UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, DC 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the Year Ended December 31, 2015
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number
001-13133
BBX Capital Corporation
(Exact name of registrant as specified in its charter)
01
Florida
(State or other jurisdiction of incorporation or
organization)
401 East Las Olas Boulevard Suite
800
Ft. Lauderdale, Florida
(Address of principal executive offices)
65-0507804
(I.R.S. Employer
Identification No.)
33301
(Zip Code)
(954) 940-4000
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of Each Class
Class A Common Stock,
Par Value $0.01 Per Share
Preferred Share Purchase Rights
Name of Each Exchange on Which
Registered
New York Stock Exchange
New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. YES [ ] NO [ X ]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of
the Act. YES [ ] NO [X ]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.
YES [ X ] NO [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate
Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§
229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge,
in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-
accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)
company [X]
Accelerated filer [ ]
Smaller reporting
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). YES [ ] NO [ X ]
The aggregate market value of the voting common equity held by non-affiliates was $48.2 million,
computed by reference to the closing price of the registrant’s Class A Common Stock on June 30, 2015. The
registrant does not have any non-voting common equity.
The number of shares of the registrant’s Class A Common Stock outstanding on March 7, 2016 was
16,199,145. The number of shares of the registrant’s Class B Common Stock outstanding on March 7, 2016 was
195,045.
Portions of the registrant’s Definitive Proxy Statement relating to its 2015 Annual Meeting of Shareholders
are incorporated by reference in Part III of this Form 10-K.
ITEM I. BUSINESS
PART I
BBX Capital Corporation is referred to in this report together with its subsidiaries as “BBX
Capital” “we,” “us,” or “our”, and is referred to in this report without its subsidiaries as the “Parent
Company” or “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 investments in operating businesses. Prior to the sale of BankAtlantic
to BB&T Corporation (“BB&T”) on July 31, 2012 BBX Capital 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”) and its
ownership interests in Florida Asset Resolution Group, LLC (“FAR”), BBX Capital Asset
Management, LLC (“CAM”), BBX Partners, Inc., Renin Holdings, LLC, BBX Sweet Holdings, LLC
and its acquired businesses and investments in eleven real estate joint ventures.
In April 2013, BBX Capital acquired a 46% equity interest in Woodbridge. Woodbridge’s
principal asset is its ownership of Bluegreen Corporation and its subsidiaries (“Bluegreen”). Bluegreen
is a vacation ownership company with over 190,000 owners and over 60 owned or managed
resorts. BFC Financial Corporation (“BFC”), the controlling shareholder of BBX Capital, owns the
remaining 54% of Woodbridge. Bluegreen’s net income attributable to Woodbridge was $70.3 million,
$57.5 million and $37.6 million for the years ended December 31, 2015, 2014 and 2013, respectively.
loans and
CAM, which was formed in connection with the sale of BankAtlantic to BB&T and BBX
Partners are wholly owned subsidiaries and their primary assets are investments in real estate joint
ventures, non-performing commercial
formerly held by
BankAtlantic. FAR, which was also formed in connection with the sale of BankAtlantic to BB&T, was
a special purpose limited liability company whose membership interests were initially held by both
BB&T, which held 95% of FAR’s preferred interests and BBX Capital Corporation, which held the
remaining 5% of the preferred interests and all of the residual common equity interests in FAR. On
May 6, 2015, BB&T’s preferred interest in FAR was repaid in full and redeemed and FAR became a
wholly-owned subsidiary of BBX Capital Corporation. FAR’s primary assets are loans and foreclosed
real estate formerly held by BankAtlantic.
real estate
foreclosed
On October 30, 2013, a newly formed joint venture entity, Renin Holdings, LLC (“Renin”),
owned 81% by BBX Capital Corporation and 19% by BFC, acquired substantially all of the assets and
certain liabilities of Renin Corp for approximately $12.8 million (“the Renin Transaction”). Renin had
$24 million of total assets as of October 30, 2013 and manufactures interior closet doors, wall décor,
hardware and fabricated glass products and operates through headquarters in Canada and two
manufacturing, assembly and distribution facilities in Canada and the United States as well as a sales
facility in the United Kingdom.
In December 2013, a wholly-owned subsidiary of BBX Capital, BBX Sweet Holdings, LLC,
acquired Hoffman’s Chocolates (“Hoffman’s”). Hoffman’s had total assets of $5.3 million as of the
acquisition date and aggregate revenues of $5.2 million for the year ended December 31,
2015. 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 such as boutique retailer, 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”). The wholesale manufacturing
companies acquired had aggregate total assets at acquisition of $8.0 million and total aggregate
revenues during the year ended December 31, 2015 of $22.5 million.
On April 30, 2015, BFC purchased 4,771,221 shares of BBX Capital’s Class A common stock
through a tender offer and in September 2015, BFC acquired an additional 221,821 shares of BBX
Capital’s Class A common
1
stock from its executive officers upon the vesting of restricted stock units. These share acquisitions
increased BFC’s ownership percentage to approximately 81% of the issued and outstanding shares of
BBX Capital’s Class A common stock, which together with the shares of BBX Capital’s Class B
common stock owned by BFC, represented an approximate 81% equity interest and 90% voting interest
in BBX Capital Corporation. BFC owns 100% of BBX Capital’s Class B common stock.
As of December 31, 2015, BBX Capital had consolidated total assets of approximately $393.5
million, liabilities of $57.6 million and total equity of $336.0 million.
This document contains forward-looking statements based on current expectations that involve
a number of risks and uncertainties. All opinions, forecasts, projections, future plans or other
statements, other than statements of historical fact, are forward-looking statements and may include
words or phrases such as “plans,” “believes,” “will,” “expects,” “anticipates,” “intends,” “estimates,”
“our view,” “we see,” “would” and words and phrases of similar import. The forward looking
statements in this document are also forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and involve substantial risks and
uncertainties. There is no assurance that such expectations will prove to be correct. Future results could
differ materially as a result of a variety of risks and uncertainties, many of which are outside of
management’s control.
These risks and uncertainties include, but are not limited to:
·
·
·
·
·
the impact of economic, competitive and other factors affecting BBX Capital and its
assets, including the impact of decreases in real estate values on BBX Capital’s
business generally, the value of BBX Capital’s assets, the ability of BBX Capital’s
borrowers to service their obligations and the value of collateral securing BBX
Capital’s loans;
the risk that loan losses will continue and the risks of additional charge-offs,
impairments and required increases in BBX Capital’s allowance for loan losses and
trade receivables;
the adverse impact of and expenses associated with litigation including the risk that
BBX Capital’s insurance carrier seeks to obtain reimbursement of the amounts it
previously advanced to BBX Capital in connection with the action brought by the
SEC against BBX Capital and Alan B. Levan and that the decision, verdict or
remedy ordered by the court in the SEC action against BBX Capital and Mr. Levan
will not be reversed on appeal;
adverse conditions in the stock market, the public debt market and other financial
and credit markets and the impact of such conditions on BBX Capital’s activities;
the risk that the assets retained by BBX Capital in CAM, BBX Partners and FAR
may not be monetized at the values currently ascribed to them and the risks
associated with the impact of periodic valuation of BBX Capital’s assets for
impairment.
In addition, this document contains forward looking statements relating to BBX Capital’s ability
to successfully implement its currently anticipated business plans, which may not be realized as
anticipated, if at all, and BBX Capital’s current and anticipated investments i n operating
businesses may not achieve the returns anticipated or may not be profitable, including the risks
associated with:
·
·
·
BBX Capital’s investment in Bluegreen (through Woodbridge),
the BBX Sweet Holdings’ investments in Hoffman’s, Williams & Bennett, Jer’s
Chocolates, Helen Grace Chocolates, Anastasia Confections and Kencraft, and
BBX Capital’s investment with BFC in Renin.
This document also contains forward looking statements relating to BBX Capital’s investments
in real estate developments, either directly or through joint ventures. These risks include:
·
·
·
·
·
exposure to downturns in the real estate and housing markets;
exposure to risks associated with real estate development activities;
risks associated with obtaining necessary zoning and entitlements;
risks that BBX Capital’s joint venture partners may not fulfill its obligations, and
risks that the projects will not be developed as anticipated or be profitable.
2
BBX Capital’s investment in Woodbridge, which owns Bluegreen Corporation, exposes BBX
Capital to:
·
risks relating to Bluegreen’s business and Bluegreen’s ability to pay dividends to
Woodbridge and in turn Woodbridge’s ability to pay dividends to BBX Capital, and
risks inherent in the vacation ownership industry, including risks associated with
regulatory compliance and customer complaints and other risks which are identified
in BFC’s Annual Report on Form 10-K filed on March 1 5, 2016 with the SEC and
available on the SEC’s website at www.sec.gov.
·
BBX Sweet Holdings acquisitions and BBX Capital’s acquisition of the assets of Renin Corp
exposes BBX Capital to the risks of its respective businesses, which include:
·
·
·
·
·
·
the amount and terms of indebtedness associated with the acquisitions which may
impact BBX Capital’s financial condition and results of operations and limit BBX
Capital’s activities;
the failure of the companies to meet financial covenants and that BBX Capital may
be required to make further capital contributions or advances to the acquired
companies;
the risk that the businesses acquired by BBX Capital may not be profitable;
the risk that the integration of these operating businesses may not be completed
effectively or on a timely basis;
the risk that BBX Capital may not realize any anticipated benefits or profits; and
Renin’s operations expose BBX Capital to foreign currency exchange risk of the
U.S. dollar compared to the Canadian dollar and Great Britain pound.
Past performance and perceived trends may not be indicative of future results. In addition to
the risks and factors identified above, reference is also made to other risks and factors detailed in this
Annual Report on Form 10-K, including Item 1A. Risk Factors. BBX Capital cautions that the
foregoing factors are not exclusive.
Operating financial information shown by segment is included in Note 22 to BBX Capital’s
Consolidated Financial Statements. BBX Capital reports its operations through three business segments
–BBX, Renin and Sweet Holdings.
BBX Capital’s internet website address is www.bbxcapital.com. BBX Capital’s annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments
to those reports are available free of charge through BBX Capital’s website, as soon as reasonably
practicable after such material is electronically filed with, or furnished to, the Securities and Exchange
Commission (“SEC”). BBX Capital’s internet website and the information contained in or connected to
BBX Capital’s website are not incorporated into, and are not part of this Annual Report on Form 10-K.
BBX Capital’s Business Strategy
Since the sale of BankAtlantic in July 2012, BBX Capital has been repositioning its business,
monetizing its legacy portfolios of loans and real estate, and pursuing its goal of transitioning into a
growth business by focusing on real estate opportunities and acquiring operating businesses.
The majority of BBX Capital’s assets do not generate income on a regular or predictable basis.
Recognizing the nature of BBX Capital’s assets, BBX Capital’s goal is to build long-term value as
opposed to focusing on quarterly or annual earnings. While capital markets generally encourage short
term results, BBX Capital’s objective continues to be long term growth as measured by increases in
book value per share over time. Further, BBX Capital does not expect to generate significant revenue
from the legacy BankAtlantic assets until the assets are monetized through repayments or transactions
involving the sale, joint venture or development of the underlying real estate. BBX Capital is currently
utilizing the cash flow from the monetization of its assets and dividends from Woodbridge to pay
operating expenses and to invest in income producing real estate, real estate developments, real estate
joint ventures and operating businesses. While there is no assurance it will be successful, BBX Capital
is seeking to manage its cash needs and the timing of monetizing its existing assets with new
investments to maximize its returns. In some cases, this may involve immediate sale and in other cases a
longer term
3
hold or development (either directly or through a joint venture). BBX Capital may also consider
transactions involving its investments in operating businesses, including Renin and Sweet Holdings, and
BBX Capital may in connection with BBX Capital’s investment with BFC in Woodbridge pursue
transactions involving Bluegreen, either directly or indirectly through a transaction involving
Woodbridge, to monetize all or a portion of BBX Capital’s investment in Woodbridge. Such
transactions may include pursuing a future sale or spin-off of a company or other transactions involving
public or private issuances of a company’s debt or equity securities which might result in the ownership
of less than 100% of an entity. BBX Capital is also engaged in land entitlement activities and land
development projects on certain properties that BBX Capital acquired through foreclosure. These
projects have included or may include in the future selling or leasing the improved properties to third
parties or entering into joint ventures with developers for the development of residential and
commercial real estate projects involving the contribution of properties by BBX Capital as well as
potential cash investments in projects. BBX Capital has also pursed potential investments in joint
venture real estate projects that include real estate held by a joint venture partner or property acquired
from unrelated parties. As a result of the substantial decline in real estate values during the recession,
the majority of BBX Capital’s non-performing commercial real estate loans and foreclosed real estate
were written down in prior periods to the then prevailing estimated fair values of the collateral less
costs to sell. BBX Capital has seen significant improvements generally in real estate markets and
believes that the prior estimated fair values of the underlying collateral securing certain of BBX
Capital’s commercial real estate loans and BBX Capital’s real estate carrying values may be below
current market values. Additionally, the recovery in the real estate market has favorably affected the
financial condition of BBX Capital’s borrowers and BBX Capital is aggressively pursuing its borrowers
and/or guarantors in order to maximize recoveries through cash settlements, loan workout arrangements
or participation interests in the development or performance of the collateral. If BBX Capital is
successful in its efforts, BBX Capital expect to recognize gains to the extent that the amounts it collects
exceed the carrying value of its commercial loans and foreclosed real estate and expect that these gains
will be reflected in an increase in BBX Capital’s shareholders’ equity in the long term. Due to the
nature of these activities however, BBX Capital does not expect to generate revenues or earnings on a
predictable or consistent basis. Accordingly, BBX Capital expects the results of its operations to vary
significantly on a quarterly basis and BBX Capital may experience losses in future periods.
Legacy Assets
Loans
On July 31, 2012, BBX Capital completed the sale of BankAtlantic to BB&T. BBX Capital
retained through CAM, BBX Partners and FAR certain loans, tax certificates and foreclosed real estate
and liabilities related to these retained assets which had been held by BankAtlantic. These retained
loans were grouped in five loan segments as follows: residential loans, commercial real estate loans,
consumer loans, small business loans and commercial non-mortgage loans. CAM holds loans from the
commercial real estate and the commercial non-mortgage loan segments. BBX Partners holds loans
from the commercial real estate segment and FAR holds loans from all five segments.
Residential: The majority of BBX Capital’s residential loans were originally acquired in the
secondary markets and were originated by financial institutions. These loans, which are serviced by
independent servicers, are secured by properties located throughout the United States. Residential loans
were typically purchased in bulk and were generally non-conforming loans under agency guidelines due
primarily to the size of the individual loans (“jumbo loans”). A portfolio of residential loans which were
made primarily to “low to moderate income” borrowers in accordance with the Community
Reinvestment Act were also retained but were sold during the year ended December 31, 2014. BBX
Capital’s residential loans serviced by independent servicers were classified as loans held-for-sale as of
December 31, 2015.
Commercial Real Estate: Commercial real estate loans were originated in connection with the
borrowers’ acquisition, development and construction of various types of properties including office
buildings,
non-residential
properties. Commercial real estate loans were also originated in connection with borrowers’ acquisition
or refinance of existing income-producing properties. These loans were primarily secured by property
located in Florida.
construction
residential
shopping
centers,
other
retail
and
4
Commercial non-mortgage loans: These loans are generally business loans secured by the
receivables, inventory, equipment, and/or general corporate assets of the borrowers.
Consumer: Consumer loans consist primarily of loans to individuals originated through
BankAtlantic’s retail network. The majority of consumer loans are home equity lines of credit secured
by a first or second mortgage on the primary residence of the borrower, substantially all of which are
located in Florida.
Small Business: BankAtlantic originated small business loans to companies located primarily
in markets within BankAtlantic’s branch network. Small business loans were originated primarily on a
secured basis and do not generally exceed $2.0 million individually. These loans were originated with
maturities ranging generally from one to three years or due upon demand. Lines of credit extended to
small businesses are due upon demand. Small business loans have either fixed or variable prime-based
interest rates.
Real Estate
Real estate was generally acquired through foreclosure or contractual settlements with
borrowers. Real estate is classified into two categories: real estate held-for-sale or real estate held-for-
investment.
Real estate held-for-sale: 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.
Real estate held-for-investment: Real estate is classified as held-for-investment when the
property is not available for immediate sale due to anticipated renovations and potential improvements
in operating performance before sale, management pursuing joint venture opportunities, potential
development, or management’s decision to retain the property in anticipation of appreciation in market
value in subsequent periods.
BBX Capital Business Segments
BBX Capital operates through three reportable business segments – BBX, Renin and Sweet
Holdings.
BBX Reportable Segment - The BBX reportable segment consists of the activities associated
with managing the commercial loan portfolio, real estate properties of BBX Capital and its consolidated
subsidiaries, including BBX Partners, CAM and FAR and the portfolio of BankAtlantic’s previously
charged off loans, BBX Capital’s investment in Woodbridge and investments in real estate
developments and joint ventures.
Renin Reportable Segment – The Renin reportable segment consists of the activities of Renin
Holdings, LLC and its subsidiaries (“Renin”). Renin manufactures interior closet doors, wall décor,
hardware and fabricated glass products and its distribution channels include big box and independent
home improvement retailers, builders, other manufacturers and specialty retail outlets primarily in
North America. Renin is headquartered in Brampton, Ontario and has two manufacturing, assembly and
distribution facilities located in Brampton, Ontario and Tupelo, Mississippi and a sales office in the
United Kingdom. BBX Capital owns 81% of Renin and BFC owns the remaining 19%.
Sweet Holdings Reportable Segment - The Sweet Holdings reportable segment consists of the
activities of BBX Capital’s acquired operating businesses in the confection industry. The Sweet
Holdings reportable segment companies manufacture chocolate and hard candy products which are sold
through wholesale and retail distribution channels.
In periods prior to June 30, 2015, FAR was reported as a separate business segment as its
activities were restricted by FAR’s operating agreement to the monetization of FAR’s assets in order to
repay BB&T’s preferred membership interest in FAR. As a result of the redemption of BB&T’s
preferred interest in FAR during May 2015,
5
FAR activities are no longer restricted to the monetization of FAR’s assets. As a consequence,
management changed BBX Capital’s internal reporting, combining the operations of FAR into BBX
and the FAR reportable segment was consolidated with the BBX reportable segment for all periods
presented.
BBX Business Segment
The BBX business segment includes the assets and related liabilities of CAM, FAR and BBX
Partners and BBX Capital’s investment
in Woodbridge and investments in real estate joint
ventures. CAM was formed prior to the closing of the BB&T Transaction when BankAtlantic
contributed to CAM cash and certain non-performing commercial loans, commercial real estate and
previously written-off assets. CAM assumed the liabilities related to these assets. FAR was formed
prior to the closing of BB&T Transaction and until May 2015 its operations consisted of overseeing
the management and monetization of its assets and, where appropriate, orderly liquidations with a view
to repaying its preferred membership interests and maximizing the cash flows of any remaining
assets. FAR’s assets consist primarily of loans receivable and foreclosed real estate . Subsequent to
May 2015, FAR became a wholly-owned subsidiary of BBX Capital managed by the BBX business
segment.
The BBX business segment’s primary assets are loans receivable, real estate held-for-sale and
real estate held-for-investment, investments in real estate joint ventures and rights to BankAtlantic’s
previously charged off loan portfolio and related judgments as well as its 46% equity interest in
Woodbridge.
BBX Capital acquired a 46% interest in Woodbridge in April 2013. Woodbridge’s principal
asset is its ownership of Bluegreen. Bluegreen is a sales, marketing and management company focused
on the vacation ownership industry. Bluegreen markets, sells and manages vacation ownership interests
(“VOIs”) in resorts, which are generally located in popular, high-volume, “drive-to” vacation
destinations, and were either developed or acquired by Bluegreen or developed and owned by others, in
which case Bluegreen earns fees for providing such services. Bluegreen utilizes a points-based system,
known as the Bluegreen Vacation Club, where purchasers of VOIs are allotted points that represent their
ownership and beneficial use rights in perpetuity in the Bluegreen Vacation Club and can be used to
reserve occupancy at participating resorts. Bluegreen Vacation Club members may use their points to
stay in any of Bluegreen Vacation Club resorts or take advantage of other vacation options, including an
exchange program offered by a third-party world-wide vacation ownership exchange network of over
4,000 resorts and other vacation experiences such as cruises and hotel stays. Bluegreen also provides
property association management services, mortgage servicing, VOI title services, reservation services,
and construction design and development services. In addition, Bluegreen provides financing to
individual purchasers of VOIs, which provides significant interest income to Bluegreen. Bluegreen had
total assets of $1.1 billion as of December 31, 2015 and net income attributable to Woodbridge of $70.3
million, $57.5 million and $37.6 million for the years ended December 31, 2015, 2014 and 2013
respectively.
BBX Capital had investments in unconsolidated real estate joint ventures of approximately
$43.0 million as of December 31, 2015. BBX Capital anticipates actively pursuing additional joint
venture investments with real estate developers which may involve BBX Capital’s contribution of held-
for-investment real estate acquired through foreclosure or real estate purchased with BBX Capital’s own
funds for joint venture development. BBX Capital may also invest funds in developments identified by
joint venture partners. BBX Capital currently expects that in most cases, BBX Capital’s joint venture
partners will be responsible for the management of the project and BBX Capital will participate in
major decisions and monitor the development’s progress. These joint venture real estate developments
are anticipated to include multifamily and single family housing, commercial retail complexes, office
buildings and land entitlement projects. To a lesser extent, BBX Capital may engage in land
entitlement and development activities without joint venture partners. BBX Capital’s real estate
investments will in most instances be multi-year projects and it is not expected that earnings from these
activities will be generated in the near term. BBX Capital’s goal is to produce earnings from these
projects over time.
6
BBX reportable segment had investments in the following real estate joint ventures as of
December 31, 2015 and 2014 (in thousands):
Investment in unconsolidated real estate joint ventures
Altis at Kendall Square, LLC
$
Altis at Lakeline - Austin Investors LLC
New Urban/BBX Development, LLC
Sunrise and Bayview Partners, LLC
Hialeah Communities, LLC
PGA Design Center Holdings, LLC
CCB Miramar, LLC
Centra Falls, LLC
The Addison on Millenia Investment, LLC
BBX/S Millenia Blvd Investments, LLC
Altis at Bonterra - Hialeah, LLC
Investments in unconsolidated real estate joint ventures
Investment in consolidated real estate joint venture
Investment in consolidated joint venture JRG/BBX
Development, LLC
$
$
Altis at Kendall Square, LLC (“Kendall Commons”)
December 31,
2015
2014
764
5,210
864
1,577
4,569
1,911
875
727
5,778
4,905
15,782
42,962
1,264
5,000
996
1,723
5,091
1,991
-
-
-
-
-
16,065
-
964
In March 2013, BBX Capital sold land to Altman Development (“Altman”), a third party real
estate developer, for net proceeds of $8.0 million. Altman is developing on that land a multifamily
rental community comprised of 12 three-story apartment buildings, one mixed-use building and one
clubhouse totaling 321 apartment units. BBX Capital has invested $1.3 million of cash in the project as
one of a number of investors. The twelve three-story apartment buildings, clubhouse and mixed-use
building have been completed. After all members (including BBX Capital) receive a preferred return of
10% and all contributed capital is returned, BBX Capital is entitled to receive 13% of venture
distributions until a 15% internal rate of return has been attained. Thereafter, BBX Capital will be
entitled to receive 9.75% of any venture distributions.
Altis at Lakeline – Austin Investor, LLC
In December 2014, BBX Capital invested $5.0 million as one of a number of investors in a
planned multi-family development – Altis at Lakeline – being developed by Altman. Located on an
approximate 23 acre parcel in the northwest area of Austin, Texas, Altis at Lakeline is planned for 19,
two and three story, residential apartment buildings with 354 apartment units, 38 enclosed garages, and
a private resort style 5,500 square foot clubhouse. Construction commenced in the first quarter of 2015
and the facility is anticipated to be substantially completed during the fourth quarter of 2016. After all
investors receive a preferred return of 9% and all contributed capital is returned, BBX Capital is entitled
to receive 26.3% of venture distributions until an 18% internal rate of return has been attained and
thereafter BBX Capital will be entitled to receive 18.8% of any venture distributions.
New Urban/BBX Development, LLC (“Village at Victoria Park”)
Village at Victoria Park consists of approximately 2 acres of vacant land previously owned by
BBX Capital that is located near downtown Fort Lauderdale, Florida. In December 2013, BBX Capital
invested in a joint venture
7
with New Urban Communities to develop the project as 30 single-family homes. The project is a 50% -
50% joint venture with New Urban Communities serving as the developer and manager of the joint
venture. The project commenced construction and sales during the third quarter of 2014. Closings are
projected to begin during the first quarter of 2016.
Bayview (Sunrise and Bayview Partners, LLC)
In June 2014, BBX Capital invested in a joint venture with an affiliate of Procacci
Development Corporation. The joint venture acquired for $8.0 million approximately three acres of
real estate located at Bayview Drive and Sunrise Boulevard in Fort Lauderdale, Florida. The joint
venture entity, Sunrise and Bayview Partners, LLC, is a 50% - 50% joint venture between BBX Capital
and an affiliate of Procacci Development. The property is currently improved with an approximate
84,000 square foot office building along with a convenience store and gas station, and located minutes
from the Fort Lauderdale beaches and directly across from the Galleria at Ft. Lauderdale. BBX Capital
anticipates that the property will be redeveloped into a mixed-use project at some point in the future.
Hialeah Communities, LLC (Bonterra – CC Homes)
During the third quarter of 2014, BBX Capital invested in a joint venture agreement with CC
Homes, a Codina-Carr Company, to develop homes in a portion of Bonterra Communities (formerly
called the Hialeah Communities) in Hialeah, Florida. As the developer and manager of the joint
venture, CC Homes currently plans to build approximately 394 single-family homes. BBX Capital
transferred approximately 50 acres of land at an agreed upon value of approximately $15.6 million
subject to an $8.3 million mortgage which was assumed by the joint venture. In exchange, BBX Capital
received its joint venture interest and $2.2 million of cash. Anticipated project profits resulting from the
joint venture after receipt of aggregate capital contributions and the preferred return will be distributed
to CC Homes and BBX Capital on a 55% and 45% basis, respectively. Any necessary additional capital
for the joint venture is required to be contributed by CC Homes and BBX Capital on a 43% and 57%
basis, respectively. BBX Capital is a guarantor of 26.3% of the joint venture’s $31.0 million acquisition
and development loan. The project commenced land development activities in October 2015.
PGA Design Center Holdings, LLC
In December 2013, BBX Capital purchased for $6.1 million a commercial property in Palm
Beach Gardens, Florida, with three existing buildings consisting of 145,000 square feet of mainly
furniture retail space. The property, which is located in a larger mixed use property now known as PGA
Station (formerly PGA Place), was substantially vacant at the date of acquisition. Subsequent to the
acquisition of the property, BBX Capital entered into a joint venture with Stiles Development which
acquired a 60% interest in the joint venture for $2.9 million in cash. BBX Capital contributed the
property (excluding certain residential development entitlements having an estimated value of $1.2
million) to the joint venture in exchange for $2.9 million in cash and the remaining 40% interest in the
joint venture. BBX Capital transferred the retained residential development entitlements to adjacent
parcels owned by it in the PGA mixed use property now known as PGA Station (see below for a
discussion of the other parcels owned by BBX Capital in PGA Station). The joint venture intends to
seek governmental approvals to change the use of a portion of the property from retail to office and
subsequently sell or lease the property.
CCB Miramar, LLC
In May 2015, BBX Capital invested in a joint venture with two separate unaffiliated developers
relating to the acquisition of real estate in Miramar, Florida for the construction of single-family
homes. BBX Capital contributed $875,000 for an approximate 35% interest in the joint venture and one
of the developers contributed to the joint venture a contract to purchase the real estate. The purchase of
the real estate is subject to certain closing conditions, including receipt of all necessary entitlements and
completion of due diligence by the joint venture.
8
Centra Falls, LLC
In August 2015, BBX Capital invested as one of a number of investors in a joint venture with
an unaffiliated developer for the development and sale of 89 townhomes in Pembroke Pines,
Florida. BBX Capital contributed $750,000 and is entitled to receive 7.143% of the joint venture
distributions until a 12% return on its investment has been attained. Thereafter, BBX Capital will be
entitled to 3.175% of the joint venture distributions thereafter. The project commenced construction
and sales during the third quarter of 2015. Closings are projected to begin in 2016.
The Addison on Millenia Investment, LLC
In December 2015, BBX Capital invested as one of a number of investors in a joint venture to
develop 11.8 acres in the Gardens at Millenia site located in Orlando, Florida into nine retail apartment
buildings containing approximately 292 units. The joint venture intends to hold the property and
operate the apartment project as an income producing business. BBX Capital transferred property with
an agreed upon value of $5.8 million and $0.3 million of cash for its initial joint venture contribution.
BBX Capital is entitled to receive 48% of the joint venture distributions until it receives its aggregate
capital contributions plus a 10% per annum return on capital. Any distributions thereafter are shared
based on its earnings with the managing member receiving an increasing percentage of distributions
based on the joint venture’s internal rate of return. Construction is expected to commence in the first
quarter of 2016.
BBX/S Millenia Blvd Investments, LLC
In October 2015, BBX Capital and an unaffiliated developer invested in a joint venture to
develop a retail center on the Gardens of Millenia site in Orlando, Florida. The joint venture intends to
obtain all necessary approvals, secure financing, construct all improvements, lease the premises and sell
the property. BBX Capital transferred property with an agreed upon value of $7.0 million to the joint
venture and received $0.7 million in cash and a 90% interest in the joint venture. BBX Capital is
entitled to receive 90% of joint venture distributions until it receives its aggregate capital contributions
plus an 8% per annum return on capital. Any distributions thereafter will be shared 54% to BBX
Capital and 46% to the developer. Construction is expected to commence in the first quarter of 2016.
Altis at Bonterra – Hialeah, LLC
In December 2015, BBX Capital invested in a joint venture with Altman to develop
approximately 314 apartment homes in a portion of Bonterra communities in Hialeah, Florida. BBX
Capital transferred approximately 14 acres of land at an agreed upon value of approximately $9.4
million and cash of $7.5 million to the joint venture. BBX Capital is entitled to receive 95% of the joint
venture distributions until it receives its aggregate capital contributions plus a 9% per annum return on
Any distributions thereafter will be shared 85% by BBX Capital and 15% by
capital.
Altman. Construction is expected to commence in the first quarter of 2016.
JRG/BBX Development, LLC (“North Flagler”)
In October 2013, BBX Capital invested in a joint venture with JRG USA pursuant to which
JRG USA assigned to the joint venture a contract to purchase for $10.8 million a 4.5 acre parcel
overlooking the Intracoastal Waterway in West Palm Beach, Florida and BBX Capital contributed $0.5
million of cash. During 2015, the zoning district surrounding this property was changed to permit up to
15 stories in building height from 4 stories in building height.
BBX Capital also owned a 2.7 acre parcel located adjacent to the 4.5 acre parcel which was the
subject of the contract held by the North Flagler joint venture with JRG USA. The 2.7 acre parcel was
acquired by BBX Capital through foreclosure.
9
In May 2015, the joint venture acquired the 4.5 acre parcel and sold the parcel to a third party
developer for $20.0 million and BBX Capital sold the 2.7 acre parcel which had a carrying value of $3.2
million on the date of sale to the same developer for $11.0 million. BBX Capital recognized an
aggregate $15.5 million gain on the sale of both parcels
PGA Station
BBX Capital owns land located in the newly named PGA Station, in the city of Palm Beach
Gardens, Florida, with carrying values aggregating $8.4 million as of December 31, 2015. The
property held by the PGA Design Center Holdings joint venture described above is adjacent to PGA
Station. BBX Capital believes this property presents a variety of development opportunities, some of
which are currently in the planning stages and remain subject to receipt of government approvals. BBX
Capital is currently seeking governmental approvals for a 111 room limited-service suite hotel and
approximately 190,000 square feet of office buildings on vacant tracts of land.
The composition of the legacy loans transferred to CAM, BBX Partners and FAR in
the BB&T was (in thousands):
Loans held-for-investment:
Loans receivable:
Commercial non-real estate
Commercial real estate
Small business
Consumer
Residential
Total loans held-for-
investment
Loans held-for-sale
As of December 31, 2015
As of December 31, 2014
Unpaid
Principal
Balance
Carrying
Amount
Unpaid
Principal
Balance
Carrying
Amount
$
$
$
12,985
23,188
5,890
4,687
117
11,250
16,294
4,054
2,368
69
3,061
40,270
-
3,868
-
1,326
24,189
-
2,306
-
46,867
34,035
47,199
27,821
34,342
21,354
56,887
35,423
10
The composition of the BBX reportable segment’s legacy real estate held-for-sale and
held-for-investment was (in thousands):
Real estate held-for-sale
Land
Rental properties
Residential single-family
Other
Total real estate held-for-sale
Real estate held-for-investment
Land
Rental properties
Other
Total real estate held-for-investment
Renin Business Segment
As of December 31,
2015
2014
25,994
17,162
2,924
258
46,338
As of December 31,
2015
2014
30,369
-
921
31,290
33,505
1,748
4,385
2,095
41,733
60,356
15,234
962
76,552
$
$
$
$
BBX Capital acquired the assets of Renin Corp. on October 30, 2013. Renin is headquartered
in Brampton, Ontario and has two manufacturing, assembly and distribution facilities located in
Brampton, Ontario a n d Tupelo, Mississippi and a sales and distribution office in the U.K. Renin
manufactures interior closet doors, wall décor, hardware and fabricated glass products and its
distribution channels include big box and independent home improvement retailers, builders, other
manufacturers and specialty retail outlets primarily in North America. Renin had total revenues for the
year ended December 31, 2015 and 2014 of $56.5 million and $57.8 million, respectively and total
assets as of December 31, 2015 of $22.8 million. Renin’s net loss for the years ended December 31,
2015 and 2014 was $2.1 million and $2.1 million, respectively.
Sweet Holdings Segment
The Sweet Holding business segment activities consist of the operations of its acquired
businesses in the candy and confections industry. Revenues from these acquisitions included in BBX
Capital’s Consolidated Statement of Operations for the year ended December 31, 2015 and 2014
aggregated $27.8 million and $16.3 million, respectively. These business acquisitions had total assets
as of December 31, 2015 of $36.9 million. Sweet Holdings’ net loss for the year ended December 31,
2015 was $8.4 million compared to net income of $3.1 million for the year ended December 31, 2014.
Employees
BBX Capital currently maintains comprehensive employee benefit programs that are
considered by management to be generally competitive with programs provided by other employers in
its markets.
11
The number of employees at the indicated dates was:
December 31, 2015
December 31, 2014
Full-
time
Part-
time
Full-
time
Part-
time
44
232
238
514
29
-
108
137
39
217
157
413
26
4
63
93
BBX Capital
Renin
Sweet Holdings
Total
Competition
The industries in which BBX Capital conducts business are very competitive and BBX Capital
faces substantial competition from real estate developers and building construction companies, and for
investments from private equity funds, family offices and hedge funds. BBX Capital may compete with
institutions and entities that are larger and have greater resources than the resources available to BBX
Capital. Four companies in the candy and confections industry currently account for approximately
71% of the industry’s revenues reflecting significant consolidation in the industry in which Sweet
Holdings operates. Renin operations include the manufacturing of wall décor, hardware, and
fabricated glass. Renin’s products are sold mainly to large retailers as well as to housing and building
construction companies. The industry in which Renin operates experiences intense competition from
foreign importers and producers.
12
ITEM 1A. RISK FACTORS
BBX Capital’s business and operations and the mix of its assets significantly changed as a result of
the sale of BankAtlantic to BB&T during July 2012, and its financial condition and results of
operations depend on the monetization of its assets at or near their current book values and its results
of operations will depend on the success of its investments.
As a result of the BB&T transaction, BBX Capital’s business and operations significantly
changed from its business and operations prior to the sale of BankAtlantic. As a consequence, BBX
Capital’s financial condition and results of operations will be dependent on its ability to successfully
manage and monetize legacy assets and on the results of operations of Bluegreen and Bluegreen’s
ability to continue to pay dividends to Woodbridge and in turn Woodbridge’s payment of dividends to
BBX Capital. Further, BBX Capital’s loan portfolio and real estate may not be easily salable in the
event BBX Capital decides to liquidate an asset through a sale transaction. BBX Capital’s financial
condition and results of operations will be dependent in the long term on the success of its investments.
If the legacy assets are not monetized at or near the current book values ascribed to them, or if these
assets are liquidated for amounts less than book value, BBX Capital’s financial condition and results of
operations would be adversely affected, and its ability to successfully pursue its business goals could be
adversely affected. Because a majority of its assets do not generate income on a regular basis, BBX
Capital does not expect to generate significant revenue or income with respect to these assets until such
time as an asset is monetized through repayments or it consummates transactions involving the sale,
joint venture or development of the underlying real estate or investments. Accordingly, BBX Capital
expects its revenues and results of operations to vary significantly on a quarterly basis and from year to
year.
BBX Capital’s substantial investment in Woodbridge and BBX Capital’s indirect interest in
Bluegreen exposes BBX Capital to the risks associated with Bluegreen and the vacation ownership
industry.
As previously described, BBX Capital invested $71.75 million in Woodbridge in April 2013 in
exchange for a 46% equity interest in Woodbridge. Woodbridge owns all of the shares of Bluegreen’s
common stock which constitute Woodbridge’s primary asset. While Woodbridge and Bluegreen are not
consolidated into BBX Capital’s financial statements, its investment in Woodbridge is significant and
its operating results and financial condition, including its liquidity, is dependent in part on Bluegreen’s
performance and Bluegreen’s ability to pay dividends. Bluegreen is subject to various risks and
uncertainties which may impact its business and results, including, but not limited to, the following:
·
·
·
Bluegreen’s business and operations, including its ability to market Vacation Ownership
Interests (“VOIs”), is subject to risks related to general economic conditions and the
availability of financing;
The vacation ownership and hospitality industries are highly competitive, and Bluegreen may
not be able to compete successfully;
Bluegreen would incur substantial losses and Bluegreen’s liquidity position could be
adversely impacted if the customers to whom Bluegreen provides financing default on their
obligations;
· While Bluegreen has attempted to restructure its business to reduce its need for and reliance
on financing for liquidity in the short term, there is no assurance that Bluegreen’s business
and profitability will not be impacted by its ability to obtain financing, which may not be
available on favorable terms, or at all;
·
·
·
·
Bluegreen's indebtedness may impact its financial condition and results of operations, and the
terms of Bluegreen's indebtedness may limit its activities and its ability to pay dividends;
The ratings of third-party rating agencies could adversely impact Bluegreen’s ability to
obtain, renew or extend credit facilities, or otherwise raise funds;
Bluegreen’s future success depends on its ability to market its products and services
successfully and efficiently and Bluegreen’s marketing expenses may increase;
Bluegreen may not be successful in increasing or expanding its capital-light business
relationships, and its capital-light activities, including fee based, sales and marketing, just-in-
time VOI arrangements, and secondary market sales activities, and such activities may not be
profitable, which may have an adverse impact on Bluegreen’s results of operations and
financial condition;
13
·
·
·
·
·
·
·
·
·
Bluegreen’s results of operations and financial condition may be materially and adversely
impacted if Bluegreen does not continue to participate in exchange networks and other
strategic alliances with third parties or if Bluegreen’s customers are not satisfied with the
networks in which Bluegreen participates or Bluegreen’s strategic alliances;
The resale market for VOIs could adversely affect Bluegreen’s business;
Bluegreen is subject to the risks of the real estate market and the risks associated with real
estate development, including a decline in real estate values and a deterioration of other
conditions relating to the real estate market and real estate development;
Adverse outcomes in legal or other regulatory proceedings, including claims for development-
related defects or consumer complaints to regulatory authorities, could adversely affect
Bluegreen’s financial condition and operating results;
Bluegreen may be adversely affected by extensive federal, state and local laws and regulations
and changes in applicable laws and regulations, including with respect to the imposition of
additional taxes on operations. In addition, results of audits of Bluegreen’s tax returns or those
of Bluegreen’s subsidiaries may have a material and adverse impact on Bluegreen’s financial
condition;
Environmental liabilities, including claims with respect to mold or hazardous or toxic
substances, could have a material adverse impact on Bluegreen’s financial condition and
operating results;
A failure to maintain the integrity of internal or customer data could result in damage to
Bluegreen's reputation and/or subject Bluegreen to costs, fines, or lawsuits;
Bluegreen’s technology requires updating and the failure to keep pace with developments in
technology could impair Bluegreen's operations or competitive position; and
The loss of the services of Bluegreen’s key management and personnel could adversely affect
its business.
For more detailed information regarding Bluegreen’s business, the risks set forth above and
other risks which Bluegreen faces, see BFC’s Annual Report on Form 10-K for the year ended
December 31, 2015, which is available free of charge on the SEC’s website at www.sec.gov,
including the “Risk Factors – Risks Related to Bluegreen” section thereof.
During the year ended December 31, 2015 and 2014 and the nine months ended December 31,
2013, BBX Capital received dividends totaling $ 76.0 million from Woodbridge following its receipt of
dividends from Bluegreen. As indicated above, Bluegreen’s debt instruments contain restrictions on its
ability to pay dividends. In addition, dividend payments by Bluegreen are subject to declaration by
Bluegreen’s board of directors, and subsequent dividends by Woodbridge are subject to the approval of
the board of directors of BFC as well as BBX Capital’s board of directors. Dividend decisions outside
of BBX Capital’s control may not be made in BBX Capital’s best interest. If Bluegreen is unable to pay
dividends or Bluegreen or Woodbridge does not otherwise pay dividends, BBX Capital’s liquidity
would be materially and adversely impacted. See “Item 7 - Management’s Discussion and Analysis of
Financial Condition and Results of Operations – Liquidity” for additional information.
BBX Capital’s future acquisitions may reduce earnings, require it to obtain additional financing and
expose it to additional risks.
BBX Capital’s business strategy includes investments in or acquisitions of operating
companies, such as its acquisitions of Renin Corp. and the acquisitions of businesses by BBX Sweet
Holdings in the candy and confections industry. Some of these investments and acquisitions may be
material. While BBX Capital is seeking investments and acquisitions primarily in companies that
provide opportunities for growth, it may not be successful in identifying these opportunities.
Investments or acquisitions that it completes may not prove to be successful or even if successful may
not initially generate income, or may generate income on an irregular basis or over a long time
period. Accordingly BBX Capital’s results of operations may vary significantly on a quarterly basis and
from year to year. Acquisitions may result in additional risks and may have a material adverse effect on
BBX Capital’s results of operations. Acquisitions entail numerous risks, including:
·
·
·
·
Difficulties in integrating and assimilating acquired management and operations;
Risks associated with achieving profitability;
The incurrence of significant due diligence expenses relating to acquisitions that are not
completed;
Unforeseen expenses and losses;
14
·
·
·
Risks associated with entering new markets in which it has no or limited prior
experience;
The potential loss of key employees or founders of acquired organizations; and
Risks associated with transferred assets and liabilities.
BBX Capital may not be able to acquire or profitably manage additional businesses, or to
integrate successfully any acquired businesses, including Renin and the businesses BBX Sweet
Holdings acquired, without substantial costs, delays or other operational or financial difficulties,
including difficulties in integrating information systems and personnel and establishing control
environment processes across acquired businesses. The failure to do so could have a material adverse
effect on its business, financial condition and results of operations. In addition, to the extent that
operating businesses are acquired outside the United States or the State of Florida, there will be
additional risks related to compliance with foreign regulations and laws including tax laws, labor laws,
currency fluctuations and geography economic conditions.
In addition, BBX Capital faces competition in making investments or acquisitions which could
increase the costs associated with the investment or acquisition. Further, investments or acquisitions
may rely on additional debt or equity financing. The issuance of debt will result in additional leverage
which could limit its operating flexibility, and the issuance of equity could result in additional dilution
t o its shareholders. In addition, such financing could consist of equity securities which have rights,
preferences or privileges senior to BBX Capital’s Class A Common Stock.
If BBX Capital requires additional financing in the future, the financing may not be available
when needed or on favorable terms, if at all. Additionally, shareholder approval will not be sought in
connection with any investments or acquisitions unless required by law or regulation.
