible into Class A common stock on a share for share basis at any time at the option of the holder.
Recently Adopted Accounting Pronouncements
The Financial Accounting Standards Board (“FASB”) has issued the following Accounting Standards Updates (“ASU”) and guidance relevant to the Company’s operations which were adopted as of January 1, 2018:
ASU No. 2014-09 – Revenue Recognition (Topic 606): In May 2014, the FASB issued a new standard related to revenue recognition (as subsequently clarified and amended by various ASUs). Under the new standard, revenue is recognized when an entity satisfies a performance obligation by transferring to a customer control over promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
The Company adopted the standard on January 1, 2018 under the full retrospective method, and accordingly, results for prior periods have been adjusted to apply the new standard as shown below.
The adoption of the standard affected Bluegreen in the following areas: (i) gross versus net presentation for payroll and insurance premium reimbursements related to resorts managed by Bluegreen and on behalf of third parties and (ii) the timing of the recognition of VOI revenue related to the removal of certain bright line tests regarding the determination of the adequacy of the buyer’s commitment under prior industry-specific guidance. Bluegreen concluded that the recognition of fee-based sales commissions, ancillary revenues, and rental revenues remained materially unchanged.
The adoption of the standard on the Company’s real estate activities results in recognizing revenue sooner for contingent consideration on sales of real estate inventory.
The adoption of the standard did not materially affect revenue recognition associated with the Company’s trade sales. Retail trade sales performance obligations are generally satisfied at the time of the sales transaction as customers of the retail business typically pay in cash at the time of transfer of the promised goods, while wholesale trade sales performance obligations are generally satisfied when the promised goods are shipped by the Company or received by the customer. However, the Company has historically recognized shipping and handling costs in selling, general and
7
administration expenses, and upon the adoption of the standard, the Company began accounting for such costs as a fulfillment cost in cost of trade sales.
The Company has elected to use the following practical expedients in connection with the adoption of ASU 2014-09:
· |
We utilize the transaction price upon completion of the contract for certain contracts with customers; |
· |
We do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less or unsatisfied performance obligations or unsatisfied promises to transfer a distinct good or service that forms a part of a single performance obligation recognized over time. See Note 2 for a further description of variable consideration identified in contracts with customers; |
· |
We expense all marketing and sales costs as incurred; |
· |
We exclude from the transaction price all taxes assessed by a governmental authority that are imposed on a specified transaction concurrent with the closing thereof and are collected by the Company from a customer; |
· |
We do not disclose remaining performance obligations for variable consideration when the variable consideration is allocated entirely to a wholly unsatisfied performance obligation; |
· |
We do not disclose remaining performance obligations when revenue is recognized based on the Company’s right to invoice; |
· |
We account for shipping and handling activities that occur after the control of the goods is transferred to a customer as fulfillment activities instead of a separate performance obligation; |
· |
We recognize incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset is one year or less; and |
· |
We do not adjust the transaction price for the effects of a significant financial component if we expect, at the contract inception, that the performance obligations will be satisfied within one year or less. |
ASU No. 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20). This standard provides guidance on the recognition of gains and losses from the transfer of nonfinancial assets to non-customers and requires that an entity must identify each distinct nonfinancial asset or in substance nonfinancial asset promised to a non-customer or counterparty and derecognize each asset when the counterparty obtains control of the asset.
This standard significantly changed the guidance on the transfer of real estate to unconsolidated joint ventures. Under prior guidance, the transfer of real estate to an unconsolidated joint venture was accounted for as a partial sale, resulting in the recognition of a partial gain, and the noncontrolling interest retained was measured at historical cost, resulting in a basis adjustment to the seller’s investment in the joint venture. In addition, the partial gain could be deferred if the sale did not satisfy certain criteria for gain recognition. As a result, the Company previously accounted for the transfer of land to certain unconsolidated real estate joint ventures for initial capital contributions as partial sales, resulting in deferred gains and joint venture basis adjustments. However, under the new standard, the full gain is recognized upon the transfer of control of real estate to an unconsolidated joint venture, and any noncontrolling interest retained is measured at fair value.
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The Company adopted the standard on January 1, 2018 under the full retrospective method and, accordingly, prior years’ results have been adjusted to apply the new standard as shown below.
