Bluegreen Vacations Holding Corp - FORM 10-Q

Attached files

file	filename
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		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 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 [ ]

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.




BBX Capital Corporation TABLE OF CONTENTS

Part I.

Item 1.	Financial Statements

	Condensed Consolidated Statements of Financial Condition as of September 30, 2018 and December 31, 2017 - Unaudited	1

	Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended September 30, 2018 and 2017 - Unaudited	2

	Condensed Consolidated Statements of Changes in Equity for the Nine Months Ended September 30, 2018 - Unaudited	3

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2018 and 2017 - Unaudited	4

	Notes to Condensed Consolidated Financial Statements - Unaudited	6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	43

Item 3.	Quantitative and Qualitative Disclosure About Market Risk	74

Item 4.	Controls and Procedures	74

Part II.	OTHER INFORMATION
Item 1.	Legal Proceedings	75

Item 1A.	Risk Factors	75

Item 6.	Exhibits	75

	Signatures	76

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements


BBX Capital Corporation
Condensed Consolidated Statements of Financial Condition - Unaudited
(In thousands, except share data)

			December 31,
		September 30, 2018	2017 *As Adjusted
ASSETS
Cash and cash equivalents	$	369,512	362,526
Restricted cash ($17,081 in 2018 and $19,488 in 2017 in variable
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

LIABILITIES AND EQUITY
Liabilities:
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;
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)
Redeemable noncontrolling interest		2,844	2,765
Equity:
Preferred stock of $.01 par value; authorized 10,000,000 shares		-	-
Class A Common Stock of $.01 par value; authorized 150,000,000 shares;
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;
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

* See Note 1 for a summary of adjustments.
See Notes to Condensed Consolidated Financial Statements - Unaudited


BBX Capital Corporation
Condensed Consolidated Statements of Operations and Comprehensive Income - Unaudited
(In thousands, except per share data)

		For the Three Months Ended		For the Nine Months Ended
		September 30,		September 30,
		2018	2017 *As Adjusted	2018	2017 *As Adjusted
Revenues:
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	-
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:
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	-
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
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
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

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
shares outstanding		93,193	98,073	95,722	98,408
Diluted weighted average number of common and
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

Net income	$	11,985	11,524	40,126	47,769
Other comprehensive income, net of tax:
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
to noncontrolling interests		5,806	3,398	16,324	9,488
Comprehensive income attributable to shareholders	$	6,233	8,560	23,853	38,644

* See Note 1 for a summary of adjustments.
See Notes to Condensed Consolidated Financial Statements - Unaudited


BBX Capital Corporation
Condensed Consolidated Statement of Changes in Equity - Unaudited
For the Nine Months Ended September 30, 2018
(In thousands)

	Shares of
	Common Stock			Common Stock				Accumulated
	Outstanding			Amount		Additional		Other	Total	Non-
	Class			Class		Paid-in	Accumulated	Comprehensive	Shareholders'	controlling	Total
	A	B		A	B	Capital	Earnings	Income	Equity	Interests	Equity
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)	-	-	-
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)	-	-	-	-	-	-
Issuance of Common Stock from vesting of restricted stock awards	535	-		5	-	(5)	-	-	-	-	-
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.
See Notes to Condensed Consolidated Financial Statements - Unaudited



BBX Capital Corporation
Condensed Consolidated Statements of Cash Flows - Unaudited
(In thousands)

		For the Nine Months Ended
		September 30,
		2018	2017
Operating activities:
Net income	$	40,126	47,769
Adjustment to reconcile net income to net cash
provided by operating activities:
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:
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	-
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:
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)	-
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



BBX Capital Corporation
Condensed Consolidated Statements of Cash Flows -- Unaudited
(In thousands)

		For the Nine Months Ended
		September 30,
		2018	2017
Supplemental cash flow information:
Interest paid on borrowings	$	27,807	21,392
Income taxes paid		3,103	2,570
Supplementary disclosure of non-cash investing and financing activities:
Construction funds receivable transferred to real estate		8,716	8,259
Acquisition of VOI inventory, property and equipment for notes payable		24,258	-
Reduction in redeemable 5% cumulative preferred stock		4,862	-
Reduction in note receivable from holder of
redeemable 5% cumulative preferred stock		(5,000)	-
Property and equipment transferred to real estate		-	6,181
Decrease in deferred tax liabilities due to cumulative effect of excess
tax benefits		-	3,054
Repurchase and retirement of shares of common stock in connection
with share based compensation withholding tax obligations		3,782	4,028
Reconciliation of cash, cash equivalents and restricted cash:
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

See Notes to Condensed Consolidated Financial Statements -- Unaudited

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

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

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.

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):




		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



		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

Bluegreen Vacations Holding Corp - FORM 10-Q - November 6, 2018

Attached files