Some of BBX Capital’s operations are through unconsolidated joint ventures with unaffiliated third
parties and BBX Capital may be adversely impacted by a joint venture partner’s failure to fulfill its
obligations.
By entering into joint ventures, BBX Capital can reduce the amount invest ed in the ownership
and development of real estate properties. However, joint venture partners may become financially
unable or unwilling to fulfill their obligations under the joint venture agreements. Most joint ventures
borrow money to help finance their activities, and although recourse on the loans is generally limited to
the managing members, joint ventures and their properties, BBX Capital has in some cases and may in
the future provide ongoing financial support or guarantees. If joint venture partners do not meet their
obligations to the joint venture, BBX Capital may be required to make significant expenditures which
may have an adverse effect on its operating results or financial condition.
Investments in real estate developments directly or through joint ventures expose it to market and
economic risks inherent in the real estate construction and development industry.
The real estate construction and development industry is highly competitive and subject to
numerous risks which in many cases are beyond management’s control. The success of BBX
Capital’s investments in real estate developments is dependent on many factors, including:
·
·
·
·
·
·
·
·
·
·
Demand for or oversupply of new homes, rental apartments and commercial real estate;
Demand for commercial real estate tenants;
Real estate market values;
Changes in capitalization rates impacting real estate values;
Inventory of foreclosed homes negatively impacting selling prices;
Availability and reasonable pricing of skilled labor;
Availability and reasonable pricing of construction materials such as lumber, framing,
concrete and other building materials;
Changes in laws and regulations for new construction and land entitlements, including
environmental and zoning laws and regulations;
Natural disasters and severe weather conditions increasing costs, delaying construction,
causing uninsured losses or reducing demand for new homes;
Availability and cost of mortgage financing for potential purchasers;
15
· Mortgage loan interest rates;
·
Availability, delays and costs associated with obtaining permits, approvals or licenses
necessary to develop property;
Construction defects and product liability claims and;
General economic conditions.
·
·
Any of these factors could give rise to delays in the start or completion of a project, or increase
the cost of developing a project, or could result in reduced prices and values for BBX Capital’s
developments, including developments underlying its joint venture investments.
A significant portion of BBX Capital’s assets are located in Florida and economic conditions in the
Florida real estate market could adversely affect, BBX Capital’s earnings and financial condition.
The legacy assets retained by BBX Capital in the BB&T Transaction and the real estate
investments made by BBX Capital are primarily in the Florida market, and adverse changes to the
Florida economy or the real estate market may negatively impact BBX Capital’s earnings and financial
condition. BBX Capital’s business, the primary source of repayment for loans and the real estate
collateralizing loans and real estate acquired through foreclosure or settlements with borrowers and its
investments in real estate joint ventures are primarily concentrated in Florida. As a result, BBX Capital
is exposed to geographic risks of high unemployment rates, declines in the housing industry and
declines in the real estate market in Florida. Adverse changes in laws and regulations in Florida would
have a negative impact on BBX Capital’s revenues, financial condition and business. Declines in the
Florida housing markets may negatively impact the credit performance of BBX Capital’s loans and
result in significant asset impairments. Further, the State of Florida is subject to the risks of natural
disasters such as tropical storms and hurricanes, which may disrupt BBX Capital’s operations, adversely
impact the ability of its borrowers to timely repay their loans, adversely impact the value of any
collateral securing loans and BBX Capital’s portfolio of real estate (both held-for-sale and held-for-
investment), or otherwise have an adverse effect on BBX Capital’s results of operations. The severity
and impact of tropical storms, hurricanes and other weather related events are unpredictable.
An increase in BBX Capital’s allowance for loan losses will result in reduced earnings.
BBX Capital continues to be exposed to the risk that borrowers will be unable to repay their
loans according to their terms and that any collateral securing the payment of these loans will not be
sufficient to assure full repayment. Management evaluates the collectability of the loan portfolio and
provides an allowance for loan losses that it believes is adequate based upon such factors as:
·
·
·
·
·
the risk characteristics of various classifications of loans;
previous loan loss experience;
delinquency trends;
estimated fair value of the collateral; and
current economic conditions.
Many of these factors are difficult to predict or estimate accurately, particularly in a changing
economic environment. The process of determining the estimated losses inherent in the loan portfolio
requires subjective and complex judgments and the level of uncertainty concerning economic conditions
may adversely affect the ability to estimate the losses which may be incurred in the loan portfolio. If
such evaluation is incorrect and borrowers’ defaults result in losses exceeding the portion of the
allowance for loan losses allocated to those loans, or if perceived adverse trends requires significant
increases in the allowance for loan losses in the future, BBX Capital’s earnings could be significantly
and adversely affected.
Non-accrual loans take significant time to resolve and adversely affect BBX Capital’s results of
operations and financial condition, and could result in further losses in the future.
At December 31, 2015, non-accrual loans totaled approximately $17.4 million or 72% of BBX
Capital’s total loan portfolio. Non-accrual loans adversely affect net income through foreclosure costs,
operating expenses and
16
taxes. Until these loans are monetized, BBX Capital may incur additional losses relating to these
non-accrual loans. BBX Capital records interest income on non-accrual loans on a cash basis. When
BBX Capital receives the collateral in foreclosures or similar proceedings, BBX Capital is required to
mark the related collateral to the then fair market value, generally based on appraisals of the property.
These loans also increase BBX Capital’s risk profile, and increases in the level of non-accrual loans
adversely affect BBX Capital’s results of operations and financial condition. While BBX Capital seeks
to manage non-accrual loans, decreases in the value of these loans or deterioration in the financial
condition of borrowers, which is often impacted by economic and market conditions beyond BBX
Capital’s control, could adversely affect BBX Capital’s business, results of operations and financial
condition. In addition, the resolution of non-accrual loans requires significant commitments of
management time.
BBX Capital’s consumer loan portfolio is concentrated in home equity loans collateralized by
properties located in South Florida.
Financial institutions and other lenders have tightened underwriting standards which has
limited the ability of borrowers to refinance. The majority of BBX Capital’s home equity loans are
residential second mortgages that exhibit higher loss severity than residential first mortgages. If home
prices decline, BBX Capital may experience higher credit losses from this loan portfolio. Since the
collateral for this portfolio consists primarily of second mortgages, it is unlikely that BBX Capital will
be successful in recovering all or any portion of BBX Capital’s loan proceeds in the event of a default
unless BBX Capital is prepared to repay the first mortgage and such repayment and the costs associated
with a foreclosure are justified by the value of the property.
The cost and outcome of pending legal proceedings may impact BBX Capital’s results of operations.
BBX Capital is involved in ongoing litigation which has resulted in significant selling, general
and administrative expenses relating to legal and other professional fees. Pending proceedings include
litigation brought by the SEC, litigation arising out of workouts and foreclosures, and legal proceedings
associated with BankAtlantic’s tax certificate business. As discussed under Item 3. Legal Proceeding s,
the jury in the SEC action found that BBX Capital and BBX Capital’s Chairman and Chief Executive
Officer, Alan B. Levan had engaged in an act of fraud or deceit toward shareholders or prospective
investors by making materially false statements knowingly or with severe recklessness (1) with respect
to three statements in a July 25, 2007 conference call and (2) failing to classify certain loans as held-for
sale in the 2007 Annual Report on Form 10-K. The jury also found that Mr. Levan made or caused to
be made false statements to the independent accountants regarding the held for sale issue. BBX Capital
and Mr. Levan have appealed the adverse judgment to the Eleventh Circuit Court of Appeals. While the
results of appellate review are uncertain legal and related costs are being incurred in connection with
the appeal. BBX Capital received legal fee and cost reimbursements from its insurance carrier in
connection with the SEC action of approximately $5.8 million as of December 31, 2015 and the
insurance carrier has indicated it may seek reimbursement for costs, charges and expenses advanced in
connection with this matter. If BBX Capital is required to reimburse the insurance carrier, such
reimbursements would adversely impact BBX Capital’s financial condition and results of operations.
See Item 3. Legal Proceedings.
Adverse market conditions may affect BBX Capital’s business and results of operations.
BBX Capital’s financial condition and results of operations may be adversely impacted as a
result of any downturn in the U.S. housing and commercial real estate markets and general economic
conditions. Negative market and economic developments may cause increases in delinquencies and
default rates of BBX Capital’s loans and may impact charge-offs and provisions for loan losses and the
value of BBX Capital’s real estate and other real estate related assets.
Renin sales are concentrated with two significant customers and there is significant competition in
the industry.
A significant amount of Renin’s sales are to big-box home centers. These home centers in
many instances have significant negotiating leverage with their vendors, and are able to affect the prices
Renin receives for its products and the terms and conditions on which Renin conducts its business with
them. These home centers may also reduce the number of vendors they purchase from or make
significant changes in their volume of purchases. Although homebuilders, dealers and other retailers
represent other channels of distribution for Renin’s products, the
17
loss of a home center customer or reduced sales volume from any of these home centers would have a
material adverse effect on Renin’s business. Further, Renin has substantial competition from overseas
manufacturers of products similar to those sold by Renin.
A significant portion of Renin’s business relies on home improvement and new home construction
activity, both of which are cyclical and outside of management’s control.
A significant portion of Renin’s business in Canada and the United States is dependent on the
levels of home improvement activity, including spending on repair and remodeling projects, and new
home construction activity. Macroeconomic conditions including consumer confidence levels,
fluctuations in home prices, unemployment and underemployment levels, interest rates, regulatory
initiatives, and the availability of home equity loans and mortgage financing affect both discretionary
spending on home improvement projects as well as new home construction activity. Adverse changes in
these factors or uncertainty regarding these macroeconomic conditions could result in a decline in
spending on home improvement projects and a decline in demand for new home construction, both of
which could adversely affect Renin’s results of operations.
The operating results of Renin and BBX Sweet Holdings would be negatively impacted if they
experience increased commodity costs or a limited availability of commodities.
BBX Capital’s operating businesses purchase various commodities to manufacture products,
including steel, aluminum, glass and mirror in the case of Renin, and sugar and cocoa in the case of
BBX Sweet Holdings. Fluctuations in the availability and prices of these commodities could increase
the cost to manufacture products. Further, increases in energy costs could increase production costs as
well as transportation costs, each of which could negatively affect these businesses operating
results. Renin’s and BBX Sweet Holdings’ existing arrangements with customers, competitive
considerations and the relative negotiating power and resistance of home center customers and big-box
retailers to price increases make it difficult to increase selling prices to absorb increased production
costs. If Renin and BBX Sweet Holdings are not able to increase the prices of its products or achieve
other cost savings or productivity improvements to offset any increased commodity and production
costs, BBX Capital’s operating results could be negatively impacted.
Unexpected events, such as natural disasters, severe weather and terrorist activities may disrupt
Renin’s operations and increase its production costs.
The occurrence of one or more unexpected events, including tsunamis, hurricanes,
earthquakes, floods and other forms of severe weather or terrorist activities in countries or regions in
which Renin’s suppliers are located could adversely affect Renin’s operations and financial
performance. Natural disasters, acts or threats of war or terrorism, or other unexpected events could
result in temporary or long-term disruption in the delivery or supply of necessary raw materials and
component products from Renin’s suppliers, which would disrupt Renin’s production capabilities and
likely increase its cost of doing business.
Market demand for chocolate and candy products could decline.
BBX Sweet Holdings and its acquired businesses operate in highly competitive markets and
compete with larger companies that have greater resources. The success of these businesses is impacted
by many factors, including the following:
·
·
·
·
·
·
·
Effective retail execution;
Effective and cost efficient advertising campaigns and marketing programs;
Adequate supply of commodities at a reasonable cost;
Oversight of product safety;
Ability to sell manufactured products at competitive prices;
Response to changes in consumer preferences and tastes; and
Changes in consumer health concerns, including obesity and the consumption of certain
ingredients.
A decline in market demand for chocolate and candy products could negatively affect
operating results.
18
BBX Sweet Holdings product recall or product liability claims could have a material and adverse
effect.
Selling products for human consumption involves inherent legal and other risks, including
product contamination, spoilage, product tampering, allergens, or other adulteration. BBX Sweet
Holdings could decide or be required to destroy inventory, recall products or lose sales in connection
with contamination, tampering, adulteration or other deficiencies. These events could result in
significant losses and may damage BBX Sweet Holdings’ reputation, and discourage consumers from
buying products, or cause production and delivery disruptions which would adversely affect BBX Sweet
Holdings’ financial condition and results of operations. BBX Sweet Holdings may also incur losses if
products cause injury, illness or death. A significant product liability claim may adversely affect both
reputation and profitability, even if the claim is unsuccessful.
BBX Capital’s financial performance may adversely affect its ability to access capital and may have a
material adverse effect on its business, financial condition and results of operations.
BBX Capital’s ability to fund operations and investment opportunities may depend on its
ability to raise capital in the secondary markets and on its ability to monetize its portfolio of
non-accruing loans and foreclosed real estate. Its ability to raise additional capital will depend on,
among other things, conditions in the financial markets at the time, which are outside of BBX Capital’s
control, as well as litigation and its financial condition, results of operations and prospects. The failure
to obtain capital may have a material adverse effect on our results of operation and financial condition.
BBX Capital is controlled by BFC and its controlling shareholders, and this control position may
adversely affect the market price of BBX Capital’s Class A Common Stock.
BFC currently owns 13,321,441 shares of BBX Capital’s Class A Common Stock, representing
approximately 81% of the outstanding shares of such stock and all 195,045 outstanding shares of BBX
Capital’s Class B Common Stock representing approximately 90% of BBX Capital’s total voting power.
Additionally, Alan B. Levan and John E. Abdo, Vice Chairman of BBX Capital and BFC, collectively
beneficially own shares of BFC’s Class A Common Stock and Class B Common Stock representing
approximately 63% of BFC’s total voting power. BBX Capital’s Class A Common Stock and Class B
Common Stock vote as a single group on most matters. Accordingly, BFC, directly, and Messrs. Levan
and Abdo, indirectly through BFC, are in a position to control BBX Capital, elect BBX Capital’s board
of directors and significantly influence the outcome of any shareholder vote. This control position may
have an adverse effect on the market price of BBX Capital’s Class A Common Stock.
BFC can reduce its economic interest in BBX Capital and still maintain voting control.
BBX Capital’s Class A Common Stock and Class B Common Stock generally vote together as
a single class, with the Class A Common Stock possessing a fixed 53% of the aggregate voting power
of BBX Capital, and the Class B Common Stock possessing a fixed 47% of such aggregate voting
power. BBX Capital’s Class B Common Stock currently represents less than 1% of BBX Capital’s total
common equity and 47% of BBX Capital’s total voting power. As a result, the voting power of BBX
Capital’s Class B Common Stock does not bear a direct relationship to the economic interest
represented by the shares.
Any issuance of shares of Class A Common Stock will further dilute the relative economic
interest of the Class B Common Stock, but will not decrease the voting power represented by the Class
B Common Stock. Further, BBX Capital’s Restated Articles of Incorporation provide that these relative
voting percentages will remain fixed until such time as BFC and its affiliates own less than 97,253
shares of the Class B Common Stock, which is approximately 50% of the number of shares of Class B
Common Stock that BFC now owns, even if additional shares of Class A Common Stock are issued.
Therefore, BFC may sell up to approximately 50% of its shares of Class B Common Stock (after
converting those shares to shares of Class A Common Stock), and significantly reduce its economic
interest in BBX Capital, while still maintaining its voting power. If BFC were to take this action, it
would widen the disparity between the equity interest represented by the Class B Common Stock and its
voting power. Any conversion of shares of Class B Common Stock into shares of Class A Common
Stock would further dilute the voting interests of the holders of the Class A Common Stock.
19
Provisions in BBX Capital’s Restated Articles of Incorporation and Amended and Restated Bylaws,
and recently adopted shareholder rights plan, may make it difficult for a third party to acquire BBX
Capital and could depress the price of BBX Capital’s Class A Common Stock.
BBX Capital’s Restated Articles of Incorporation and Amended and Restated Bylaws contain
provisions that could delay, defer or prevent a change of control of BBX Capital or its management.
These provisions could make it more difficult for shareholders to elect directors and take other
corporate actions. As a result, these provisions could limit the price that investors are willing to pay in
the future for shares of BBX Capital’s Class A Common Stock. These provisions include:
·
·
·
the provisions in the Restated Articles of Incorporation regarding the voting rights of Class B
Common Stock;
the authority of the board of directors to issue additional shares of common or preferred stock
and to fix the relative rights and preferences of the preferred stock without additional
shareholder approval; and
advance notice procedures to be complied with by shareholders in order to make shareholder
proposals or nominate directors.
In addition, on February 7, 2013, BBX Capital adopted a shareholder rights plan which is
designed to preserve certain tax benefits available to BBX Capital. However, because the rights plan
provides a deterrent to investors from acquiring a 5% or greater ownership interest in Class A Common
Stock, it may have an anti-takeover effect.
The loss of key personnel or the failure to attract and retain highly qualified personnel could
adversely affect BBX Capital’s operations.
BBX Capital’s performance is largely dependent on the talents and efforts of skilled
individuals. BBX Capital’s business operations could be adversely affected if BBX Capital is unable to
retain and motivate BBX Capital’s existing employees and attract new employees as needed. In
addition, as previously described, the jury in the SEC action found that BBX Capital and Alan B. Levan
committed violations of federal securities laws. While BBX Capital and Mr. Levan appealed the adverse
judgment to the Eleventh Circuit Court of Appeals, the results of appellate review are uncertain . Mr.
Alan Levan resigned as BBX Capital’s Chairman and Chief Executive Officer on December 23, 2015.
BBX Capital believes that Mr. Abdo, who serves as a director and Vice Chairman of BBX Capital and
Jarett Levan, the Board appointed acting Chairman and Chief Executive Officer will mitigate the loss of
Mr. Alan Levan as Chairman and Chief Executive Officer.
Information technology failures and data security breaches could harm BBX Capital’s business.
BBX Capital relies on information technology (IT) systems, including Internet sites, data
hosting facilities and other hardware and platforms, some of which are hosted by third parties. These IT
systems, like those of most companies, may be vulnerable to a variety of interruptions, including, but not
limited to, natural disasters, telecommunications failures, hackers, and other security issues. Moreover,
BBX Capital’s computer systems, like those of most companies, are subjected to computer viruses or
other malicious codes, and to cyber or phishing-attacks. Although administrative and technical controls
have been implemented which attempt to minimize the risk of cyber incidents, computer intrusion
efforts are becoming increasingly sophisticated, and any enhanced controls installed might be breached.
If the IT systems cease to function properly, BBX Capital could suffer interruptions in its operations. If
the cyber-security is breached, unauthorized persons may gain access to proprietary or confidential
information, including information about borrowers, employees or investments. This could require
BBX Capital to incur significant costs to repair or restore the security of its systems.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
20
ITEM 2. PROPERTIES
BBX Capital leases its principal executive offices which are located at 401 East Las Olas
Blvd, Fort Lauderdale, Florida, 33301. The office lease expiration date is June 30, 2021. BBX Capital
has the right to renew the terms of the lease for two additional five year terms.
Renin leases its executive offices located at 110 Walker Drive, Brampton, Ontario. The office
lease expiration date is December 31, 2024. Renin leases two manufacturing facilities in the United
States and Canada which have lease expiration dates of December 31, 2022 and December 31, 2024.
Hoffman’s owns its chocolate manufacturing facility located at 5190 Lake Worth Road,
Greenacres, Florida. The facility is comprised of a 4,000 square foot office and store front area and a
11,526 square foot manufacturing area. Hoffman’s also owns two warehouse facilities in Riviera Beach,
Florida and leases a warehouse in Greenacres, Florida which expires June 30, 2017.
Hoffman’s leases three of its retail locations in West Palm Beach, Florida with lease expiration
dates ranging from March 5, 2017 to December 31, 2019. Hoffman’s leases four retail locations in
Broward County, Florida with lease expiration dates ranging from June 30, 2019 to December 31, 2020.
Williams and Bennett leases its chocolate manufacturing facility located at 2045 High Ridge
Road, Boynton Beach, Florida with an expiration date of January 31, 2020. The facility is comprised of
30,000 square feet of office, manufacturing, warehousing and food storage areas.
Anastasia leases its chocolate manufacturing facility located at 1815 Cypress Lake Drive,
Orlando, Florida with an expiration date of September 30, 2019 with three additional option terms of
five years each commencing as of the expiration date. The facility is comprised of 80,000 square feet of
office, manufacturing, warehousing and food storage areas.
Kencraft leases a manufacturing, storage and distribution facility located at 680 South 500
East, American Fork, Utah, with a lease expiration date of May 31, 2023.
21
ITEM 3. LEGAL PROCEEDINGS
Securities and Exchange Commission v. BankAtlantic Bancorp, Inc. and Alan B. Levan, Case No.
12-60082-CV-SCOLA, United States District Court, Southern District of Florida
On January 18, 2012, the SEC brought an action in the United States District Court for the
Southern District of Florida against BBX Capital and Alan B. Levan, BBX Capital’s Chairman and
Chief Executive Officer, alleging that they violated securities laws by not timely disclosing known
adverse trends in BBX Capital’s commercial real estate loans, selectively disclosing problem loans and
engaging in improper accounting treatment of certain specific loans which may have resulted in a
material understatement of its net loss in BBX Capital’s Annual Report on Form 10-K for the year
ended December 31, 2007. Further, the complaint alleged that Mr. Alan B. Levan intentionally misled
investors in related earnings calls. The Court denied summary judgment as to most issues, but granted
the SEC’s motion for partial summary judgment that certain statements in one of Alan Levan’s answers
on a July 25, 2007 investor conference call were false.
On December 15, 2014, after a six-week trial, the jury found in favor of BBX Capital and Alan
B. Levan with respect to the disclosures made during an April 2007 earnings conference call and in
BBX Capital’s quarterly reports on Form 10-Q for the 2007 first and second quarters, but found that
they had engaged in an act of fraud or deceit toward shareholders or prospective investors by making
materially false statements knowingly or with severe recklessness (1) with respect to three statements in
the July 25, 2007 conference call referenced above, and (2) failing to classify certain loans as held-for
sale in the 2007 Annual Report on Form 10-K. The jury also found that Mr. Levan made or caused to
be made false statements to the independent accountants regarding the held for sale issue.
The SEC sought a final judgment: (i) permanently barring Alan B. Levan from serving as an
officer or director of any SEC reporting company; (ii) imposing civil penalties of $5.2 million against
BBX Capital and $1.56 million against Alan B. Levan; and (iii) permanently restraining BBX Capital
and Alan B. Levan from violating securities laws. On September 24, 2015, the court entered a final
judgment denying the SEC’s request for a permanent bar from Mr. Levan serving as an officer or
director of any public company, but instead ordered Mr. Levan barred from serving as an officer or
director of any public company for a period of two years commencing on December 23, 2015. As a
result of the court's decision, on December 23, 2015 Mr. Levan resigned as Chairman and Chief
Executive Officer of BBX Capital, as Chairman, Chief Executive Officer and President of BFC, and as
a director of BBX Capital and BFC. The court also imposed monetary penalties against BBX Capital
in the amount of $4,550,000 and monetary penalties against Mr. Levan in the amount of
$1,300,000. BBX Capital and Mr. Levan are appealing the final judgment to the Eleventh Circuit Court
of Appeals.
On January 14, 2015, BBX Capital received notice from its insurance carrier that, based upon
its interpretation of the jury verdict in this action, the carrier does not believe it is obligated to advance
further payments towards fees and costs incurred in connection with this action and that it reserves its
right to obtain reimbursement of the amounts it previously advanced with respect to this action. BBX
Capital has received legal fee and cost reimbursements from its insurance carrier in connection with this
action of approximately $5.8 million.
In re: New Jersey Tax Sales Certificates Antitrust Litigation v. BBX Capital Corporation f/k/a
BankAtlantic Bancorp, Inc., Fidelity Tax, LLC, Gary I. Branse, Michael Deluca and BB&T
Corporation, and multiple other individuals and entities who purchased New Jersey tax certificates
between 1998 to February 2009, Case No.12-CV-01893-MAS-TJB, United States District Court,
District of New Jersey (Trenton)
On December 21, 2012, plaintiffs filed an Amended Complaint in an existing purported class
action filed in Federal District Court in New Jersey adding BBX Capital and Fidelity Tax, LLC, a
wholly owned subsidiary of CAM, among others as defendants. The class action complaint was brought
on behalf of a class defined as “all persons who owned real property in the State of New Jersey and who
had a Tax Certificate issued with respect to their property that was purchased by a Defendant during the
Class Period at a public auction in the State of New Jersey at an interest rate above 0%.” Plaintiffs
alleged that beginning in January 1998 and at least through February
22
2009, the Defendants were part of a statewide conspiracy to manipulate interest rates associated with tax
certificates sold at public auction from at least January 1, 1998, through February 28, 2009. During this
period, Fidelity Tax was a subsidiary of BankAtlantic. Fidelity Tax was contributed to CAM in
connection with the sale of BankAtlantic in the BB&T Transaction. While BBX Capital believed the
claims to be without merit, BBX Capital reached an agreement to settle the action, subject to court
approval. The settlement has been preliminarily approved by the court and the final approval hearing is
currently scheduled for the second quarter of 2016.
ITEM 4. Mine Safety Disclosures.
Not Applicable
23
ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
PART II
Market Information
BBX Capital’s Class A Common Stock is traded on the New York Stock Exchange under the
symbol “BBX.” BFC Financial Corporation (“BFC”) is the sole holder of BBX Capital’s Class B
Common Stock and there is no trading market for BBX Capital’s Class B Common Stock. The Class B
Common Stock may only be owned by BFC or its affiliates and is convertible into Class A Common
Stock on a share for share basis.
On March 8, 2016, there were approximately 236 record holders and 16,199,145 shares of the
Class A Common Stock issued and outstanding. In addition, there were 195,045 shares of Class B
Common Stock outstanding at March 8, 2016.
The following table sets forth, for the periods indicated, the high and low sale prices of the
Class A Common Stock as reported by the New York Stock Exchange:
Calendar Year 2014
First quarter
Second quarter
Third quarter
Fourth quarter
For the year ended December 31, 2014
Calendar Year 2015
First quarter
Second quarter
Third quarter
Fourth quarter
For the year ended December 31, 2015
Dividends
$
$
Class A Common Stock
Low
High
22.54 $
20.50
19.95
18.50
22.54
18.79 $
19.18
16.56
18.44
19.18
14.18
17.06
17.25
11.80
11.80
13.26
15.39
15.32
14.45
13.26
There were no cash dividends paid by BBX Capital during the years ended December 31,
2015, and 2014. While BBX Capital currently expects to continue to utilize its available cash to
pursue opportunities in accordance with its business strategies, it may consider the payment of
dividends in the future depending upon its results of operations, liquidity needs and other factors.
Issuer Purchases of Equity Securities
In September 2014 BBX Capital’s Board of Directors approved a share repurchase program
which authorizes the repurchase of up to $20.0 million of Class A Common Stock. BBX Capital
announced the share repurchase program on November 10, 2014 and have yet to make any repurchases
under the program.
24
Securities Available Under Equity Compensation Plan
The following table lists all securities authorized for issuance under the Company’s equ ity
compensation plans at December 31, 2015:
Number of securities
to
be issued upon
exercise
Plan category
of outstanding options
Number of securities
remaining available
for
future issuance under
equity compensation
plans
Weighted-average
exercise price of
excluding outstanding
outstanding
options
options
Equity compensation plans
approved by security
holders
7,016 $
108.24
177,410
Total
7,016 $
108.24
177,410
In March 2015 BBX Capital’s Board of Directors approved an amendment to both the BBX
Capital Corporation 2014 Stock Incentive Plan and the 2005 Restricted Stock and Option Plan. The
amendment to each Plan authorizes the Compensation Committee to issue restricted stock awards in the
form of restricted stock units rather than just restricted stock. Following the amendment, BBX Capital
and its executive officers agreed to retire any shares of BBX Capital’s outstanding Class A restricted
common stock awards (“RSAs”) previously issued in the name of the Compensation Committee and
subject to forfeiture until vested in exchange for BBX Capital issuing to the executive officers restricted
Class A common stock units (“RSUs”) resulting in the retirement of 1,391,282 Class A common shares.
Pursuant to the terms of the RSUs, BBX Capital promises to issue Class A common stock only at the
time the underlying units vest. The RSUs issued have the same terms, and cover the same number of
underlying shares of Class A common stock, as the RSAs that were retired.
Shareholder Return Performance Graph
Set forth below is a graph comparing the cumulative total returns (assuming reinvestment of
dividends) for the Class A common stock, the Standard and Poor’s 500 Stock Index and the Standard
and Poor’s 500 Small-Cap Stock Index and assumes $100 is invested on December 31, 2010.
BBX Capital Corporation
Standard and Poor's Small-Cap
Stock Index
Standard and Poor's 500 Stock
Index
12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015
272.17
116.52
286.09
271.30
100.00
58.78
100.00
99.752
114.06
159.38
166.58
160.81
100.00
99.997
113.40
146.97
163.71
162.52
25
BBX Capital has focused on repositioning its business since the sale of BankAtlantic to BB&T
in July 2012, and BBX Capital is not able to identify a group of peer companies or industry or line-of-
business index which it believes is comparable to BBX Capital and its current operations. Accordingly,
the Standard and Poor’s Small-Cap Stock Index was selected based on BBX Capital’s market
capitalization.
The performance graph should not be deemed “filed” for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference into
any filing of BBX Capital under the Securities Act of 1933, as amended, or the Exchange Act, except as
shall be expressly set forth by specific reference in such filing.
26
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following tables present a summary of selected historical consolidated financial data as of
and for the periods indicated below. The selected historical consolidated statements of operations for
fiscal years 2015, 2014 and 2013 and the selected consolidated statements of financial condition as of
December 31, 2015 and 2014 are derived from BBX Capital’s consolidated financial statements
included in Item 8 of this report. The selected historical consolidated statement s of operations for fiscal
years 2012 and 2011 and the selected consolidated statements of financial condition as of December 31,
2013, 2012 and 2011 are derived from BBX Capital’s previously filed audited consolidated financial
statements and have been updated to conform to the current presentation.
(In thousands except per share data)
Statements of Operations Data:
Total revenues
Recoveries from (provision for) for loan losses
Asset impairments, net
Other costs and expenses
Total costs and expenses
Equity in earnings of Woodbridge Holdings, LLC
Equity in losses of unconsolidated real estate joint
ventures
Income (loss) from continuing operations before
income taxes
Provision (benefit) for income taxes (5)
Income (loss) from continuing operations
Discontinued operations, net of tax (4)
Net income (loss)
Less: net (earnings) loss attributable to noncontrolling
interest
Net income (loss) attributable to BBX Capital
Corporation
(In thousands except per share data)
Per Common Share Data (1):
Basic earnings (loss) per share (5)(6)
Diluted earnings (loss) per share (5)(6)
Book value per share (2)
Weighted Average Number of Common Shares
Outstanding:
Basic weighted average number of common shares
outstanding
Diluted weighted average number of common shares
outstanding
$
$
$
$
$
27
For the Years Ended December 31,
2013
2012
2014
2015
2011
131,483
13,457
(287)
92,645
7,155
(7,015)
(134,780) (116,305)
(121,610) (116,165)
25,282
14,974
48,658
43,865
(4,708)
(53,596)
(14,439)
13,461
33,285
(2,405)
(9,931)
(68,169)
(80,505)
-
45,682
(37,874)
(14,666)
(72,134)
(124,674)
-
(1,565)
(559)
-
-
-
23,282
(245)
23,527
-
23,527
1,203
(3,101)
4,304
-
4,304
47,680
20
47,660
-
47,660
(47,220)
(18,744)
(28,476)
264,238
235,762
(78,992)
(19,480)
(59,512)
30,771
(28,741)
(1,753)
391
179
-
(336)
21,774
4,695
47,839
235,762
(29,077)
For the Years Ended December 31,
2013
2014
2012
2015
2011
1.34
1.30
20.42
0.29
0.28
19.16
3.02
2.94
18.93
15.00
15.00
15.24
(2.04)
(2.04)
(1.08)
16,229
16,043
15,843
15,720
14,227
16,805
16,678
16,278
15,720
14,227
(In thousands except share and per share data)
Statements of Financial Condition Data (at
period end):
Loans held-for-sale
Loans receivable, net of allowance for loan losses
Total assets
Deposits
Other borrowings (3)
Total equity
2015
As of December 31,
2013
2014
2012
2011
$
21,354
34,035
393,541
-
21,421
335,979
35,423
26,844
392,936
-
42,021
311,280
53,846
72,226
431,147
-
99,213
303,566
24,748
55,601
292,562 2,448,203
470,703 3,678,119
- 3,280,083
359,114
(16,926)
207,178
240,324
1. No cash dividends have been declared or paid during each of the years in the five year period ended December
2.
31, 2015.
The denominator of book value per share for all periods was computed by combining the number of Class A and
Class B shares outstanding at year end.
3. Other borrowings consisted of notes payable for the year ended December 31, 2015. Other borrowings
consisted of BB&T’s preferred interest in FAR, notes payable to related parties and notes payable as of
December 31, 2014, 2013 and 2012. Other borrowings were primarily FHLB advances, subordinated
debentures, and junior subordinated debentures as of December 31, 2011.
4. Discontinued operations include the results of operations of BankAtlantic’s Community Banking, Investments,
Tax Certificates and Capital Services reporting units for each of the years in the two year per period ended
December 31, 2012.
5. During each of the years in the five year period ended December 31, 201 5, BBX Capital maintained a deferred
tax valuation allowance for its entire net deferred tax asset. During the years ended December 31, 2015 and
2014, BBX Capital recognized a tax benefit of $0.3 million and $3.1 million from the reduction in the deferred
tax valuation allowance for taxable temporary differences recognized in connection with certain BBX Sweet
Holdings acquisitions. During the years ended December 31, 2012 and 2011, BBX Capital recognized a tax
benefit of $18.7 million and $19.2 million, respectively, from the reduction in the deferred tax asset valuation
allowance associated with income from discontinued operations.
For the years ended December 31, 201 2 and 2011, basic and diluted earnings per share from discontinued
operations was $ 16.81 and $2.17 per share, respectively.
6.
28
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
BBX Capital Corporation was organized under the laws of the State of Florida in 1994. BBX
Capital Corporation’s principal asset until July 31, 2012 was its ownership of BankAtlantic and its
subsidiaries. BankAtlantic was a federal savings bank headquartered in Fort Lauderdale, Florida and
provided traditional retail banking services and a wide range of commercial banking products and
related financial services through a broad network of community branches located in Florida. On July
31, 2012, BBX Capital completed the sale to BB&T of all of the issued and outstanding shares of
capital stock of BankAtlantic (the “BB&T Transaction”).
BBX Capital’s activities subsequent to the consummation of the BB&T Transaction involve
the ownership, acquisition, investment and management of real estate and real estate development
projects as well as its investments in operating businesses.
BBX Capital’s investments in real estate joint ventures generally were arrangements with
developers for residential and commercial development projects in which BBX Capital has funded its
equity investment in joint ventures through cash investments or by contributing real estate properties.
Consolidated Results of Operations
BBX Capital reports its consolidated results of operations in three reportable segments, BBX ,
Renin and Sweet Holdings.
Income (loss) from each of BBX Capital’s reportable segments was as follows (in thousands):
BBX
Renin
Sweet Holdings
Reconciling item (1)
Income before income taxes
(Benefit) provision for income taxes
Net income
$
$
For the Years Ended December 31,
2015
2014
2013
33,334
(2,058)
(8,767)
773
23,282
(245)
23,527
3,224
(2,044)
23
-
1,203
(3,101)
4,304
48,659
(941)
(38)
-
47,680
20
47,660
(1)
Represents capitalized interest on real estate development and joint venture activities in excess of interest
expense incurred in the BBX reportable segment.
Overview
BBX Reportable Segment
The increase in BBX reportable segment income for the year ended December 31, 2015
compared to the same 2014 period resulted primarily from a $25.6 million increase in net gains on the
sales of assets, $6.3 million of higher recoveries from loan losses and a $6.7 million reduction in asset
impairments. The above improvements in BBX reportable segment income were partially offset by
$10.3 million of lower equity in earnings from BBX Capital’s investment in Woodbridge.
Gains on sales of assets for the year ended December 31, 2015 were $31.1 million compared to
$5.5 million during the comparable 2014 period. The gains on the sales of assets during the year ended
December 31,
29
2015 resulted primarily from the sales of four properties. Two of the properties were located in West
Palm Beach, Florida, a third property was located in the Bonterra master-planned community and the
fourth property was acquired through a loan participation and sold by the lead bank. BBX recognized
aggregate gains of $31.4 million in connection with sales of these four properties.
Recoveries for loan losses for the year ended December 31, 2015 were $13.5 million compared
to $7.2 million during the comparable 2014 period. The improvement in recoveries during 2015 was
mainly due to lower charge-offs and higher recoveries from the charged off loan portfolio. During the
year ended December 31, 2015 charge-offs were $1.0 million compared to $7.2 million during the same
2014 period.
The lower asset impairments for the year ended December 31, 2015 compared to the same
2014 period resulted primarily from $8.6 million of impairments on two student housing rental facilities
in Tallahassee, Florida during the year ended December 31, 2014 compared to a $1.8 million additional
impairment on one of the student housing rental facilities in Tallahassee, Florida during the year ended
December 31, 2015.
The $10.3 million decline in the equity in earnings of Woodbridge resulted primarily from
Woodbridge’s $36.5 million settlement of litigation brought by Bluegreen’s former shareholders related
to Woodbridge’s April 2013 acquisition of Bluegreen as described in further detail under “Liquidity and
Capital Resources”. As BBX has a 46% ownership interest in Woodbridge, the $36.5 million
settlement reduced BBX’s equity in earnings of Woodbridge by $16.8 million for the year ended
December 31, 2015. The reduction in BBX’s equity in earnings of Woodbridge as a consequence of the
litigation settlement was partially offset by improved earnings at Bluegreen. Bluegreen’s net income
attributable to shareholder was $68.0 million for the year ended December 31, 2015 compared to $54.5
million during the comparable 2014 period.
The decline in BBX reportable segment income for the year ended December 31, 2014
compared to the same 2013 period resulted primarily from $36.7 million of lower recoveries from loan
losses and a $18.9 million decline in interest income recoveries associated with the repayment of non-
accrual loans. The above declines in BBX reportable segment income were partially offset by $11.8
million of higher equity earnings from BBX Capital’s investment in Woodbridge and lower interest
expense associated with BB&T’s preferred interest in FAR.
Recoveries from loan losses and interest income recognized on non-accrual loans were $7.2
million and $5.4 million, respectively, for the year ended December 31, 2014 compared to $43.9
million and $24.3 million during the same 2013 period, respectively. T h e significant loan loss
recoveries and interest income for the year ended December 31, 2013 resulted primarily from a
settlement with a borrower which resulted in reversals of previously charged-off commercial loans of
$20.1 million and interest income recoveries of $13.6 million.
BBX Capital’s equity in earnings of Woodbridge was $25.3 million for the year ended
December 31, 2014 compared to $13.5 million during the same 2013 period. Equity in earnings of
Woodbridge for the year ended December 31, 2013 were from the date of the investment (April 2,
2013) through December 31, 2013.
Renin Reportable Segment
Renin’s reportable segment loss during the year ended December 31, 2015 resulted primarily
from $1.0 million of foreign exchange losses and expenses associated with the hiring of additional sales
representatives and advertising expenditures for sales initiatives during 2015 as well as consulting
expenditures to achieve product development and manufacturing efficiencies. Renin’s new members of
management include its CEO hired in June 2015 and a Vice President of Sales hired in September
2015. Renin incurred severance costs associated with the reorganization of its marketing and corporate
personnel during the year ended December 31, 2015. Renin improved its gross margin and gross margin
percentage for the year ended December 31, 2015 compared to the same 2014 period as a greater
proportion of Renin’s trade sales were higher margin hardware products. Renin’s interest expense was
lower during the year ended December 31, 2015 compared to the same 2014 period as Renin refinanced
its notes payable in June 2014 at lower interest rates.
30
Renin’s reportable segment loss during the year ended December 31, 2014 resulted primarily
from a $0.7 million loss on foreign currency exchange and $0.9 million of costs associated with the
consolidation of manufacturing facilities in Canada.
Renin’s reportable segment loss for the two months ended December 31, 2013 included $1.0
million of acquisition related costs offset by a $1.0 million bargain purchase gain. Management
believes that it was able to acquire Renin for a bargain purchase gain because Renin Corp. was a
distressed company.
Sweet Holdings Reportable Segment
The higher Sweet Holdings reportable segment loss for the year ended December 31, 2015
compared to the same 2014 period resulted primarily from increases in selling, general and
administrative expenses, inventory markdowns as well as lower acquisition bargain purchase gains
partially offset by an increase in trade sales associated with acquired companies.
The higher selling, general and administrative expenses of $9.1 million for the year ended
December 31, 2015 compared to 2014 reflects operating expenses associated with companies acquired
and costs to integrate these companies as well as increased compensation expense related to the hiring
of industry professionals and fees to consultants. Executives hired during the first quarter of 2015
included a President for BBX Sweet Holdings and a President for Hoffman’s. Also contributing to
higher selling, general and administrative expenses were costs associated with relocating the Helen
Grace California manufacturing facilities to Kencraft’s manufacturing facilities in Utah and costs
associated with Hoffman’s retail store expansion initiatives. Hoffman’s opened one retail location
during the third quarter of 2014 as well as three retail locations during the year ended December 31,
2015 and anticipates opening additional retail locations in 2016. Included in selling, general and
administrative expenses for the year ended December 31, 2015 were $1.3 million of employee
severance expenses and costs to relocate the Helen Grace manufacturing facilities to Utah.
The gross margin was adversely affected for the year ended December 31, 2015 by $600,000
of inventory markdowns and the relocation of Helen Grace’s manufacturing facilities from California to
Utah in September 2015.
The bargain purchase gain of $254,000 for the year ended December 31, 2015 was associated
with the Kencraft acquisition and the bargain purchase gain of $1.2 million for the year ended
December 31, 2014 was associated with the Helen Grace acquisition.
Benefit for Income Taxes
The benefit for income taxes of $0.3 million for the year ended December 31, 2015 resulted
from acquisition re-measurement adjustments and a reduction in BBX Capital’s deferred tax valuation
allowance as a result of net taxable temporary differences that Sweet Holdings recognized in connection
with the Kencraft acquisition.
The $3.1 million benefit for income taxes represents the reduction in BBX Capital’s deferred
tax valuation allowance as a result of net taxable temporary differences that Sweet Holdings recognized
in connection with its 2014 acquisitions.
31
BBX Reportable Segment Results of Operations
The following table is a condensed income statement summarizing the results of operations of
the BBX reportable segment (“BBX”) (in thousands):
$
For the Years Ended
Ended December 31,
2015
2014
2013
10,286
31,092
3,887
2,585
47,850
5,422
5,527
5,516
2,533
18,998
72
-
775
815
4,773
6,296
24,337
6,728
4,161
3,375
38,601
3,397
1,774
5,807
(13,457)
287
(7,155)
7,015
(43,865)
4,708
36,250
27,925
32,751
40,497
31,582
3,403
14,974
25,282
13,461
(1,565)
33,334
88
33,246
(559)
3,224
-
3,224
-
48,659
20
48,639
$
Change
2015 vs
2014
Change
2014 vs
2013
4,864
25,565
(1,629)
52
28,852
(703)
(815)
(1,523)
(6,302)
(6,728)
3,499
(12,572)
(10,308)
(1,006)
30,110
88
30,022
(18,915)
(1,201)
1,355
(842)
(19,603)
(2,622)
(959)
489
36,710
2,307
1,169
37,094
11,821
(559)
(45,435)
(20)
(45,415)
Interest income
Net gains on sales of assets
Income from real estate operations
Other revenues
Total revenues
BB&T's priority return in FAR
distributions
Interest expense
Real estate operating expenses
Recoveries from loan losses, net
Asset impairments, net
Selling, general and administrative
expenses
Total costs and expenses
Equity in earnings of Woodbridge
Equity in losses of unconsolidated real
estate joint ventures
Income before income taxes
Provision for income taxes
BBX segment income
Interest Income
The increase in interest income for the year ended December 31, 2015 compared to 2014
reflects higher interest income recognized on a cash basis from the payoffs of nonaccrual loans partially
offset by lower interest income recognized on accruing loans associated with declining accruing loan
balances due primarily to loan repayments and loan sales. Accruing loan balances declined from $23.0
million as of December 31, 2013 to $6.7 million at December 31, 2015.