The following represents the impact of the adoption of ASU 2014-09 and ASU 2017-05 on our consolidated statements of financial condition as of December 31, 2017 and December 31, 2016 and consolidated statements of operations for the three and nine months ended September 30, 2017 and the years ended December 31, 2017 and 2016 (in thousands, except per share data):
|
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|
|||||||||
|
|||||||||
|
For the Three Months Ended September 30, 2017 |
||||||||
|
Prior to Adoption |
ASU 2014-09 Adjustments |
ASU 2017-05 Adjustments |
As Adjusted |
|||||
Statement of Operations: |
|||||||||
Sales of VOIs |
$ |
61,687 | 766 |
- |
62,453 | ||||
Cost reimbursements |
- |
14,097 |
- |
14,097 | |||||
Cost reimbursements |
- |
14,097 |
- |
14,097 | |||||
Cost of VOIs sold |
6,284 | 160 |
- |
6,444 | |||||
Trade sales |
44,877 | (159) |
- |
44,718 | |||||
Net loss on sales of real estate assets |
(18) |
- |
- |
(18) | |||||
Cost of trade sales |
29,494 | 2,316 |
- |
31,810 | |||||
Selling, general and administrative expenses |
149,021 | (2,179) |
- |
146,842 | |||||
Equity in earnings of unconsolidated |
|||||||||
real estate joint ventures |
2,451 |
- |
(346) | 2,105 | |||||
Income before income taxes |
19,686 | 310 | (346) | 19,650 | |||||
Provision for income taxes |
(8,195) | (64) | 133 | (8,126) | |||||
Net income |
11,491 | 246 | (213) | 11,524 | |||||
Less: Net income attributable to |
|||||||||
noncontrolling interests |
3,256 | 142 |
- |
3,398 | |||||
Net income attributable to shareholders |
$ |
8,235 | 104 | (213) | 8,126 | ||||
Basic earnings per share |
$ |
0.08 | 0.08 | ||||||
Diluted earnings per share |
$ |
0.08 | 0.08 |
|
|||||||||
|
|||||||||
|
For the Nine Months Ended September 30, 2017 |
||||||||
|
Prior to Adoption |
ASU 2014-09 Adjustments |
ASU 2017-05 Adjustments |
As Adjusted |
|||||
Statement of Operations: |
|||||||||
Sales of VOIs |
$ |
172,839 | 3,255 |
- |
176,094 | ||||
Cost reimbursements |
- |
40,660 |
- |
40,660 | |||||
Cost reimbursements |
- |
40,660 |
- |
40,660 | |||||
Cost of VOIs sold |
10,737 | 615 |
- |
11,352 | |||||
Trade sales |
96,831 | (462) |
- |
96,369 | |||||
Net gains on sales of real estate assets |
2,161 |
- |
(493) | 1,668 | |||||
Cost of trade sales |
68,027 | 5,746 |
- |
73,773 | |||||
Selling, general and administrative expenses |
400,845 | (5,356) |
- |
395,489 | |||||
Equity in earnings of unconsolidated |
|||||||||
real estate joint ventures |
9,620 |
- |
(1,192) | 8,428 | |||||
Income before income taxes |
77,687 | 1,788 | (1,685) | 77,790 | |||||
Provision for income taxes |
(30,028) | (643) | 650 | (30,021) | |||||
Net income |
47,659 | 1,145 | (1,035) | 47,769 | |||||
Less: Net income attributable to |
|||||||||
noncontrolling interests |
9,467 | 21 |
- |
9,488 | |||||
Net income attributable to shareholders |
$ |
38,192 | 1,124 | (1,035) | 38,281 | ||||
Basic earnings per share |
$ |
0.39 | 0.39 | ||||||
Diluted earnings per share |
$ |
0.36 | 0.36 |
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|
||||||||
|
||||||||
|
As of and for the Year Ended December 31, 2017 |
|||||||
|
As Previously Reported |
ASU 2014-09 Adjustments |
ASU 2017-05 Adjustments |
As Adjusted |
||||
Statement of Financial Condition: |
||||||||
Notes receivable, net |
$ |
431,801 | (4,943) |
- |
426,858 | |||
Investment in unconsolidated |
||||||||
real estate joint ventures |
47,275 |
- |
3,959 | 51,234 | ||||
Property and equipment, net |
112,858 | (929) |
- |
111,929 | ||||
Other assets |
121,824 | 929 |
- |
122,753 | ||||
Other liabilities |
103,926 |
- |
(462) | 103,464 | ||||
Deferred income |
36,311 | (19,418) |
- |
16,893 | ||||
Deferred income taxes |
43,093 | 3,755 | 1,120 | 47,968 | ||||
Total equity |
$ |
653,501 | 10,720 | 3,301 | 667,522 | |||
|
||||||||
Statement of Operations: |
||||||||
Sales of VOIs |
$ |
239,662 | 2,355 |
- |
242,017 | |||
Cost reimbursements |
- |
52,639 |
- |
52,639 | ||||
Cost reimbursements |
- |
52,639 |
- |
52,639 | ||||
Cost of VOIs sold |
17,439 | 240 |
- |
17,679 | ||||
Trade sales |
142,798 | (713) |
- |
142,085 | ||||
Net gains on sales of assets |
2,442 |
- |
(493) | 1,949 | ||||
Cost of trade sales |
97,755 | 8,163 |
- |
105,918 | ||||
Selling, general and administrative expenses |
538,125 | (8,423) |
- |
529,702 | ||||
Equity in earnings of unconsolidated |
||||||||
real estate joint ventures |
14,483 |
- |
(1,942) | 12,541 | ||||
Income before income taxes |
93,374 | 1,662 | (2,435) | 92,601 | ||||
Benefit for income taxes |
7,223 | 954 | 1,525 | 9,702 | ||||
Net income |
100,597 | 2,616 | (910) | 102,303 | ||||
Less: Net income attributable to |
||||||||
noncontrolling interests |
18,402 | (24) |
- |
18,378 | ||||
Net income attributable to shareholders |
$ |
82,195 | 2,640 | (910) | 83,925 | |||
Basic earnings per share |
$ |
0.83 | 0.85 | |||||
Diluted earnings per share |
$ |
0.79 | 0.81 |
10
|
||||||||
|
||||||||
|
As of and for the Year Ended December 31, 2016 |
|||||||
|
As Previously Reported |
ASU 2014-09 Adjustments |