During the year ended December 31, 2015, $5.8 million of interest income was recognized on
the payoff of two commercial loans.
The decline in interest income for the year ended December 31, 2014 compared to 2013
resulted primarily from lower interest income recognized on a cash basis from the settlement of non-
accrual loans and secondarily from lower interest income recognized on accruing loans due primarily to
lower accruing loan balances.
During the year ended December 31, 2013, $13.6 million of interest income was recovered in
connection with the repayment of non-accrual loans pursuant to a settlement agreement with respect to
litigation between CAM and Daniel S. Catalfumo and certain members of his family and affiliated
entities.
32
Net Gains on the Sales of Assets
The net gains on the sales of assets during the years ended December 31, 2015, 2014 and 2013
were primarily gains on the sales of real estate properties.
Gains on the sales of assets during the year ended December 31, 2015 resulted primarily from
the sales of four properties. Two of the properties were located in West Palm Beach, Florida. One of
the properties, which was purchased by the JRG/BBX Development joint venture for $10.8 million,
was sold to a third party developer for $20.0 million. A second property, which had a $3.2 million
carrying value at the date of sale, was acquired by BBX through foreclosure and sold for $11.0 million.
A third property was located in the Bonterra master-planned community in Hialeah, Florida, had a
carrying value of $13.9 million and sold for $26.2 million. The fourth property was acquired through
foreclosure in Las Vegas, Nevada, had a carrying value of $2.6 million and sold for $6.0 million. BBX
recognized gains of $31.4 million in the aggregate in connection with these four property sales.
Included in net gains on the sales of assets during the year ended December 31, 2014 was a
$2.5 million gain on the sale of one property, the sale of first lien consumer and residential loans for a
$0.6 million gain and gains of $1.3 million on the sales of various real estate properties.
Included in net gains on the sales of assets during the year ended December 31, 2013 was a
$1.5 million gain from the sale of rental property, $0.9 million of gains associated with the sale of tax
certificates, a $1.0 million gain on the sale of a storage facility and a $0.6 million gain on the sale of a
held-for-sale commercial real estate loan.
Income from Real Estate Operations
Income from real estate operations consists of rental income from foreclosed properties.
The lower income from real estate operations during the year ended December 31, 2015
compared to the same 2014 period resulted primarily from the sales of rental properties and one
operating property during the fourth quarter of 2014.
The increase in income from real estate operations during the year ended December 31, 2014
compared to the same 2013 period reflects an increase in the number of income producing foreclosed
properties which resulted in higher rental income during 2014 compared to 2013. The additional
foreclosed properties included two student housing facilities that BBX acquired through settlements
with borrowers in September 2013 and January 2014.
Other Revenues
Other revenues during the year ended December 31, 2015 consisted mainly of $1.5 million of
rental income from a public storage operating facility that was acquired through foreclosure in April
2013, $0.4 million of office facilities revenues paid by BFC for use of its office space and $0.4 million
of management fees recognized from Sweet Holdings. The Sweet Holdings management fees were
eliminated in consolidation.
Other revenues during the year ended December 31, 2014 consisted mainly of $1.2 million of
rental income associated with a public storage operating facility, $0.6 million of income associated with
a foreclosed loan, $0.4 million of office facilities revenues from BFC and $0.2 million of management
fees from Sweet Holdings.
Other revenues during the year ended December 31, 2013 consisted mainly of $0.7 million of
rental income associated with the public storage operating facility, $0.9 million of income associated
with a foreclosed loan, $0.7 million of recoveries on loans in excess of contractual principal, $0.2
million of deposit overdraft recoveries associated with the charged off deposit overdraft portfolio
retained in the BB&T Transaction and $0.4 million of office facilities revenues from BFC.
33
BB&Ts Priority Return in FAR Distributions
BB&T’s priority return in FAR distributions during the year ended December 31, 2015, 2014
and 2013 represented the priority return paid to BB&T pursuant to its preferred membership interests in
FAR. The required priority return was set at LIBOR + 200 basis points per annum on the unpaid
preferred membership interest preference amount. The preferred membership interest preference
amount was reduced from $196.9 million as of December 31, 2012 to $72.1 million as of December 31,
2013 to $12.3 million as of December 31, 2014 and was paid in full in May 2015. FAR utilized cash
receipts primarily from loan repayments and the sales of assets to repay the preference amount and fund
the priority return.
Interest Expense
For the year ended December 31, 2015 $0.4 million of BBX reportable segment interest
expense was capitalized in connection with real estate development and joint venture activities. The
capitalized interest expense for year ended December 31, 2015 was incurred in connection with the
Woodbridge promissory note. The Woodbridge promissory note was repaid in full during September
2015.
Interest expense for the year ended December 31, 2014 resulted from $0.6 million of interest
expense recognized on the Woodbridge promissory note and $0.2 million of interest expense
recognized on the Florida Community Bank mortgage. The $8.3 million Florida Community Bank
mortgage was assumed by the Hialeah Communities joint venture in June 2014.
Interest expense for the year ended December 31, 2013 resulted from two notes payable
aggregating $10.3 million issued as of December 31, 2012. The notes were issued to two third party
participants in loans for which BBX Capital was the lead lender in connection with BBX Capital’s
acquisition of the participants’ interest in a loan and certain real estate property. One note payable in the
amount of $2.5 million was repaid in December 2013.
Real Estate Operating Expenses
Real estate operating expenses for the years ended December 31, 2015, 2014 and 2013
represent real estate holding costs, including taxes and insurance, associated with real estate acquired
through foreclosure.
The decline in real estate operating expenses for the year ended December 31, 2015 compared
to 2014 reflects the sale of properties and the transfer of properties to real estate joint ventures.
The increase in real estate operating expenses for the year ended December 31, 2014 compared
to 2013 resulted primarily from loan foreclosures.
Recoveries from Loan Losses
Changes in the allowance for loan losses were as follows (in thousands):
Allowance for Loan Losses:
Balance, beginning of period
Charge-offs
Recoveries
Recoveries from loan losses
Balance, end of period
For the Years Ended December 31,
2013
2014
2015
977
(1,037)
13,517
(13,457)
-
2,713
(7,189)
12,608
(7,155)
977
5,311
(10,867)
52,134
(43,865)
2,713
$
$
Loan charge-offs for the year ended December 31, 2015 were mainly second-lien consumer
loans.
34
Loan charge-offs for the year ended December 31, 2014 consisted of a charge-off of a $1.9
million commercial non-mortgage business loan, $2.7 million of charge-offs associated with the
transfer of performing second lien consumer loans to loans held-for-sale and $0.7 million of charge-offs
due to initial charge downs on loans past due greater than 120 days and first lien foreclosures. The
remaining charge-offs during the year ended December 31, 2014 related primarily to updated valuations
on collateral dependent loans.
Loan charge-offs during the year ended December 31, 2013 consisted primarily of consumer
and residential loan charge-offs of $3.3 million and charge-offs of $0.7 million upon the transfer of the
loans to loans held-for-sale. The remaining charge-offs reflect updated valuations on non-accrual loans
and initial charge downs on loans past due greater than 120 days.
Recoveries for the year ended December 31, 2015 related primarily to settlements on charged
off commercial loans of $5.3 million and recoveries from the charged off loan portfolio.
Recoveries for the year ended December 31, 2014 related primarily to $6.1 million of cash
collected on certain previously charged-off commercial loans and related judgments which were
transferred from BankAtlantic to CAM in connection with the BB&T Transaction, $1.6 million of
recoveries from non-accrual loan payoffs, $1.4 million of property tax refunds on a charged off
commercial land loan and a $1.9 million recovery from the transfer of a commercial land loan to real
estate held-for-investment.
Recoveries for the year ended December 31, 2013 related primarily to the repayment of non-
accrual commercial loans including two nonaccrual loans that were previously charged down by $9.5
million and the Catalfumo settlement agreement which resulted in reversals of previously charged-off
commercial real estate and commercial non-real estate loans of $10.2 million and $9.9 million,
respectively. Additionally, BBX foreclosed on a residential commercial real estate property resulting in
an $11.0 million recovery as the fair value of the collateral based on an updated valuation was greater
than the recorded investment in the loan. The remaining recoveries during the year ended December
31, 2013 related primarily to cash collected on certain previously charged-off loans and related
judgments and recoveries from foreclosures as the fair value of the underlying collateral less cost to sell
was greater than the recorded investment on certain loans.
The allowance for loan losses at December 31, 2013 consisted primarily of a $1.0 million
specific valuation allowances on two commercial non-real estate loans with an aggregate recorded
investment of $3.0 million and $1.5 million allowance on consumer loans. The allowance for loan
losses as of December 31, 2014, consisted primarily of consumer second-lien loans greater than 120
days past due and $0.1 million on commercial real estate loans. The majority of BBX’s commercial
loans receivable were collateral dependent and charged down to the fair value of the collateral less cost
to sell. There was no allowance for loan losses as of December 31, 2015 as the consumer second-lien
loans greater than 120 days past due were deemed uncollectible and charged-off.
Asset Impairments
Asset impairments during the year ended December 31, 2015 resulted primarily from valuation
allowance adjustments of $3.6 million on foreclosed real estate properties to reflect updated valuations
partially offset by recoveries of previously written down loans in connection with short sales and
payoffs of residential loans held-for-sale.
Asset impairments for the year ended December 31, 2014 were primarily the result of $8.6
million of impairments on two student housing rental facilities in Tallahassee, Florida. The
impairments reflected a decline in occupancy rates and rents per unit. The student housing impairments
were partially offset by $1.6 million of loans held-for-sale valuation allowance recoveries associated
with loan repayments, short sales and updated valuations.
Asset impairments during the year ended December 31, 2013 consisted of $2.7 million of net
impairments on real estate to reflect updated valuations, a $1.6 million increase in the loans held-for-
sale valuation allowance and a $0.2 million increase in the provision for tax certificate losses. The real
estate impairments were primarily associated with a $2.0 million impairment on an office warehouse
property based on an updated valuation. The increase in the valuation allowance for loans held-for-sale
resulted from a decline in small business loan valuations.
35
Selling, general and administrative expenses (“SG&A”) consisted of the following (in
thousands):
For the Years Ended
December 31,
2015
2014
2013
Change
Change
2015 vs
2014
2014 vs
2013
Employee compensation and benefits
$
18,490
15,951
14,437
2,539
1,514
Occupancy and equipment
Professional fees
SEC Civil Penalty
Other
Asset servicing expenses
Total selling, general and administrative
expenses
2,315
8,331
3,550
2,964
600
2,063
7,578
1,000
4,396
1,763
1,690
7,172
-
5,518
2,765
252
753
2,550
(1,432)
(1,163)
373
406
1,000
(1,122)
(1,002)
$
36,250
32,751
31,582
3,499
1,169
Employee Compensation and Benefits
The increase in employee compensation and benefits expense in each of the years in the three
year period ended December 31, 2015 was primarily the result of higher share based compensation
associated with the issuance of restricted stock awards and higher salaries and bonuses. Share based
compensation increased $1.8 million during the year ended December 31, 2015 compared to 2014 and
$1.2 million during the year ended December 31, 2014 compared to 2013 primarily as a result of the
granting of 419,492, 396,082 and 430,000 shares of Class A restricted common stock awards in
September 2015, October 2014 and October 2013, respectively. The higher salaries and bonuses were
mainly due to new hires and annual salary increases.
Occupancy and Equipment
The increase in occupancy and equipment for the year ended December 31, 2015 compared to
2014 was primarily the result of increased rent associated with leasing additional corporate office
space.
The increase in occupancy and equipment for the year ended December 31, 2014 compared to
2013 relate primarily to the operations of a public storage rental facility that was acquired through
foreclosure in April 2013.
Professional Fees
The increase in professional fees during the year ended December 31, 2015 compared to 2014
resulted primarily from higher accounting and consulting fees. During the year ended December 31,
2014, the insurance carrier reimbursed $1.7 million of legal fees in connection with the SEC civil action
compared to no reimbursements of legal fees during the year ended December 31, 2015. The higher
professional and accounting fees were mainly due to the BFC tender offer and higher audit fees
associated with acquired businesses, real estate joint venture investments and the SEC civil action.
The increase in professional fees during the year ended December 31, 2014 compared to 2013
resulted primarily from higher legal and consulting fees associated with the termination of the merger
agreement with BFC and the SEC civil action. The SEC civil action trial commenced on November 3,
2014 and lasted six weeks.
SEC Civil Penalty
The SEC civil penalty assessed against BBX Capital in connection with the SEC action was
$4.6 million. While the penalty is being appealed, BBX Capital recognized $1.0 million of the civil
penalty as an accrual during
36
the year ended December 31, 2014 with the balance of the civil penalty of $3.6 million recognized
during the year ended December 31, 2015.
Other
The decrease in other expenses during the year ended December 31, 2015 compared to 2014
reflects $1.1 million of lower foreclosure costs. Foreclosure expenses consisted primarily of real estate
taxes on delinquent collateral dependent loans in foreclosure. The decline in foreclosure expenses
resulted primarily from a significant decrease in the number of loans in BBX’s loan portfolio.
The decrease in other expenses during the year ended December 31, 2014 compared to 2013
resulted primarily from lower foreclosure expenses. The significant decline in foreclosure expense for
the year ended December 31, 2014 compared to 2013 reflects $0.8 million of bankruptcy trustee and
accounting fees associated with the foreclosure of two related properties during 2013 and a decision to
pay delinquent real estate taxes on residential loans during 2013.
Asset Servicing Expense
Asset servicing expenses for the years ended December 31, 2015, 2014 and 2013 were fees to
third party management companies who service loans and real estate. The significant decline in asset
servicing costs reflects loan repayments and sales, real estate liquidations and the renegotiation of the
servicing contract at lower rates as well as BBX taking back the servicing of certain commercial loans
and real estate from a third party servicer.
Equity in Earnings of Woodbridge
BBX recognized equity in earnings of Woodbridge during the years ended December 31, 2015,
2014 and 2013 of $15.0 million, $25.3 million and $13.5 million, respectively. Woodbridge’s earnings
for year ended December 31, 2015 included a $36.5 million settlement of litigation brought by
Bluegreen’s former shareholders related to Woodbridge’s April 2013 acquisition of Bluegreen as
described in further detail under “Liquidity and Capital Resources”. As BBX has a 46% ownership
interest in Woodbridge, the $36.5 million liability reduced BBX’s equity in earnings of Woodbridge by
$16.8 million for the year ended December 31, 2015. Equity in earnings of Woodbridge for the year
ended December 31, 2013 were from the date of the investment (April 2, 2013) through December 31,
2013. Woodbridge’s earnings consisted primarily of the operations of Bluegreen.
Bluegreen Corporation is a sales, marketing, and management company focused on the
vacation ownership industry. Bluegreen Vacations markets, sells and manages vacation ownership
interests in resorts, which are generally located in popular, high-volume, “drive-to” vacation
destinations. The resorts in which Bluegreen Vacations markets, sells or manages VOIs were either
developed or acquired by Bluegreen, or were developed and are owned by third parties. Bluegreen
Vacations earns
third party
for providing sales and marketing services
developers. Bluegreen Vacations also earns fees by providing management services to the Bluegreen
Vacation Club and property owners’ associations, mortgage servicing, VOI title services, reservation
services, and construction design and development services. In addition, Bluegreen Vacations provides
financing to FICO score-qualified individual purchasers of VOIs, which generates significant interest
income.
these
fees
to
®
In addition to Bluegreen’s traditional vacation ownership operations, Bluegreen has in recent
years pursued a business strategy, referred to herein as the “capital-light” business strategy, involving
activities that typically do not require the significant costs and capital investments generally incurred in
connection with the acquisition and development of VOIs under Bluegreen’s traditional vacation
ownership business. Bluegreen believes its capital-light business strategy enables it to leverage its
expertise and existing infrastructure in resort management, sales and marketing, mortgage servicing,
title services, and construction management
third
parties. Bluegreen’s goal is for its capital-light business activities to become an increasing portion of its
business over time; however, these efforts may not be successful. As of December 31, 2015,
Bluegreen’s capital-light business activities consisted of the following: fee-based sales and marketing
arrangements; just-in-time
to generate
recurring
revenues
from
37
inventory acquisition arrangements; secondary market arrangements; and other fee-based services.
Each of these categories is described below.
Fee-Based Sales and Marketing Arrangements
In 2009, Bluegreen began offering sales and marketing services to third-party developers for a
fee. Under these arrangements, Bluegreen sells third-party VOIs as Bluegreen Vacation Club interests
through its distribution network of sales offices, typically on a non-committed basis. Bluegreen seeks to
structure its fee for these services to cover its selling and marketing costs, plus an operating
profit. Because the completed VOI was built by a third-party, Bluegreen is not at risk for the
development financing of these projects and Bluegreen has little to no capital requirements. Notes
receivable originated in connection with Bluegreen’s sale of third party VOIs under commission-based
arrangements are held by the third party developer, and in certain cases are serviced by Bluegreen for a
fee. Bluegreen refers to sales made on behalf of third-party developers as “FBS Sales”.
Just-In-Time Arrangements
In 2013, Bluegreen began entering into agreements with third-party developers that allow
Bluegreen to buy VOI inventory from time to time in close proximity to the timing of when Bluegreen
intends to sell such VOIs. Bluegreen strives to enter into such arrangements on a non-committed basis,
although Bluegreen may engage in committed arrangements under certain circumstances. Because the
completed VOI was built by a third-party, Bluegreen is not at risk for the development financing of
these projects. Unlike FBS Sales, receivables originated in connection with sales of just-in-time
inventory are held by Bluegreen. Bluegreen refers to sales of inventory acquired through these
arrangements as “Just-In-Time Sales”.
Secondary Market Arrangements
In 2012, Bluegreen began a program to acquire VOI inventory from POAs and other third
parties on a non-committed basis, in close proximity to the timing of when Bluegreen intends to sell
such VOIs. Such VOIs are typically obtained by the POAs through foreclosure in connection with
maintenance fee defaults, and are generally acquired by Bluegreen at a significant discount. Bluegreen
refers to sales of inventory acquired through these arrangements as “Secondary Market Sales”.
Other Fee-Based Services
Bluegreen also earns fees for providing management services to the Bluegreen Vacation Club
and to certain POAs. In connection with the management services provided to the Bluegreen Vacation
Club, Bluegreen manages the club reservation system and provides owner services as well as billing and
collection services. In connection with Bluegreen’s management of POAs, Bluegreen provides day-to-
day management services, including oversight of housekeeping services, maintenance, and certain
accounting and administrative services. As of December 31, 2015, Bluegreen provided management
services to 46 timeshare resort properties and hotels. Other fee-based services also include the
processing of sales of VOIs through Bluegreen’s wholly-owned title company subsidiary, which earns
title fees in connection with the closing of the VOI transactions.
Bluegreen’s Operating Results
Bluegreen’s net income attributable to Woodbridge was $70.3 million, $57.5 million and $37.6
million for the years ended December 31, 2015, 2014 and 2013, respectively. The higher Bluegreen
net income in each year during the three year period ended December 31, 2015 resulted primarily from
increased sales of VOIs sold on behalf of third parties on a commission basis and higher commissions
earned on these commission based sales. The increase in VOI sales primarily reflected the results of an
increased number of tours. Bluegreen’s management believes that the increase in tours mainly resulted
from efforts to expand marketing initiatives to new sales prospects as well as expanded marketing
programs targeting existing owners. The increase in sales was partially offset by higher selling and
marketing expenses associated with these marketing initiatives. Sales to existing owners
38
generally involve lower marketing expenses than sales to new prospects. Bluegreen expects to continue
to increase its focus on sales to new prospects and, as a result, sales and marketing expenses may
continue to increase.
Equity in Losses of Unconsolidated Real Estate Joint Ventures
BBX recognized equity in losses of unconsolidated joint ventures of $1.6 million and $0.6
million during the years ended December 31, 2015 and 2014, respectively. The unconsolidated real
estate joint ventures are generally real estate joint ventures that develop properties for residential and
commercial use. The joint ventures are currently in the entitlement and construction phases and the
losses during the year ended December 31, 2015 and 2014 mainly represent marketing and management
fees.
Renin Reportable Segment Results of Operations
For the Years Ended
Ended December 31,
2014
2015
For the Two
Months
Ended
December
31,
2013
Trade sales
Cost of goods sold
Gross margin
Interest expense
Selling, general and administrative expenses
Bargain purchase gain
Foreign exchange loss
Total costs and expenses
Loss before income taxes
Benefit for income taxes
Net loss
Gross margin percentage
SG&A as a percent of trade sales
$
$
%
%
56,461
(42,122)
14,339
308
15,051
-
1,038
16,397
(2,058)
(4)
(2,054)
25.40
26.66
57,839
(43,888)
13,951
551
14,729
-
715
15,995
(2,044)
6
(2,050)
24.12
25.47
9,300
(7,227)
2,073
144
3,515
(1,001)
356
3,014
(941)
-
(941)
22.29
37.80
Trade sales declined for the year ended December 31, 2015 compared to the same 2014 period
due to the discontinuation by a major customer of the wall décor product partially offset by increased
sales of newly designed hardware products.
The improvement in the gross margin percentage for the year ended December 31 2015
compared to the same 2014 period reflects increased sales of higher margin hardware products and
lower sales of lower margin wall décor products. Also contributing to the improved gross margin
percentage was the consolidation of manufacturing facilities during the second half of 2014.
Renin’s interest expense for the year ended December 31, 2014 resulted primarily from the
Bluegreen notes payable. Renin refinanced the Bluegreen notes payable with a financial institution in
June 2014 under a facility with lower interest rates and outstanding balances. The decline in average
notes payable balances was the result of BBX Capital and BFC contributing $2.0 million and $0.5
million of capital, respectively, to repay a portion of the Bluegreen notes payable in connection with the
refinancing transaction.
Included in Renin’s selling, general and administrative expenses for year ended December 31,
2015 were salaries and recruitment fees associated with the hiring of additional sales representatives and
advertising expenditures for sales initiatives as well as consulting expenditures associated with
identifying ways to enhance
39
product development and improve manufacturing efficiencies. Renin’s new members of management
include its CEO hired in June 2015 and a Vice President of Sales hired in September 2015. Also
included in selling, general and administrative expenses for the year ended December 31, 2015 was
severance associated with the reorganization of Renin’s marketing and corporate personnel.
Included in Renin’s selling, general and administrative expenses for year ended December 31,
2014 was $0.9 million of costs associated with the consolidation of manufacturing facilities in
Canada. Renin also incurred $0.1 million of acquisition related expenses and $0.2 million of process
improvement professional fees during the year ended December 31, 2014.
The loss on foreign currency exchange for the year ended December 31, 2015, 2014 and 2013
resulted from the decrease in value of the Canadian dollar compared to the U.S. dollar. The Canadian
dollar to U.S. dollar exchange rate declined from 94.02 as of December 31, 2013 to 86.2 as of December
31, 2014 to 72.09 at December 31, 2015.
Renin’s trade sales and gross margin as a percent of trade sales for the year ended December
31, 2014 were consistent with prior quarters during 2014. The improvement in the gross margin from
22.29% during the two months end December 31, 2013 to 24.12% during the year ended December 31,
2014 reflects the consolidation of the Concord manufacturing facility into the Brampton facility and
higher average trade sales volume during the year ended December 31, 2014 compared to the two
months ended December 31, 2013.
Renin’s interest expense for the year ended December 31, 2014 included $0.3 million of
interest expense associated with the Bluegreen notes payable. Renin refinanced the Bluegreen notes
payable with a financial institution in June 2014 at lower interest rates and outstanding balances.
Included in selling, general and administrative expenses during the two months ended
December 31, 2013 were $1.0 million of acquisition related costs incurred in connection with the Renin
acquisition.
Sweet Holdings Reportable Segment Results of Operations
For the Years Ended
Ended December 31,
2014
2015
For the One
Month
Ended
December
31,
2013
27,837
(20,585)
7,252
949
(254)
15,324
16,019
(8,767)
(329)
(8,438)
26.05
55.05
16,257
(10,794)
5,463
440
(1,237)
6,237
5,440
23
(3,107)
3,130
33.60
38.37
966
(633)
333
24
-
347
371
(38)
-
(38)
34.47
35.92
Trade sales
Cost of goods sold
Gross margin
Interest expense
Bargain purchase gain
Selling, general and administrative expenses
Total costs and expenses
(Loss) income before income taxes
Benefit for income taxes
Net (loss) income
Gross margin percentage
SG&A as a percent of trade sales
$
$
%
%
40
The Sweet Holdings results of operations for the year ended December 31, 2015 consisted of
the activities of Hoffman’s, Williams & Bennett, Helen Grace Chocolates, Jer’s Chocolates and
Anastasia Confections for the entire year and the operations of Kencraft for the nine months ended
December 31, 2015.
Sweet Holdings results of operation for the year ended December 31, 2014 includes the
activities of Hoffman’s and Williams and Bennett for the year ended December 31, 2014, and the
activities of Jer’s, Helen Grace and Anastasia from their respective dates of acquisition, July 1, 2014,
July 21, 2014 and October 1, 2014.
Sweet Holdings results of operations for the year ended December 31, 2013 include the
activities of Hoffman’s for the month of December 2013.
The lower gross margin percentage for the year ended December 31, 2015 compared to 2014
was primarily the result of a higher percent of wholesale trade sales compared to retail trade sales and
secondarily from approximately $725,000 of inventory markdowns related to Helen Grace and Williams
& Bennett obsolete inventory. The majority of Sweet Holdings acquisitions subsequent to September
30, 2014 were acquisitions of manufacturers selling to wholesale customers. Trade sales to wholesale
customers typically have lower gross margins than trade sales to retail customers.
The increase in interest expense for each of the years in the three year period ended December
31, 2015 resulted primarily from additional borrowings for working capital lines-of-credit and
acquisition promissory notes.
The bargain purchase gain for the year ended December 31, 2015 was associated with the
Kencraft acquisition and the bargain purchase gain for the year ended December 31, 2014 was
associated with the Helen Grace acquisition. The bargain purchase gain represents the amount by
purchase
net
which
consideration. Management believes that it was able to acquire Kencraft and Helen Grace for bargain
purchase gains because Kencraft and Helen Grace were distressed companies.
identifiable
exceeded
acquired
assets
value
fair
the
the
of
The higher selling, general and administrative expenses for the year ended December 31, 2015
compared to 2014 reflects operating expenses associated with companies acquired and costs to integrate
these companies as well as increased compensation expense related to the hiring of industry
professionals and fees to consultants. Executives hired during the first quarter of 2015 included a
President for BBX Sweet Holdings and a President for Hoffman’s. Also contributing to higher selling,
general and administrative expenses were costs associated with relocating the Helen Grace California
manufacturing facilities to Kencraft’s manufacturing facilities in Utah and costs associated with
Hoffman’s retail store expansion initiatives. Hoffman’s opened one retail location during the third
quarter of 2014 as well as three retail locations during the year ended December 31, 2015 and
anticipates opening additional retail locations in 2016. Included in selling, general and administrative
expenses for the year ended December 31, 2015 were $1.3 million of employee severance expenses and
costs to relocate the Helen Grace manufacturing facilities to Utah.
41
BBX Capital Corporation Consolidated Financial Condition
BBX Capital’s total assets as of December 31, 2015 were $393.5 million compared to $392.9
million as of December 31, 2014. The changes in the components of total assets from December 31,
2014 to December 31, 2015 are summarized below:
·
·
·
·
·
·
·
·
·
·
Increase in cash resulting primarily from sales of real estate and dividends from Woodbridge
partially offset by land development and improvement costs, repayment of BB&T’s
preferred interest in FAR, notes payable scheduled payments, repayment of the Woodbridge
note payable, investments in unconsolidated real estate joint ventures, additional investment
in Woodbridge and operating expenses.
Increase in trade receivables due to acquisitions by BBX Sweet Holdings partially offset by
$0.8 million of lower Renin trade receivables,
Decrease in real estate held-for-investment due primarily to the transfer of $41.8 million of
real estate held-for-investment to real estate held-for-sale and the contribution of $19.4
million of real estate to joint ventures partially offset by $16.0 million of property
improvements,
Increase in real estate held-for-sale due primarily to $41.8 million of properties transferred
from real estate held-for-investment, $13.9 million of real estate purchases and property
improvements and $3.2 million of real estate acquired through foreclosure partially offset by
$51.0 million of real estate sales and $3.2 million in impairments,
Increase in investments in unconsolidated real estate joint ventures reflecting $8.0 million of
cash investments in real estate joint ventures and $19.4 million of property contributed to
joint ventures in exchange for joint venture membership interests,
Increase investment in Woodbridge reflecting an additional investment in Woodbridge of
$11.4 million and the recognition of $15.0 million of equity in Woodbridge’s earnings
partially offset by $23.8 million of dividends received from Woodbridge,
Increase in properties and equipment associated with the opening of Hoffman stores and
corporate headquarter renovations partially offset by $2.1 million of depreciation expense,
Increase in inventory resulting primarily from acquisitions by BBX Sweet Holdings,
Increase in goodwill and other intangible assets resulting from acquisitions by BBX Sweet
Holdings, and
Increase in other asset balances resulting primarily from $1.2 million of investments in
securities and a $1.1 million escrow balance associated with land sales.
BBX Capital's total liabilities at December 31, 2015 were $57.6 million compared to $81.7
million at December 31, 2014. The changes in the components of total liabilities from December 31,
2014 to December 31, 2015 are summarized below:
·
·
·
·
Higher accounts payable balances due primarily to an increase in trade accounts payable at
Renin and BBX Sweet Holdings,
Payment in full of BB&T’s preferred interest in FAR using proceeds from the monetization
of FAR’s assets,
Decrease in note payable to Woodbridge as the note was paid-in-full in September 2015, and
Increase in notes payable reflecting $1.4 million of promissory notes issued in connection
with the Kencraft acquisition, a $5.0 million line-of-credit from a financial institution issued
to fund BBX Sweet Holdings working capital, partially offset by $3.6 million of notes
payable scheduled principal repayments.
Liquidity and Capital Resources
BBX Capital’s current assets at December 31, 2015 consisted of cash, inventory and trade
receivables aggregating $81.3 million. This does not include $18.0 million of current assets held in
Renin. BBX Capital had $19.8 million of current liabilities as of December 31, 2015. This does not
include $7.5 million of current liabilities of Renin. BBX Capital’s principal sources of liquidity are its
cash holdings, funds obtained from scheduled
42
payments on loans, loan recoveries, sales of its loans, loan payoffs, sales of real estate, income from
income producing real estate, revenues from BBX Sweet Holdings’ operations and distributions
received from Woodbridge. Management believes that BBX Capital has sufficient liquidity to fund
future operations.
Bluegreen’s former public shareholders brought an action against Bluegreen, the directors of
Bluegreen, BFC, Woodbridge, certain directors and officers of BFC and others, challenging the terms
of the merger pursuant to which Bluegreen merged into a wholly owned subsidiary of Woodbridge and
Bluegreen’s shareholders (other than Woodbridge) were paid $10.00 in cash for each share of
Bluegreen’s common stock that they held immediately prior to the effective time of the merger, and on
June 5, 2015 the plaintiffs and defendants agreed to a settlement of the litigation. Pursuant to the
settlement, Woodbridge paid $36.5 million, which amounts to approximately $2.50 per share, into a
settlement fund for the benefit of former shareholders of Bluegreen whose shares were acquired in
connection with the merger. The amount to be received by such former Bluegreen shareholders will be
reduced by administrative costs and attorneys’ fees and costs. In connection with the settlement, BBX
Capital repaid its $11.75 million promissory note to Woodbridge and BBX Capital and BFC made
additional capital contributions to Woodbridge of $11.4 million and $13.4 million, respectively, based
on their respective 46% and 54% ownership interests in Woodbridge.
BBX Capital expects that it will receive dividends from time to time from its 46% ownership
interest in Woodbridge. Distributions must be declared by Woodbridge and approved in advance by
both BFC and BBX Capital. Dividends from Woodbridge will be dependent on and subject to
Bluegreen’s results of operations, cash flows and business of Bluegreen, as well as restrictions
contained in Bluegreen’s debt facilities. Additionally, in April 2015, BFC borrowed $80 million from
Bluegreen to finance the purchase of 4,771,221 shares of BBX Capital’s Class A common stock in
BFC’s completed tender offer. As a consequence, BBX Capital may not receive dividends from
Woodbridge consistent with prior periods or in the time frames or amounts anticipated, or at all. BBX
Capital may also receive funds from BFC in connection with its tax sharing agreement to the extent
BFC utilizes BBX Capital’s tax benefits in BFC’s consolidated tax return. BBX Capital also expects to
obtain funds in subsequent periods from cash flows on its loans, real estate and investments in
unconsolidated real estate joint ventures. BBX Capital also may seek to obtain funds through
borrowings or the issuance of equity securities. BBX Capital anticipates utilizing these funds for
general corporate purposes, including selling, general and administrative expenses, loan servicing costs,
real estate operating expenses, Renin and BBX Sweet Holdings operating expenses and, to the extent of
available liquidity, to pursue its business strategy of investing, directly or through joint ventures, in real
estate (which may include the acquisition and/or development of real estate) and operating
businesses. BBX Sweet Holdings currently intends to continue to pursue acquisitions in the candy and
confections industry.
A significant source of BBX Capital’s liquidity is proceeds from the liquidation of loans and
real estate, recoveries from the charged off loan portfolio, cash proceeds from the contribution of
properties to real estate joint ventures and dividends from Woodbridge. During the year ended
December 31, 2015, proceeds from principal repayments of loans and sales of real estate were
approximately $30.2 million and $72.2 million, respectively. During the year ended December 31,
2015, BBX Capital received $23.8 million of dividends from Woodbridge. There is no assurance that
BBX Capital will realize proceeds from these sources in future periods in similar amounts or on similar
timeframes.
BBX Capital’s real estate activities include hiring property managers to operate income
producing properties, making protective expenditures (including the payment of property taxes) in an
effort to maintain the value of properties and undertaking the zoning and entitlement, development or
improvement of properties
joint venture
arrangements. There is no assurance that BBX Capital will realize proceeds from these sources in
future periods in similar amounts or on similar timeframes.
the properties for sale or potential
to position
43
Notes payable as of December 31, 2015 consisted of a term loan and revolving credit advances
issued by Renin with an aggregate balance of $8.1 million, $6.7 million of promissory notes and
holdback amounts owed by BBX Sweet Holdings in connection with its acquisitions, $5.0 million
revolving line of credit to BBX Sweet Holdings and a $1.6 million note payable issued by a subsidiary
of BBX Sweet Holdings. See Note 15, Notes Payable to the “Notes to Consolidated Financial
Statements”, for a discussion of the notes payable terms and covenants.
BBX Capital guarantees certain obligations of
its wholly-owned subsidiaries and
unconsolidated real estate joint ventures. See Note 17 Commitments and Contingencies and Note 15,
Notes Payable to the “Notes to Consolidated Financial Statements”, for a discussion of BBX Capital’s
guarantees.
BBX Capital’s Contractual Obligations and Off Balance Arrangements as of December 31,
2015 were (in thousands):
Contractual Obligations
Operating lease obligation
(1)
Notes payable
Other obligations
Total contractual cash obligations
Payments Due by Period
Total
18,990
21,591
340
40,921
$
$
Less than
1 year
3,065
2,315
120
5,500
1-3 years 4-5 years
5,069
6,031
10,492
220
16,743
7,171
-
12,240
After 5
years
4,825
1,613
-
6,438
(1) Amounts represent scheduled principal payments and do not include interest payments.
The operating lease obligations represent minimum future lease payments on executed leases
for BBX Capital’s headquarters, BBX Sweet Holdings and subsidiaries’ manufacturing facilities, office
space and retail stores and Renin’s manufacturing, equipment leases and office facilities.
BBX Capital Corporation and its subsidiaries are parties to lawsuits as plaintiff or defendant
involving its collections, lending and prior period tax certificate activities. Although BBX Capital
believes it has meritorious defenses in all current legal actions, the outcome and the ultimate resolution
of litigation are inherently difficult to predict and uncertain.
Reserves are accrued for matters in which it is probable that a loss will be incurred and the
amount of such loss can be reasonably estimated. The actual costs of resolving these legal claims may
be substantially higher or lower than the amounts anticipated for these claims. There were no reserves
accrued as of December 31, 2015. See Item 3. Legal Proceedings and Note 17 Commitments and
Contingencies to the “Notes to Consolidated Financial Statements” for more information regarding
BBX Capital’s legal matters.
BBX Capital had no commitments to fund loans as of December 31, 2015.
44
Consolidated Cash Flows
A summary of BBX Capital’s consolidated cash flows follows (in thousands):
For the Years Ended December 31,
2014
2015
2013
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Increase (decrease) in cash and cash equivalents
$
$
(16,045)
53,722
(27,456)
10,221
2,835
71,852
(59,006)
15,681
(190)
104,076
(123,125)
(19,239)
The decrease in cash flows from operating activities during 2015 compared to 2014 resulted
primarily from higher operating losses at Renin and BBX Sweet Holdings and an increase in selling,
general and administrative expenses.
The increase in cash flows from operating activities during 2014 compared to 2013 resulted
primarily from lower operating expenses associated with a decline in loan servicing fees, foreclosure
expenses and collection fees associated with a declining loan portfolio.
The decline in cash flows from investing activities during 2015 compared to 2014 resulted
primarily from higher investments in real estate and real estate joint ventures as well as an additional
$11.4 million investment in Woodbridge partially offset by a $38.9 million increase in proceeds from
the sales of real estate.
The decline in cash flows from investing activities during 2014 compared to 2013 resulted
primarily from lower loan payments partially offset by a $60.4 million investment in Woodbridge in
April 2013.
The decrease in cash outflows from financing activities during 2015 compared to 2014 resulted
primarily from lower distributions to BB&T from FAR on account of the payoff of BB&T’s preferred
interest in FAR in May 2015 partially offset by the repayment of the Woodbridge notes payable.
The decrease in cash outflows from financing activities during 2014 compared to 2013 resulted
primarily from lower distributions to BB&T from FAR.
Critical Accounting Policies
Management views critical accounting policies as accounting policies that are important to the
understanding of BBX Capital’s financial statements and also involve estimates and judgments about
inherently uncertain matters. In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the consolidated statements of financial condition and
assumptions that affect the recognition of income and expenses on the Consolidated Statements of
Operations for the periods presented. Actual results could differ significantly from those estimates.
Significant estimates that are particularly susceptible to significant change in subsequent periods relate
to the determination of the allowance for loan losses, including the valuation of collateral dependent
loans, the valuation of loans held-for-sale, the impairment of long-lived assets including amortizable
intangible assets, real estate held-for-sale and held-for-investment , the determination of lower of cost
or market for inventories, the valuation of assets acquired and liabilities assumed in the acquisition of a
business, the amount of the deferred tax asset valuation allowance, accounting for uncertain tax
positions and accounting for contingencies. T h e three accounting policies that BBX Capital has
identified as critical accounting policies are allowance for loan losses, inventory reserves and
impairment of long-lived assets. See Note 2, Summary of Significant Accounting
45
Policies to the “Notes to Consolidated Financial Statements”, for a detailed discussion of BBX Capital’s
significant accounting policies.
Allowance for loan losses, valuation of collateral dependent loans and loans-held-for-sale
The allowance for loan losses is maintained at an amount that is believed by its management to
be a reasonable estimate of probable losses inherent in BBX Capital’s loan portfolio as of the date of the
financial statements presented. BBX Capital has developed policies and procedures for evaluating the
allowance for loan losses which considers all available information. However, BBX Capital relies on
estimates and judgments regarding issues where the outcome is unknown. As a consequence, if
circumstances differ from BBX Capital’s estimates and judgments, the allowance for loan losses may
decrease or increase significantly and the amount of losses actually realized in BBX Capital’s loan
portfolio could be significantly higher or lower. There was no allowance for loan losses as of
December 31, 2015. BBX Capital’s loans receivable as of December 31, 2015 was $34.0 million and
were primarily collateralized by real estate. Declines in real estate market condition in geographical
areas where BBX Capital’s collateral is located may result in material changes to BBX Capital’s
allowance for loan losses.
In June 2015, BBX Capital transferred its small business, residential and second-lien consumer
loans from loans held-for-sale to loans receivable measured at the lower of cost or fair value at the
transfer date. The difference between the carrying amount of the loans and the fair value was
recognized as a discount. The discount on the transferred loans was greater than the calculated
allowance for loan loss. As a consequence there was no allowance for loan losses assigned to these
loans as of December 31, 2015.
Commercial loans were evaluated individually and were either written down to the fair value of
the collateral or based on the primary source of repayment and pier group analysis management
determined no allowance for loan losses should be assigned to the commercial loan portfolio.
Valuation allowances or charge downs on collateral dependent loans and the fair value of loans
held-for-sale are established using management estimates of the fair value of collateral or based on
valuation models that present value estimated expected future cash flows. The outstanding balance of
collateral dependent loans and loans held-for-sale was $9.6 million and $21.4 million, respectively, as
of December 31, 2015.
These valuations are based on available information and require estimates and subjective
judgments about fair values of the collateral or expected future cash flows. Most of BBX Capital’s
loans do not have an observable market price, and an estimate of the collection of contractual cash flows
is based on the judgment of management. BBX Capital generally utilizes broker price opinions and
third party appraisals to assist us in determining the fair value of collateral. The appraisers or brokers
use professional judgment in determining the fair value of the collateral. It is likely that the results
would materially differ if different assumptions or conditions were to prevail. As a consequence of the
estimates and assumptions required to calculate the valuation allowance, charge downs on collateral
dependent loans or the fair value of loans held-for-sale, a change in these highly uncertain estimates
could have a materially favorable or unfavorable impact on BBX Capital’s financial condition and
results of operations.
BBX Capital analyzes its loan portfolio quarterly by monitoring credit quality, loan-to-value
ratios, delinquency trends, collateral valuations and economic conditions. As a consequence, BBX
Capital’s allowance for loan losses and fair value estimates will change from period to period. BBX
Capital believes that its performance in subsequent periods will be highly sensitive to changes in the
Florida real estate market and availability of mortgage financing in Florida. If real estate and economic
conditions deteriorate, BBX Capital is likely to experience increased credit losses and valuation
allowance adjustments.
Inventory lower of cost or market
Inventories consisted of $8.4 million at Renin and $7.9 million at BBX Sweet Holdings as of
December 31, 2015. Inventories are stated at the lower of cost (first-in, first-out) or market.
Fluctuations in the market price of raw materials and labor costs may affect the value of inventory and
may have a favorable or unfavorable effect on
46
costs of goods sold and gross margin. For the Renin inventory, when expected market sales prices move
below costs, or when BBX Capital identifies slow moving or obsolete inventory, BBX Capital records
adjustments to write down the carrying values of inventories. Renin recognized $0.1 million of
inventory adjustment write downs during the year ended December 31, 2015. BBX Sweet Holdings
evaluates its inventory periodically and recognized $1.7 million of inventory adjustments during the
year ended December 31, 2015. Renin and BBX Sweet Holdings maintain inventories of bulk raw
materials and included in BBX Sweet Holdings inventory was paper goods and packaging material. For
Renin, quantities were determined based upon its inventory systems and are subject to periodic
verification techniques including observation, weighing and other methods. For BBX Sweet Holdings
inventory quantities were determined by period-end observation and weighing. The quantities and costs
are generally subject to change in estimates based on market sales prices and general economic
conditions in the industry. As a consequence, if raw material or labor costs increase or if market sales
prices decline, BBX Capital will likely experience higher amounts of obsolete inventory, higher
inventory reserves with a corresponding increase cost of goods sold and lower gross margins.
Impairment of long lived assets including amortizable intangible assets
Long-lived assets such as properties and equipment, amortizable intangible assets and real
estate held-for-investment are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. When testing a long-lived asset
for recoverability, it may be necessary to review estimated lives and adjust the depreciation or
amortization period. Changes in circumstances and the estimates of future cash flows, as well as
evaluating estimated lives of long-lived assets, are subjective and involve a significant amount of
judgment. A change in the estimated life of a long-lived asset may substantially change depreciation and
amortization expense in subsequent periods.
Real estate held-for-sale is reviewed for impairment at least annually or whenever events or
changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Fair
values are not available for many of BBX Capital’s long-lived assets, and estimates must be based on
available information, including prices of similar assets and present value valuation techniques.
During the years ended December 31, 2015 and 2014, BBX Capital recognized impairments
on real estate of $3.6 million and $8.9 million, respectively. BBX Capital generally utilizes broker
price opinions and third party appraisals to assist in determining the fair value of real estate. The
appraisers or brokers use professional judgment in determining the fair value of the properties and BBX
Capital may also adjust these values for changes in market conditions subsequent to the valuation date
when current appraisals are not available.
The assumptions used to calculate the fair values are highly subjective and extremely sensitive
to changes in market conditions. The assumptions used are representative of assumptions that BBX
Capital believes market participants would use in fair valuing these assets, but different assumptions
may result in significantly different results. BBX Capital validates assumptions by comparing
completed transactions with prior period fair value estimates and BBX Capital may check its
assumptions against multiple valuation sources.
The outstanding balance of real estate held-for-sale, real estate held-for-investment,
amortizable intangible assets and properties and equipment was $46.3 million, $31.3 million, $8.2
million and $18.1 million, respectively, as of December 31, 201 5. The amount ultimately realized upon
the sale or operation of these properties may be significantly different than the recorded amounts.
Future events, including volatility in real estate values, may result in additional impairments or
recoveries of long-lived assets in the foreseeable future.
Dividends
BBX Capital has historically not paid dividends. While BBX Capital currently expects to
continue to utilize its available cash to pursue opportunities in accordance with its business strategies, it
may consider the payment of dividends in the future depending upon its results of operations, liquidity
needs and other factors considered by its board of directors.
47
Impact of Inflation
The financial statements and related financial data and notes presented herein have been
prepared in accordance accounting principles generally accepted in the United States of America , which
require the measurement of financial position and operating results in terms of historical dollars without
considering changes in the relative purchasing power of money over time due to inflation.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Consolidated Market Risk
Market risk is defined as the risk of loss arising from adverse changes in market valuations
which arise from interest rate risk, foreign currency exchange rate risk, commodity price risk and equity
price risk.
BBX Capital’s market risk consists primarily of equity pricing risk and secondarily interest rate
risk of real estate assets. The majority of BBX Capital’s assets are investments in unconsolidated real
estate companies, real estate held-for-investment or held-for-sale and loans secured by real estate. BBX
Capital’s financial condition and earnings are significantly affected by changes in real estate values in
the markets where the real estate or real estate collateral is located and changes in interest rates which
affects the affordability of real estate. As a result, BBX Capital is exposed to equity pricing and interest
rate risk in the real estate market.
BBX Capital is also subject to foreign currency exchange risk of the U.S. dollar compared to
the Canadian dollar and Great Britain Pound as a result of the operations of Renin. The assets,
liabilities, revenue and expenses that are denominated in foreign currencies will be affected by changes
in the exchange rates between the U.S. dollar and the Canadian dollar or Great Britain Pound. As of
December 31, 2015, BBX Capital has not entered into any foreign exchange forward contracts as
hedges against foreign currency exchange risk.
48
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Management’s Report on Internal Control over Financial Reporting
Reports of Independent Registered Public Accounting Firm – Grant Thornton LLP
Report of Independent Registered Public Accounting Firm - PricewaterhouseCoopers LLP
Consolidated Statements of Financial Condition as of December 31, 2015 and 2014
Consolidated Statements of Operations and Comprehensive Income for each of the years in the
three year period ended December 31, 2015
Consolidated Statements of Total Equity (Deficit) for each of the years in the three period ended
December 31, 2015
Consolidated Statements of Cash Flows for each of the years in the three year period ended
December 31, 2015
Notes to Consolidated Financial Statements
Page
F-2
F-3
F-6
F-7
F-8
F-9
F-10
F-13
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Our internal
control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles in the United States of America. Because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our
management, with the participation of our principal executive officer and principal financial officer, conducted
an evaluation of the effectiveness, as of December 31, 2015, of our internal control over financial reporting
based on the framework in Internal Control – Integrated Framework 2013 issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Based on such evaluation, our management
concluded that our internal control over financial reporting was effective as of December 31, 2015. Grant
Thornton, an independent registered certified public accounting firm, has audited the effectiveness of our
internal control over financial reporting as of December 31, 2015, as stated in its report which appears herein.
Management has excluded Kencraft Confections, LLC from its assessment of internal control over
financial reporting as of December 31, 2015. We acquired this business during the second quarter of 2015 and
our management has not conducted an assessment of the acquired business’ internal control over financial
reporting. Total revenues and total assets of Kencraft Confections, LLC represent 5% and 2%, respectively, of
the related consolidated financial statement amounts as of and for the year ended December 31, 2015.
/s/ Jarett S. Levan
Jarett S. Levan
Acting Chairman, and
Chief Executive Officer
/s/ Raymond S. Lopez
Raymond S. Lopez
Executive Vice President
Chief Financial Officer
March 15, 2016
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
BBX Capital Corporation
We have audited the accompanying consolidated balance sheet of BBX Capital Corporation (a Florida
corporation) and subsidiaries (the “Company”) as of December 31, 2015, and the related consolidated
statements of operations, comprehensive income, changes in equity, and cash flows for the year ended
December 31, 2015. Our audit of the basic consolidated financial statements included the financial
statement schedules listed in the index appearing under Item 15(a)(2). These financial statements and
financial statement schedules are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these financial statements and financial statement schedules based on our
audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of BBX Capital Corporation and subsidiaries as of December 31, 2015,
and the results of their operations and their cash flows for the year ended December 31, 2015 in
conformity with accounting principles generally accepted in the United States of America. Also in our
opinion, the related financial statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material respects, the information set forth
therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the Company’s internal control over financial reporting as of December 31,
2015, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated
March 15, 2016 expressed an unqualified opinion.
/s/Grant Thornton LLP
Fort Lauderdale, Florida
March 15, 2016
F-3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
BBX Capital Corporation
We have audited the internal control over financial reporting of BBX Capital Corporation (a Florida
corporation) and subsidiaries (the “Company”) as of December 31, 2015, based on criteria established
in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company’s management is responsible for
maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management’s
Report on Internal Control over Financial Reporting (“Management’s Report”). Our responsibility is to
express an opinion on the Company’s internal control over financial reporting based on our audit. Our
audit of, and opinion on, the Company’s internal control over financial reporting does not include the
internal control over financial reporting of Kencraft Confections, LLC, a wholly-owned subsidiary,
whose financial statements reflect total assets and revenues constituting 2 and 5 percent, respectively,
of the related consolidated financial statement amounts as of and for the year ended December 31,
2015. As indicated in Management’s Report, Kencraft Confections, LLC was acquired during 2015.
Management’s assertion on the effectiveness of the Company’s internal control over financial reporting
excluded internal control over financial reporting of Kencraft Confections, LLC.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
F-4
In our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2015, based on criteria established in the 2013 Internal Control
—Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated financial statements of the Company as of and for the year
ended December 31, 2015, and our report dated March 15, 2016 expressed an unqualified opinion on
those financial statements.
/s/Grant Thornton LLP
Fort Lauderdale, Florida
March 15, 2016
F-5
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of BBX Capital Corporation:
In our opinion, the consolidated statement of financial condition as of December 31, 2014 and the
related consolidated statements of operations and comprehensive income, consolidated statements of
changes in equity, and consolidated statements of cash flows for each of two years in the period ended
December 31, 2014 present fairly, in all material respects, the financial position of BBX Capital
Corporation and its subsidiaries at December 31, 2014, and the results of their operations and their cash
flows for each of the two years in the period ended December 31, 2014, in conformity with accounting
principles generally accepted in the United States of America. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these statements in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
March 16, 2015
F-6
BBX CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
ASSETS
Cash and cash equivalents ($0 and $4,993 in Variable Interest Entities
("VIEs"))
Restricted cash and time deposits
Loans held-for-sale ($0 and $35,423 in VIEs)
Loans receivable, net of allowance for loan losses of $0 and $977
($0 and $18,972, net of allowance of $0 and $977 in VIEs)
Trade receivables, net of allowance for bad debts of $404 and $148
Real estate held-for-investment ($0 and $19,945 in VIEs)
Real estate held-for-sale ($0 and $13,745 in VIEs)
Investments in unconsolidated real estate joint ventures
Investment in Woodbridge Holdings, LLC
Properties and equipment ($0 and $7,561 in VIEs)
Inventories
Goodwill
Other intangible assets
Other assets ($0 and $1,017 in VIEs)
Total assets
LIABILITIES AND EQUITY
Liabilities:
Accounts payable
BB&T preferred interest in FAR, LLC ($0 and $12,348 in VIE)
Notes payable to Woodbridge Holdings, LLC
Notes payable
Principal and interest advances on residential loans ($0 and $11,171 in
VIE)
Other liabilities ($0 and $1,431 in VIE)
Total liabilities
Commitments and contingencies (Note 17)
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 15,977,322 shares
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
Accumulated deficit
Accumulated other comprehensive income
Total BBX Capital Corporation shareholders' equity
Noncontrolling interest
Total equity
Total liabilities and equity
$
$
$
$
See Notes to Consolidated Financial Statements
F-7
December 31,
2015
2014
69,040
2,651
21,354
34,035
13,732
31,290
46,338
42,962
75,545
18,083
16,347
7,601
8,211
6,352
393,541
11,059
-
-
21,421
10,356
14,726
57,562
-
162
2
350,878
(16,622)
384
334,804
1,175
335,979
393,541
58,819
-
35,423
26,844
13,416
76,552
41,733
16,065
73,026
16,717
14,505
7,377
8,440
4,019
392,936
9,603
12,348
11,750
17,923
11,171
18,861
81,656
-
160
2
347,937
(38,396)
85
309,788
1,492
311,280
392,936
BBX CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(In thousands, except per share data)
Revenues:
Trade sales
Interest income
Net gains on the sales of assets
Income from real estate operations
Other
Total revenues
Costs and expenses:
Cost of goods sold
BB&T's priority return in FAR distributions
Interest expense
Real estate operating expenses
Recoveries from loan losses, net
Asset impairments, net
Selling, general and administrative expenses
Total costs and expenses
Equity in earnings of Woodbridge Holdings, LLC
Equity in losses of unconsolidated real estate joint ventures
Foreign exchange loss
Income before income taxes
(Benefit) provision for income taxes
Net income
Net (earnings) loss attributable to noncontrolling interest
Net income attributable to BBX Capital Corporation
Basic earnings per share
Diluted earnings per share
Basic weighted average number of common shares
outstanding
Diluted weighted average number of common and common
equivalent shares outstanding
Net income
Other comprehensive income, net of tax
Foreign currency translation adjustments
Unrealized gains on securities available for sale
Other comprehensive income, net of tax
Comprehensive income
Less: net (earnings) loss attributable to noncontrolling
interest
Foreign currency translation adjustments attributable
to noncontrolling interest
Total comprehensive income attributable to
BBX Capital Corporation
For the Years Ended December 31,
2014
2015
2013
$
$
$
$
$
84,284
10,056
31,092
3,887
2,164
131,483
62,707
68
258
4,773
(13,457)
287
65,936
120,572
14,974
(1,565)
(1,038)
23,282
(245)
23,527
(1,753)
21,774
1.34
1.30
74,084
5,164
5,527
5,516
2,354
92,645
54,682
736
1,580
6,296
(7,155)
7,015
52,296
115,450
25,282
(559)
(715)
1,203
(3,101)
4,304
391
4,695
0.29
0.28
10,243
24,158
6,728
4,161
3,368
48,658
7,860
3,227
1,933
5,807
(43,865)
4,708
34,412
14,082
13,461
-
(357)
47,680
20
47,660
179
47,839
3.02
2.94
16,229
16,043
15,843
16,805
23,527
353
13
366
23,893
(1,753)
(67)
-
16,678
4,304
88
-
88
4,392
391
(16)
16,278
47,660
16
-
16
47,676
179
(3)
$
22,073
4,767
47,852
See Notes to Consolidated Financial Statements
F-8
BBX CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR EACH OF THE YEARS IN THE THREE YEAR PERIOD ENDED DECEMBER 31, 2015
Shares of
Class A
Common
Stock
Additional
Other
BBX
Capital
Non-
Accumulated
Common Paid-in (AccumulatedComprehensiveCorporationControlling Total
(In thousands)
Outstanding
Stock
Capital
Deficit)
Income
Equity
Interest
Equity
Balance, December 31, 2012
Net income
Noncontrolling interest
contributions
Other comprehensive income
Investment in Woodbridge
Holdings, LLC
Retirement of Class A
common shares to satisfy
share-based compensation
income tax withholding
requirements
Share based compensation
expense
15,577 $
157
-
331,097
-
(90,930)
47,839
-
-
-
-
-
13,337
(114)
(1)
(1,646)
315
4
2,512
-
-
-
-
-
-
-
-
13
-
-
-
240,324
47,839
-
(179)
240,324
47,660
-
13
1,360
1,360
3
16
13,337
-
13,337
(1,647)
2,516
-
-
(1,647)
2,516
Balance, December 31, 2013
15,778 $
160
345,300
(43,091)
13
302,382
1,184 303,566
Net income
Noncontrolling interest
distributions
Noncontrolling interest
contributions
Other comprehensive income
Woodbridge capital
transactions - excess tax
benefits
Retirement of Class A
common shares to satisfy
share-based compensation
income tax withholding
requirements
Share based compensation
expense
-
-
-
-
-
-
-
-
-
957
(116)
(1)
(2,020)
315
3
3,700
Balance, December 31, 2014
15,977 $
162
347,937
Net income
Noncontrolling interest
distributions
Noncontrolling interest
contributions
Other comprehensive income
Retirement of Class A
common shares to satisfy
share-based compensation
income tax withholding
requirements
Share based compensation
expense
Balance, December 31, 2015
-
-
-
-
-
-
-
-
(160)
(2)
(2,527)
382
16,199 $
4
5,468
4,695
-
-
-
-
-
-
(38,396)
21,774
-
-
-
-
-
-
-
-
72
-
-
-
4,695
(391)
4,304
-
-
72
(157)
(157)
840
16
840
88
957
-
957
(2,021)
3,703
-
-
(2,021)
3,703
85
309,788
1,492 311,280
21,774
1,753
23,527
-
-
(2,299)
(2,299)
162
67
162
366
299
299
-
-
-
-
-
(2,529)
5,472
-
-
(2,529)
5,472
164
350,878
(16,622)
384
334,804
1,175 335,979
See Notes to Consolidated Financial Statements
F-9
BBX CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Operating activities:
Net income
Adjustment to reconcile net income to net cash
(used in) provided by operating activities:
Recoveries from loan losses and asset recoveries, net
Depreciation, amortization and accretion, net
Share-based compensation expense
Net gains on sales of real estate, loans held-for-sale,
properties and equipment and other assets
Equity in losses of unconsolidated real estate joint
ventures
Bargain purchase gain from acquisitions
Deferred income tax benefit
Decrease in principal and interest advances on residential
loans
(Increase) decrease in trade receivables
(Increase) decrease in inventories
Decrease in accrued interest receivable
(Increase) decrease in other assets
(Decrease) increase in other liabilities
Net cash (used in) provided by operating activities
For the Years Ended December 31,
2015
2014
2013
$
23,527
4,304
47,660
(13,233)
3,464
5,472
(1,470)
2,382
3,703
(39,157)
1,055
2,516
(31,048)
(5,187)
(6,728)
1,565
(254)
(329)
(815)
(559)
(899)
88
(1,148)
(1,876)
(16,045)
559
(1,237)
(3,107)
(81)
(4,741)
(22)
164
2,696
4,872
2,835
-
(1,001)
-
(1,971)
3
703
1,269
(2,616)
(1,923)
(190)
(CONTINUED)
See Notes to Consolidated Financial Statements
F-10
BBX CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Investing activities:
Proceeds from redemptions of tax certificates
Increase in restricted cash and time deposits
Proceeds from maturities of interest bearing deposits
Purchase of tax certificates
Investments in securities
Net repayments of loans receivable
Proceeds from the sale of loans receivable
Proceeds from the sale of tax certificates
Additions to real estate held-for-investment
Purchases of real estate held-for-sale
Proceeds from sales of real estate held-for-sale
Proceeds from the sale of properties and equipment
Purchases of office properties and equipment, net
Distributions from unconsolidated real estate joint
ventures
Proceeds from the contribution of real estate to
unconsolidated real estate joint ventures
Investment in unconsolidated real estate joint ventures
Investment in Woodbridge Holdings, LLC
Return of Woodbridge Holdings, LLC investment
Cash outflows from acquisitions, net of cash acquired
Net cash provided by investing activities
Financing activities:
Repayment of BB&T preferred interest in FAR, LLC
Proceeds from notes payable to related parties
Repayment of notes payable to related parties
Proceeds from notes payable
Repayment of notes payable
Deferred financing fees
Retirement of Class A Common Stock to satisfy share-
based
compensation withholding income tax requirements
Noncontrolling interest contributions
Noncontrolling interest distributions
Net cash used in financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of period
Cash and cash equivalents at the end of period
$
For the Years Ended December 31,
2013
2014
2015
438
(2,651)
-
-
(1,240)
30,170
68
-
(20,032)
(10,667)
72,154
121
(3,634)
510
701
(9,687)
(11,385)
8,866
(10)
53,722
(12,348)
-
(11,750)
4,997
(3,643)
(46)
(2,529)
162
(2,299)
(27,456)
10,221
58,819
69,040
627
-
-
-
-
42,298
9,497
-
(4,242)
-
33,240
164
(1,404)
-
4,086
(10,074)
-
6,504
(8,844)
71,852
(56,169)
-
(3,267)
3,033
(905)
(360)
(2,021)
840
(157)
(59,006)
15,681
43,138
58,819
2,384
-
496
(31)
-
136,136
3,490
928
(6,063)
-
31,365
5,889
(265)
-
-
(1,354)
(60,404)
6,918
(15,413)
104,076
(128,360)
9,911
-
-
(4,389)
-
(1,647)
1,360
-
(123,125)
(19,239)
62,377
43,138
(CONTINUED)
See Notes to Consolidated Financial Statements
F-11
BBX CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Cash paid for:
Interest on borrowings
Income taxes payments, net
Supplementary disclosure of non-cash investing and
financing activities:
Loans receivable and tax certificates transferred to real
estate
held-for-sale or real estate held-for-investment
Loans receivable transferred to property and equipment
Loans receivable transferred to loans held-for-sale
Loans receivable transferred from loans held-for-sale
Increase in loans receivable from the sale of real estate
Notes payable issued in connection with the investment
in Woodbridge Holdings, LLC
Increase in additional paid-in-capital associated with the
investment in Woodbridge Holdings, LLC
Woodbridge capital transactions - excess tax benefits
Change in accumulated other comprehensive income
Refinance of notes payable to related parties
Increase in notes payable associated with refinance
of notes payable to related parties
Issuance of notes payable to purchase properties and
equipment
Transfer of real estate-held-for-investment to real estate-
held-for-sale
Real estate held-for-investment transferred to investment
in real estate joint ventures
Increase in real estate held-for-sale from assumption of
other liabilities
For the Years Ended December 31,
2014
2013
2015
$
1,423
84
2,053
6
5,013
20
3,215
-
-
7,365
10,000
-
-
-
366
-
-
-
21,400
-
2,299
-
-
82,177
12,834
42,398
1,312
-
-
11,750
-
957
88
7,475
7,475
21
13,337
-
16
-
-
-
-
-
-
41,751
28,018
19,448
-
1,920
2,879
See Notes to Consolidated Financial Statements
F-12
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
BBX Capital Corporation (formerly BankAtlantic Bancorp, Inc.) and its subsidiaries may also be
referred to as “BBX Capital”, “we”, “us,” or “our” in these notes to the consolidated financial statements. BBX
Capital Corporation (excluding its subsidiaries, “BBX Capital Corporation”) was organized under the laws of
the State of Florida in 1994. BBX Capital is involved in the ownership , acquisition, development and
management of and investments in real estate and real estate related assets, and BBX Capital is also involved in
the investment in or acquisition of operating businesses. In April 2013, BBX Capital Corporation 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 5 Investment in Woodbridge Holdings, LLC).
BBX Capital Corporation’s principal asset until July 31, 2012 was its ownership of BankAtlantic and
its subsidiaries (“BankAtlantic”). BankAtlantic was a federal savings bank headquartered in Fort Lauderdale,
Florida. On July 31, 2012, BBX Capital Corporation completed the sale to BB&T Corporation (“BB&T”) of all
of the issued and outstanding shares of capital stock of BankAtlantic (the stock sale and related transactions
described herein are collectively referred to as the “BB&T Transaction”). Prior to the closing of the BB&T
Transaction, BankAtlantic formed two wholly-owned subsidiaries, BBX Capital Asset Management, LLC
(“CAM”) and Florida Asset Resolution Group, LLC (“FAR”).
Prior to the closing of the BB&T Transaction, BankAtlantic contributed approximately $82 million in
cash to CAM and certain non-performing commercial loans, commercial real estate and previously written-off
assets that had an aggregate carrying value on BankAtlantic’s balance sheet of $125 million as of July 31,
2012. CAM assumed all liabilities related to these assets. Prior to the closing of the BB&T Transaction,
BankAtlantic distributed all of the membership interests in CAM to BBX Capital. CAM remains a wholly-
owned subsidiary of BBX Capital.
BankAtlantic contributed to FAR certain performing and non-performing loans, tax certificates and
real estate that had an aggregate carrying value on BankAtlantic’s balance sheet of approximately $346 million
as of July 31, 2012. FAR assumed all liabilities related to these assets. BankAtlantic also contributed
approximately $50 million in cash to FAR on July 31, 2012 and thereafter distributed all of the membership
interests in FAR to BBX Capital. At the closing of the BB&T Transaction, BBX Capital transferred to BB&T
95% of the outstanding preferred membership interests in FAR in connection with BB&T’s assumption of BBX
Capital’s $285.4 million in principal amount of outstanding trust preferred securities (“TruPS”) obligations.
BBX Capital retained the remaining 5% of FAR’s preferred membership interests. Under the terms of the
Amended and Restated Limited Liability Company agreement of FAR entered into by BBX Capital and BB&T
at the closing, BB&T was entitled to hold its 95% preferred interest in the net cash flows of FAR until it
recovered $285 million in preference amount plus a priority return of LIBOR + 200 basis points per annum on
any unpaid preference amount. On May 6, 2015, BB&T’s preferred interest in FAR was repaid in full and
redeemed and FAR became a wholly-owned subsidiary of BBX Capital.
On April 30, 2015, BFC purchased 4,771,221 shares of BBX Capital’s Class A common stock through
a tender offer and in September 2015, BFC acquired an additional 221,821 shares of BBX Capital’s Class A
common stock from its executive officers upon the vesting of restricted stock units. These share acquisitions
increased BFC’s ownership percentage to approximately 81% of the issued and outstanding shares of BBX
Capital’s Class A common stock, which together with the shares of BBX Capital’s Class B common stock
owned by BFC, represented an approximate 81% equity interest and 90% voting interest in BBX Capital. BFC
owns 100% of BBX Capital’s Class B common stock.
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% at December 31, 2015, respectively. 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.
F-13
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
2. Summary of Significant Accounting Policies
The accounting policies applied by BBX Capital conform to accounting principles generally accepted
in the United States of America.
BBX Capital’s consolidated financial statements have been prepared on a going concern basis, which
reflects the realization of assets and the repayments of liabilities in the normal course of business.
Certain amounts for prior years have been reclassified to conform to the revised financial statement
presentation for 2015.
Use of Estimates - In preparing the financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities as of the date of the statements of financial condition and operations for the periods presented. Actual
results could differ significantly from those estimates. Material estimates that are particularly susceptible to
significant change relate to the determination of the allowance for loan losses, including the valuation of
collateral dependent loans, the valuation of loans held-for-sale, the valuation of real estate held-for-sale and
held-for-investment, the determination of lower of cost or market for inventories, the valuation of assets
acquired and liabilities assumed in the acquisition of a business, the amount of the deferred tax asset valuation
allowance, accounting for uncertain tax positions and accounting for contingencies.
Consolidation Policy – The consolidated financial statements include the accounts of BBX Capital
Corporation and its wholly-owned subsidiaries and majority-owned subsidiaries. All inter-company transactions
and balances have been eliminated.
Entities in which BBX Capital has a controlling financial interest are consolidated in BBX Capital’s
consolidated financial statements. BBX Capital determines whether it has a controlling financial interest in an
entity by first evaluating whether the entity is a voting interest entity or a variable interest entity (VIE). Voting
interest entities are entities in which the total equity investment at risk is sufficient to enable the entity to finance
itself independently and provides the equity holders with the obligation to absorb losses, the right to receive
residual returns and the right to make decisions about the entity’s activities. BBX Capital consolidates voting
interest entities in which it has all, or at least a majority of, the voting interest. VIEs are entities that lack one or
more of the characteristics of a voting interest entity. A controlling financial interest in a VIE is present when an
enterprise has both the power to direct the activities of the VIE that most significantly impact the VIE’s
economic performance and an obligation to absorb losses or the right to receive benefits that could potentially
be significant to the VIE. The enterprise with a controlling financial interest, known as the primary beneficiary,
consolidates the VIE. BBX Capital consolidates all VIE’s in which it is the primary beneficiary.
Cash Equivalents – Cash equivalents consist of cash, demand deposits at financial institutions, money
market funds and other short-term investments with maturities of 90 days or less when originated. Cash
maintained at financial institutions exceeds the $250,000 federally insured limit.
Restricted Cash and Time Deposits - Cash and interest bearing deposits are segregated into restricted
accounts for specific uses in accordance with the terms of certain land development agreements, loan servicing
contracts and notes payable security agreements. Restricted funds are controlled by third-parties.
Loans – Loans that management has the intent and ability to hold for the foreseeable future, or until
maturity or payoff, are reported at their outstanding principal balances net of any unearned income, unamortized
deferred fees or costs, premiums or discounts and an allowance for loan losses. Loans that management has the
intent to sell are classified as loans held-for-sale and are reported at the lower of aggregate cost or estimated fair
value. Loan origination fees, and related direct loan origination costs, premiums and discounts on loans held-
for-sale are deferred until the related loan is sold and included in gains and losses upon sale. Loans are
classified as loans held-for-sale when management originates loans for resale or when management decides to
sell loans that were not originated or purchased for sale. Transfers of loans between classifications are recorded
at the lower of aggregate cost or estimated fair value at the transfer date.
Allowance for Loan Losses – The allowance for loan losses reflects management’s reasonable
estimate of probable credit losses inherent in the loan portfolio based on management’s evaluation of credit risk
as of period end. Loans are charged off against the allowance when management believes the loan is not
collectible. Recoveries are credited to the allowance.
F-14
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The allowance consists of two components. The first component of the allowance is for loans that are
individually evaluated for impairment. Management evaluates commercial real estate and commercial non-real
estate loans greater than $0.5 million for impairment quarterly. Once an individual loan is found to be impaired,
an evaluation is performed to determine if a specific valuation allowance needs to be assigned to the loan based
on the present value of expected future cash flows discounted at the loan’s effective interest rate, except that as
a practical expedient, impairment may be measured based on the observable market price of the loan or the fair
value of the collateral if the loan is collateral dependent. Loans determined to be collateral dependent are
measured based on the fair value of the collateral less costs to sell. Consumer and residential loans past due 120
days or more were also evaluated individually for impairment and measured based on the lower of the estimated
fair value of the collateral less cost to sell or the carrying amount of the loan.
The second component of the allowance is for groups of loans with common characteristics that are
evaluated in loan pools to estimate the inherent losses in the portfolio. Management segregates loans into
segments with certain common characteristics so as to form a basis for estimating losses as it relates to the
segment. The loan portfolio has the following loan segments: residential, consumer, commercial non-real
estate, commercial real estate, and small business loans. The loss experience for each loan segment was derived
by calculating a charge-off history by loan segment adjusted by an expected recovery rate. Based on the nature
of each portfolio, a time frame is selected for the charge-off history in order to estimate the inherent loss in each
segment. The loss factor that was calculated from the charge-off history by loan segment is adjusted by
considering the following factors: delinquency and charge-off levels and trends, non-accrual levels and trends,
credit scores of borrowers, collateral value and external factors. Based on an analysis of the above factors,
management may adjust the historical loss experience up or down to reflect current conditions that differ from
the conditions that existed during the historical loss experience time frame.
Non-accrual and Past Due Loans – Loans are generally placed on non-accrual status at the earlier of
the loan becoming past due 90 days as to either principal or interest or when the borrower has entered
bankruptcy proceedings and the loan is delinquent. Commercial and small business loans may be placed on non-
accrual status sooner due to material deterioration of conditions surrounding the repayment sources, which
could include insufficient borrower capacity to service the debt, declines in the loan-to-value ratio of the loan’s
collateral or other factors causing the full payment of the loan’s principal and interest to be in doubt.
Accordingly, BBX Capital may place a loan on non-accrual status even when payments of principal or interest
are not currently in default. When a loan is placed on non-accrual, all accrued interest is reversed against interest
income. Loans may be restored to accrual status when there has been a satisfactory period of performance and
the loan is expected to perform in the future according to its contractual terms. Commercial and small business
loans are charged-down if the collection of principal or interest is considered doubtful. Consumer and
residential real estate loans that are 120 days past due are charged down to the collateral’s fair value less
estimated selling costs.
Trade Receivables
- Trade receivables are recorded at the invoiced amount and do not bear
interest. BBX Capital maintains an allowance for doubtful accounts for estimated losses inherent in its accounts
receivable portfolio. In establishing the required allowance, management considers historical losses adjusted to
take into account current market conditions and the customers' financial condition, the amount of receivables in
dispute, and the current receivables aging and current payment patterns. BBX Capital reviews its allowance for
doubtful accounts quarterly. Past due balances over 90 days and over a specified amount are reviewed
individually for collectability. Account balances are charged off against the allowance after all means of
collection have been exhausted and the potential for recovery is considered remote.
Real Estate Held-for-Investment and Real Estate Held-for-Sale – Real estate held-for-investment and
real estate held-for-sale represents real estate that BBX Capital has taken possession or ownership through
foreclosure of the underlying loan collateral. At the time of foreclosure the real estate is measured at its
estimated fair value less cost to sell and any impairments or recoveries are reflected in the allowance for loan
losses.
Real estate held-for-sale is subsequently measured at the lower of cost or estimated fair value and
valuation allowance adjustments are made to reflect any subsequent declines in fair values. Recoveries are
recognized for any subsequent increases in fair value but not in excess of cumulative losses recognized. Real
estate held-for-investment is depreciated over its useful life using the straight line method, if applicable.
Expenditures for capital improvements are generally capitalized. The costs of holding real estate are charged to
real estate operating expenses as incurred. Changes in the real estate valuation allowance are recorded as asset
(recoveries) impairments in BBX Capital’s Consolidated Statements of Operations.
Investments in Unconsolidated Real Estate Joint Ventures and Investment in Woodbridge Holdings,
LLC – BBX Capital follows the equity method of accounting to record its interests in companies in which it has
the ability to significantly influence the decisions of the entity and to record its investment in variable interest
entities in which it is not
F-15
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
the primary beneficiary. Under the equity method, an investment is shown on the Statement of Financial
Condition of an investor as a single amount and an investor’s share of earnings or losses from its investment is
shown in the Statement of Operations as a single amount. The investment is initially measured at cost and
adjusted for the investor’s share of the earnings or losses of the investee as well as dividends received from the
investee. The investor recognizes its share of the earnings or losses of the investee in the periods for which they
are reported by the investee in its financial statements rather than in the period in which an investee declares a
dividend. BBX Capital recognizes earnings or losses on certain equity method investments based on the
hypothetical liquidation at book value (“HLBV”) method. Under the HLBV method, earnings or losses are
recognized based on how an entity would allocate and distribute its cash if it were to sell all of its assets and
settle its liabilities for their carrying amounts and liquidate at the reporting date. The HLBV method is used to
calculate earnings or losses for equity method investments when the contractual cash disbursements are
different than the investors’ equity interest.
Interest expense is capitalized by the investor on investments, advances or loans to real estate equity
method companies that began qualifying activities. Total capitalized interest expense cannot exceed interest
expense incurred. Interest expense capitalization ceases when the investee completes its qualifying activities.
BBX Capital evaluates its investments accounted for under the equity method of accounting for other-
than-temporary declines in value on an on-going basis. The review for other-than-temporary declines takes into
account the length of time and the extent to which the fair value has been less than cost, the financial condition
and near-term prospects of the project or the investment and the intent and ability of BBX Capital to retain the
investment for a period of time sufficient to allow for recovery. BBX Capital considers all available evidence to
evaluate the fair value of BBX Capital’s equity method investments, including prior forecasts compared to
actual performance, discounted forecasts of future distributions and economic trends in the real estate
industry. If BBX Capital believes that the decline in the fair value of the equity investment is other-than-
temporary, BBX Capital will record the investment at fair value and recognize impairment in BBX Capital’s
consolidated statements of operations.
Properties and Equipment– Land is carried at cost. Office properties, leasehold improvements,
equipment and computer software are carried at cost less accumulated depreciation. Depreciation is computed
on the straight-line method over the estimated useful lives of the assets which generally range up to 40 years for
buildings and 3-10 years for equipment. The cost of leasehold improvements is amortized using the straight-line
method over the shorter of the terms of the related leases or the useful lives of the assets. Expenditures for new
properties, leasehold improvements, equipment and major renewals and betterments are capitalized.
Expenditures for maintenance and repairs are expensed as incurred, and gains or losses on disposal of assets are
reflected in current operations.
Inventories – Inventories are measured at the lower of cost or market. Cost includes all costs of
conversions, including materials, direct labor, production overhead, depreciation of equipment and shipping
costs. Raw materials are stated at the lower of approximate cost, on a first-in, first-out basis, and market
determined by reference to replacement cost. Raw materials are not written down unless the goods in which
they are incorporated are expected to be sold for less than cost, in which case, they are written down by
reference to replacement cost of the raw materials. Finished goods and work in progress are stated at the lower
of approximate cost or market determined on a first-in, first-out basis for Renin’s finished goods inventory and
on an approximate average cost basis for the Sweet Holdings’ finished goods inventory.
Goodwill and other Intangible Assets – Other intangible assets consists of trade names, customer
relationships, non-competition agreements and lease premiums that were initially recorded at fair value and are
amortized on a straight-line basis over their respective estimated useful lives. Other intangible assets are tested
for recoverability whenever events or changes in circumstances indicate that the carrying amount of the
intangible asset may not be recoverable. The carrying amount of an intangible asset is not considered
recoverable when the carrying amount exceeds the sum of the undiscounted cash flows expected to result from
the use of the intangible asset. The impairment is measured as the amount by which the carrying amount of the
intangible asset exceeds its fair value.
Goodwill is recorded at the acquisition date of a business. Annually, goodwill is assessed for
qualitative factors to determine whether it is necessary to perform a goodwill impairment test. Goodwill testing
is a two-step process. The first step of the goodwill impairment test is used to identify potential impairment.
This step compares the fair value of a reporting unit with its carrying value. If the fair value of the reporting unit
exceeds its carrying value, goodwill is considered not impaired and the second step of the impairment test is not
necessary. If the fair value of the reporting unit is less than the carrying value, then the second step of the test is
used to measure the amount of goodwill impairment, if any, in the reporting unit. This step compares the current
implied goodwill in the reporting unit to its carrying amount. If the carrying
F-16
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
amount of the goodwill exceeds the implied goodwill, impairment is recorded for the excess. The implied
goodwill is determined in the same manner as the amount of goodwill recognized in a business combination is
determined.
Tax Certificates – Tax certificates included in other assets totaled $0.1 million and $0.2 million, net of
allowance for tax certificate losses as of December 31, 2015 and 2014, respectively. Tax certificates represent a
priority lien against real property for which assessed real estate taxes are delinquent. Tax certificates were
acquired from municipalities generally through public auction.
Income Taxes – BBX Capital as of May 1, 2015 files federal and state income tax returns as part of
BFC’s consolidated income tax returns. In prior years, BBX Capital filed consolidated federal and state income
tax returns. Renin’s Canadian and United Kingdom subsidiaries’ earnings are subject to taxation in Canada and
the United Kingdom and these subsidiaries file separate income tax returns in those countries.
BBX Capital’s provision for income taxes for the year ended December 31, 2015 was calculated based
on the separate return method. Under the separate return method it is assumed that BBX Capital files a separate
consolidated income tax return with the taxing authorities reporting its taxable income or loss and paying the
applicable tax to or receiving the appropriate refund from BFC.
BBX Capital’s provision for income taxes is based on income before taxes reported for financial
statement purposes after adjustments for transactions that do not have tax consequences. Deferred tax assets and
liabilities are realized according to the estimated future tax consequences attributable to differences between the
carrying value of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities
are measured using the enacted tax rates as of the date of the Consolidated Statements of Financial Condition.
The effect of a change in tax rates on deferred tax assets and liabilities is reflected in the period that includes the
statutory enactment date. A deferred tax asset valuation allowance is recorded when it has been determined that
it is more-likely-than-not that deferred tax assets will not be realized. If a valuation allowance is needed, a
subsequent change in circumstances in future periods that causes a change in judgment about the realization of
tax valuation
the
allowance. Additionally, taxable temporary differences that originate from a business combination could result
in deferred tax valuation allowance reversals.
tax amount could
related deferred
the deferred
reversal of
result
the
in
An uncertain tax position is defined as a position in a previously filed tax return or a position expected
to be taken in a future tax return that is not based on clear and unambiguous tax law and which is reflected in
measuring current or deferred income tax assets and liabilities for interim or annual periods. BBX Capital may
recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position
will be sustained on examination by the taxing authorities, based on the technical merits of the position. BBX
Capital measures the tax benefits recognized based on the largest benefit that has a greater than 50% likelihood
of being realized upon ultimate resolution. BBX Capital recognizes interest and penalties related to
unrecognized tax benefits in its provision for income taxes.
Revenue Recognition – Gains and losses from the sales of real estate and the transfer of real estate to
joint ventures are recognized when the sales are closed and title passes to the buyer, the buyer’s initial and
continuing investment is adequate to demonstrate a commitment to pay for the property, the buyer’s receivable,
if applicable, is not subject to future subordination and BBX Capital does not have substantial continuing
involvement with the property.
Revenues are recognized on trade sales when products are shipped and the customer takes ownership
and assumes the risk of loss.
Revenues from interest income are recognized on accruing loans when it is probable that all of the
principal and interest will be collected in accordance with the loan’s contractual terms. Interest income is
recognized on non-accrual loans on a cash basis.
Revenues from real estate operations are generally rental income from properties under operating
leases. Rental income is recognized as rents become due and rental payments received in advance are deferred
until earned.
Advertising Costs – Advertising costs are expensed as incurred.
Accounting for Loss Contingencies – Loss contingencies, including those arising from legal actions,
are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be
reasonably estimated.
Earnings Per Share – 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
F-17
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
per share reflect the potential dilution that could occur if options to issue common shares or restricted common
stock awards of BBX Capital were exercised or lapse. 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 awards are included in the weighted average number of common shares outstanding based on
the treasury stock method, if dilutive.
Stock-Based Compensation Plans – Compensation expense for stock options and non-vested restricted
common stock awards is based on the fair value of the award on the measurement date, which is generally the
grant date. BBX Capital recognizes these compensation costs on a straight-line basis over the requisite service
period of the award, which is generally four years for non-vested restricted common stock awards and five years
for stock options. The fair value of stock options is estimated using the Black-Scholes option-pricing model.
The fair value of non-vested restricted common stock awards is generally the market price of BBX Capital’s
common stock on the grant date.
New Accounting Pronouncements:
The FASB has issued the following accounting pronouncements and guidance relevant to BBX
Capital’s operations:
Accounting Standards Update Number 2016-02 – Leases (Topic 845). This update requires an entity to
recognize a right-of-use asset and a lease liability for virtually all of its leases. The liability will be equal to the
present value of lease payments. The asset will generally be based on the liability. For income statement
purposes operating leases will result in straight-line expense and finance leases will result in expenses similar to
current capital leases. The guidance also requires additional disclosures to enable users of financial statements
to understand the amount, timing and uncertainty of cash flows arising from leases. The guidance will be
effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal
years. Early adoption is permitted. BBX Capital is currently evaluating the requirements of this update and has
not yet determined its impact on BBX Capital’s consolidated financial statements.
Accounting Standards Update Number 2016-01 –– Financial Instruments – Overall (Topic 825) –
Recognition and Measurement of Financial Assets and Financial Liabilities. This update requires all equity
investments in unconsolidated entities (other than those accounted for using the equity method of accounting) to
generally be measured at fair value through earnings. There will no longer be an available-for-sale
classification for equity securities with readily determinable fair values. The cost method is eliminated for
equity investments without readily determinable fair values. However, entities will be able to elect to record
equity investments without readily determinable fair values at cost, less impairment. This update also simplifies
the impairment assessment for equity investments and requires the use of the exit price when measuring the fair
value of financial instruments measured at amortized cost for disclosure purposes. The amendments in this
update are effective for fiscal years beginning after December 15, 2017, including interim periods within those
fiscal years. BBX Capital is currently evaluating the requirements of this update and has not yet determined its
impact on BBX Capital's consolidated financial statements.
Accounting Standards Update Number 2015-16 –– Business Combinations (Topic 805) – Simplifying
the Accounting Measurement-Period Adjustments. This update requires an acquirer in a business combination
to recognize adjustments to provisional amounts that are identified during the measurement period in the
reporting period in which the adjustment amounts are determined. The acquirer is required to record, in the
same period’s financial statements, the effect on earnings, if any, as a result of the change to the provisional
amounts, calculated as if the accounting had been completed at the acquisition date. The update requires that
the acquirer disclose in the notes or on the face of the income statement the portion of the amount recorded in
current-period earnings by line item that would have been recorded in previous reporting periods if the
adjustment to the provisional amounts had been recognized as of the acquisition date. The amendments in this
update are effective for fiscal years beginning after December 15, 2015, including interim periods within those
fiscal years. This update should be applied prospectively to adjustments to provisional amounts that occur after
the effective date of this update with earlier application permitted for financial statements that have not been
issued. We do not expect the adoption of this update on January 1, 2016 to have a material impact on BBX
Capital’s consolidated financial statements.
Accounting Standards Update Number 2015-15 –– Interest – Imputation of Interest (Topic 835-30) –
Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit
Arrangements. This update amends ASU 2015-03 and permits presentation of debt issuance costs on line-of-
credit arrangements as an asset and subsequently amortizing the deferred debt issuance costs ratably over the
term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-
of-credit arrangement. This update was effective upon the issuance of the
F-18
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
standard and may be applied prospectively. We do not expect the adoption of this update on January 1, 2016 to
have a material impact on BBX Capital’s consolidated financial statements.
Accounting Standards Update Number 2015-11 –– Inventory (Topic 330) – Simplifying the
Measurement of Inventory. This update requires that an entity should measure inventory at the lower of cost and
net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less
reasonably predictable costs of completion, disposal, and transportation. The update was intended to more
clearly articulate the requirements for the measurement and disclosure of inventory and not to change current
practices. The update is effective for annual and interim reporting periods beginning after December 15, 2016.
The update should be applied prospectively with early application permitted at the beginning of an interim or
annual reporting period. The adoption of this update is not expected to have a material impact on BBX
Capital’s consolidated financial statements.
Accounting Standards Update Number 2015-05 –– Intangibles – Goodwill and Other – Internal-Use
Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. This
update provides guidance to customers about whether a cloud computing arrangement includes a software
license. If a cloud computing arrangement includes a software license, then the customer should account for the
software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud
computing arrangement does not include a software license, the customer should account for the arrangement as
a service contract. The standard is effective for annual and interim reporting periods beginning after
December 15, 2015. Early application is permitted. We do not expect the adoption of this update on January 1,
2016 to have a material impact on BBX Capital’s consolidated financial statements.
Accounting Standards Update Number 2015-03 –– Interest - Imputation of Interest (Subtopic 835-30):
Simplifying the Presentation of Debt Issuance Costs. This update requires that debt issuance costs related to a
recognized debt liability be presented in the Statement of Financial Condition as a direct deduction from the
carrying amount of that debt liability, consistent with debt discounts. The standard is effective for annual and
interim reporting periods beginning after December 15, 2015. Early application is permitted. We do not expect
the adoption of this update on January 1, 2016 to have a material impact on BBX Capital’s consolidated
financial statements.
Accounting Standards Update Number 2015-02 – Amendments to the Consolidation Analysis (Topic
810): This update changes 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
standard is effective for annual reporting periods beginning after December 15, 2015. Early application is
permitted. We do not expect the adoption of this update on January 1, 2016 to have a material impact on BBX
Capital’s consolidated financial statements.
Accounting Standards Update Number 2014-15 – Presentation of Financial Statements – Going
Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going
Concern. This update provides guidance regarding management’s responsibility to evaluate whether there is
substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote
disclosures. The guidance requires management to assess an entity’s ability to continue as a going concern by
incorporating and expanding upon certain principles that are currently in United States auditing standards. The
standard is effective for annual and interim reporting periods beginning after December 15, 2016. Early
application is permitted. BBX Capital is currently evaluating the requirements of this update and has not yet
determined its impact on the Company's consolidated financial statements.
Accounting Standards Update Number 2014-09 – Revenue from Contracts with Customers – (Topic
606). Accounting Standards Update Number 2014-09 – Revenue Recognition (Topic 606): Revenue from
Contracts with Customers. This guidance is intended to improve the financial reporting requirements for
revenue from contracts with customers by providing a principle based approach. It also requires disclosures
designed to enable readers of financial statements to understand the nature, amount, timing and uncertainty of
revenue and cash flows arising from contracts with customers. This accounting guidance update will replace
most existing revenue recognition guidance in U.S. GAAP. The standard was effective for annual and interim
reporting periods beginning after December 15, 2016. AU 2015-14 deferred the effective date of this update for
all entities by one year. Earlier application is permitted only as of annual reporting periods beginning after
December 15, 2016, including interim reporting periods within that reporting period. BBX Capital
F-19
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
is currently evaluating the requirements of this update and has not yet determined its adoption date, adoption
method or the impact it may have on BBX Capital's consolidated financial statements.
3. Acquisitions
In April 2015, BBX Sweet Holdings, LLC (“BBX Sweet Holdings”), a wholly owned subsidiary of
BBX Capital Corporation, acquired the assets of Kencraft Confections, LLC (“Kencraft”) for $1.4 million. The
purchase consideration was funded by a $995,000 notes payable to a financial institution and a $400,000
promissory note to the seller. Kencraft is a Utah based manufacturer of hard candies and icing
decorations. Business combination disclosures required by Topic 805-10-50 for the Kencraft asset acquisition
are not included in BBX Capital’s notes to the consolidated financial statements as the Kencraft asset
acquisition was not considered material to BBX Capital’s Consolidated Financial Statements. BBX Capital
recognized a $254,000 bargain gain from the acquisition of Kencraft and incurred $0.1 million of acquisition
related costs.
2014 Acquisitions
In October 2014, BBX Sweet Holdings acquired the outstanding common shares of Anastasia
Confections (“Anastasia”) for $11.4 million. Founded in 1984 and headquartered in an 80,000 square foot
production facility in Orlando, Florida, Anastasia manufactures gourmet coconut and chocolate candy, salt
water taffy, and other chocolate gift products. The purchase consideration included cash of $4.2 million and a
$7.5 million promissory note. The promissory note was recorded at a $0.3 million discount to reflect the fair
value of the promissory note at the acquisition date .
In July 2014, BBX Sweet Holdings acquired Helen Grace Chocolates (“Helen Grace”), a California
based manufacturer of premium chocolate confections, chocolate bars, chocolate candies and truffles and in a
separate transaction during July 2014 BBX Sweet Holdings acquired Jer’s Chocolates (“Jer’s”), a California
based distributor of peanut butter chocolate products internationally and in the United States. In January 2014,
BBX Sweet Holdings acquired Williams and Bennett, including its brand Big Chocolate Dipper. Williams and
Bennett is headquartered in Boynton Beach, Florida and is a manufacturer of chocolate products serving
boutique retailers, big box chains, department stores, national resort properties, corporate customers, and private
label brands.
The purchase consideration for the Williams and Bennett, Helen Grace, and Jer’s acquisitions included
cash of $4.6 million and holdback amounts of $0.7 million. The holdback amounts serve to satisfy any
indemnification claims made by BBX Sweet Holdings against a seller pursuant to the purchase agreements.
The following tables summarize the fair value of the assets acquired and liabilities assumed from
Anastasia at the acquisition date (in thousands):
Fair value of identifiable assets acquired and liabilities assumed:
Trade receivables
Inventories
Properties and equipment
Identifiable intangible assets (1)
Deferred tax liabilities
Other liabilities
Fair value of identifiable net assets
Goodwill
Purchase consideration
$
$
483
1,338
1,873
3,410
(1,589)
(421)
5,094
6,337
11,431
(1)
Identifiable intangible assets consisted primarily of $1.9 million and $1.5 million of trademarks and customer
relationships, respectively.
BBX Capital incurred $0.1 million of acquisition related costs in connection with the Anastasia
acquisition. The acquisition related costs are included in selling, general and administrative expenses in BBX
Capital’s Consolidated Statements of Operations for the year ended December 31, 2014.
F-20
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The amount of revenues and net income from Anastasia included in BBX Capital’s Consolidated
Statements of Operations for the year ended December 31, 2014 was $2.1 million and $268,000,
respectively. The Anastasia net income excludes acquisition related costs and is from the date of acquisition
(October 1, 2014) through December 31, 2014.
The supplemental pro forma amount of BBX Capital’s revenues and net income had the Anastasia
acquisition been as of January 1, 2013 was as follows (in thousands):
(unaudited)
Pro forma from 1/1/2014 -12/31/2014
Pro forma from 1/1/2013 -12/31/2013
Revenue
Income (1)
$
$
98,022
54,828
4,540
48,305
(1) Amounts represent income from continuing operations.
The following tables summarize the fair value of the assets acquired and liabilities assumed from
Williams and Bennett, Jer’s and Helen Grace at the respective acquisition dates (in thousands):
Fair value of identifiable assets acquired and liabilities assumed:
Trade receivables
Inventories
Properties and equipment
Identifiable intangible assets
Other assets
Notes payable
Deferred tax liabilities
Other liabilities
Fair value of identifiable net assets
Goodwill
Purchase consideration
Bargain purchase gain
$
$
49
3,284
1,329
2,738
416
(186)
(1,742)
(602)
5,286
1,264
(5,313)
1,237
(1)
Identifiable intangible assets consisted primarily of $1.2 million and $1.1 million of trademarks and customer
relationships intangible assets, respectively.
BBX Capital
incurred $0.4 million of acquisition related costs in connection with these
acquisitions. The acquisition related costs are included in selling, general and administrative expenses in BBX
Capital’s Consolidated Statements of Operations for the year ended December 31, 2014.
The bargain purchase gain of $1.2 million from the Helen Grace acquisition represents the amount by
which the fair value of identifiable net assets acquired exceeded the purchase consideration. Management
believes that it was able to acquire Helen Grace for a bargain purchase gain because Helen Grace was a division
of a larger company that made a strategic decision to divest chocolate manufacturing activities.
The amount of revenues and net loss from these acquisitions included in BBX Capital’s Consolidated
Statements of Operations for the year ended December 31, 2014 was $9.7 million and $0.3 million,
respectively. The net loss from the date of these acquisitions through December 31, 2014 excludes $0.4 million
of acquisition related costs and the $1.2 million Helen Grace bargain purchase gain.
F-21
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The supplemental pro forma amount of BBX Capital’s revenues and net income had these acquisitions
been consummated as of January 1, 2013 was as follows (in thousands):
(unaudited)
Pro forma from 1/1/2014 -12/31/2014
Pro forma from 1/1/2013 -12/31/2013
Revenue
Income (1)
$
$
97,148
64,496
3,289
46,941
(1) Amounts represent income from continuing operations.
The net cash outflows from the Williams and Bennett, Jer’s, Helen Grace and Anastasia acquisitions
(collectively, “2014 Acquisitions”) was as follows (in thousands):
Total purchase consideration
Notes payable
Other liabilities
Net cash outflow from acquisitions
2013 Acquisitions
$
$
16,744
(7,750)
(150)
8,844
On October 30, 2013, Renin Holdings, LLC (“Renin”) a newly formed joint venture owned 81% by
BBX Capital and 19% by BFC acquired through two subsidiaries substantially all of the assets and certain
liabilities of Renin Corp for approximately $14.5 million (the “Renin Transaction Consideration”). Renin
manufactures interior closet doors, wall décor, hardware and fabricated glass products and operates through
headquarters in Canada and two manufacturing, assembly and distribution facilities in Canada and the United
States and a sales facility in the United Kingdom.
Renin funded approximately $9.4 million of the Renin Transaction Consideration through proceeds
from a loan and revolver facility to Renin provided by Bluegreen. The remainder of the Renin Transaction
Consideration was funded $4.2 million by BBX Capital and $1.0 million by BFC pro rata in accordance with
their percentage equity interests in Renin. At closing, $1.7 million of the Renin Transaction Consideration was
placed in an escrow account pending final determination of the working capital adjustment (if any) and final
resolution of any indemnification obligations of Renin Corp. In January 2014, the working capital and
indemnification obligations of the sellers were finalized and the entire escrow balance was distributed to
Renin. As a result, the Renin Transaction Consideration was reduced to $12.8 million.
In December 2013, BBX Sweet Holdings acquired the outstanding equity interests in Hoffman’s
Chocolates and
its subsidiaries Boca Bons, LLC and S&F Good Fortunes, LLC (collectively,
“Hoffman’s”). Hoffman’s is a manufacturer of gourmet chocolates, with retail locations in South Florida. The
purchase consideration included a $500,000 holdback (“Holdback”) that was payable on the second anniversary
of the closing date and accrued interest at 1.93% per annum. The Holdback served as security for the
Hoffman’s sellers’ obligations under the Hoffman’s stock purchase and sale agreement including the indemnity
obligations and performance under each of such seller’s non-competition agreements. The Holdback was
recorded at a $46,000 premium to reflect the fair value of the Holdback at the acquisition date. The obligation
of BBX Sweet Holdings to pay to the Hoffman’s sellers all or any portion of the Holdback was guaranteed by
BBX Capital.
F-22
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following tables summarize the purchase consideration for the Hoffman’s acquisition and for the
Renin Transaction and the fair value of the assets acquired and liabilities assumed and the net cash outflows
from the acquisitions at the acquisition dates (in thousands):
Fair value of identifiable assets acquired and liabilities assumed:
Cash
Trade receivables
Inventories
Properties and equipment
Identifiable intangible assets
Other assets
Note payable
Other liabilities
Fair value of identifiable net assets
Purchase consideration
Bargain purchase gain
Purchase consideration
Working capital adjustment receivable
Holdback Amounts
Discount on Holdback Amount
Cash acquired
Net cash outflows from acquisitions
$
$
$
$
1,033
7,523
9,858
6,134
2,686
477
(2,493)
(9,011)
16,207
(15,206)
1,001
15,206
1,694
(500)
46
(1,033)
15,413
BBX Capital
the
incurred $1.1 million of acquisition related costs
acquisitions. The bargain purchase gain of $1.0 million from the Renin Transaction represents the amount by
which the fair value of identifiable net assets acquired exceeded the Renin Transaction Consideration.
Management believes that it was able to acquire Renin Corp. for a bargain purchase gain because Renin Corp.
was a distressed company. The acquisition related costs are included in selling, general and administrative
expenses in BBX Capital’s Consolidated Statements of Operations for the year ended December 31, 2013.
in connection with
The amount of revenues and net loss from the Renin Transaction included in BBX Capital’s
Consolidated Statements of Operations for the year ended December 31, 2013 was $9.3 million and a net loss
of $0.9 million, respectively. Actual net loss from October 30, 2013 through December 31, 2013 excludes
acquisition costs and the bargain purchase gain.
F-23
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The supplemental pro forma amount of BBX Capital’s revenues and net income (loss) had the Renin
Transaction been consummated as of January 1, 2012 was as follows (in thousands):
(unaudited)
Revenue
Income (1)
Pro forma from 1/1/2013 - 12/31/2013
$
104,987
43,639
(1) Amounts represent income from continuing operations
The methodology utilized to fair value the assets acquired for the acquisitions was as follows:
Trade Receivables
Trade receivables were recorded at fair value using the cost approach with level 3 inputs based on the
percentage of gross receivables collected in a trailing eighteen month period ending in October 2013 for
Renin. The inputs used were trade receivable balances, allowances, charge-offs, sales discounts and volume of
returned merchandise. The fair value of the trade receivables acquired from the BBX Sweet Holdings
acquisitions were recorded at the invoiced amounts.
Inventories
Raw materials were fair valued using the cost approach. Raw material items replaced on a regular
basis were recorded at fair value based on historical costs. Raw material items acquired in the Renin transaction
with greater than 180 days of usage on hand were recorded at fair value based on discounts relative to historical
cost amounts. Finished goods inventory was recorded at fair value using the cost approach. A gross margin
was added to the finished goods historical cost amounts in order to estimate a reasonable profit margin for
selling finished goods. Finished goods on hand acquired in the Renin Transaction greater than 180 days of
sales were recorded at fair value with discounts relative to historical costs.
Properties and Equipment
Properties and equipment acquired consisted primarily of machinery and equipment used in
manufacturing operations. The machinery and equipment was recorded at fair value using the market approach
with level 2 inputs as market comparable data. The cost approach was used to estimate the contributing
installation costs to fair value and the electrical distribution system in certain manufacturing facilities. The
inputs were obtained from market data collected from used equipment dealers that purchase and sell comparable
equipment, quotations from new machinery dealers and manufacturers, historical installation cost information
and searches on the internet.
Identifiable Intangible Assets
The identifiable intangible assets acquired primarily consisted of trade names and customer
relationships. The relief from royalty valuation method, a form of the income approach, was used to estimate
the fair value of the trade names. The fair value was determined by present valuing the expected future
estimated royalty payments that would have to be paid if the trade names were not owned. The fair value of the
net royalties saved was estimated based on discounted cash flows at a risk adjusted discount rate. The multi-
period excess earnings method, a form of the income approach, was used to estimate the fair value of the
customer relationships. The multi-period excess earnings method isolates the expected cash flows attributable to
the customer relationship intangible asset and discounts these cash flows at a risk adjusted discount rate.
F-24
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
4. Goodwill and Other Intangible Assets
Included in BBX Capital’s Consolidated Statements of Financial Condition as of December 31, 2015
and 2014 was $7.6 million and $7.4 million of goodwill, respectively. The goodwill was recognized in
connection with BBX Sweet Holdings acquisitions and is part of the Sweet Holdings reportable segment. The
Anastasia acquisition goodwill was adjusted based on additional information obtained concerning the tax basis
of properties and equipment acquired. The adjustment to the tax basis increased the taxable temporary
differences established in connection with the Anastasia acquisition resulting in a $0.2 million increase in
Goodwill during the year ended December 31, 2015.
BBX Capital tests goodwill for potential impairment annually on December 31 or during interim
periods if impairment indicators exist. BBX Capital first assesses qualitatively whether it is necessary to
perform the two-step goodwill impairment test. The two-step test is performed when it is more-likely-than-not
that the reporting unit’s goodwill fair value is less than its carrying amount. BBX Capital evaluates the
following factors in its qualitative assessment: macroeconomic conditions, market considerations, cost factors,
financial performance and events affecting the reporting unit.
If BBX Capital concludes from the qualitative assessment that further testing is required, BBX Capital
performs the two-step goodwill impairment test. Step one involves the determination of the fair value of BBX
Capital’s reporting unit. If the fair value of the reporting unit exceeds the carrying amount, the reporting unit’s
goodwill is not considered impaired. If the fair value of the reporting unit is less than the carrying amount
BBX Capital performs step two of the goodwill impairment test which calculates the reporting units
goodwill. If the carrying amount of the reporting unit’s goodwill is greater than the implied fair value of the
reporting unit’s goodwill, an impairment loss is recognized.
Inherent in such fair value determinations are certain judgments and estimates relating to future cash
flows,
including BBX Capital’ s assessment of current economic indicators and market valuations, and
assumptions about BBX Capital’s strategic plans with regard to its operations. BBX Capital generally
establishes fair value using the discounted cash flow methodology. The discounted cash flow methodology
establishes fair value by estimating the present value of the projected future cash flows to be generated from the
reporting unit. The discount rate applied to the projected future cash flows to arrive at the present value is
intended to reflect all risks of ownership and the associated risks of realizing the stream of projected future cash
flows. BBX Capital generally used a five year period in computing discounted cash flow values. The most
significant assumptions used in the discounted cash flow methodology are the discount rate, the terminal value
and the forecast of future cash flows.
Major classes of other intangible assets was as follows (in thousands):
Class
Trademarks
Customer Relationships
Other
Accumulated amortization
Total other intangible assets
December 31,
2015
2014
$
$
5,965
2,691
601
9,257
(1,046)
8,211
5,715
2,631
490
8,836
(396)
8,440
The amortization expense of other intangible assets included in selling general and administrative
expenses for the years ended December 31, 2015 and 2014 was $0.6 million and $0.4 million, respectively.
F-25
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The estimated aggregate amortization expense of other intangible assets for each of the five
succeeding years was as follows:
Years Ending December 31,
2016
2017
2018
2019
2020
$
Total
649
621
597
583
536
Trademarks, customer relationships and non-competition agreements are amortized using the straight-
line method over their expected useful lives of 20 years, 12 years and 4 years, respectively. The lease premium
is amortized using the straight-line method over the lease term of 73 months.
Included in other liabilities was a $306,000 lease discount intangible liability associated with the
Anastasia acquisition. The lease discount is amortized using the straight-line method over the lease term of five
years.
5. 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 managing member of Woodbridge. Since BFC is the majority owner of Woodbridge
and the managing member, BBX Capital’s investment in Woodbridge is accounted for under the equity
method. BBX Capital’s investment in Woodbridge consisted of $60.4 million in cash (including $0.4 million in
transaction costs) and a promissory note in Woodbridge’s favor in the principal amount of $11.75 million. 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.
BBX Capital’s investment in Woodbridge was accounted for as a transaction between entities under
common control as BFC is the controlling shareholder of BBX Capital and Woodbridge. As a consequence, the
investment in Woodbridge was recorded by BBX Capital at BFC’s historical cost and the difference between
46% of BFC’s historical cost in Woodbridge ($85.1 million) and the amount BBX Capital invested in
Woodbridge ($71.75 million) was recognized as an increase in additional paid-in capital ($13.3 million) in BBX
Capital’s consolidated financial statements.
Bluegreen’s former public shareholders brought an action against Bluegreen, the directors of
Bluegreen, BFC, Woodbridge, certain directors and officers of BFC and others, challenging the terms of the
merger pursuant to which Bluegreen merged into a wholly owned subsidiary of Woodbridge and Bluegreen’s
shareholders (other than Woodbridge) were paid $10.00 in cash for each share of Bluegreen’s common stock
that they held immediately prior to the effective time of the merger, and on June 5, 2015 the plaintiffs and
defendants agreed to a settlement of the litigation. Pursuant to the settlement, which was finalized during
September 2015, Woodbridge paid $36.5 million into a settlement fund for the benefit of former shareholders of
Bluegreen whose shares were acquired in connection with the transaction. BBX Capital repaid in full its $11.75
million promissory note to Woodbridge and BFC and BBX Capital made additional capital contributions to
Woodbridge of $13.4 million and $11.4 million, respectively (based on their respective 54% and 46%
ownership interests in Woodbridge), to fund the settlement payment.
F-26
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following was the activity related to BBX Capital’s investment in Woodbridge under the equity
method (in thousands):
For the Years Ended December 31,
Through
2015
2014
December 31, 2013
From April 2, 2013
Investment in Woodbridge
Additional investment in Woodbridge
Equity in earnings of Woodbridge
Woodbridge capital transactions - excess tax
benefits
Dividends received from Woodbridge
Investment in Woodbridge
$
$
73,026
11,385
14,974
-
(23,840)
75,545
78,573
-
25,282
957
(31,786)
73,026
85,491
-
13,461
-
(20,379)
78,573
The condensed Consolidated Statements of Financial Condition as of December 31, 2015 and 2014,
and the condensed Consolidated Statements of Operations for the years ended December 31, 2015 and 2014 and
from April 2, 2013 through December 31, 2013 of Woodbridge Holdings, LLC are as follows (in thousands):
December 31,
2015
2014
Assets
Cash and restricted cash
Notes receivable, net
Notes receivable from related parties
Inventory of real estate
Properties and equipment, net
Intangible assets
Other assets
Total assets
Liabilities and Equity
Accounts payable, accrued liabilities and other
Deferred tax liabilities, net
Notes payable
Junior subordinated debentures
Total liabilities
Total Woodbridge members' equity
Noncontrolling interest
Total equity
Total liabilities and equity
$
$
$
$
F-27
172,758
415,598
80,000
220,211
71,937
61,977
70,496
1,092,977
113,473
110,202
510,401
152,307
886,383
163,397
43,197
206,594
1,092,977
240,427
424,267
11,750
194,713
72,319
63,913
53,158
1,060,547
114,263
92,609
502,465
150,038
859,375
157,920
43,252
201,172
1,060,547
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
For the Years Ended December 31,
From April 2, 2013
Through December
31,
2015
2014
2013
Total revenues
Total costs and expenses
Other income (expense)
Income before taxes
Provision for income taxes
Net income
Net income attributable to noncontrolling
interest
Net income attributable to Woodbridge
BBX Capital 46% equity earnings
in Woodbridge
$
$
$
614,765
533,260
3,410
84,915
40,658
44,257
(11,705)
32,552
580,328
477,507
3,872
106,693
40,321
66,372
(11,411)
54,961
14,974
25,282
399,708
341,938
(123)
57,647
18,409
39,238
(9,974)
29,264
13,461
6. Investments in Unconsolidated Real Estate Joint Ventures
BBX Capital had the following investments in unconsolidated real estate joint ventures (in thousands):
Investment in unconsolidated real estate joint ventures
Altis at Kendall Square, LLC
$
Altis at Lakeline - Austin Investors LLC
New Urban/BBX Development, LLC
Sunrise and Bayview Partners, LLC
Hialeah Communities, LLC
PGA Design Center Holdings, LLC
CCB Miramar, LLC
Centra Falls, LLC
The Addison on Millenia Investment, LLC
BBX/S Millenia Blvd Investments, LLC
Altis at Bonterra - Hialeah, LLC
Investments in unconsolidated real estate joint ventures
$
December 31,
2015
2014
764
5,210
864
1,577
4,569
1,911
875
727
5,778
4,905
15,782
42,962
1,264
5,000
996
1,723
5,091
1,991
-
-
-
-
-
16,065
BBX Capital’s investments in unconsolidated real estate joint ventures are variable interest entities.
See Note 7 for a listing of BBX Capital’s investments in consolidated variable interest entities.
Information regarding BBX Capital’s investments in unconsolidated real estate joint ventures are listed
below.
Altis at Kendall Square, LLC (“Kendall Commons”)
In March 2013, BBX Capital invested $1.3 million in a joint venture to develop 321 apartment units.
BBX Capital is entitled to receive 13% of the joint venture distributions until a 15% internal rate of return has
been attained and then BBX Capital will be entitled to receive 9.75% of any joint venture distributions
thereafter.
BBX Capital analyzed the operating agreement of Kendall Commons and determined that it is not the
primary beneficiary and therefore the investment in the real estate joint venture is accounted for under the
equity method of
F-28
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
accounting. This conclusion was based primarily on the determination that BBX Capital only has limited
protective rights under the operating agreement, is not the manager of the joint venture and BBX Capital does
not have day-to-day decision making authority.
BBX Capital’s maximum exposure to loss as a result of its involvement with the Altis at Kendall
Square joint venture is its carrying amount of $0.8 million as of December 31, 2015.
Altis at Lakeline – Austin Investors, LLC (“Altis at Lakeline”)
In December 2014, BBX Capital invested $5.0 million in a joint venture to develop 354 apartment
units in Austin, Texas. BBX Capital contributed 34% of the capital to the joint venture. After BBX Capital
receives a preferred return of 9% and all of its capital is returned, BBX Capital is then entitled to receive 26.3%
of the joint venture’s distributions until an 18% internal rate of return has been attained and thereafter BBX
Capital will be entitled to receive 18.8% of any joint venture distributions.
BBX Capital analyzed the operating agreement of Altis at Lakeline and determined that it is not the
primary beneficiary and therefore the investment in the real estate joint venture is accounted for under the
equity method of accounting. This conclusion was based on the determination that the joint venture has four
members and the approval of an issue requires three of the four members to agree. Also, BBX Capital is not the
managing member or the developer and the managing member guarantees the indebtedness of the joint venture.
BBX Capital’s maximum exposure to loss as a result of its involvement with the Altis at Lakeline joint
venture is its carrying amount of $5.2 million as of December 31, 2015.
The amount of interest capitalized associated with the Altis at Lakeline joint venture land development
activities for the year ended December 31, 2015 was $210,000. There was no capitalized interest in 2014.
New Urban/BBX Development, LLC (“Village at Victoria Park”)
In December 2013, BBX Capital invested in a joint venture with New Urban Communities to develop
2 acres of vacant land owned by BBX Capital located near downtown Fort Lauderdale, Florida as 30 single-
family homes. BBX Capital and New Urban Communities each have a 50% membership interest in the joint
venture and New Urban Communities serves as the developer and the manager.
In April 2014, the joint venture obtained an acquisition, development and construction loan from a
financial institution and BBX Capital and New Urban Communities each contributed $692,000 to the joint
venture as a capital contribution. The joint venture purchased the two acre site from BBX Capital for $3.6
million consisting of $1.8 million in cash (less $0.2 million in selling expenses) and a $1.6 million promissory
note. The promissory note bears interest at 8% per annum and is subordinated to the financial institution
acquisition, development and construction loan. BBX Capital recognized a partial gain included in net gains on
the sales of assets in BBX Capital’s Consolidated Statements of Operations of $188,000 for the year ended
December 31, 2014 and recorded a deferred gain of $1.1 million included in other liabilities in the BBX
Capital’s Consolidated Statements of Financial Condition as of December 31, 2015 and 2014 on the sale of the
vacant land to the joint venture. The sale of appreciated property to the joint venture resulted in a joint venture
basis difference as BBX Capital’s carrying value of the land was $1.1 million lower than the fair value. BBX
Capital accounted for the sale of the vacant land to the joint venture using the cost recovery method. BBX
Capital will recognize the deferred gain based on the repayments of the principal balance of the notes
receivable. BBX Capital will recognize the joint venture basis adjustment as joint venture equity earnings upon
the joint venture sale of single-family units.
BBX Capital analyzed the Village at Victoria Park’s operating agreement and determined that it is not
the primary beneficiary and therefore the investment in the real estate joint venture is accounted for under the
equity method of accounting. This conclusion was based primarily on the determination that New Urban
Communities has the power to direct activities of the joint venture that most significantly affect the joint
venture’s performance as it is the developer and manager of the project. Additionally, New Urban Communities
also receives significant benefits from the joint venture in excess of its 50% membership interest in the form of
development and administrative fees.
F-29
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
BBX Capital’s maximum exposure to loss as a result of its involvement with the New Urban/BBX
Development joint venture is its carrying amount of $0.9 million as of December 31, 2015.
The amount of interest capitalized associated with New Urban/BBX Development joint venture land
development activities for the year ended December 31, 2015 was $44,000. There was no capitalized interest in
2014.
Sunrise and Bayview Partners
In June 2014, BBX Capital invested in a joint venture with an affiliate of Procacci Development
Corporation (“PDC”) and BBX Capital and PDC each contributed $1.8 million to the Sunrise and Bayview
Partners joint venture. BBX Capital and PDC each have a 50% interest in the joint venture. In July 2014, the
joint venture borrowed $5.0 million from PDC and acquired for $8.0 million three acres of real estate in Fort
Lauderdale, Florida from an unrelated third party. The property is improved with an approximate 84,000 square
foot office building along with a convenience store and gas station. The joint venture refinanced the PDC
borrowings with a financial institution and BBX Capital provided the financial institution with a guarantee of
50% of the outstanding balance of the joint venture’s $5.0 million loan.
BBX Capital analyzed the Sunrise and Bayview Partners operating agreement and determined that it is
not the primary beneficiary and therefore the investment in the real estate joint venture is accounted for under
the equity method of accounting. This conclusion was based primarily on the determination that PDC has the
power to direct activities of the joint venture that most significantly affect the joint venture’s performance as it
is managing the property, including locating tenants, executing leases, collecting rent payments and conducting
development activities. Additionally, PDC also receives significant benefits from the joint venture in excess of
its 50% membership interest in the form of development and property management fees.
BBX Capital’s maximum exposure to loss as a result of its involvement with the Sunrise and Bayview
Partners as of December 31, 2015 is $4.1 million consisting of the joint venture carrying amount of $1.6 million
and BBX Capital’s $2.5 million joint venture acquisition loan guarantee.
Hialeah Communities, LLC
In July 2014, BBX Capital invested in a joint venture with CC Bonterra to develop approximately 394
homes in a portion of Bonterra communities in Hialeah, Florida. BBX Capital transferred approximately 50
acres of land at an agreed upon value of approximately $15.6 million subject to an $8.3 million mortgage which
was assumed by the joint venture. In exchange, BBX Capital received $2.2 million in cash and a joint venture
interest with an agreed upon assigned initial capital contribution value of $4.9 million. BBX Capital is entitled
to receive 57% of the joint venture distributions until it receives its aggregate capital contributions plus a 9% per
annum return on capital. Any distributions thereafter are shared 45% by BBX Capital and 55% by CC
Bonterra. BBX Capital contributes 57% of the capital and remains liable as a co-borrower on the $8.3 million
mortgage that was assumed by the joint venture. The transfer of the land to the joint venture as an initial capital
contribution resulted in a deferred gain of $1.6 million included in other liabilities in BBX Capital’s
Consolidated Statements of Financial Condition as of December 31, 2015 and 2014 and a joint venture basis
adjustment of $2.1 million. BBX Capital determined that the transfer of the land to the joint venture should be
accounted for on the cost recovery method. The deferred gain of $1.6 million will be recognized upon the
repayment of the principal balance of the $8.3 million mortgage. BBX Capital will recognize the joint venture
basis adjustment as joint venture equity earnings upon the joint venture sale of single-family units. In March
2015, the joint venture refinanced the $8.3 million mortgage loan with proceeds from a $31.0 million
acquisition and development loan. BBX Capital is a guarantor on 26.3% of the $31.0 million joint venture
acquisition and development loan.
BBX Capital analyzed the Hialeah Communities operating agreement and determined that it is not the
primary beneficiary and therefore the investment in the real estate joint venture is accounted for under the
equity method of accounting. This conclusion was based primarily on the determination that CC Bonterra as
the managing member and developer of the homes has the power to direct activities of the joint venture that
most significantly affect the joint venture’s performance. Additionally, CC Bonterra also receives significant
benefits from the joint venture in excess of its 43% membership interest in the form of development and
administrative fees as well as 55% of joint venture residual profits.
In September 2014, BBX Capital contributed additional capital to the joint venture of $1.8 million with
CC Bonterra contributing $1.4 million. The additional capital contributions funded the joint venture’s purchase
of property adjacent to the project for $0.9 million. The joint venture advanced $2.3 million to a wholly-owned
subsidiary of BBX
F-30
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Capital and the wholly-owned subsidiary of BBX Capital used the funds received from the joint venture to
purchase $2.3 million of additional property adjacent to the project. BBX Capital repaid the joint venture
advance upon the sale of properties to a developer.
BBX Capital’s maximum exposure to loss as a result of its involvement with the Hialeah Communities
as of December 31, 2015 is $12.7 million consisting of the joint venture carrying amount of $4.6 million and
BBX Capital’s $8.1 million joint venture acquisition and development loan guarantee.
The amount of interest capitalized associated with Hialeah Communities joint venture land
development activities for the year ended December 31, 2015 was $226,000. There was no capitalized interest
in 2014.
PGA Design Center Holdings, LLC (“PGA Design Center”)
In December 2013, BBX Capital purchased for $6.1 million a commercial property with three existing
buildings consisting of 145,000 square feet of mainly furniture retail space. In January 2014, BBX
Capital invested in a joint venture with Stiles Development, and in connection with the formation of the joint
venture, BBX Capital sold the commercial property to the joint venture in exchange for $2.9 million in cash and
a 40% interest in the joint venture. The joint venture intends to seek governmental approvals to change the use
of a portion of the property from retail to office and subsequently sell or lease the property. The property
contributed to the joint venture excluded certain residential development entitlements with an estimated value of
$1.2 million which were transferred to adjacent parcels owned by BBX Capital.
BBX Capital analyzed the PGA Design Center’s operating agreement and determined that it is not the
primary beneficiary and therefore the investment in the real estate joint venture is accounted for under the
equity method of accounting. This conclusion was based primarily on the determination that Stiles
Development has a 60% interest in the joint venture and is also the managing member. As such, Stiles
Development is the joint venture member that has the majority of the power to direct the activities of the joint
venture that most significantly impact its economic performance and through its 60% membership interest has
the obligation to absorb the majority of the losses and the right to receive the majority of the benefits of the
joint venture.
BBX Capital’s maximum exposure to loss as a result of its involvement with the PGA Design Center
Holdings joint venture is its carrying amount of $1.9 million as of December 31, 2015.
CCB Miramar, LLC
In May 2015, BBX Capital invested in a joint venture with two separate unaffiliated developers for the
acquisition of real estate in Miramar, Florida to construct single-family homes. BBX Capital contributed
$875,000 for a 35% interest in the joint venture and one of the developers contributed to the joint venture a
contract to purchase real estate. The purchase of the real estate is subject to certain closing conditions,
including receipt of all necessary entitlements and completion of due diligence by the joint venture.
BBX Capital analyzed the CCB Miramar operating agreement and determined that it is not the primary
beneficiary and therefore the investment in the real estate joint venture is accounted for under the equity method
of accounting. This conclusion was based primarily on the determination that the developer members were
managing the activities of obtaining entitlements for the potential purchase and development of the
property. As a consequence, BBX Capital is not the member that has the most power to significantly impact the
economic performance of the joint venture.
BBX Capital’s maximum exposure to loss as a result of its involvement with the CCB Miramar joint
venture is its carrying amount of $0.9 million as of December 31, 2015.
Centra Falls, LLC
In August 2015, BBX Capital and other investors invested in a joint venture with a developer for the
development and sale of 89 townhomes in Pembroke Pines, Florida. BBX Capital contributed 7.143% of the
total capital of the joint venture or $750,000 and is entitled to receive 7.143% of the joint venture distributions
until a 12% return on its investment has been attained and then BBX Capital will be entitled to 3.175% of the
joint venture distributions thereafter.
F-31
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
BBX Capital analyzed the joint venture operating agreement and determined that it is not the primary
beneficiary and therefore the investment in the real estate joint venture is accounted for under the equity method
of accounting. This conclusion was based primarily on the determination that the activities of the joint venture
are controlled by the managing member with a 10% interest in the joint venture. The remaining 90% interest in
the joint venture is controlled by nine investors including BBX Capital. The managing member can only be
removed for cause and the investing members do not participate in the day-to-day operations of the joint
venture.
BBX Capital’s maximum exposure to loss as a result of its involvement with the Centra Falls joint
venture is its carrying amount of $0.7 million as of December 31, 2015.
The Addison on Millenia Investment, LLC
In December 2015, BBX Capital and another investor invested in a joint venture to develop 11.8 acres
in the Gardens at Millenia site located in Orlando, Florida into nine retail apartment buildings totaling
approximately 292 units. The joint venture intends to operate the property as an income producing
business. BBX Capital invested 48% of the joint ventures total capital by transferring property with an agreed
upon value of $5.8 million and $0.3 million of cash. In exchange, BBX Capital is entitled to receive 48% of the
joint venture distributions until it receives its aggregate capital contributions plus a 10% per annum return on
capital. Any distributions thereafter are shared based on the project’s internal rate of return resulting in the
managing member receiving an increasing percentage of distributions based on the joint venture’s internal rate
of return.
The transfer of the land to the joint venture as an initial capital contribution resulted in a deferred gain
of $0.4 million included in other liabilities in BBX Capital’s Consolidated Statements of Financial Condition as
of December 31, 2015 and a joint venture basis adjustment of $0.4 million. BBX Capital determined that
the gain on the transfer of the land to the joint venture should be recorded on the cost recovery method as BBX
Capital did not receive cash. The deferred gain of $0.4 million will be recognized upon the receipt of cash
distributions from the joint venture. BBX Capital will recognize the joint venture basis adjustment as joint
venture equity earnings upon the joint venture sale of the apartment units.
BBX Capital analyzed the Addison on Millenia Investment operating agreement and determined that it
is not the primary beneficiary and therefore the investment in the real estate joint venture is accounted for under
the equity method of accounting. This conclusion was based primarily on the determination that ContraVest,
the managing member, has the authority to make all decisions concerning the day-to-day operations of the joint
venture and manages the construction, leasing and property management of the joint venture. Additionally,
ContraVest receives significant benefits from the joint venture in excess of its 3.75% membership interest in the
form of development and administrative fees as well as up to 37.5% of the joint venture residual profits upon
achievement of IRR hurdles. ContraVest is also exposed to significant joint venture losses from construction
cost overruns and construction loan guarantees.
BBX Capital’s maximum exposure to loss as a result of its involvement with the Addison on Millenia
Investment joint venture is its carrying amount of $5.8 million as of December 31, 2015.
BBX/S Millenia Blvd Investments, LLC
In October 2015, BBX Capital and a developer invested in a joint venture to develop a retail center on
the Gardens of Millenia site in Orlando, Florida. The joint venture intends to obtain all necessary approvals,
secure financing, construct all improvements, lease the premises and sell the property. BBX Capital transferred
property with at an agreed upon value of $7.0 million to the joint venture and received $0.7 million in cash and
a 90% interest in the joint venture. BBX Capital is entitled to receive 90% of the joint venture distributions
until it receives its aggregate capital contributions plus an 8% per annum return on capital. Any distributions
thereafter are shared 54% to BBX Capital and 46% to the developer.
The transfer of the land to the joint venture as an initial capital contribution resulted in a recognized
gain of $0.1 million included in gains on sales of assets in BBX Capital’ s Consolidated Statements of
Operations and a joint venture basis adjustment of $0.9 million that will be recognized as joint venture equity
earnings upon the sale of the retail center.
BBX Capital analyzed the BBX/S Millenia Blvd Investments operating agreement and determined that
it is not the primary beneficiary and therefore the investment in the real estate joint venture is accounted for
under the equity method of
F-32
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
accounting. This conclusion was based primarily on the determination that the developer makes all decisions
concerning the operations of the joint venture and is managing the construction, leasing, property management,
accounting, tenant improvements and disposition of the property. Additionally, the developer receives
significant benefits from the joint venture in excess of its 10% membership interest in the form of development,
construction and other fees as well as up to 45% of the joint venture residual profits. The developer is also
exposed to significant joint venture losses from construction loan guarantees.
BBX Capital’s maximum exposure to loss as a result of its involvement with the BBX/S Millenia Blvd
Investments joint venture is its carrying amount of $4.9 million as of December 31, 2015.
Altis at Bonterra - Hialeah, LLC
I n December 2015, BBX Capital invested in a joint venture with Altman Companies to develop
approximately 314 apartment homes in a portion of Bonterra communities in Hialeah, Florida. BBX Capital
transferred approximately 14 acres of land at an agreed upon value of approximately $9.4 million and cash of
$7.5 million to the joint venture. In exchange, BBX Capital is entitled to receive 95% of the joint venture
distributions until it receives its aggregate capital contributions plus a 9% per annum return on capital. Any
distributions thereafter are shared 85% by BBX Capital and 15% by Altman Companies. BBX Capital
contributed 95% of the capital and the Altman Companies contributed the remaining 5% of capital, guaranteed
the construction loan and is liable for construction cost overruns. The transfer of the land to the joint venture as
an initial capital contribution resulted in a joint venture basis adjustment of $4.1 million. BBX Capital will
recognize the joint venture basis adjustment as joint venture equity earnings upon the joint venture sale of the
multi-family apartment complex.
BBX Capital analyzed the Altis at Bonterra - Hialeah operating agreement and determined that it is not
the primary beneficiary and therefore the investment in the real estate joint venture was accounted for under the
equity method of accounting. This conclusion was based primarily on the determination that the Altman
Companies as the managing member makes all decisions concerning the operations of joint venture and is
managing the construction, leasing, property management, accounting, tenant improvements and disposition of
the property. The managing member, Altman Companies, can only be removed by BBX Capital for cause.
Altman Companies receives significant benefits from the joint venture in excess of its membership interest in
the form of development, construction and other fees as well as up to 15% of the joint venture’s residual profits.
The Altman Companies is also exposed to significant joint venture losses from construction loan and cost
overrun guarantees.
BBX Capital’s maximum exposure to loss as a result of its involvement with the Altis at Bonterra joint
venture is its carrying amount of $15.8 million as of December 31, 2015.
F-33
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The condensed Statements of Financial Condition as of December 31, 2015 and 2014, and the
condensed Statements of Operations for the year s ended December 31, 2015, 2014 and 2013 for the above
equity method joint ventures in the aggregate was as follows (in thousands):
Assets
Cash
Real estate inventory
Properties and equipment
Other assets
Total assets
Notes payable
Other liabilities
Total liabilities
Liabilities and Equity
Total equity
Total liabilities and equity
December 31,
2015
2014
$
$
$
$
25,139
154,334
3,960
8,872
192,305
68,275
20,422
88,697
103,608
192,305
1,375
75,395
3,996
4,423
85,189
34,951
9,333
44,284
40,905
85,189
For the Years Ended December 31,
2014
2013
2015
Total revenues
Total costs and expenses
Net loss
$
$
4,147
(8,594)
(4,447)
635
(1,841)
(1,206)
-
-
-
7. Consolidated Variable Interest Entities
FAR
In consideration for BB&T assuming BBX Capital’s $ 285.4 million in principal amount of TruPS in
connection with the sale of BankAtlantic, BB&T received from BBX Capital at the closing of the BB&T
Transaction a 95% preferred membership interest in the net cash flows of FAR (Class A Units in FAR) which it
held until it recovered $285 million in preference amount plus a priority return of LIBOR + 200 basis points per
annum. On May 6, 2015, BB&T’s preferred membership interest in FAR was repaid in full and at that time,
BB&T’s interest in FAR terminate d, and BBX Capital, which held the remaining 5% of the Class A Units and
100% of the Class R units, is entitled to any and all residual proceeds. Upon the termination of BB&T’s interest
in FAR, BBX Capital became the sole member of FAR. BBX Capital analyzed FAR’s amended and restated
limited liability agreement and determined that it was the primary beneficiary and therefore should consolidate
FAR in its financial statements.
The activities of FAR are governed by an amended and restated limited liability company agreement
which grants the Board of Managers decision-making authority over FAR. Prior to May 6, 2015, the Board had
four members, two members elected by BBX Capital and two members elected by BB&T. Upon redemption of
BB&T’s preferred interest in FAR on May 6, 2015, FAR became a wholly-owned subsidiary of BBX Capital
and the two Board members designated by BB&T resigned. FAR was no longer a variable interest entity as of
May 6, 2015.
F-34
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The carrying amount of the assets and liabilities of FAR and the classification of these assets and
liabilities in BBX Capital’s Consolidated Statements of Financial Condition was as follows (in thousands):
Cash and cash equivalents
Loans held-for-sale
Loans receivable, net
Real estate held-for-investment
Real estate held-for-sale
Properties and equipment, net
Other assets
Total assets
BB&T preferred interest in FAR, LLC
Principal and interest advances on residential loans
Other liabilities
Total liabilities
JRG/BBX Development, LLC (“North Flagler”)
December 31,
2014
4,976
35,423
18,972
19,129
13,745
7,561
638
100,444
12,348
11,171
1,315
24,834
$
$
$
$
In October 2013, an indirect wholly-owned subsidiary of BBX Capital entered into the North Flagler
joint venture with JRG USA, and in connection with the formation of the joint venture JRG USA assigned to the
joint venture a contract to purchase for $10.8 million a 4.5 acre real estate parcel overlooking the Intracoastal
Waterway in West Palm Beach, Florida . BBX Capital is entitled to receive 80% of any joint venture
distributions until it receives the return of its capital investment and 70% of any joint venture distributions
thereafter. BBX Capital is the managing member and has control of all aspects of the operations of the joint
venture.
BBX Capital analyzed North Flagler’s operating agreement and determined that it was the primary
beneficiary of the joint venture and therefore should consolidate North Flagler in BBX Capital’s financial
statements. This conclusion was based primarily on the determination that BBX Capital absorbs 80% of the
losses, is entitled to 70% of the profits and controls all aspects of North Flagler’s operations.
In May 2015, the North Flagler joint venture purchased the 4.5 acre parcel for $10.8 million and on the
same day sold the property to a third party developer for $20.0 million. Included in BBX Capital’s
Consolidated Statements of Operation in net gains on sales of assets for the year ended December 31, 2015 is a
$7.8 million gain on the property sale. Net sales proceeds in the amount of $2.3 million were distributed to the
noncontrolling member.
The carrying amount of the assets and liabilities of North Flagler and the classification of these assets
and liabilities in BBX Capital’s Consolidated Statements of Financial Condition was as follows (in thousands):
Cash and cash equivalents
Real estate held-for-investment
Other assets
Total assets
Other liabilities
Noncontrolling interest
F-35
December 31,
2014
17
816
379
1,212
116
132
$
$
$
$
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
8. Inventories
Inventories as of December 31, 2015 and 2014 were as follows (in thousands):
Raw materials
Paper goods and packaging materials
Finished goods
Total
December 31,
2015
2014
$
$
5,822
4,504
6,021
16,347
4,628
3,834
6,043
14,505
Inventories consisted of $8.4 million for Renin and $7.9 million for BBX Sweet Holdings as of
December 31, 2015, respectively. Inventories consisted of $8.6 million for Renin and $5.9 million for BBX
Sweet Holdings as of December 31, 2014, respectively. Shipping and handling fees billed to the customers were
recorded as trade sales and shipping and handling fees paid by BBX Capital were recorded as selling, general,
and administrative expenses. Included in BBX Capital’s Consolidated Statements of Operations as selling,
general, and administrative expenses for the years ended December 31, 2015, 2014 and 2013 were $5.5 million,
$5.5 million and $1.0 million, respectively, of costs associated with shipping goods to customers.
9. Loans Held-for-Sale
Loans-held-for-sale were as follows (in thousands):
Residential
Second-lien consumer
Small business
Total loans held-for-sale
December 31,
2015
2014
$
$
21,354
-
-
21,354
27,331
2,351
5,741
35,423
Loans held-for-sale are reported at the lower of cost or fair value and measured on an aggregate
basis. As of December 31, 2015 and 2014 the lower of cost or fair value adjustment on loans held-for-sale was
$1.6 million and $6.4 million, respectively. BBX Capital transfers loans to held-for-sale when, based on the
current economic environment and related market conditions, it does not have the intent to hold those loans for
the foreseeable future. BBX Capital transfers loans previously held-for-sale to loans held-for-investment at the
lower of cost or fair value on the transfer date.
In September 2014, BBX Capital, based on market conditions at that time, decided to sell performing
second-lien consumer loans. BBX Capital charged down these loans $2.7 million to fair value and transferred
the loans to held-for-sale in the aggregate amount of $2.3 million.
During the 2013 fourth quarter, management evaluated its residential loan portfolio in light of the
general appreciation of residential real estate values during 2013 and decided to transfer first lien residential and
consumer loans to loans held-for-sale as of December 31, 2013. BBX Capital charged down its first lien
residential and consumer loan portfolio by $4.1 million and reduced its allowance for loan losses by $1.4
million upon the transfer of first lien residential and consumer loans to loans held-for-sale.
In June 2015, BBX Capital transferred its small business, residential and second-lien consumer loans
from loans held-for-sale to loans held-for-investment based on its decision to hold these loans for the
foreseeable future as a result of the recent appreciation of real estate values and the improving economic
environment. As a consequence, $2.4 million, $70,000 and $4.9 million of second-lien consumer, residential
and small business loans, respectively, were transferred from loans held-for-sale to loans receivable measured at
the lower of cost or fair value on the transfer date. Any difference between the carrying amount of the loan and
its outstanding principal balance was recognized as a discount. Such loans are
F-36
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
included in loans receivable, net of the discount on BBX Capital’s Consolidated S tatements of Financial
Condition as of December 31, 2015.
In July 2014, BBX Capital received net proceeds from the sales of its first-lien consumer loan portfolio
and certain residential loans of approximately $3.2 million and $6.3 million, respectively. Included in net gains
on the sales of assets for the year ended December 31, 2014 was a $0.6 million gain from the sale of these
loans.
As of December 31, 2015, foreclosure proceedings were in-process on $14.1 million principal balance
of residential loans held-for-sale.
10. Loans Receivable
The loans receivable portfolio consisted of the following components (in thousands):
Commercial non-real estate
Commercial real estate
Small business
Consumer
Residential
Total loans, net of discount
Allowance for loan losses
Loans receivable -- net
December 31,
2015
2014
$
$
11,250
16,294
4,054
2,368
69
34,035
-
34,035
1,326
24,189
-
2,306
-
27,821
(977)
26,844
The underlying collateral for BBX Capital ’s real estate loan portfolio was primarily located in Florida
at December 31, 2015 and 2014.
As of December 31, 2015, foreclosure proceedings were in process on $0.5 million of consumer loans.
The total discount on loans receivable was $3.3 million and $0 as of December 31, 2015 and 2014,
respectively.
BBX Capital segregates its loan portfolio into five segments. BBX Capital’s loan segments are:
residential loans, commercial real estate loans, commercial non-real estate loans, consumer loans, and small
business loans. BBX Capital’s loan segments are described below:
Commercial non-real estate - represents a $10.0 million unsecured loan made in connection with the
sale of land to a developer and loans secured by general corporate assets of the borrowers’ business.
Commercial real estate - represents loans for acquisition, development and construction of various
types of properties including residential, office buildings, retail shopping centers, and other non-residential
properties.
Small business – consists of loans originated to businesses in principal amounts that do not generally
exceed $2.0 million. The principal source of repayment for these loans is generally from the cash flow of a
business.
Consumer - consists of loans to individuals originated through BankAtlantic’s branch network.
Consumer loans are generally home equity lines of credit secured by a second mortgage on the primary
residence of the borrower. All collateral secured consumer loans are located in Florida. First-lien consumer
loans were transferred to loans held-for-sale as of December 31, 2013 and sold during the year ended December
31, 2014.
Residential – represents loans secured by one to four dwelling units.
F-37
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Credit Quality Information
BBX Capital monitors delinquency trends, current loan to value ratios, credit scores and general
economic conditions in an effort to assess loan credit quality. BBX Capital assesses loan credit quality through
accrual and non-accrual loan classifications.
The recorded investment (unpaid principal balance less charge-offs and discounts) of non-accrual
loans receivable was (in thousands):
Loan Class
Commercial non-real estate
Commercial real estate
Small business
Consumer
Residential
Total nonaccrual loans
December 31,
2015
2014
$
$
1,250
9,639
4,054
2,368
69
17,380
1,326
14,464
-
1,990
-
17,780
An age analysis of the past due recorded investment in loans receivable as of December 31, 2015 and
December 31, 2014 was as follows (in thousands):
31-59 Days
60-89 Days
90 Days
Total
Total
Loans
December 31, 2015
Past Due
Past Due
or More (1)
Past Due
Current
Receivable
Commercial non-real estate
Commercial real estate
Small business
Consumer
Residential
Total
$
$
-
-
-
316
-
316
-
-
205
138
24
367
329
3,986
-
562
42
4,919
329
3,986
205
1,016
66
5,602
10,921
12,308
3,849
1,352
3
11,250
16,294
4,054
2,368
69
28,433
34,035
31-59 Days
60-89 Days
90 Days
Total
Total
Loans
December 31, 2014
Past Due
Past Due
or More (1)
Past Due
Current
Receivable
Commercial non-real estate
Commercial real estate
Consumer
Residential
Total
$
$
-
-
-
-
-
-
-
227
-
227
330
5,458
1,703
-
7,491
330
5,458
1,930
-
996
18,731
376
-
1,326
24,189
2,306
-
7,718
20,103
27,821
(1) BBX Capital had no loans that were past due greater than 90 days and still accruing as of December 31, 2015 or 2014.
F-38
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The activity in the allowance for loan losses for the year s ended December 31, 2015, 2014 and 2013
was as follows (in thousands):
Allowance for Loan Losses:
Beginning balance
Charge-offs :
Recoveries :
Provision:
Ending balance
Ending balance individually evaluated for impairment
Ending balance collectively evaluated for impairment
Total
Loans receivable:
Ending balance individually evaluated for impairment
Ending balance collectively evaluated for impairment
Total
Proceeds from loan sales
Transfer to loans held-for-sale
Transfer from loans held-for-sale
For the Years Ended December 31,
2013
2014
2015
$
$
$
$
$
$
$
$
$
977
(1,037)
13,517
(13,457)
-
-
-
-
12,849
21,186
34,035
68
-
7,365
2,713
(7,189)
12,608
(7,155)
977
-
977
977
17,045
10,776
27,821
9,497
2,299
-
5,311
(10,867)
52,134
(43,865)
2,713
954
1,759
2,713
51,131
23,808
74,939
3,490
42,398
1,312
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. For a loan that has been restructured, the actual terms of the loan agreement refer
to the contractual terms specified by the original loan agreement, not the contractual terms specified by the
restructured 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 payment history, financial
strength of the borrower or guarantors and cash flow associated with the collateral or business. If a loan is
impaired, a specific valuation allowance is established, if necessary, based on the present value of estimated
future cash flows using the loan’s existing interest rate or based on the fair value of the loan. 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.
Individually impaired loans as of December 31, 2015 and 2014 were as follows (in thousands):
As of December 31, 2015
As of December 31, 2014
Unpaid
Unpaid
Recorded
Principal
Related
Recorded
Principal
Related
Investment
Balance
Allowance
Investment
Balance
Allowance
Total with allowance recorded
Total with no allowance recorded
Total
$
$
-
17,380
17,380
-
30,212
30,212
-
-
-
735
17,361
18,096
1,664
35,812
37,476
735
-
735
F-39
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Average recorded investment and interest income recognized on individually impaired loans as of
December 31, 2015 and 2014 were (in thousands):
For the Years Ended December 31,
2015
2014
Average Recorded Interest Income Average Recorded Interest Income
Investment
Recognized
Investment
Recognized
Total with allowance recorded
Total with no allowance recorded
Total
$
$
-
22,186
22,186
-
1,299
1,299
837
23,161
23,998
7
1,111
1,118
Individually impaired loans and the average recorded investment and interest income recognized on
impaired loans as of December 31, 2013 (in thousands):
As of December 31, 2013
For the Year Ended
December 31, 2013
Unpaid
Average
Recorded
Principal
Related
Recorded
Interest
Investment
Balance
Allowance
Investment
Income
Total with allowance recorded
Total with no allowance recorded
Total
$
$
3,921
53,088
57,009
6,700
88,739
95,439
1,874
-
1,874
4,055
55,027
59,082
121
1,478
1,599
Impaired loans without specific 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 were equal to or greater than the carrying value of the loans, or were collectively measured for
impairment.
BBX Capital had no commitments to lend additional funds on impaired loans as of December 31,
2015.
11. Real Estate Held-for-Investment and Real Estate Held-for-Sale
Although BBX Capital has purchased certain property, substantially all of 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.
F-40
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following table presents real estate held-for-sale grouped in the following classifications (in
thousands):
Real estate held-for-sale
Land
Rental properties
Residential single-family
Other
Total real estate held-for-sale
As of December 31,
2015
2014
$
$
25,994
17,162
2,924
258
46,338
33,505
1,748
4,385
2,095
41,733
The following table presents real estate held-for-investment grouped in the following classifications (in
thousands):
Real estate held-for-investment
Land
Rental properties
Other
Total real estate held-for-investment
As of December 31,
2015
2014
$
$
30,369
-
921
31,290
60,356
15,234
962
76,552
The amount of interest capitalized in land held-for-investment associated with real estate development
improvements for the year ended December 31, 2015 was $706,000. There was no capitalized interest in 2014.
The following table presents the activity in real estate held-for-sale and held-for-investment for the
years ended December 31, 2015 and 2014 (in thousands):
For the Years Ended December 31,
2015
2014
Real Estate
Real Estate
Beginning of period, net
Acquired through foreclosure
Transfers
Purchases
Improvements
Accumulated depreciation
Sales
Property contributed to joint ventures
Impairments, net
End of period, net
$
$
Held-for-Sale
41,733
3,215
41,751
10,667
3,261
-
(51,040)
-
(3,249)
46,338
F-41
Held-for-
Investment
76,552
-
(41,751)
-
16,771
(468)
-
(19,448)
(366)
31,290
Held-for-Sale
33,971
5,300
28,018
2,313
-
-
(26,973)
-
(896)
41,733
Held-for-
Investment
107,336
16,100
(28,018)
1,977
3,824
(462)
(16,200)
-
(8,005)
76,552
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following table presents the real estate held-for-sale valuation allowance activity for the years
ended December 31, 2015, 2014 and 2013 (in thousands):
Beginning of period
Transfer to held-for-investment
Impairments, net (1)
Sales
End of period
For the Years Ended December 31,
2014
2015
2013
$
$
2,940
(93)
3,089
(1,536)
4,400
4,818
-
896
(2,774)
2,940
3,729
-
3,893
(2,804)
4,818
(1) Tax certificate impairments are not included.
Net real estate income (losses) included in the BBX Capital’s Consolidated Statements of Operations
were as follows (in thousands):
For the Years Ended December 31,
2014
2015
2013
Real estate acquired in settlement of
loans and tax certificates:
Income from real estate operations
Real estate operating expenses
Impairment of real estate
Net gains on the sales of real estate
Net real estate income (losses)
12. Properties and Equipment
$
$
3,887
(4,773)
(3,615)
31,114
26,613
5,516
(6,296)
(8,901)
4,677
(5,004)
4,161
(5,807)
(3,342)
4,155
(833)
Properties and equipment was comprised of (in thousands):
Land
Buildings and leasehold improvements
Office equipment and furniture
Transportation and equipment
Accumulated depreciation
Property and equipment, net
December 31,
2015
2014
$
$
2,270
10,204
9,235
91
21,800
(3,717)
18,083
2,270
9,868
6,536
44
18,718
(2,001)
16,717
Included in selling, general and administrative expenses on BBX Capital’s Consolidated Statements of
Operations was $2.2 million, $2.0 million and $0.7 million of depreciation expense for the years ended
December 31, 2015, 2014 and 2013, respectively. During the year ended December 31, 2013, the Company
sold a public storage operating facility with a carrying value of $4.9 million for a $1.0 million gain.
F-42
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
13. Income Taxes
U.S. and foreign components of income (loss) before income taxes were as follows (in thousands):
U.S.
Foreign
Income before income taxes
$
$
25,871
(2,589)
23,282
4,378
(3,175)
1,203
48,643
(963)
47,680
For the Years Ended December 31,
2015
2014
2013
The (benefit) provision for income taxes consisted of (in thousands):
Current:
Federal
State
Total current
Deferred:
Federal
State
Total deferred
(Benefit) provision for income
$
$
For the Years Ended December 31,
2015
2014
2013
-
84
84
(282)
(47)
(329)
(245)
6
-
6
(2,605)
(502)
(3,107)
(3,101)
-
20
20
-
-
-
20
BBX Capital's actual (benefit) provision for income taxes differs from the Federal expected income tax
(benefit) provision as follows (in thousands):
Income tax (benefit) provision at
federal statutory rate of 35%
(Decrease) increase resulting from:
(Benefit) provision for state taxes
net of federal benefit
Taxes related to subsidiaries not
consolidated for income taxes
Sale of BankAtlantic
Nondeductible executive compensation
Change in valuation allowance
Penalties
Other - net
(Benefit) provision for income taxes
$
For the Years Ended December 31,
2014
2015
2013
$
8,149 35.00%
421
35.00%
16,688 35.00%
673
2.89%
(369)
-30.67%
2,003
4.20%
-
(6,963) -578.80%
0.00%
1,883 156.52%
1,407 116.96%
29.09%
14.13%
(3,101) -257.77%
350
170
(6,054) -12.70%
5,884 12.34%
4.66%
2,223
(22,584) -47.36%
0.00%
3.90%
0.04%
-
1,860
20
(3,699)
-
1,107
(7,678)
1,243
(40)
(245)
-15.89%
0.00%
4.75%
-32.98%
5.34%
-0.17%
-1.05%
F-43
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets
and tax liabilities were (in thousands):
Deferred tax assets:
Allowance for loans and impairments for
financial statement purposes
Federal and State NOL and tax credit carryforward
Real estate held for development and sale capitalized costs for tax
purposes in excess of amounts capitalized for financial statement
purposes
Share based compensation
Other
Total gross deferred tax assets
Less valuation allowance
Total deferred tax assets
Deferred tax Liabilities:
Intangible assets
Properties and equipment
Other
Total gross deferred tax liabilities
Net deferred tax (liability) asset
Less net deferred tax asset at beginning of period
Net deferred tax liabilities from acquisitions
Benefit from deferred income taxes
For the Years Ended December 31,
2014
2015
2013
$
1,960
60,708
2,658
64,132
2,955
63,781
14,729
1,879
1,000
80,276
(76,292)
3,984
1,866
2,053
65
3,984
-
-
329
329
18,849
1,302
-
86,941
(83,970)
2,971
15,536
691
-
82,963
(82,563)
400
1,912
1,043
16
2,971
-
-
3,107
3,107
-
-
400
400
-
-
-
-
Activity in the deferred tax valuation allowance was (in thousands):
Balance, beginning of period
(Decrease) increase in deferred tax valuation allowance
Acquisitions
Balance, end of period
$
$
83,970
(7,678)
-
76,292
82,563
1,407
-
83,970
2013
105,548
(22,584)
(401)
82,563
For the Years Ended December 31,
2015
2014
On April 30, 2015, BFC purchased 4,771,221 shares of BBX Capital’s Class A common stock through
a tender offer increasing BFC’s ownership percent to 81% of the issued and outstanding shares of BBX
Capital. As a consequence, BBX Capital as of May 1, 2015 will file federal and state income tax returns as part
of BFC’s consolidated income tax returns.
On May 8, 2015, BFC, BBX Capital Corporation, Woodbridge, Bluegreen and their respective
subsidiaries entered into an “Agreement to Allocate Consolidated Income Tax Liability and Benefits” . The
parties will calculate their respective income tax liabilities and attributes as if each of them were a separate filer.
If any tax attributes are used by another party to the agreement to offset its tax liability, the party providing the
benefit will receive an amount for the tax benefits realized. As such income taxes will continue to be
recognized by BBX Capital on a separate return basis and any taxable income or loss will be settled with BFC
under the tax allocation agreement. The computation of taxable income or refunds, including the effects of
AMT, is the same as if BBX Capital was filing its federal tax return with the IRS. As such, BBX Capital will
only consider its operations as sources of taxable income in determining the need for a deferred tax valuation
allowance for its deferred tax assets.
BBX Capital evaluates its deferred tax assets to determine if valuation allowances are required. In its
evaluation, management considers taxable loss carry-back availability, expectations of sufficient future taxable
income, trends in earnings, existence of taxable income in recent years, the future reversal of temporary
differences, and available tax planning strategies that could be implemented, if required. Valuation allowances
are established based on the consideration of all available evidence using a more-likely-than-not standard. BBX
Capital had taxable income during the year ended December
F-44
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
31, 2015 from the sale of real estate acquired through foreclosure and significant recoveries on loans charged off
in prior periods. BBX Capital’s operations including its acquired businesses do not generate taxable income on a
regular basis. BBX Capital had a taxable loss during the year ended December 31, 2014. BBX Capital
concluded that it was more-likely-than-not that it would not generate sufficient taxable income in subsequent
periods in order to recognize the deferred tax assets as of December 31, 2015. Based on BBX Capital’s
evaluation, a deferred tax valuation allowance of $76.3 million, $84.0 million, a n d $82.6 million was
maintained against its net deferred tax assets as of December 31, 2015, 2014 and 2013, respectively. BBX
Capital’s deferred tax assets as of December 31, 201 5 for which it has not established a valuation allowance
relate to amounts that can be realized through future reversals of existing taxable temporary differences. As a
consequence, BBX Capital will continue to maintain a full deferred tax valuation allowance for its net deferred
tax assets
The majority of the benefits of BBX Capital’s net deferred tax assets can be carried forward for
20 years and applied to offset future taxable income. BBX Capital’s deferred tax asset valuation allowance
would be reversed if and when it becomes more-likely-than-not that BBX Capital will generate sufficient
taxable income in the future to utilize the tax benefits of the related deferred tax assets.
In connection with BBX Sweet Holdings’ acquisitions during 2015 and 2014, BBX Capital established
net taxable temporary differences as a result of recording for financial reporting purposes identifiable intangible
assets and properties and equipment in excess of amounts recognized for tax purposes. After considering the
taxable temporary differences established in connection with the acquisitions, BBX Capital reduced its deferred
tax asset valuation allowance and recognized a $329,000 and $3.1 million benefit for income taxes.
Included in BBX Capital’s deferred tax assets as of December 31, 201 5 was $110.5 million of federal
income tax NOL carry-forwards which expire from 2029 to 2034. BBX Capital’s federal tax credit carry-
forwards were $2.1 million at December 31, 2015 and expire from 2025 to 2031.
BBX Capital filed separate state income tax returns for years ending prior to December 31, 2011. BBX
Capital’s state NOL carry-forwards were $ 533.5 million as of December 31, 2015 and expire from 2023
through 2033. Renin’s Canadian subsidiaries’ earnings are subject to taxation in Canada and the United
Kingdom. Renin had taxable losses in these tax jurisdictions during the years ended December 31, 2015 and
2014 and two months ended December 31, 2013. BBX Capital’s foreign income tax NOL carryforwards were
$3.8 million and expire from 2033 to 2035.
BBX Capital’s income tax returns for all years subsequent to the 2011 tax year are subject to
examination. Various state jurisdiction tax years remain open to examination. There were no income tax filings
under examination as of December 31, 2015.
14. Notes Payable to Related Parties
BBX Capital issued an $11.75 million promissory note in Woodbridge’s favor as part of BBX
Capital’s consideration for its investment in Woodbridge. The note ha d a term of five years maturing in April
2018, accrued interest at a rate of 5% per annum and required BBX Capital to make payments of interest only
on a quarterly basis during the term of the note, with all outstanding amounts being due and payable at the end
of the five-year term. During September 2015, in connection with settlement of the Bluegreen shareholder
litigation, the $11.75 million Woodbridge note payable was paid-in-full.
F-45
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
15. Notes Payable
The following notes payable were outstanding as of December 31, 2015 or 2014 (in thousands):
Wells Fargo Capital Finance
Anastasia Note
Iberia Line of Credit
Centennial Bank - Hoffman's
Centennial Bank - Kencraft
Holdback notes
Other
Total Notes Payable
December 31, 2015
December 31, 2014
Debt
Balance
8,071
5,330
4,997
1,613
995
400
15
21,421
$
$
Interest
Rate
various
5.00%
3.18%
5.25%
2.35%
6.00%
0.90%
Debt
Balance
8,028
7,214
-
1,645
-
1,016
20
17,923
Interest
Rate
various
5.00%
-
5.25%
-
various
0.90%
The aggregate notes payable discount recorded in BBX Capital’s Consolidated Statements of Financial
Condition as of December 31, 2015 and 2014 was $170,000 and $320,000, respectively.
Wells Fargo Capital Finance. On June 11, 2014, Renin entered into a credit agreement (the “WF
Credit Agreement”) with Wells Fargo Capital Finance Corporation (“Wells Fargo”). Under the terms and
conditions of the WF Credit Agreement, Wells Fargo made a $1.5 million term loan to Renin. The WF Credit
Agreement also includes a revolving advance facility pursuant to which Wells Fargo agreed to make loans to
Renin on a revolving basis up to a maximum of approximately $18 million or, if lower, the Borrowing Base (as
defined in the WF Credit Agreement), subject to Renin’s compliance with the terms and conditions of the WF
Credit Agreement, including certain specific financial covenants as discussed below.
Amounts outstanding under the term loan and loans made under the revolving advance facility bear
interest at the Canadian Prime Rate or the daily three month LIBOR rate plus a margin specified in the WF
Credit Agreement at various rates between 0.5% per annum and 3.25% per annum. The revolving advance
facility also includes a 0.25% per annum fee charged on the amount of unused commitment. The term loan and
borrowings under the revolving advance facility require monthly interest payments. In addition, beginning on
October 1, 2014, the term loan requires quarterly principal repayments of $75,000. The maturity date under the
WF Credit Agreement with respect to the term loan and all loans made pursuant to the revolving advance
facility is June 11, 2019. The amount outstanding under the term loan and revolving advance facility were $1.1
million and $7.0 million as of December 31, 2015. The amounts outstanding under the term loan and revolving
advance facility were $1.4 million and $6.6 million as of December 31, 2014.
Under the terms and conditions of the WF Credit Agreement, Renin was originally required to comply
with certain financial covenants from June 30, 2014 to November 30, 2014, including limits on monthly capital
expenditures and the achievement of monthly EBITDA (as defined in the WF Credit Agreement) in amounts
equal to or greater than specific amounts set forth in the WF Credit Agreement. However, the WF Credit
Agreement was amended in October 2014 replacing the EBITDA financial covenants requirements for each
month ended during the period from September 2014 through November 2014 with a Fixed Charge Coverage
Ratio (as defined in the amended WF Credit Agreement). In addition, beginning on December 1, 2014, Renin is
required to maintain as of the end of each month a certain specified Fixed Charge Coverage Ratio (as defined in
the WF Credit Agreement) measured on a trailing twelve-month basis. The WF Credit Agreement also contains
customary affirmative and negative covenants, including those that, among other things, limit the ability of
Renin to incur liens or engage in certain asset dispositions, mergers or consolidations, dissolutions, liquidations
or winding up of its businesses. The loans are collateralized by all of Renin’s assets. Renin was in compliance
with the WF Credit Agreement financial covenants as of December 31, 2015.
Anastasia Note. In October 2014, BBX Sweet Holdings acquired the outstanding common shares of
Anastasia. A portion of the purchase consideration was a $7.5 million promissory note. The promissory note
bears interest at 5% per annum and $2.0 million of the promissory note plus accrued interest was repaid on
October 1, 2015. The remaining balance of the promissory note is payable in three annual payments of
principal and accrued interest as follows: $2.0 million plus accrued interest on October 1, 2016, $2.0 million
plus accrued interest on October 1, 2017 and the final payment of $1.5
F-46
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
million plus accrued interest on October 1, 2018. The repayment of the promissory note is guaranteed by BBX
Capital Corporation and secured by the common stock of Anastasia. The Anastasia note payable was recorded
at a $0.3 million discount to reflect the fair value of the note payable at the acquisition date.
Iberia Line of Credit. On August 7, 2015, BBX Sweet Holdings entered into a Loan and Security
Agreement and related agreements with Iberiabank, which provides for borrowings by BBX Sweet Holdings of
up to $5.0 million on a revolving basis. Amounts borrowed under this facility accrue interest at a floating rate of
thirty day LIBOR plus 2.75% or 3.18% as of December 31, 2015. Payments of interest only are payable
monthly. The facility matures, and all outstanding principal and interest will be payable, on July 31, 2017, with
one twelve month renewal option at BBX Sweet Holdings’ request, subject to satisfaction of certain conditions.
The loan documents include a number of covenants, including financial covenants relating to BBX Sweet
Holdings’ debt service coverage ratio. The facility is secured by the assets of BBX Sweet Holdings and its
subsidiaries and is guaranteed by BBX Capital. BBX Sweet Holdings is using the proceeds of the facility for
general corporate purposes. BBX Sweet Holdings was in compliance with the Iberiabank loan financial
covenants as of December 31, 2015.
Centennial Bank – Hoffman’s. In October 2014, a wholly-owned subsidiary of BBX Sweet Holdings
borrowed $1.7 million from Centennial Bank in the form of a ten year promissory note for working capital. The
note bears interest at a fixed rate of 5.25% per annum for the first five years and adjusts to the 5-year US
Treasury SWAP Rate in effect on the change date plus 345 basis points for the remaining five year term of the
note. The note requires monthly principal and interest payments based upon a 25 year amortization schedule
and is due and payable in October 2024. BBX Sweet Holdings and BBX Capital are guarantors of the note and
the note is collateralized by land and buildings with a carrying value of $2.1 million as of December 31, 2015.
Centennial Bank – Kencraft. In April 2015, a wholly-owned subsidiary of BBX Sweet Holdings
borrowed $995,000 from Centennial Bank in the form of a promissory note in order to partially fund the
Kencraft asset acquisition. The promissory note bears interest at 2.35% per annum and the principal balance is
payable on April 1, 2017 or sooner upon demand. Interest is payable monthly. The promissory note is secured
by a $995,000 certificate of deposit and a blanket lien on the Kencraft assets acquired. The $995,000 time
deposit account is included in restricted cash in BBX Capital’s Consolidated Statements of Financial Condition
as of December 31, 2015. BBX Sweet Holdings was in compliance with the debt financial covenants of the
loan as of December 31, 2015.
Holdback Notes. The Holdback Notes relate to purchase consideration payable in connection with the
Hoffman’s, Williams and Bennett and Kencraft acquisitions. The Hoffman and William and Bennett Holdback
Notes had an aggregate balance at origination of $1.1 million, bear interest at interest rates ranging from 1.65%
to 1.93% and matured from January 2015 through December 31, 2015. The Hoffman and William and Bennett
Holdback Notes were recorded at an $82,000 premium to reflect the fair value of the Holdback Notes at the
acquisition dates. The Hoffman and William and Bennett Holdback Notes were paid-in-full as of December 31,
2015. The Kencraft $400,000 Holdback Note bears interest at 6% per annum payable quarterly beginning on
July 1, 2015 and matures on April 1, 2017.
The Holdback Notes serve as security for the sellers’ obligations under the respective purchase and
sale agreements, including the sellers’ indemnity obligations and performance under each of the seller’s
respective non-competition agreements and provide BBX Sweet Holdings with a set-off right. BBX Capital is
the guarantor on the remaining BBX Sweet Holdings’ Holdback Note.
F-47
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The annual contractual principal repayments of notes payable as of December 31, 2015 was as follows
(in thousands):
Year Ending
December 31,
2016
2017
2018
2019
2020
Thereafter
Total
Notes
Payable
2,315
8,692
1,800
7,171
-
1,613
21,591
$
$
16. Employee Benefit Plans
The table below outlines the terms of the Security Plus 401(k) Plan and the associated employer costs
(dollars in thousands):
For the Years Ended December 31,
2014
2015
2013
Employee salary contribution Limit (1)
Percentage of salary limitation
Total match contribution (2)
$
%
$
18.0
75
322
17.5
75
150
17.5
75
-
(1) For the years ended December 31, 2015, 2014 and 2013 employees over 50 were entitled to contribute
$24,000, $23,000 and $23,000, respectively.
(2) The employer match vests immediately. BBX Capital did not offer an employer match for the year
ended December 31, 2013.
17. Commitments and Contingencies
BBX Capital is a lessee under various operating leases for real estate and equipment. BBX Capital at
the end of the initial lease terms generally has the right to renew its leases at market rental rates. The
approximate minimum future rental payments under such leases, as of December 31, 2015, for the periods
shown are (in thousands):
Year Ending December 31,
Amount
2016
2017
2018
2019
2020
Thereafter
Total
3,065
3,041
2,990
2,849
2,220
4,825
18,990
$
$
F-48
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
BBX Capital incurred rent expense for the periods shown (in thousands):
2015
As of December 31,
2014
2013
Rental expense for premises and equipment
$
3,493
3,207
1,039
BBX Capital had no commitments to extend credit as of December 31, 2015.
BBX Capital Corporation guarantees certain obligations of its unconsolidated real estate joint ventures
and guarantees payment to third parties in connection with land development as follows:
·
·
·
During the year ended December 31, 2014, the Sunrise and Bayview Partners, LLC joint venture
owned 50% by Procacci Bayview, LLC and 50% by a wholly-owned subsidiary of BBX Capital
refinanced its land acquisition loan with a financial institution. BBX Capital Corporation
provided the financial institution with a guarantee of 50% of the outstanding balance of the joint
venture’s loan which had an outstanding balance of $5.0 million as of December 31, 2015.
In July 2014, BBX Capital entered into a joint venture with CC Bonterra to develop
approximately 394 homes in a portion of the master-planned development of Bonterra
community in Hialeah Florida. BBX Capital transferred approximately 50 acres of land at an
agreed upon value of approximately $15.6 million subject to an $8.3 million mortgage which was
assumed by the joint venture. CAM remained liable as a co-borrower on the mortgage that was
assumed by the joint venture. The mortgage was also guaranteed by BBX Capital Corporation.
In March 2015, the joint venture refinanced the $8.3 million mortgage loan into a $31.0 million
acquisition and development loan. BBX Capital is a guarantor for 26.3% of the joint venture’s
$31.0 million acquisition and development loan.
In March 2015, BBX Capital placed $1.3 million in a money market account with a financial
institution in order to obtain an irrevocable letter of credit for a wholly-owned subsidiary of
CAM. The letter of credit was to guarantee payment to a third party upon the third party
obtaining wetlands permits in connection with a potential development project. The $1.3 million
money market account is included in “Restricted Cash” in BBX Capital’s Consolidated Statement
of Financial Condition at December 31, 2015. In January 2016, BBX Capital paid the third party
for the wetlands permits and the letter of credit was cancelled.
BBX Capital Corporation and its subsidiaries are parties to lawsuits as plaintiff or defendant involving
its collections, lending and prior period tax certificate activities. Although BBX Capital believes it has
meritorious defenses in all current legal actions, the outcome of litigation and the ultimate resolution are
uncertain and inherently difficult to predict.
Reserves are accrued for matters in which it is probable that a loss will be incurred and the amount of
such loss can be reasonably estimated. The actual costs of resolving these legal claims may be substantially
higher or lower than the amounts anticipated for these claims. There were no reserves accrued as of December
31, 2015.
In certain matters we are unable to estimate the loss or reasonable range of loss until additional
developments in the case provide information sufficient to support an assessment of the loss or range of loss.
Frequently in these matters the claims are broad and the plaintiffs have not quantified or factually supported the
claim.
BBX Capital believes that liabilities arising from litigation discussed below will not have a material
impact to BBX Capital’s consolidated financial statements. However, due to the significant uncertainties
involved in these legal matters, BBX Capital may incur losses in excess of accrued amounts and an adverse
outcome in these matters could be material to BBX Capital’s consolidated financial statements.
The discussion below does not include litigation relating to companies which are not consolidated into
BBX Capital’s financial statements, including Woodbridge and Bluegreen.
BBX Capital has received notices from BB&T regarding a series of claims asserted against BB&T’s
subsidiary, Branch Banking and Trust Company, as successor to BankAtlantic, by certain individuals who
purport to have had accounts in their names with BankAtlantic prior to consummation of the sale of
BankAtlantic to BB&T. These third party claims allege wrongful conduct by BankAtlantic in connection with
certain alleged unauthorized transactions associated with their
F-49
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
accounts. BB&T’s notices assert its belief that it may be entitled to indemnification under the BankAtlantic
stock purchase agreement with respect to such claims as well as another third party claim relating to an action
which was settled by BB&T. On July 31, 2014, BBX Capital and BB&T entered into a tolling agreement with
respect to the time period within which BB&T may assert a claim for indemnity under the stock purchase
agreement with respect to such claims.
The following is a description of certain ongoing or recently concluded litigation matters:
Securities and Exchange Commission Complaint
On January 18, 2012, the SEC brought an action in the United States District Court for the Southern
District of Florida against BBX Capital and Alan B. Levan, BBX Capital’s Chairman and Chief Executive
Officer, alleging that they violated securities laws by not timely disclosing known adverse trends in BBX
Capital’s commercial real estate loans, selectively disclosing problem loans and engaging in improper
accounting treatment of certain specific loans which may have resulted in a material understatement of its net
loss in BBX Capital’s Annual Report on Form 10-K for the year ended December 31, 2007. Further, the
complaint alleged that Mr. Alan B. Levan intentionally misled investors in related earnings calls. The Court
denied summary judgment as to most issues, but granted the SEC’s motion for partial summary judgment that
certain statements in one of Alan Levan’s answers on a July 25, 2007 investor conference call were false.
On December 15, 2014, after a six-week trial, the jury found in favor of BBX Capital and Alan B.
Levan with respect to the disclosures made during an April 2007 earnings conference call and in BBX Capital’s
quarterly reports on Form 10-Q for the 2007 first and second quarters, but found that they had engaged in an act
of fraud or deceit toward shareholders or prospective investors by making materially false statements knowingly
or with severe recklessness (1) with respect to three statements in the July 25, 2007 conference call referenced
above, and (2) by failing to classify certain loans as held-for sale in the 2007 Annual Report on Form 10-
K. The jury also found that Mr. Levan made or caused to be made false statements to the independent
accountants regarding the held for sale issue.
The SEC sought a final judgment: (i) permanently barring Alan B. Levan from serving as an officer or
director of any SEC reporting company; (ii) imposing civil penalties of $5.2 million against BBX Capital and
$1.56 million against Alan B. Levan; and (iii) permanently restraining BBX Capital and Alan B. Levan from
violating securities laws. On September 24, 2015, the court entered a final judgment denying the SEC’s request
for a permanent bar from Mr. Levan serving as an officer or director of any public company, but instead ordered
Mr. Levan barred from serving as an officer or director of any public company for a period of two years
commencing on December 23, 2015. The court also imposed monetary penalties against BBX Capital in the
amount of $4,550,000 and monetary penalties against Mr. Levan in the amount of $1,300,000. BBX Capital
and Mr. Levan are appealing the final judgment to the Eleventh Circuit Court of Appeals. As a result of the
court's decision, on December 23, 2015 Mr. Levan resigned as Chairman and Chief Executive Officer of BBX
Capital, as Chairman, Chief Executive Officer and President of BFC, and as a director of BBX Capital and
BFC.
On January 14, 2015, BBX Capital received notice from its insurance carrier that, based upon its
interpretation of the jury verdict in this action, the carrier does not believe it is obligated to advance further
payments towards fees and costs incurred in connection with this action and that it reserves its right to obtain
reimbursement of the amounts it previously advanced with respect to this action. BBX Capital has received
legal fee and cost reimbursements from the insurance carrier in connection with this action of approximately
$5.8 million.
New Jersey Tax Sales Certificates Antitrust Litigation
On December 21, 2012, plaintiffs filed an Amended Complaint in an existing purported class action
filed in Federal District Court in New Jersey adding BBX Capital and Fidelity Tax, LLC, a wholly owned
subsidiary of CAM, among others as defendants. The class action complaint is brought on behalf of a class
defined as “all persons who owned real property in the State of New Jersey and who had a Tax Certificate
issued with respect to their property that was purchased by a Defendant during the Class Period at a public
auction in the State of New Jersey at an interest rate above 0%.” Plaintiffs allege that beginning in January
1998 and at least through February 2009, the Defendants were part of a statewide conspiracy to manipulate
interest rates associated with tax certificates sold at public auction from at least January 1, 1998, through
February 28, 2009. During this period, Fidelity Tax was a subsidiary of BankAtlantic. Fidelity Tax was
contributed to CAM in connection with the sale of BankAtlantic in the BB&T Transaction. BBX Capital and
Fidelity Tax filed a Motion to Dismiss in March 2013 and on October 23, 2013, the Court granted the Motion to
Dismiss and dismissed the Amended Complaint with prejudice as to certain claims, but without prejudice as to
plaintiffs’ main antitrust
F-50
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
claim. Plaintiffs filed a Consolidated Amended Complaint on January 6, 2014. While BBX Capital believed
the claims to be without merit, BBX Capital reached an agreement to settle the action, subject to court approval.
The settlement has been preliminarily approved by the court and the final approval hearing is currently
scheduled for the second quarter of 2016.
18. Common Stock and Restricted Stock and Common Stock Option Plans
Class A Common Stock Share Repurchase Program
In September 2014, BBX Capital’s Board of Directors approved a share repurchase program and
authorized management, at its discretion, to repurchase up to $20 million of BBX Capital’s Class A Common
Stock from time to time, subject to market conditions and other factors considered by management to be
appropriate at the time of repurchase. There were no common shares repurchased during the years ended
December 31, 2015 and 2014.
BBX Capital Corporation Restricted Stock and Stock Option Plans:
BBX Capital has two share-based compensation plans: the 2005 Restricted Stock and Option Plan and
the BBX Capital Corporation 2014 Stock Incentive Plan. The maximum term of incentive stock options and
non-qualifying stock options issuable under each of these plans is ten years. Vesting is established by the
Compensation Committee of the Board of Directors (the “Compensation Committee”) in connection with each
grant of options or restricted stock award. All directors’ stock options vest immediately. The 2005 Restricted
Stock and Option Plan provides that up to 1,875,000 shares of Class A common stock may be issued for
restricted stock awards and upon the exercise of options granted under the Plan, and at December 31, 2015 no
shares remained available for grants of awards under the 2005 Plan. The 2014 Stock Incentive Plan provides
that up to 1,000,000 shares of Class A common stock may be issued for restricted stock awards and upon the
exercise of options granted under the Plan, and at December 31, 2015, 184,426 shares remained available for
grants of awards under the 2014 Stock Incentive Plan.
In March 2015, BBX Capital’s Board of Directors approved an amendment to both the BBX Capital
Corporation 2014 Stock Incentive Plan and the 2005 Restricted Stock and Option Plan. The amendment to each
Plan authorizes the Compensation Committee to issue restricted stock awards in the form of restricted stock
units rather than directly in restricted stock. Following the amendment, BBX Capital and its executive officers
agreed to retire any shares of BBX Capital’s outstanding restricted Class A common stock awards (“RSAs”)
previously issued in the name of the Compensation Committee and subject to forfeiture until vested, in
exchange
for BBX Capital’s issuing to the executive officers restricted Class A common stock units
(“RSUs”). This exchange resulted in the retirement of 1,391,282 Class A common shares. Pursuant to the terms
of the RSUs, BBX Capital promises to issue Class A common stock at the time the underlying units vest. The
RSUs issued have the same terms, and cover the same number of underlying shares of Class A common stock,
as the RSAs that were retired.
F-51
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following is a summary of BBX Capital’s non-vested restricted Class A common stock units
activity:
Class A
Non-vested
Restricted
Stock
Weighted
Average
Grant date
Fair Value
Outstanding at December 31, 2012
Vested
Forfeited
Granted
Outstanding at December 31, 2013
Vested
Forfeited
Granted
Outstanding at December 31, 2014
Vested
Forfeited
Granted
Outstanding at December 31, 2015
$
1,195,406 $
(315,104)
-
430,000
1,310,302
(315,102)
-
396,082
1,391,282
(381,622)
-
419,492
1,429,152
$
$
6.53
6.52
-
13.33
8.76
6.52
-
16.58
11.50
9.13
-
15.60
13.33
In September 2015, BBX Capital’s Compensation Committee of the Board of Directors’ granted
419,492 Class A common stock units (“RSUs”) to its executive officers under the BBX Capital’s 2014 Stock
Incentive Plan. These RSUs had a $6.5 million fair value on the grant date and vest ratably each year over the 4
year service period beginning in October 2016. The grant date fair value was calculated based on the closing
price of BBX Capital’s Class A common stock on the grant date. BBX Capital recognizes the compensation
costs based on the straight-line method over the vesting period.
On September 30, 2015, 381,622 shares of restricted Class A common stock units granted to executive
officers in September 2012 and September 2014 vested. BBX Capital repurchased and retired 159,801 shares of
the executive officers’ Class A common stock to satisfy the $2.5 million withholding tax obligations associated
with the vesting of these shares in connection with these grants.
In October 2014, the Board of Directors granted in the aggregate 396,082 shares of restricted Class A
common stock awards (“RSAs”) under the 2014 Stock Incentive Plan to certain of its executive officers. The
grant date fair value was calculated based on the closing price of BBX Capital’s Class A common stock on the
grant date. The RSAs vest pro-rata over a four year period beginning September 30, 2015 and had a fair value
of $16.58 per share at the grant date.
I n October 2013, the Board of Directors granted in the aggregate 430,000 RSAs under the 2005
Restricted Stock and Option Plan to certain of its executive officers. The grant date fair value was calculated
based on the closing price of BBX Capital’s Class A common stock on the grant date. The RSAs vest four years
from the grant date or October 8, 2017. The RSAs had a fair value of $13.33 per share at the grant date.
As of December 31, 2015, the total unrecognized compensation cost related to non-vested RSUs was
approximately $14.5 million. The cost of these non-vested RS Us is expected to be recognized over a weighted-
average period of approximately 17 months. The fair value of RSUs vested during the years ended December
31, 2015, 2014 and 2013 was $6.0 million, $5.5 million and $4.3 million, respectively.
BBX Capital recognizes stock based compensation costs based on the grant date fair value. The grant
date fair value for stock options is calculated using the Black-Scholes option pricing model incorporating an
estimated forfeiture rate and recognizes the compensation costs for those shares expected to vest on a straight-
line basis over the requisite service period of the award, which is generally the option vesting term of five years.
F-52
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following is a summary of BBX Capital’s Class A common stock option activity:
Outstanding at December 31, 2012
Exercised
Forfeited
Expired
Granted
Outstanding at December 31, 2013
Exercised
Forfeited
Expired
Granted
Outstanding at December 31, 2014
Exercised
Forfeited
Expired
Granted
Outstanding at December 31, 2015
Exercisable at December 31, 2015
Class A
Outstanding
Options
36,804 $
-
(7,559)
(7,963)
-
21,282 $
-
-
(5,801)
-
15,481 $
-
(3,307)
(5,158)
-
7,016 $
7,016 $
Weighted
Average
Exercise
Price
233.00
-
124.57
185.82
-
289.17
-
455.00
-
227.03
92.09
475.12
108.24
108.24
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value ($000)
3.1
2.5
2.3
1.6 $
1.6 $
-
-
There were no options granted or exercised during each of the years in the three year period ended
December 31, 2015.
Included in BBX Capital’s Consolidated Statements of Operations in compensation expense was $5.5
million, $3.7 million and $2.5 million of share-based compensation expense for the years ended December 31,
2015, 2014 and 2013, respectively. There was no recognized tax benefit associated with the compensation
expense for the years ended December 31, 2015, 2014 and 2013 as it was not more-likely-than-not that BBX
Capital would realize the tax benefits associated with the share based compensation expense.
F-53
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
19. Earnings per Share
The following reconciles the numerators and denominators of the basic and diluted earnings per share
computation for the years ended December 31, 2015, 2014 and 2013 (in thousands, except per share data).
Basic earnings per share
Numerator:
Net income
Less: net (earnings) loss attributable to
noncontrolling interest
Net income available to common shareholders
Denominator:
Basic weighted average number of common
shares outstanding
Basic earnings per share
Diluted earnings per share
Numerator:
Net income
Less: net (earnings) loss attributable to
noncontrolling interest
Net income available to common shareholders
Denominator:
Basic weighted average number of common
shares outstanding
Stock-based compensation
Diluted weighted average shares outstanding
Diluted earnings per share
$
$
$
$
$
$
For The Years Ended December 31,
2014
2015
2013
23,527
(1,753)
21,774
4,304
391
4,695
47,660
179
47,839
16,229
16,043
15,843
1.34
0.29
3.02
For the Years Ended December 31,
2014
2015
2013
23,527
(1,753)
21,774
16,229
576
16,805
1.30
4,304
391
4,695
16,043
635
16,678
0.28
47,660
179
47,839
15,843
435
16,278
2.94
Options to acquire 7,016, 15,481 and 21,282 shares of Class A common stock were anti-dilutive for the
years ended December 31, 2015, 2014 and 2013, respectively. There were no anti-dilutive RSUs for the years
ended December 31, 2015, 2014, or 2013.
20. Fair Value Measurement
Fair value is defined as the price that would be received on the sale of an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. There are three main
valuation techniques to measure the fair value of assets and liabilities: the market approach, the income
approach and the cost approach. The accounting literature defines an input fair value hierarchy that has three
broad levels and gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or
liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
The valuation techniques are summarized below:
The market approach uses prices and other relevant information generated by market transactions
involving identical or comparable assets or liabilities.
F-54
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The income approach uses financial models to convert future amounts to a single present amount.
These valuation techniques include present value and option-pricing models.
The cost approach is based on the amount that currently would be required to replace the service
capacity of an asset. This technique is often referred to as current replacement cost.
The input fair value hierarchy is summarized below:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that
BBX Capital has the ability to access at each reporting date. An active market for the asset or liability is a
market in which transactions for the asset or liability occur with sufficient frequency and volume to provide
pricing information on an ongoing basis. A quoted price in an active market provides the most reliable evidence
of fair value and is used to measure fair value whenever available.
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2
input must be observable for substantially the full term of the asset or liability. Level 2 inputs include: quoted
prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities
in markets that are not active, that is, markets in which there are few transactions for the asset or liability, the
prices are not current, or price quotations vary substantially either over time or among market makers (for
example, some brokered markets), or in which little information is released publicly (for example, a principal-
to-principal market); inputs other than quoted prices that are observable for the asset or liability (for example,
interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss
severities, credit risks, and default rates).
Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs are only used to
measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which
there is little, if any, market activity for the asset or liability at the measurement date.
Assets and Liabilities on a Recurring Basis
There were no assets or liabilities measured at fair value on a recurring basis in BBX Capital’s
consolidated financial statements as of December 31, 2015 and 2014.
Assets on a Non-Recurring Basis
The following table presents major categories of assets measured at fair value on a non-recurring basis
as of December 31, 2015 (in thousands):
Fair Value Measurements Using
Quoted prices in Significant
Total
Active Markets
Other
Significant
Impairments (1)
As of
for Identical
Observable Unobservable
For the
December 31,
Assets
Inputs
Inputs
Year Ended
2015
(Level 1)
(Level 2)
(Level 3) December 31, 2015
Description
Loans measured for
impairment using the fair value
of the underlying collateral
$
186
Impaired real estate held-for-sale
and held-for-investment
Impaired loans held-for-sale
Total
$
13,257
5,856
19,299
-
-
-
-
-
-
186
13,257
5,856
19,299
120
3,000
740
3,860
F-55
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(1)
Total impairments represent the amount of losses recognized during the year ended December 31, 201 5 on assets that
were held and measured at fair value as of December 31, 2015.
Quantitative information about significant unobservable inputs within Level 3 on major categories of
assets measured at fair value on a non-recurring basis is as follows (dollars in thousands):
As of December 31, 2015
Fair
Valuation
Unobservable
Description
Value
Technique
Inputs
Range (Average) (1)(2)
Loans measured for
impairment using the fair
value
Fair Value of
Discount Rates and
Appraised
of the underlying collateral
$
186
Collateral
Value less Cost to Sell
Impaired real estate
Fair Value of
held-for-sale
13,257
Property
Fair Value of
Discount Rates and
Appraised
Value less Cost to Sell
Discount Rates and
Appraised
Impaired loans held-for-sale
5,856
Collateral
Value less Cost to Sell
Total
$
19,299
$0.2 - $0.4 million ( $0.3
million)
$0.3 - $11.0 million ( $2.0
million)
$0.1 - $0.5 million ( $0.2
million)
(1) Range and average appraised values were reduced by costs to sell.
(2) Average was computed by dividing the aggregate appraisal amounts by the number of appraisals.
The following table presents major categories of assets measured at fair value on a non-recurring basis
as of December 31, 2014 (in thousands):
Fair Value Measurements Using
Quoted prices in Significant
Total
Active Markets
Other
Significant
Impairments (1)
As of
for Identical
Observable Unobservable
For the Nine
December 31,
Assets
Inputs
Inputs
Months Ended
Description
2014
(Level 1)
(Level 2)
(Level 3) December 31, 2014
Loans measured for
impairment using the fair value
of the underlying collateral
Impaired real estate held-for-sale
and held-for-investment
Total
$
$
2,648
20,701
23,349
-
-
-
-
-
-
2,648
2,161
20,701
23,349
8,756
10,917
(1) Total impairments represent the amount of losses recognized during the year ended December 31, 201 4 on assets that
were held and measured at fair value as of December 31, 2014.
F-56
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Quantitative information about significant unobservable inputs within Level 3 on major categories of
assets measured on a non-recurring basis is as follows (dollars in thousands):
As of December 31, 2014
Description
Fair
Value
Valuation
Technique
Unobservable
Inputs
Range (Average) (1)(2)
Loans measured for
impairment using the fair
value
of the underlying collateral
Impaired real estate held-for-
sale
Fair Value of
Discount Rates and
Appraised
$
2,648
Collateral
Fair Value of
Value less Cost to Sell
Discount Rates and
Appraised
$0.1 - $2.6 million ( $0.5
million)
and held-for-investment
Total
20,701
23,349
$
Property
Value less Cost to Sell
$0.3 - $8.4 million ( $1.7
million)
(1) Range and average appraised values were reduced by costs to sell.
(2) Average was computed by dividing the aggregate appraisal amounts by the number of appraisals.
Liabilities on a Non-Recurring Basis
There were no material liabilities measured at fair value on a non-recurring basis in BBX Capital’s
consolidated financial statements as of December 31, 2015 and December 31, 2014.
Loans Measured For Impairment
Impaired loans are generally valued based on the fair value of the underlying collateral less cost to sell
as the majority of BBX Capital’s loan s are collateral dependent. The fair value of BBX Capital’s loans may
significantly increase or decrease based on changes in property values as BBX Capital’s loans are primarily
secured by real estate. BBX Capital primarily uses third party appraisals to assist in measuring non-
homogenous impaired loans and broker price opinions to assist in measuring homogenous impaired loans. These
appraisals generally use the market or income approach valuation techniques and use market observable data to
formulate an estimate of the fair value of the loan’s collateral. However, the appraiser uses professional
judgment in determining the fair value of the collateral, and BBX Capital may also adjust these values for
changes in market conditions subsequent to the appraisal date. When current appraisals are not available for
certain loans, BBX Capital uses its judgment on market conditions to adjust the most current appraisal. As a
consequence, the calculation of the fair value of the collateral is considered a Level 3 input. BBX Capital
generally recognizes impairment losses based on third party broker price opinions when impaired homogenous
loans become 120 days delinquent. These third party valuations from real estate professionals also use Level 3
inputs in determining fair values. The observable market inputs used to fair value loans include comparable
property sales, rent rolls, market capitalization rates on income producing properties, risk adjusted discounts
rates and foreclosure timeframes and exposure periods.
Real Estate Held-for-Sale and Held-for-Investment
Real estate is generally valued using third party appraisals or broker price opinions. These appraisals
generally use the market or income approach valuation techniques and use market observable data to formulate
an estimate of the fair value of the properties. The market observable data typically consists of comparable
property sales, rent rolls, market capitalization rates on income producing properties and risk adjusted discount
rates. The above inputs are considered Level 3 inputs as the appraiser uses professional judgement in the
calculation of the fair value of the properties.
Loans Held-for-Sale
Loans held-for-sale are valued using an income approach with Level 3 inputs as market quotes or sale
transactions of similar loans are generally not available. The fair value is estimated by discounting forecasted
cash flows, using a discount rate that reflects the risks inherent in the loans held-for-sale portfolio. For non-
performing loans held-for-sale, the forecasted cash flows are based on the estimated fair value of the collateral
less cost to sell adjusted for foreclosure expenses and other operating expenses of the underlying collateral until
foreclosure or sale.
F-57
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Financial Disclosures about Fair Value of Financial Instruments
The following table presents the fair value of BBX Capital’s consolidated financial statements as of
December 31, 2015 and 2014 (in thousands):
Fair Value Measurements Using
Carrying
Quoted prices in
Amount
Fair Value
Active Markets
Significant
Other
Significant
As of
As of
for Identical
Observable Unobservable
December 31, December 31,
Assets
Inputs
Inputs
2015
2015
(Level 1)
(Level 2)
(Level 3)
$
69,040
69,040
69,040
55,389
63,668
-
2,651
2,651
2,651
21,421
21,856
10,356
9,630
-
-
-
-
-
-
-
-
63,668
-
21,856
9,630
(in thousands)
Description
Financial assets:
Cash and cash equivalents
Loans receivable including
loans held-for-sale, net
Restricted cash and time
deposits at financial
institutions
Financial liabilities:
Notes payable
Principal and interest
advances on residential loans
Fair Value Measurements Using
Carrying
Quoted prices in
Amount
Fair Value
Active Markets
Significant
Other
Significant
As of
As of
for Identical
Observable Unobservable
December 31, December 31,
Assets
Inputs
Inputs
2014
2014
(Level 1)
(Level 2)
(Level 3)
$
58,819
58,819
58,819
62,267
73,423
17,923
11,750
18,196
11,615
12,348
12,383
11,171
10,125
-
-
-
-
-
-
-
-
-
-
73,423
18,196
11,615
12,383
10,125
(in thousands)
Description
Financial assets:
Cash and cash equivalents
Loans receivable including
loans held-for-sale, net
Financial liabilities:
Notes payable
Note payable to Woodbridge
BB&T preferred interest in
FAR
Principal and interest
advances on residential loans
Management has made estimates of fair value that it believes to be reasonable. However, because there
is no active market for many of these financial instruments, management has derived the fair value of the
majority of these financial instruments using the income approach technique with Level 3 unobservable inputs.
Management estimates used in its net present value financial models rely on assumptions and judgments
regarding issues where the outcome is unknown and actual results or values may differ significantly from these
estimates. BBX Capital’s fair value estimates do not consider the tax effect that would be associated with the
disposition of the assets or liabilities at their fair value estimates. As such, BBX Capital may not receive the
estimated value upon sale or disposition of the asset or pay the estimated value upon disposition of the liability
in advance of its scheduled maturity.
F-58
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Fair values are estimated for loan portfolios with similar financial characteristics. Loans are segregated
by category, and each loan category is further segmented by accruing and non-accrual categories.
The fair value of accruing loans is calculated by using an income approach with Level 3 inputs. The
fair value of accruing loans is estimated by discounting forecasted cash flows using estimated market discount
rates that reflect the interest rate and credit risk inherent in the loan portfolio. Management assigns a credit risk
premium and an illiquidity adjustment to these loans based on delinquency status. The fair value of non-accrual
collateral dependent loans is estimated using an income approach with Level 3 inputs utilizing the fair value of
the collateral adjusted for operating and selling expenses and discounted over the estimated holding period
based on the market risk inherent in the property.
The fair value of notes payables, including to related parties, and principal and interest advances on
residential loans were measured using the income approach with Level 3 inputs obtained by discounting the
forecasted cash flows based on estimated market rates.
BB&T’s preferred interest in FAR was considered an adjustable rate debt security. The fair value of
this security was calculated using the income approach with Level 3 inputs. The fair value was obtained by
discounting forecasted cash flows by risk adjusted market interest rate spreads to the LIBOR swap curve. The
market spreads were obtained from reference data in the secondary institutional market place.
21. Related Parties
BBX Capital, BFC and Bluegreen are entities under common control. The controlling shareholder of
BBX Capital and Bluegreen is BFC. Shares of BFC’s capital stock representing a majority of the voting power
are owned or controlled by Alan Levan, BBX Capital’s Chairman until December 23, 2015 and Jack Abdo,
BBX Capital’s Vice Chairman. Alan Levan was also the Chairman of BFC until December 23, 2015. Mr.
Abdo currently serves as Vice-Chairman of both BFC and Bluegreen. Alan Levan is currently an employee of
BBX Capital and BFC. BBX Capital, BFC and Bluegreen share certain office premises and employee services,
pursuant to the agreements described below.
Effective December 1, 2012, BBX Capital entered into an agreement with BFC under which BBX
Capital provides office facilities and is reimbursed by BFC, based on an agreed upon amount. BFC also
provides risk management services to BBX Capital and BFC is reimbursed by BBX Capital based on an agreed
upon amount. BBX Capital’s employees are provided health insurance under policies maintained by Bluegreen
for which Bluegreen is reimbursed based on an agreed upon amount.
The table below shows the effect of these related party agreements and arrangements on BBX
Capital’s consolidated statements of operations for the years ended December 31, 2015, 2014 and 2013 (in
thousands):
Other revenues
Expenses:
Employee benefits
Other - back-office support
Net effect of affiliate transactions before income taxes
$
$
For the Years Ended
2015
2014
2013
419
(1,150)
(180)
(911)
448
(524)
(185)
(261)
431
(225)
(200)
6
On October 30, 2013, Renin, a joint venture entity owned 81% by BBX Capital and 19% by BFC,
completed the Renin Transaction. Bluegreen funded approximately $9.4 million of the Renin Transaction
consideration in the form of a loan and revolver facility and the remaining funds necessary to complete the
Renin Transaction were funded by BBX Capital and BFC pro rata in accordance with their percentage equity
interests in Renin. The Bluegreen loan was paid-in-full in June 2014 from the proceeds received from a
financing with a financial institution and pro rata capital contributions to Renin from BBX Capital and BFC of
$2.0 million and $0.5 million, respectively. Renin recognized $0.3 million and $0.1 million, respectively, of
interest expense under the Bluegreen loan for the years ended December 31, 2014 and 2013.
F-59
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
As disclosed in Note 5, 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 of the publicly held shares of Bluegreen. BFC holds the remaining 54% of Woodbridge. BBX
Capital contributed $60 million in cash and issued to Woodbridge an $11.75 million note payable in connection
with BBX Capital’s acquisition of its 46% equity interest in Woodbridge. During the years ended December 31,
2015, 2014 and 2013, BBX Capital recognized $0.4 million, $0.6 million and $0.4 million, respectively, of
interest expense in connection with the Woodbridge note pa yable. During September 2015, in connection with
settlement of the Bluegreen shareholder litigation, the $11.75 million Woodbridge note payable was paid-in-full
and BBX Capital made an additional investment in Woodbridge of $11.4 million.
On May 8, 2015, BFC, BBX, Woodbridge, Bluegreen and their respective subsidiaries entered into
an “Agreement to Allocate Consolidated Income Tax Liability and Benefits” pursuant to which, among other
customary terms and conditions, the parties agreed to file consolidated federal tax returns. The parties will
calculate their respective income tax liabilities and attributes as if each of them were a separate filer. If any tax
attributes are used by another party to the agreement to offset its tax liability, the party providing the benefit
will receive an amount for the tax benefits realized.
22. Segment Reporting
The
information provided for segment reporting
internal reports utilized by
management. Net income (loss) is reported through three reportable segments: BBX, Renin and Sweet
Holdings.
is based on
In prior periods, FAR was reported as a separate business segment as its activities were restricted by
FAR’s operating agreement to the monetization of FAR’s assets in order to repay BB&T’s preferred
membership interest in FAR. As a result of the redemption of BB&T’s preferred interest in FAR during May
2015, FAR activities are no longer restricted to the monetization of FAR’s assets. As a consequence,
management changed BBX Capital’s internal reporting, combining the operations of FAR into BBX and the
FAR reportable segment was consolidated with the BBX reportable segment for the year ended December 31,
2015.
The BBX reportable segment for the year ended December 31, 2015 includes the results of operations
of CAM, FAR and BBX Partners, a wholly owned subsidiary of BBX Capital Corporation, and BBX Capital’s
equity interest in Woodbridge. BBX’s activities consisted of the activities associated with managing its
commercial loan portfolio, real estate properties, and portfolio of charged off loans as well as its investment in
Woodbridge and investments in real estate joint ventures. The activities of managing the commercial loan
portfolios included renewing, modifying, collecting, increasing, extending, refinancing and making protective
advances on these loans, as well as managing and liquidating real estate properties acquired through foreclosure.
FAR was a separate reportable segment for the years ended December 31, 2014 and 2013 as the
activities of FAR were restricted to the management and monetization of FAR’s assets with a view to the
repayment of BB&T’s preferred membership interest and maximizing the cash flows of any remaining assets.
The Renin reportable segment consists of the activities of Renin which commenced operations in
October 2013 upon the asset acquisition of Renin Corp. Therefore, the Renin reportable segment includes the
results of operations of Renin for the two months ended December 31, 2013 and years ended December 31,
2014 and 2015. During 2015, total revenues for the Renin reportable segment include $14.5 million of trade
sales to one major customer and its affiliates. Renin’s revenues and properties and equipment located outside of
the United States totaled $22.1 million and $1.2 million, respectively.
The Sweet Holdings reportable segment consists of the activities of Hoffman’s, Williams and Bennett,
Jer’s, Helen Grace and Anastasia for the year ended December 31, 2015, and the activities of Kencraft from the
date of acquisition, April 1, 2015 through December 31, 2015. For 2014, this reportable segment consists of the
activities of Hoffman’s and Williams & Bennett for the year ended December 31, 2014, and the activities of
Jer’s, Helen Grace and Anastasia from their respective dates of acquisition, July 1, 2014, July 21, 2014 and
October 1, 2014 through December 31, 2014. In 2013, the activities of Hoffman’s were included for the month
of December 2013.
The accounting policies of the segments are generally the same as those described in the summary of
significant accounting policies. Intersegment transactions are eliminated in consolidation.
F-60
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
During the years ended December 31, 2015 and 2014, acquisition due diligence costs of $0.3 million
a n d $0.6 million, respectively, incurred in connection with the Sweet Holdings reportable segment were
included in the results of operations of the BBX reportable segment in costs and expenses. During the year
ended December 31, 2013, acquisition related costs o f $1.0 million incurred in connection with the Renin
Transaction were included in the Renin reportable segment and $0.1 million of acquisition related costs
incurred in connection with the Hoffman’s acquisition were included in the Sweet Holdings reportable segment
in costs and expenses. The Sweet Holding reportable segment benefit for income taxes for the years ended
December 31, 2015 and 2014 resulted from the reduction in BBX Capital’s deferred tax valuation allowance in
connection with deferred tax liabilities recognized in connection with the Sweet Holdings acquisitions.
Depreciation and amortization consist of: depreciation on properties and equipment, amortization of
leasehold improvements, intangible assets and discounts on notes payable.
BBX Capital evaluates segment performance based on segment net income (loss). The tables below
contain segment information for segment net income (loss) for the years ended December 31, 2015, 2014 and
2013 (in thousands):
For the Year Ended:
December 31, 2015:
Revenues
Recoveries from loan losses, net
Asset impairments
Other costs and expenses
Total costs and expenses
Equity in earnings of unconsolidated
companies
Foreign exchange loss
Segment income (loss) before income
taxes
Provision (benefit) for income tax
Net income (loss)
Total assets
Equity method investments
included in total assets
Expenditures for segment assets
Depreciation and amortization
BBX
Renin
Sweet
Holdings
Reconciling
Items and
Elimination
Entries
$
47,850
56,461
27,837
(665)
13,457
(287)
(41,095)
(27,925)
13,409
-
33,334
88
33,246
645,817
118,507
1,429
1,058
$
$
$
$
$
-
-
(57,481)
(57,481)
-
-
(36,604)
(36,604)
-
-
1,438
1,438 (1)
-
(1,038)
(2,058)
(4)
(2,054)
22,778
-
92
643
-
-
(8,767)
(329)
(8,438)
36,884
-
2,113
1,763
-
-
773
-
773
(311,938)
-
-
-
Segment
Total
131,483
13,457
(287)
(133,742)
(120,572)
13,409
(1,038)
23,282
(245)
23,527
393,541
118,507
3,634
3,464
(1) Includes a reconciling item of $773,000 associated with capitalized interest on real estate development and joint venture
activities in excess of interest expense incurred by BBX reportable segment.
F-61
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
For the Year Ended:
December 31, 2014:
Revenues
Recoveries from (provision for) loan
losses
Asset impairments
Costs and expenses
Total costs and expenses
Equity earnings in unconsolidated
companies
Foreign currency loss
Segment income (loss) before income
taxes
Provision for income tax
Net income (loss)
Total assets
Equity method investments
included in total assets
Expenditures for segment assets
Depreciation and amortization
Adjusting
and
Elimination
Entries
Sweet
Holdings
Total
BBX
FAR
Renin
$
8,773
10,225
57,839
16,257
(449)
92,645
10,169
(266)
(31,515)
(3,014)
(6,749)
(9,122)
-
-
(59,168)
(21,612)
(18,885)
(59,168)
24,723
-
-
-
-
(715)
11,884
(8,660)
(2,044)
-
11,884
$
$ 550,993
-
(8,660)
97,024
6
(2,050)
24,061
$
$
$
89,091
277
176
-
792
772
-
93
602
-
-
(16,234)
(16,234)
-
-
23
(3,107)
3,130
31,645
-
263
832
-
-
449
449
7,155
(7,015)
(115,590)
(115,450)
-
-
-
-
-
(310,787)
24,723
(715)
1,203
(3,101)
4,304
392,936
-
-
-
89,091
1,425
2,382
For the Year Ended:
December 31, 2013:
Revenues
Recoveries from loan losses
Asset impairments
Costs and expenses
Total costs and expenses
Equity earnings in Woodbridge
Foreign currency loss
Segment income (loss) before income
taxes
Provision for income tax
Net income (loss)
Total assets
Equity method investments included
in total assets
Real estate operating expenses
Depreciation and amortization
BBX
FAR
Renin
Sweet
Holdings
Elimination Segment
Entries
Total
Adjusting
and
$
22,062
34,128
(219)
(28,906)
5,003
13,461
-
40,526
-
40,526
$
$ 476,947
78,573
33
462
$
$
9,300
-
-
(9,884)
(9,884)
-
(357)
(941)
-
(941)
23,809
-
-
-
16,539
9,737
(4,489)
(13,654)
(8,406)
-
-
8,133
20
8,113
166,114
-
232
476
F-62
966
-
-
(1,004)
(1,004)
-
-
(38)
-
(38)
5,383
-
-
117
(209)
-
-
209
209
-
-
-
-
-
(241,106)
-
-
-
48,658
43,865
(4,708)
(53,239)
(14,082)
13,461
(357)
47,680
20
47,660
431,147
7,873
265
1,055
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
23. Selected Quarterly Results (Unaudited)
The following tables summarize BBX Capital’s quarterly results of operations for the years ended
December 31, 2015 and 2014 (in thousands except per share data).
2015
Revenues
Recoveries from (provision for) loan
losses
Asset recoveries (impairments), net
Other costs and expenses
Total costs and expenses
Equity in earnings (losses) of
Woodbridge Holdings, LLC
Equity in losses of unconsolidated real
estate
joint ventures
Foreign exchange (loss) gain
Income before income taxes
Net income
Net income attributable to
BBX Capital Corporation
Basic earnings per share
Basic weighted average number of
common
shares outstanding
Diluted earnings per share
Diluted weighted average number of
common
shares outstanding
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$
21,709
38,615
25,535
45,624
3,821
1,063
(30,743)
(25,859)
6,608
810
(29,546)
(22,128)
4,427
(274)
(36,592)
(32,439)
(1,399)
(1,886)
(36,861)
(40,146)
Total
131,483
13,457
(287)
(133,742)
(120,572)
5,803
(10,168)
10,306
9,033
14,974
(304)
(469)
880
877
1,034
0.06
(291)
70
6,098
6,320
4,138
0.26
(158)
(236)
3,008
3,039
(812)
(403)
13,296
13,291
(1,565)
(1,038)
23,282
23,527
3,116
13,486
21,774
0.19
0.82
1.34
16,172
16,172
16,175
16,394
16,229
0.06
0.25
0.18
0.79
1.30
16,725
16,885
16,852
17,001
16,805
$
$
$
The first quarter of 2015 performance was favorably impacted by recoveries from loan losses primarily
from the charged off residential loan portfolio and secondarily from charged off commercial loans as well as
impairment recoveries associated with foreclosures. Other costs and expenses were unfavorably impacted by
higher professional fees and an increase in selling, general and administrative expenses. The increased
professional fees resulted primarily from the SEC civil action and the BFC tender offer. The higher selling,
general and administrative expenses reflected increased compensation and consulting fees at acquired
companies.
The second quarter of 2015 net income was favorably impacted by a $15.5 million gain on the sale of
two properties located in West Palm Beach, Florida and recoveries from loan losses associated with commercial
loans and the charged off loan portfolio. Woodbridge equity earnings were unfavorably impacted by a $36.5
million litigation settlement with Bluegreen’s former shareholders related to Woodbridge’s April 2013
acquisition of the publicly held shares of Bluegreen. The Woodbridge litigation settlement reduced BBX
Capital’s equity in earnings of Woodbridge by $16.8 million.
The third quarter of 2015 net income was favorably impacted by $10.3 million of Woodbridge equity
earnings and $4.4 million of recoveries from loan losses partially offset by higher costs and expenses. The
Woodbridge equity earnings resulted from higher net income at Bluegreen. The recoveries from loan losses
reflects recoveries from commercial loan settlements and from the charged off loan portfolio. Other costs and
expenses were unfavorably impacted by the recognition of an additional $3.6 million of civil penalties and
higher legal costs associated with the SEC civil action.
The fourth quarter of 2015 net income was favorably impacted by $15.9 million of gains on the sale of
real estate and $9.0 million of Woodbridge equity earnings. The gains on the sale of real estate resulted
primarily from a $12.3 gain on a land sale in the master-planned development of Bonterra Communities. The
fourth quarter of 2015 cost and expense was
F-63
BBX CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
unfavorably impacted by a substantial increase in BBX Sweet Holdings cost of goods sold associated with
seasonal trade sales.
2014
Revenues
Recoveries from (provision for) loan
losses
Asset (impairments) recoveries, net
Other costs and expenses
Total costs and expenses
Equity in earnings of Woodbridge
Holdings, LLC
Equity in losses of unconsolidated real
estate
joint ventures
Foreign exchange (loss) gain
Income (loss) before income taxes
Net income (loss)
Net income (loss) attributable to
BBX Capital Corporation
Basic (loss) earnings per share
Basic weighted average number of
common
shares outstanding
Diluted (loss) earnings per share
Diluted weighted average number of
common
shares outstanding
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
$
20,816
22,650
21,906
27,273
92,645
1,248
(1,319)
(25,363)
(25,434)
2,046
94
(25,850)
(23,710)
(656)
(5,926)
(24,399)
(30,981)
4,517
136
(39,978)
(35,325)
7,155
(7,015)
(115,590)
(115,450)
6,222
8,108
7,635
3,317
25,282
(6)
(307)
1,291
1,291
(26)
141
7,163
7,157
(205)
(319)
(1,964)
(1,964)
(322)
(230)
(5,287)
(2,180)
(559)
(715)
1,203
4,304
1,358
7,291
(1,898)
(2,056)
4,695
0.08
0.46
(0.12)
(0.13)
0.29
15,986
16,006
16,007
16,172
16,043
0.08
0.43
(0.12)
(0.13)
0.28
16,699
16,791
16,007
16,172
16,678
$
$
$
The first quarter of 2014 performance was favorably impacted by $6.2 million of Woodbridge equity
earnings and $0.9 million of insurance reimbursements of expenses associated with the SEC civil action against
BBX Capital and its Chairman discussed in Note 17 – Commitments and Contingencies.
The second quarter of 2014 net income was favorably impacted by $2.0 million recover ies from loan
losses, a gain on the sale of real estate for $2.5 million and $8.1 million of Woodbridge equity earnings. The
recoveries for loan losses primarily resulted from payoffs of non-accrual loans.
The third quarter of 2014 net loss was significantly impacted by $5.9 million of asset impairments
primarily relating to two real estate properties partially offset by a $1.2 million bargain purchase gain arising
from the Helen Grace acquisition.
The fourth quarter of 2014 net income was favorably impacted by a $3.1 million benefit for income
taxes from the reduction in BBX Capital’s deferred tax valuation allowance in connection with deferred tax
liabilities recognized in the 2014 acquisitions. Included in the $3.1 million benefit for income taxes was $0.6
million and $0.8 million of benefits associated with the Williams and Bennett and Helen Grace acquisitions
which should have been corrected during the first quarter and third quarter of 2014, respectively. The benefit
for income taxes was partially offset by $4.3 million of legal fees and accruals associated primarily with the
SEC civil trial which commenced in November 2014, lower equity earnings from Woodbridge and higher BBX
Sweet Holdings cost of goods sold and compensation associated with seasonal revenues and the 2014
acquisitions. The recoveries from loan losses and asset impairments resulted primarily from charged off loan
recoveries and updated valuations.
F-64
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
BBX Capital has established disclosure controls and procedures (as defined in Rule 13a-15(e) of the
Securities Exchange Act of 1934 (the “Exchange Act”)) to make known material information concerning the
Company, including its subsidiaries, to those officers who certify BBX Capital’s financial reports and to other
members of our senior management. As of December 31, 2015, BBX Capital’s management carried out an
evaluation, with the participation of the principal executive officer and principal financial officer, of the
effectiveness of their disclosure controls and procedures. Based on that evaluation, BBX Capital’s principal
executive officer and principal financial officer concluded that, as of December 31, 2015, their disclosure
controls and procedures were effective to ensure that information required to be disclosed by BBX Capital in
the reports that it files or submits under the Exchange Act was recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms and was accumulated and communicated to BBX
Capital’s management, including BBX Capital’s principal executive officer and principal financial officer, as
appropriate to allow timely decisions regarding required disclosure.
BBX Capital’s management, including the principal executive officer and principal financial officer,
does not expect that their disclosure controls and procedures and internal control over financial reporting will
prevent all errors and all improper conduct. A control system, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the
design of a control system must reflect the fact that there are resource constraints, and the benefits of controls
must be considered relative to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues and instances of improper conduct,
if any, have been detected. These inherent limitations include the realities that judgments in decision-making
can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be
circumvented by the individual acts of some persons, by collusion of two or more people, or by management
override of the control. Further, the design of any control system is based in part upon assumptions about the
likelihood of future events, and there can be no assurance that any such design will succeed in achieving its
stated goals under all potential future conditions.
Management’s Report on Internal Control Over Financial Reporting
Management’s Report on Internal Control Over Financial Reporting is included in Item 8 immediately
preceding Report of Independent Registered Certified Public Accounting Firm, which includes an attestation
report of BBX Capital’s independent registered certified public accounting firm regarding BBX Capital’s
internal control over financial reporting.
Scope of Management’s Report on Internal Control Over Financial Reporting
Management has excluded Kencraft Confections, LLC from its assessment of internal control over
financial reporting as of December 31, 2015. We acquired this business during the second quarter of 2015 and
our management has not conducted an assessment of the acquired business’ internal control over financial
reporting. Total revenues and total assets of Kencraft Confections, LLC represent 5% and 2%, respectively, of
the related consolidated financial statement amounts as of and for the year ended December 31, 2015.
Changes in Internal Control Over Financial Reporting
There was no change in BBX Capital’s internal control over financial reporting that occurred during
the quarter ended December 31, 2015 that has materially affected, or is reasonably likely to materially affect,
BBX Capital’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None
PART III
The information required by Items 10 through 14 will be provided by incorporating the information
required under such items by reference to BBX Capital’s definitive proxy statement to be filed with the
Securities and Exchange Commission no later than 120 days after the end of the year covered by this Form 10-
K or, alternatively, by amendment to this Form 10-K under cover of 10-K/A no later than the end of such 120
day period.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
PART IV
(a)
Documents Filed as Part of this Report:
(1) Financial Statements
The following consolidated financial statements of BBX Capital Corporation. and its subsidiaries are
included herein under Part II, Item 8 of this Form 10-K.
Reports of Independent Registered Public Accounting Firms.
Consolidated Statements of Financial Condition as of December 31, 2015 and 2014.
Consolidated Statements of Operations and Comprehensive Income for each of the years in the three
year period ended December 31, 2015.
Consolidated Statements of Changes in Equity for each of the years in the three year period ended
December 31, 2015.
Consolidated Statements of Cash Flows for each of the years in the three year period ended December
31, 2015.
Notes to Consolidated Financial Statements.
(2) Financial Statement Schedules
Schedule III – Real estate and accumulated depreciation
Schedule IV – Mortgage loans on real estate
All schedules not listed above are omitted as the required information is either not applicable or
presented in the financial statements or related notes.
(3) Exhibits
The following exhibits are either filed as a part of this Form 10-K or are incorporated herein by reference to
documents previously filed as indicated below:
Exhibit
Number
2.1
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
4.1
4.2
Description
Purchase Agreement, dated April 2, 2013
by and among Woodbridge Holdings,
LLC, BBX Capital Corporation and BFC
Financial Corporation
Restated Articles of Incorporation
Articles of Amendment to the Restated
Articles
of Incorporation, effective May 20, 2008
Reference
Exhibit 2.1 to the Registrant’s Current
Report on Form 8-K, filed on April 5,
2013.
Exhibit 3.1 to the Registrant’s Quarterly
Report on
Form 10-Q for the quarter ended June 30,
2001, filed on August 14, 2001.
Appendix A to the Registrant’s Definitive
Proxy
Statement on Schedule 14A, filed on May
5, 2008.
Articles of Amendment to the Restated
Articles of Incorporation, effective
September 24, 2008
Appendix A to the Registrant’s Definitive
Information Statement on Schedule 14C,
filed on September 4, 2008.
Articles of Amendment to the Restated
Articles of Incorporation, effective
September 26, 2008
Articles of Amendment to the Restated
Articles of Incorporation, effective May 19,
2009
Articles of Amendment to the Restated
Articles of Incorporation of BankAtlantic
Bancorp, Inc.
Articles of Amendment to the Restated
Articles of Incorporation, effective July
31, 2012
Exhibit 3.4 to the Registrant’s Current
Report on Form 8-K, filed on September
26, 2008.
Appendix A to the Registrant’s Definitive
Proxy
Statement on Schedule 14A, filed on
April 29,
2009.
Exhibit 3.1 to the Registrant’s Current
Report on Form 8-K, filed on October 11,
2011.
Appendix D to the Registrant’s Definitive
Information Statement on Schedule 14C,
filed on April 12, 2012
Articles of Amendment to the Restated
Articles of Incorporation, effective
February 7, 2013
Exhibit 3.1 to the Registrant’s Current
Report on Form 8-K, filed on February 7,
2013.
Amended and Restated Bylaws of BBX
Capital Corporation
Exhibit 3.1 to the Registrant’s Current
Report on Form 8-K, filed on February
12, 2015.
Rights Agreement, dated February 7,
2013, between BBX Capital Corporation
and American Stock Transfer & Trust
Company, LLC
Amendment No. 1 to Rights Agreement,
dated as of May 7, 2013, between the
Company and American Stock Transfer
& Trust Company, LLC
Exhibit 3.1 to the Registrant’s Current
Report on Form 8-K, filed on February 7,
2013.
Exhibit 4.1 to the Registrant’s Current
Report on Form 8-K, filed on May 13,
2013.
4.3
10.2
10.21
10.30
10.31
Amendment No. 2 to Rights Agreement,
dated as of April 2, 2015, between the
Company and American Stock Transfer
& Trust Company, LLC
2005 Restricted Stock and Option Plan
First Amendment to the BankAtlantic
Bancorp, Inc. 2005 Restricted Stock and
Option Plan
Exhibit 4.1 to the Registrant’s Current
Report on Form 8-K, filed on April 2,
2015.
Appendix B to the Registrant’s Proxy
Statement on Schedule 14A, filed on
April 29, 2009
Form 10-K for the year ended December
31, 2014 filed on March 16, 2015.
BBX Capital Corporation 2014 Stock
Incentive Plan *
Appendix A to the Registrant’s Definitive
Proxy Statement filed on April 30, 2014.
First Amendment to the BankAtlantic
Bancorp, Inc. 2014 Restricted Stock and
Option Plan
Form 10-K for the year ended December
31, 2014 filed on March 16, 2015.
10.46
Non-employee Director Compensation
Plan for 2005
Exhibit 10.1 to the Registrant’s Form 8-K
Filed on May 23, 2005.
10.55
Employment agreement of Alan B. Levan
10.56
Employment agreement of John E. Abdo
10.57
10.58
10.59
10.60
10.61
10.62
10.63
10.64
Employment agreement of Jarett S.
Levan
Employment agreement of Seth M. Wise
Employment agreement of Raymond S.
Lopez
Stock Purchase Agreement Dated as of
November 1, 2011 Between BB&T
Corporation and BankAtlantic Bancorp,
Inc.
Amendment to the BB&T Stock Purchase
Agreement
Amended and Restated Limited Liability
Agreement of Florida Asset Resolution
Group, LLC
Omnibus Asset Servicing Agreement
with Bayview Loan Servicing Inc.
Promissory Note dated April 2, 2013
Form 10-Q for the quarter ended
September 30, 2012 filed on November
15, 2012.
Form 10-Q for the quarter ended
September 30, 2012 filed on November
15, 2012.
Form 10-Q for the quarter ended
September 30, 2012 filed on November
15, 2012.
Form 10-Q for the quarter ended
September 30, 2012 filed on November
15, 2012.
Exhibit 10.1 to the Registrant’s F orm 10-
Q for the quarter ended March 31, 2015
filed on May 8, 2015.
Exhibit 10.1 to the Registrant’s current
report on Form 8-K dated November 1,
2012 filed on November 7, 2011.
Exhibit 2.2 to the Registrant’s current
report on Form 8-K dated March 13, 2012
and filed on March 16, 2012.
Exhibit A to the Registrant’s Definitive
Information Statement on Schedule 14C,
filed on April 12, 2012
Form 10-K for the year ended December
31, 2012 filed on April 1, 2013.
issued by BBX Capital Corporation in
favor of Woodbridge Holdings, LLC
Exhibit 10.1 to the Registrant’s Current
Report on Form 8-K, filed on April 5,
2013.
10.65
10.66
Amended and Restated Operating
Agreement of Woodbridge Holdings, LLC
Agreement to Allocate Consolidated
Income Tax Liabilities and Benefits
21.1
Subsidiaries of the Registrant
Exhibit 10.1 to the Registrant’s Current
Report on Form 8-K, filed on April 5,
2013.
Exhibit 10.2 to the Registrant’s F orm 10-
Q for the quarter ended March 31, 2015
filed on May 8, 2015.
Filed with this Report
23.1
23.2
23.3
23.4
31.1
31.2
32.1
32.2
99.1
Consent of Grant Thornton LLP
Filed with this Report
Consent of PricewaterhouseCoopers LLP
Filed with this Report
Consent of Grant Thornton LLP –
Woodbridge Holdings, LLC
Filed with this Report
Consent of PricewaterhouseCoopers LLP
– Woodbridge Holdings, LLC
Filed with this Report
Certification of the Chief Executive
Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Certification of the Chief Financial
Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Certification of the Chief Executive
Officer pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
Certification of the Chief Financial
Officer pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
Filed with this Report
Filed with this Report
Furnished with this Report
Furnished with this Report
Audited Consolidated Financial
Statements of Woodbridge Holding, LLC
Filed with this Report
101
Interactive data files
*Compensatory Plan
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has
duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
BBX Capital Corporation
March 15, 2016
By:
/s/Jarett S. Levan
Jarett S. Levan, Acting Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
/s/ Jarett S. Levan
Jarett S. Levan
/s/John E Abdo
John E. Abdo
/s/Raymond S. Lopez
Raymond S. Lopez
/s/David M. Friedman
David M. Friedman
/s/Seth M. Wise
Seth M. Wise
/s/Steven M. Coldren
Steven M. Coldren
/s/Charlie C. Winningham, II
Charlie C. Winningham, II
/s/Norman H. Becker
Norman H. Becker
/s/Willis N. Holcombe
Willis N. Holcombe
/s/Tony P. Segreto
Tony P. Segreto
Title
Acting Chairman of the Board, President and Chief
Executive Officer
Date
March 15, 2016
Vice Chairman of the Board
March 15, 2016
Executive Vice President and Chief Financial Officer
March 15, 2016
Managing Director, Chief Accounting Officer
March 15, 2016
Executive Vice President
Director
Director
Director
Director
Director
March 15, 2016
March 15, 2016
March 15, 2016
March 15, 2016
March 15, 2016
March 15, 2016
Schedule III – Real Estate Investments and Accumulated Depreciation
BBX Capital Corporation
As of December 31, 201 5
(Dollars in thousands)
Initial Costs
Building and
Capitalized
Costs
Subsequent
to
Property
Land
Improvements Acquisition Other
Depreciable
Year of
Foreclosure
Lives
Total Accumulated
Cost
(1)
Depreciation Construction Month/Year
(Years)
RoboVault
$
1,590
6,310
-
- 7,900
840
2009
4/2013
40
(1) The aggregate cost for federal income tax purposes is $6.4 million.
The following table presents the changes in the Company’s real estate investments for the year ended
December 31, 2015 (in thousands):
(in thousands)
Balance at December 31, 2014
Depreciation
Transfer to held-for-sale
Balance at December 31, 2015
Total
Costs
22,440
-
(14,540)
7,900
Accumulated
Depreciation
630
652
(442)
840
$
$
Schedule IV – Mortgage Loans on Real Estate
BBX Capital Corporation
As of December 31, 201 5
(Dollars in thousands)
Principal
Amount of
Loans
Subject
to
Delinquent
Final
Periodic
Face Carrying
Interest Maturity Payment Prior
Amount
of
Amount of Principal
Description
Rate
(1)
Date (2) Terms
Liens Loans Loans (3) or Interest
Number
of
Loans
101 First-lien 1-4 Family (4)
5.71% 12/17/2033 Monthly $
- 34,432
21,354
27,450
Second lien -Consumer held-for-
investment
45
3.21% 2/18/2017 Monthly
8,107
4,686
2,368
910
18 Small Business Real Estate
7.05% 7/14/2023 Monthly
Commercial Real Estate held-for-
investment
1
Large Balance Commercial Real
Estate Loans
1 Retail
1 Marina
1 Apartment building
1 Residential
1 Land
Total Mortgage Loans
5.00% 5/31/2016 Monthly
7.00% 6/20/2018 Monthly
2.08% 1/1/2018 Monthly
5.00% 6/1/2017 Monthly
5.75% 5/1/2016 Monthly
4.00% 12/31/2016 Maturity
-
-
-
-
-
753
-
4,373
3,529
879
879
2,074
4,500
8,048
3,702
3,985
2,074
2,206
3,448
3,702
3,985
-
-
-
-
-
-
-
$ 8,860 66,679
43,545
28,360
(1) Represents weighted average interest rates for mortgage loans grouped by category where there is more than one loan in the
category.
(2) Represents weighted average maturity dates for mortgage loans grouped by category where there is more than one loan in a
category.
(3) The aggregate cost for federal income tax purposes was $48.5 million.
(4) The Company does not own the servicing on these loans.
The following table presents the changes in the Company’s mortgage loans for the year ended December 31, 201 5 (in
thousands):
Balance at December 31, 2014
Advances on existing mortgages
Collections of principal
Foreclosures
Costs of mortgages sold
Balance at December 31, 2015
$
$
61,230
-
(14,470)
(3,215)
-
43,545
Date of
State or Other Jurisdiction of
Exhibit 21.1
Subsidiary Name
Incorporation
Incorporation or Organization
Subsidiaries of BBX Capital Corporation
BBX Partners, Inc.
BBX Capital Asset Management, LLC
Florida Asset Resolution Group, LLC
BBX Capital Partners, LLC
BBX Sweet Holdings, LLC
Renin Holdings LLC
Subsidiaries of Renin Holdings LLC
Renin US LLC
Renin Canada Corp
Subsidiaries of Renin Canada Corp
3/26/1998
2/20/2012
4/13/2012
8/12/2013
10/2/2013
10/21/2013
Florida
Florida
Delaware
Florida
Florida
Delaware
10/21/2013
10/21/2013
Delaware
British Columbia, CA
Renin UK Corp
10/21/2013
United Kingdom
Subsidiaries of BBX Sweet Holdings, LLC
The Hoffman Commercial Group, Inc.
Good Fortunes East, LLC
Boca Bons East, LLC
B&B Bons, LLC
Brea Enterprises, LLC
S&F Good Fortunes, LLC
Hoffchoc, LLC
Hoffmans Chocolate, LLC
Fantasy Chocolates, Inc.
Chocolate Acquisition Sub, LLC
Sweet Acquisitions CA1, LLC
Sweet Acquisitions CA2, LLC
Sweet Acquisitions CA3, LLC
Sweet Acquisitions CA4, LLC dba Droga
Chocolates
Sweet Acquisitons UT1 dba Kencraft Candy
Sweet Acquisitons UT2
Anastasia Confections, Inc.
Subsidiaries of BBX Partners, Inc.
Heartwood Partners 1, LLC
Heartwood Partners 2, LLC
Heartwood Partners 3, LLC
Heartwood Partners 4, LLC
5/10/1993
9/15/2009
2/23/2010
2/23/2010
4/10/2007
9/9/2009
10/10/2005
2/23/2012
7/24/1994
5/2/2014
6/1/2014
6/1/2014
9/1/2014
3/6/2015
2/24/2015
2/24/2015
6/27/1984
3/13/2009
6/2/2009
10/2/2009
10/2/2009
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
California
California
California
California
Utah
Utah
Florida
Florida
Florida
Florida
Florida
Date of
State or Other Jurisdiction of
Exhibit 21.1
Subsidiary Name
Incorporation
Incorporation or Organization
Heartwood Partners 2, LLC
JRG/BBX Development, LLC
10/25/2013
Florida
Subsidiaries of BBX Capital Asset Management,
LLC
BBX Austin, LLC
BBX Hialeah Apartments, LLC'
Hialeah Multifamily, LLC
BBX Residential Victoria Park, LLC
Premier Flagler, LLC
Banc Servicing Center, LLC
Fidelity Service, LLC
Fidelity Tax, LLC
Heartwood 3, LLC
Heartwood 4, LLC
Heartwood 7, LLC
Heartwood 11, LLC
Heartwood 14, LLC
Heartwood 18, LLC
Heartwood 19, LLC
Heartwood 21, LLC
Heartwood 23, LLC
Heartwood 24, LLC
Heartwood 40, LLC
Heartwood 41, LLC
Heartwood 42, LLC
Heartwood 44, LLC
Heartwood 47, LLC
Heartwood 50, LLC
Heartwood 88, LLC
Heartwood 90, LLC
Heartwood 91, LLC
Heartwood 91-2, LLC
Heartwood 91-3, LLC
Heartwood 91-4, LLC
Heartwood 92, LLC.
Bonterra Single-family Holdings, LLC
BBX Bonterra Multifamily Holdings, LLC
BBX Gardens Multifamily, LLC
BBX Miramar, LLC
BBX Centra, LLC
12/15/2014
5/2/2014
2/18/2014
12/23/2013
6/5/2012
9/1/1995
10/1/1970
3/7/2000
2/5/1991
2/5/1991
5/23/1991
5/23/1991
5/23/1991
6/2/1992
6/2/1992
2/8/1991
7/23/2009
10/9/2009
4/28/2010
4/28/2010
4/28/2010
4/28/2010
4/28/2010
4/28/2010
5/9/1988
11/13/1990
1/8/1991
7/8/1987
12/4/1985
1/10/1986
5/26/2010
6/26/2014
6/26/2014
1/15/2015
4/24/2015
4/22/2015
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Date of
State or Other Jurisdiction of
Exhibit 21.1
Subsidiary Name
Incorporation
Incorporation or Organization
Subsidiaries of Bonterra Single-family Holdings,
LLC
Bonterra Single-family Management, LLC
6/26/2014
Florida
Subsidiaries of Bonterra Single-family
Management, LLC
Bonterra Single-family Real Estate, LLC
Bonterra Single-family TIC, LLC
Subsidiaries of Florida Asset Resolution Group,
LLC
FAR Holdings Group, LLC
Heartwood 58, LLC
Subsidiaries of FAR Holdings Group, LLC
Heartwood 2, LLC
Heartwood 43, LLC
Heartwood 55, LLC
FAR 1, LLC
FAR 2, LLC
FAR 3, LLC
FAR 4, LLC
FAR 5, LLC
FAR 6, LLC
Subsidiaries of Heartwood 58, LLC
FT Properties, LLC
Sunrise Atlantic, LLC
Heartwood 45, LLC
Heartwood 56, LLC
Heartwood 57, LLC
6/26/2014
6/26/2014
10/4/2013
5/26/2010
2/5/1991
4/28/2010
4/28/2010
10/18/2012
2/14/2013
2/14/2013
2/14/2013
4/9/2013
7/18/2013
2/5/1991
1/26/1990
4/28/2010
4/28/2010
5/26/2010
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Subsidiary of Heartwood 7, LLC
Steeplechase Estates Community Association, Inc.
7/19/2005
Florida
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 23.1
We have issued our reports dated March 15, 2016 with respect to internal control over
financial repor(cid:29)ng, the consolidated financial statements as of and for the year ended
December 31, 2015, and related schedules, included in the Annual Report of BBX Capital
Corpora(cid:29)on on Form 10-K for the year ended December 31, 2015. We hereby consent to the
incorpora(cid:29)on by reference of said reports in the Registra(cid:29)on Statements of BBX Capital
Corpora(cid:29)on on Forms S-8 (File No. 333-127501, File No. 333-159808 and File No. 333-197357).
/s/Grant Thornton LLP
Fort Lauderdale, Florida
March 15, 2016
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Exhibit 23.2
We have issued our report dated March 15, 2016, with respect to the consolidated financial
statements of Woodbridge Holdings, LLC as of and for the year ended December 31, 2015,
included as Exhibit 99.1 in the Annual Report of BBX Capital Corpora(cid:29)on on Form 10-K for the
year ended December 31, 2015. We hereby consent to the incorpora(cid:29)on by reference of said
report in the Registra(cid:29)on Statements of BBX Capital Corpora(cid:29)on on Forms S-8 (File No. 333-
127501, File No. 333-159808 and File No. 333-197357).
/s/Grant Thornton LLP
Fort Lauderdale, Florida
March 15, 2016
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statement s on Form S-8 (No.
333-197357; 333-127501; 333-159808), of BBX Capital Corporation of our report dated March 16,
2015, relating to the financial statements, which appears in this Form 10-K.
/s/PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
March 15, 2016
Exhibit 23.4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8
(No. 333-197357; 333-127501; 333-159808) of BBX Capital Corporation of our report dated March 16,
2015 relating to the financial statements of Woodbridge Holdings, LLC, which appears in this Form
10‑K as Exhibit 99.1.
/s/PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
March 15, 2016
BBX Capital Corporation
I, Jarett S. Levan, certify that:
Exhibit 31.1
1.
I have reviewed this annual report on Form 10-K of BBX Capital Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
a.
b.
c.
d.
designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant's disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent functions):
a.
b.
all significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the
registrant’s ability to record, process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
Date: March 15, 2016
By:/s/Jarett S. Levan
Jarett S. Levan,
Acting Chief Executive Officer
21
BBX Capital Corporation
I, Raymond S. Lopez, certify that:
Exhibit 31.2
1.
I have reviewed this annual report on Form 10-K of BBX Capital Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
a.
b.
c.
d.
designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant's disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent functions):
a.
b.
all significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the
registrant’s ability to record, process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
Date: March 15, 2016
By:/s/Raymond S. Lopez
Raymond S. Lopez,
Chief Financial Officer
21
BBX Capital Corporation
Exhibit 32.1
Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with
the Annual Report on Form 10- K of BBX Capital
Corporation (the “Company”) for the year ended December 31, 2015 as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Jarett S.
Levan, Acting Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.
§1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1) the Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
2) the information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
/s/Jarett S. Levan
Jarett S. Levan
By:
Name:
Title: Acting Chief Executive Officer
Date: March 15, 2016
BBX Capital Corporation
Exhibit 32.2
Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with
the Annual Report on Form 10-K of BBX Capital
Corporation (the “Company”) for the year ended December 31, 2015 as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Raymond S.
Lopez, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1) the Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
2) the information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
/s/Raymond S. Lopez
By:
Name: Raymond S. Lopez
Title: Chief Financial Officer
Date: March 15, 2016
21
WOODBRIDGE HOLDINGS, LLC
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants – Grant Thornton LLP…….…………………………...
Report of Independent Certified Public Accountants – PricewaterhouseCoopers LLP……………………...
1
3
Financial Statements:
Consolidated Statements of Financial Condition as of December 31, 2015 and 2014 …………………
4
Consolidated Statements of Operations for the years ended December 31, 2015 and 2014,
and from April 2, 2013 through December 31, 2013 ………………………….
5
Consolidated Statements of Changes in Equity for the years ended December 31, 2015 and 2014,
and from April 2, 2013 through December 31, 2013 ………………………….6
Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014
and from April 2, 2013 through December 31, 2013 …………………………
Notes to Consolidated Financial Statements ……………………………………………………………
7
8-34
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Managers
Woodbridge Holdings, LLC
We have audited the accompanying consolidated financial statements of Woodbridge Holdings, LLC (a Florida corporation)
and subsidiaries, which comprise the consolidated balance sheet as of December 31, 2015, and the related consolidated
statements of income and comprehensive income, changes in equity, and cash flows for the year then ended, and the related
notes to the financial statements.
Management’s responsibility for the financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance
with accounting principles generally accepted in the United States of America; this includes the design, implementation, and
maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are
free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our
audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of
material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments,
the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial
statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Woodbridge Holdings, LLC and subsidiaries as of December 31, 2015, and the results of their operations and their
cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of
America.
/s/Grant Thornton LLP
Fort Lauderdale, Florida
March 15, 2016
1
Report of Independent Certified Public Accountants
To the Board of Managers of Woodbridge Holdings, LLC
We have audited the accompanying consolidated financial statements of Woodbridge Holdings, LLC and its subsidiaries,
which comprise the consolidated statement of financial position as of December 31, 2014, and the related results of their
operations and their cash flows for the year then ended, and the nine month period ended December 31, 2013.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance
with accounting principles generally accepted in the United States of America; this includes the design, implementation, and
maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are
free from material misstatement, whether due to fraud or error.
Certified Public Accountants’ Responsibility
Our responsibility is to express an opinion on the consolidated financial statements based on our audit. We conducted our
audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we
consider internal control relevant to the Company's preparation and fair presentation of the consolidated financial statements in
order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Woodbridge Holdings, LLC and its subsidiaries at December 31, 2014, and the related results of their operations
and their cash flows for the year then ended, and the nine month period ended December 31, 2013, in accordance with
accounting principles generally accepted in the United States of America.
/s/PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
March 16, 2015
2
Woodbridge Holdings, LLC
Consolidated Statements of Financial Condition
(In thousands)
ASSETS
Cash and cash equivalents
Restricted cash ($25,358 in 2015 and $31,554 in 2014
held by
variable interest entities ("VIEs")
Notes receivable, including net securitized notes of
$280,841 in
2015 and $293,950 held by VIEs in 2014, net of
allowance
of $110,714 in 2015 and $102,566 in 2014
Loans to related parties
Inventory
Prepaid expenses and other assets
Properties and equipment, net
Intangible assets, net
Total assets
LIABILITIES AND EQUITY
Liabilities:
Accounts payable
Accrued expenses and other liabilities
Deferred revenue
Deferred income taxes
Notes and mortgage notes payable and other borrowings
Receivable-backed notes payable - recourse
Receivable-backed notes payable - non-recourse (held by
VIEs)
Junior subordinated debentures
Total liabilities
Commitments and contingencies (See Note 9)
Paid-in capital
Accumulated deficit
Total Woodbridge Holdings, LLC ("Woodbridge")
members' equity
Noncontrolling interests
Total equity
Total liabilities and equity
As of December 31,
2015
2014
116,044
185,807
56,714
54,620
415,598
80,000
220,211
70,496
71,937
61,977
1,092,977
14,848
69,778
28,847
110,202
101,584
89,888
318,929
152,307
886,383
374,561
(211,164)
163,397
43,197
206,594
1,092,977
424,267
11,750
194,713
53,158
72,319
63,913
1,060,547
10,059
79,147
25,057
92,609
90,061
92,129
320,275
150,038
859,375
349,811
(191,891)
157,920
43,252
201,172
1,060,547
$
$
$
$
See Notes to Consolidated Financial Statements.
3
Woodbridge Holdings, LLC
Consolidated Statements of Income and Comprehensive Income
(In thousands)
Revenues
Sales of VOIs
Fee-based sales commission
Other fee-based services revenue
Interest income
Other income
Total revenues
Costs and Expenses
Cost of VOIs sold
Cost of other resort fee-based
operations
Interest expense
Litigation settlement
Selling, general and administrative
expenses
Total costs and expenses
Income before income taxes
Less: Provision for income taxes
Net income
Less: Net income attributable to
noncontrolling interests
Net income attributable to Woodbridge
Comprehensive income attributable to
Woodbridge members
For the Years Ended December 31,
2014
2015
259,236
173,659
97,539
84,331
3,410
618,175
262,334
144,239
92,089
81,666
4,088
584,416
From April 2, 2013
through December 31,
2013
204,155
72,994
60,840
61,719
-
399,708
22,884
30,766
26,046
60,942
39,311
36,500
373,623
533,260
84,915
40,658
44,257
11,705
32,552
56,941
44,909
-
344,891
477,507
106,909
40,537
66,372
11,411
54,961
40,032
33,749
-
242,429
342,256
57,452
18,214
39,238
9,974
29,264
32,552
54,961
29,264
$
$
$
See Notes to Consolidated Financial Statements.
4
Woodbridge Holdings, LLC
Consolidated Statements of Changes in Equity
From April 2, 2013 through December 31, 2013 and the Years Ended December 31, 2014 and 2015
(In thousands)
Balance, April 2, 2013
Net income
Distributions paid to
subsidiairies'
noncontrolling interest
Distributions paid to
members
Balance, December
31, 2013
Net income
Subsidiary's excess tax
benefit from
stock based compensation
Distributions paid to
subsidiairies'
noncontrolling interest
Distributions paid to
members
Balance, December
31, 2014
Net income
Distributions paid to
subsidiairies'
noncontrolling interest
Distributions paid to
members, net of
contributions received
Balance, December
31, 2015
$
$
$
$
Paid-in
Capital
347,731
-
Accumulated
Deficit
(162,712)
29,264
Total
Woodbridge
Equity
185,019
29,264
Non-
controlling
Interest in
Subsidiaries
36,322
9,974
Total
Equity
221,341
39,238
(44,302)
(44,302)
-
(44,302)
(8,575)
(8,575)
347,731
-
(177,750)
54,961
169,981
54,961
37,721
11,411
207,702
66,372
2,080
2,080
2,080
(69,102)
(69,102)
-
(69,102)
(5,880)
(5,880)
349,811
-
(191,891)
32,552
157,920
32,552
43,252
11,705
201,172
44,257
(11,760)
(11,760)
24,750
(51,825)
(27,075)
(27,075)
374,561
163,397
(211,164)
See Notes to Consolidated Financial Statements.
43,197
206,594
5
Woodbridge Holdings, LLC
Consolidated Statements of Cash Flows
(In thousands)
Operating activities:
Net income
Adjustment to reconcile net loss to net cash
provided by
operating activities:
Provision for notes receivable allowances
Depreciation, amortization and accretion, net
Net activities from the disposal of assets
Provision for deferred income taxes
Changes in operating assets and liabilities:
Inventory
Notes receivable
Restricted cash
Other assets
Accounts payable, accrued expenses and other
liabilities, and
deferred income
Net cash provided by operating activities
Investing activities:
Proceeds from sale of property and equipment
Purchases of office property and equipment
(Loans to) proceeds from repayment of loans to
related parties, net
Net cash used in investing activities
Financing activities:
Proceeds from notes, mortgage notes payable and
other borrowings
Repayment of notes, mortgage notes payable and
other borrowings
Distributions paid to members, net of contributions
received
Distributions paid to subsidiaries' noncontrolling
interests
Payments for debt issuance costs
Excess tax benefit from stock-based compensation
Net cash used in financing activities
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental cash flow information
Interest paid on borrowings, net of amounts
capitalized
Income taxes paid, net
For the Year Ended December 31,
2014
2015
From April 2, 2013
through December
31,
2013
$
44,257
66,372
39,238
40,164
7,001
473
15,883
19,137
(9,820)
10,665
(1,386)
(3,427)
145,062
50,199
3,312
1,014
12,009
(4,429)
(26,375)
(6,860)
10,183
14,833
93,124
-
-
(18,049)
9,662
(8,387)
127,596
(162,919)
(69,102)
(5,880)
(1,462)
2,080
(109,687)
26,988
158,819
185,807
39,612
26,077
(10,059)
(9,662)
(19,721)
140,941
(125,628)
(44,302)
(8,575)
(4,115)
-
(41,679)
31,724
127,095
158,819
29,636
6,130
42,063
7,032
(163)
17,593
(15,641)
(34,538)
(2,094)
(14,902)
(1,507)
42,100
251
(9,176)
(68,250)
(77,175)
257,903
(249,972)
(27,075)
(11,760)
(3,784)
-
(34,688)
(69,763)
185,807
116,044
33,688
25,699
$
$
6
Woodbridge Holdings, LLC
Notes to Consolidated Financial Statements
1. Business and Summary of Significant Accounting Policies
Basis of Financial Statement Presentation
Woodbridge Holdings, LLC (“Woodbridge” or, unless otherwise indicated or the context otherwise requires, “we”, “us”, “our”
or the “Company”) is a holding company whose principal holdings include a 100% controlling interest in Bluegreen
Corporation and its subsidiaries (“Bluegreen”). Prior to the purchase agreement as described below, Woodbridge was a
wholly-owned subsidiary of BFC Financial Corporation (“BFC”). Woodbridge’s reports its results through one operating
segment, Bluegreen Vacations.
One of Bluegreen’s wholly-owned subsidiaries has a joint venture arrangement with Big Cedar, LLC (“Big Cedar”), an affiliate
of Bass Pro, Inc. relating to Bluegreen/Big Cedar Vacations. Bluegreen’s subsidiary owns 51% of Bluegreen/Big Cedar
Vacations and Big Cedar owns the remaining 49%. Bluegreen/Big Cedar Vacations develops, markets and sells vacation
ownership interests (“VOIs”) and timeshare interests. The results of operations of Big Cedar are included in our consolidated
financial statements.
Generally accepted accounting principles in the United States of America (“GAAP”) require that Woodbridge consolidate the
financial results of the entities in which it has controlling interest. As a consequence, the assets and liabilities of all such
entities are presented on a consolidated basis in Woodbridge’s financial statements. However, except as otherwise noted, the
debts and obligations of the consolidated entities, including Bluegreen, are not direct obligations of Woodbridge and are non-
recourse to Woodbridge. Similarly, the assets of those entities are not available to Woodbridge absent a dividend or
distribution from those entities. The recognition by Woodbridge of income from controlled entities is determined based on the
total percent of economic ownership in those entities.
On April 2, 2013, Woodbridge acquired all of the shares of Bluegreen’s common stock not previously owned by Woodbridge
in a cash merger transaction (sometimes hereinafter referred to as the “Bluegreen merger”). As a result of the merger,
Bluegreen is a wholly-owned subsidiary of Woodbridge. Woodbridge is currently owned 54% by BFC Financial Corporation
(OTCQB: BFCF; BFCFB) (“BFC”) and 46% by BBX Capital Corporation (NYSE: BBX) (“BBX Capital”).
Summary of Significant Accounting Policies
The accounting policies applied by the Company conform to GAAP.
Consolidation Policy - The consolidated financial statements include the accounts of all the Company’s wholly-owned
subsidiaries including Bluegreen, the Company’s controlled subsidiaries, and other entities in which the Company and its
subsidiaries hold controlling financial interests, and variable interest entities (“VIEs”) if the Company or its consolidated
subsidiary is deemed the primary beneficiary of the VIE. All significant inter-company accounts and transactions have been
eliminated among consolidated entities.
Use of Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. On an ongoing basis, management evaluates its estimates, including those that relate
to the estimated future sales value of inventory; the recognition of revenue, including revenue recognition under the
percentage-of-completion method of accounting; allowance for credit losses; the recovery of the carrying value of real estate
inventories; the fair value of assets measured at, or compared to, fair value on a non-recurring basis such as intangible assets
and other long-lived assets; and the estimate of contingent liabilities related to litigation and other claims and
assessments. Estimates are based on historical experience and on various other assumptions that it believes to be reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under
different
7
assumptions and conditions.
Cash and Cash Equivalents - Cash equivalents consist of cash, demand deposits at financial institutions, money market funds
and other short-term investments with original maturities of three months or less. Cash and cash equivalents are held at various
financial institutions located throughout the United States, Canada and Aruba. However, a significant portion of unrestricted
cash is maintained with a single bank and, accordingly, is subject to credit risk. Periodic evaluations of the relative credit
standing of financial institutions maintaining the Company’s deposits are performed to evaluate and, if necessary, take actions
in an attempt to mitigate credit risk.
Restricted Cash – Restricted cash consists primarily of customer deposits held in escrow accounts and cash collected on
pledged/secured notes receivable not yet remitted to lenders.
Notes Receivable (Bluegreen) - Bluegreen’s notes receivable are carried at amortized cost less an allowance for credit
losses. Interest income is suspended, and previously accrued but unpaid interest income is reversed, on all delinquent notes
receivable when principal or interest payments are more than 90 days contractually past due and not resumed until such loans
are less than three months past due. As of December 31, 2015 and December 31, 2014, $10.4 million and $11.7 million,
respectively, of Bluegreen’s VOI notes receivable were more than 90 days past due, and accordingly, consistent with
Bluegreen’s policy, were not accruing interest income. After 120 days, Bluegreen’s VOI notes receivable are generally written
off against the allowance for credit loss.
Bluegreen records an estimate of expected uncollectible VOI notes receivable as a reduction of revenue at the time Bluegreen
recognizes a VOI sale. Bluegreen estimates uncollectible VOI notes receivable in accordance with timeshare accounting
rules. Under these rules, the estimate of uncollectibles is based on historical uncollectibles for similar VOI notes
receivable. Bluegreen uses a static pool analysis, which tracks uncollectibles for each year’s sales over the entire life of the
notes. Bluegreen also considers whether the historical economic conditions are comparable to current economic conditions, as
well as variations in underwriting standards. Additionally, under timeshare accounting rules, no consideration is given for
future recoveries of defaulted inventory in the estimate of uncollectible VOI notes receivable. Bluegreen reviews its allowance
for credit losses on at least a quarterly basis. Loan origination costs are deferred and recognized over the life of the related
notes receivable.
Acquired Notes Receivable – During November 2009, Woodbridge acquired additional shares of Bluegreen’s common stock
which resulted in Woodbridge having a controlling interest in Bluegreen. In connection with such transaction, Woodbridge
was deemed under applicable accounting guidance to have acquired certain of Bluegreen’s assets, including a pool of notes
receivable consisting principally of homogenous consumer timeshare loans originated by Bluegreen. Consistent with the
accounting guidance, Woodbridge has elected an accounting policy based on expected cash flows, which includes guidance on
maintaining the integrity of a pool of multiple loans accounted for as a single asset. The loans have common risk
characteristics as defined in the accounting guidance, Loans and Debt Securities with Deteriorated Credit Quality, including
similar risk ratings, as defined and monitored by risk rating agencies, term, purpose and similar collateral type (VOIs). The
Company evaluates the pool of loans accounted for as a single asset for indications of impairment. Purchased loans are
considered to be impaired if it is not expected that all contractually required cash flows will be received due to concerns about
credit quality. The excess of the cash flows expected to be collected measured as of the acquisition date, over the estimated
fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan using a
level yield methodology. The difference between contractually required payments as of the acquisition date and the cash flows
expected to be collected is referred to as the nonaccretable difference. Subsequent decreases to expected cash flows result in a
charge to provision for credit losses and a corresponding increase to a valuation allowance included in the allowance for loan
losses. Subsequent increases in expected cash flows result in a recovery of any previously recorded allowance for loan losses,
to the extent applicable, and a reclassification from nonaccretable difference to accretable yield for any remaining
increase. Loan disposals, which may include receipt of payments in full from the borrower or foreclosure, result in the removal
of the loan from the loan pool at its allocated carrying amount.
Inventory (Bluegreen) - Bluegreen’s inventory consists of completed VOIs, VOIs under construction and land held for future
vacation ownership development. Bluegreen carries its completed inventory at the lower of (i) cost, including costs of
improvements and amenities incurred subsequent to acquisition, capitalized interest, real estate taxes and other costs incurred
during construction, or (ii) estimated fair market value, less costs to sell. VOI
8
inventory and cost of sales are accounted for under timeshare accounting rules, which define a specific method of the relative
sales value method for relieving VOI inventory and recording cost of sales. Under the relative sales value method required by
timeshare accounting rules, cost of sales is calculated as a percentage of net sales using a cost-of-sales percentage - the ratio of
total estimated development costs to total estimated VOI revenue, including the estimated incremental revenue from the resale
of VOI inventory repossessed, generally as a result of the default of the related receivable. Also, pursuant to timeshare
accounting rules, Bluegreen does not relieve inventory for VOI cost of sales related to anticipated credit losses. Accordingly,
no adjustment is made when inventory is reacquired upon default of the related receivable.
Bluegreen also periodically evaluates the recoverability of the carrying amount of its undeveloped or under development resort
properties in accordance with ASC 360, Property, Plant and Equipment (“ASC 360”), which provides guidance relating to the
accounting for the impairment or disposal of long-lived assets. No impairment charges were recorded with respect to VOI
inventory during any of the periods presented.
Impairment of Long Lived Assets - Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the full carrying amount of an asset may not be recoverable under the guidelines of ASC 360. In
performing the review for impairment, the Company compares the expected undiscounted future cash flows to the carrying
amount of the asset and records an impairment loss if the carrying amount exceeds the expected future cash flows based on the
estimated discounted cash flows generated by the long-lived assets.
The assumptions developed and used by management to evaluate impairment are subjective and involve significant estimates,
and are subject to increased volatility due to the uncertainty of the market environment.
Long-lived assets to be abandoned are considered held and used until disposed. The carrying value of a long-lived asset to be
abandoned is depreciated over its shortened depreciable life when the Company commits to a plan to abandon the asset before
the end of its previously estimated useful life.
Properties and Equipment - Property and equipment is recorded at acquisition cost. Depreciation and amortization is recorded
in a manner that recognizes the cost of its depreciable assets over their estimated useful lives using the straight-line
method. Leasehold improvements are amortized over the shorter of the terms of the underlying leases or the estimated useful
lives of the improvements. Interest expense associated with the construction of certain fixed assets is capitalized as incurred
and relieved to expense through depreciation once the asset is put into use.
The costs of software developed for internal use are capitalized in accordance with the guidance for accounting for costs of
computer software developed or obtained for internal use. Capitalization of software developed for internal use commences
during the development phase of the project. Software developed or obtained for internal use is generally amortized on a
straight-line basis over 3 to 5 years.
Expenditures for new properties, leasehold improvements and equipment and major renewals and betterments are
capitalized. Expenditures for maintenance and repairs are expensed as incurred, and gains or losses on disposal of assets are
reflected in current operations.
Intangible Assets – Intangible assets consist of property management contracts which are now included in our financial
statements as a result of the previously described acquisition of additional shares of Bluegreen’s common stock during
November 2009 which gave us a controlling interest in Bluegreen. The property management contracts have indefinite useful
lives and are not amortized, but instead are reviewed for impairment on at least an annual basis, or more frequently if events or
changes in circumstances indicate that the related carrying amounts may not be recoverable. During the first quarter of 2015,
the Company reduced the value of its property management contracts by $1.7 million as a result of the sale of one of its
contracts. The company did not record any impairment charges during the year ended December 31, 2014 and from April 2,
2013 through December 31, 2013.
The Company evaluates the recovery of the carrying amount of its long-lived assets under applicable accounting guidance
which requires that intangible assets deemed to have indefinite lives not be amortized, but rather be tested for impairment on at
least an annual basis, or more frequently if events and circumstances indicate that assets may be impaired, and when the
undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. The carrying value of
these assets is dependent upon estimates of future earnings. If cash flows
9
decrease significantly, intangible assets may be impaired in which case they would be written down to their fair value. The
estimates of useful lives and expected cash flows require the Company to make significant judgments regarding future periods
that are subject to numerous factors, many of which may be beyond the Company’s control.
Revenue Recognition (Bluegreen) – Revenue is recorded for the sale of VOIs, net of a provision for credit losses, in
accordance with timeshare accounting guidance. In accordance with the requirements of ASC 978, Real Estate Time-sharing
Activities (“ASC 978”), Bluegreen recognizes revenue on VOI sales and when a minimum of 10% of the sales price has been
received in cash (demonstrating the buyer’s commitment), the legal rescission period has expired, collectibility of the
receivable representing the remainder of the sales price is reasonably assured and Bluegreen has completed substantially all of
its obligations with respect to any development related to the real estate sold.
Bluegreen believes that it uses a reasonably reliable methodology to estimate the collectibility of the receivables representing
the remainder of the sales price of real estate sold. Bluegreen’s policies regarding the estimation of credit losses on its notes
receivable are discussed in further detail under “Notes Receivable” below.
Under timeshare accounting rules, the calculation of the adequacy of a buyer’s commitment for the sale of VOIs requires that
cash received towards the purchase of VOIs be reduced by the value of certain incentives provided to the buyer at the time of
sale. If after considering the value of the incentives provided, the 10% requirement is not met, the VOI sale, and the related
cost and direct selling expenses, are deferred until such time that sufficient cash is received from the customer, generally
through receipt of mortgage payments, to meet the 10% threshold. Changes to the quantity, type, or value of sales incentives
that Bluegreen provides to buyers of its VOIs may result in additional VOI sales being deferred or extend the period during
which a sale is deferred.
In cases where construction and development on Bluegreen-owned resorts has not been substantially completed, Bluegreen
recognizes revenue in accordance with the percentage-of-completion method of accounting. Should Bluegreen’s estimates of
the total anticipated cost of completing any of its projects increase, Bluegreen may be required to defer a greater amount of
revenue or may be required to defer revenue for a longer period of time.
Under timeshare accounting rules, rental operations, including accommodations provided through the use of Bluegreen’s
sampler program, are accounted for as incidental operations whereby incremental carrying costs in excess of incremental
revenues are expensed as incurred. Conversely, incremental revenues in excess of incremental carrying costs are recorded as a
reduction to the carrying cost of VOI inventory. Incremental carrying costs include costs that have been incurred by Bluegreen
during the holding period of unsold VOIs, such as developer subsidies and maintenance fees on unsold VOI inventory. During
each of the years presented, all of Bluegreen’s rental revenue and sampler revenue earned was recorded as an offset to cost of
other fee-based services, as such amounts were less than the incremental carrying cost.
In addition to sales of VOIs, Bluegreen also generates revenue from the activities listed below. The table provides a brief
description of the applicable revenue recognition policy:
Activity
Fee-based sales commissions
Resort management and service fees
Resort title fees
10
Revenue is recognized when:
The sale transaction with the VOI purchaser is consummated in
accordance with the terms of the agreement with the third-party
developer and the related consumer rescission period has
expired.
Management services are rendered
Escrow amounts are
completed.
title documents are
released and
(1)
.
Rental and sampler program
Guests complete stays at the resorts. Rental and sampler
program proceeds are classified as a reduction to “Cost of other
fee-based services” in Bluegreen’s Consolidated Statements of
Income and Comprehensive Income.
(1)
In connection with Bluegreen’s management of POAs, Bluegreen acts as agent for the property owners’ association to operate the
resort as provided under the management agreements. In certain cases, personnel at the resorts are Bluegreen employees. The
POAs bear all of the economic costs of such personnel and generally pays Bluegreen in advance of, or simultaneously with, the
payment of payroll. In accordance with ASC 605-45, Overall Considerations of Reporting Revenues Gross as a Principal versus
Net as an Agent, reimbursements from the POAs relating to direct pass-through costs are recorded net of the related expenses.
Bluegreen’s cost of other fee-based services consists of the costs associated with the various activities described above, as well
as developer subsidies and maintenance fees on Bluegreen’s unsold VOIs.
Deferred Revenue (Bluegreen) - Bluegreen defers VOI revenue, net of direct incremental selling expenses, for sales for which
the legal rescission period has expired, but the required revenue recognition criteria described above has not been
met. Additionally, in connection with its sampler programs, Bluegreen defers revenue, net of direct incremental selling
expenses, for guest stays not yet completed. Bluegreen’s deferred income was as follows (in thousands):
Deferred sampler program income
Deferred VOI sales revenue
Other deferred income
Total
$
$
As of December 31,
2015
2014
10,024
15,095
3,728
28,847
9,497
12,211
3,349
25,057
Deferred Financing Costs - Deferred financing costs included in “prepaids and other assets” on the Company’s consolidated
statements of financial condition are comprised of costs incurred in connection with obtaining financing from third-party
lenders. These costs are capitalized and amortized to interest expense over the terms of the related financing arrangements. As
of December 31, 2015 and 2014, unamortized deferred financing costs totaled $13.7 million and $13.3 million, respectively.
Interest expense from the amortization of deferred financing costs for the years ended December 31, 2015 and 2014 was $3.6
million and $3.4 million, respectively, and $2.4 million for the period April 2, 2013 through December 31, 2013.
Income Taxes – Through April 2, 2013, the Company and most of its wholly owned subsidiaries, operated as a limited liability
company that is owned by a single corporate member. Accordingly, the Company was a single member LLC (“SMLLC”). As
a SMLLC, the Company was disregarded for federal and state income tax purposes and was treated as a division of
BFC. Income taxes attributed to the Company are included in the accompanying consolidated financial statements as if the
Company was filing a separate company tax return. As the Company owned less than 80% of Bluegreen’s outstanding equity,
Bluegreen and its subsidiaries filed income tax returns in the U.S. federal jurisdiction and various states and foreign
jurisdictions as a separate group.
Pursuant to the terms of the Purchase Agreement, as described above, in which BBX Capital acquired a 46% equity interest in
the Company, on April 3, 2013, the Company became a multi-member LLC. By default, as a multi-member LLC the
Company is treated as a partnership for federal and state income tax purposes. As such, its partnership taxable income and
losses are included in the income of its members. Additionally, as the Company owns 100% of Bluegreen’s equity, Bluegreen
was taxed as a corporation and filed income tax returns.
Effective on May 1, 2015, Woodbridge made an election to change is classification from a partnership to a corporation for
income tax purposes. In addition, BFC increased its ownership interest in BBX Capital in connection with the cash tender
offer completed on April 30, 2015 (as discussed in Note 14). As a consequence of these events, BFC will be filing a
consolidated group tax return with BBX Capital, Woodbridge and Bluegreen,
11
which will include the operations Woodbridge and Bluegreen from May 1, 2015 forward. As a result of BFC, BBX,
Bluegreen, Woodbridge and their respective subsidiaries becoming a consolidated group for income tax purposes, Bluegreen
and its subsidiaries filed income tax returns in the U.S. federal jurisdiction for the four month period ended April 30, 2015.
On May 8, 2015, BFC, BBX, Woodbridge and Bluegreen and their respective subsidiaries entered into an Agreement to
Allocate Consolidated Income Tax Liability and Benefits pursuant to which, among other customary terms and conditions, the
parties agreed to file consolidated federal tax returns. The parties will calculate their respective income tax liabilities and
attributes as if each of them were a separate filer. If any tax attributes are used by another party to the agreement to offset its
tax liability, the party providing the benefit will receive an amount for the tax benefits realized. Bluegreen paid BFC or its
affiliated entities $19.2 million during 2015, pursuant to the Agreement to Allocate Consolidated Income Tax Liability and
Benefits.
The provision for income taxes is based on income before taxes reported for financial statement purposes after adjustment for
transactions that do not have tax consequences. Deferred tax assets and liabilities are realized according to the estimated future
tax consequences attributable to differences between the carrying value of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using the enacted tax rates as of the date of the statement of financial
condition. The effect of a change in tax rates on deferred tax assets and liabilities is reflected in the period that includes the
statutory enactment date. A deferred tax asset valuation allowance is recorded when it has been determined that it is more
likely than not that deferred tax assets will not be realized. A subsequent change in circumstances that causes a change in
judgment about the realization of the related deferred tax amount could result in the reversal of all or part of the deferred tax
valuation allowance.
An uncertain tax position is defined as a position taken or expected to be taken in a tax return that is not based on clear and
unambiguous tax law and which is reflected in measuring current or deferred income tax assets and liabilities for interim or
annual periods. The Company may recognize the tax benefit from an uncertain tax position only if it believes that it is more
likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of
the position. The Company measures the tax benefits recognized based on the largest benefit that has a greater than 50%
likelihood of being realized upon ultimate resolution. The Company recognizes interest and penalties related to unrecognized
tax benefits in its provision for income taxes. There were no uncertain tax positions at December 31, 2015 and 2014.
Noncontrolling Interests – Noncontrolling interests reflect third parties’ ownership interests in entities that are consolidated in
Woodbridge’s financial statements, but less than 100% owned by Woodbridge or its subsidiaries. GAAP require that a
noncontrolling interest be recognized as equity in the consolidated financial statements and itemized separately from the
parent’s equity.
Accounting for Loss Contingencies – Loss contingencies, including those arising from legal actions, are recorded as liabilities
when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.
Future Adoption of Accounting Pronouncements
In March 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02 – “Leases (Topic 845) ”. This update
requires an entity to recognize a right-of-use asset and a lease liability for virtually all of their leases. The liability will be equal
to the present value of lease payments. The asset will generally be based on the liability. For income statement purposes
operating leases will result in straight-line expense and finance leases will result in expenses similar to current capital
leases. The guidance also requires additional disclosures to enable users of financial statements to understand the amount,
timing and uncertainty of cash flows arising from leases. The guidance will be effective for fiscal years beginning after
December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is
currently evaluating the requirements of this update and has not yet determined its impact on the Company’s consolidated
financial statements.
In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers
(Topic 606)” (“ASU 2014-09”), which specifies how and when to recognize revenue from contracts with customers. ASU
2014-09 also requires additional disclosures about the nature, amount, timing, and uncertainty of revenue and cash flows
arising from contracts with customers. This standard will be effective for Bluegreen on January 1, 2018. Early adoption is
permitted on January 1, 2017. The Company is currently evaluating the impact
12
that ASU 2014-09 may have on its consolidated financial statements.
In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810) – Amendments to the Consolidation Analysis”
(“ASU 2015-02”). This new guidance makes targeted amendments to the current consolidation guidance and ends the deferral
granted to investment companies from applying the variable interest entity (“VIE”) guidance. This standard will be effective
for Bluegreen on January 1, 2016. The Company’s adoption of ASU 2015-02 is not expected to have a material impact on its
consolidated financial statements.
In April 2015, the FASB issued ASU 2015-03, ”Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”), which
requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated
debt liability, consistent with the presentation of a debt discount. This standard will be effective for Bluegreen on January 1,
2016. The Company’s adoption of ASU 2015-03 is not expected to have a material impact on its consolidated financial
statements.
2. Liquidity
Woodbridge, at its parent company level, had cash and cash equivalents totaling approximately $520,000 at December 31,
2015. Woodbridge’s principal sources of liquidity are its cash holdings and dividend distributions received from
Bluegreen. During 2015, 2014 and 2013, Bluegreen paid a total of $54.4 million, $71.5 million and $47.0 million,
respectively, in cash dividends to Woodbridge, and Woodbridge declared and paid cash dividends totaling $51.8 million, $69.1
million and $44.3 million, respectively, which were allocated pro rata among BFC and BBX Capital based on their percentage
ownership interests in Woodbridge.
Woodbridge
On September 21, 2009, BFC consummated its merger with Woodbridge Holdings Corporation (“WHC”). Pursuant to the
merger, WHC merged with and into Woodbridge, which was a wholly-owned subsidiary of BFC at that time. Dissenting
shareholders, who collectively held approximately 4.2 million shares of WHC’s Class A Common Stock, rejected
Woodbridge’s offer of $1.10 per share and requested payment for their shares based on their respective fair value estimates of
WHC’s Class A Common Stock. On August 27, 2015, the Company made a payment of approximately $13.7 million to the
dissenting shareholders for the fair value portion of the judgment and interest thereon, On January 7, 2016, Woodbridge filed a
notice with the Florida Supreme Court to seek discretionary review of the matter. The Florida Supreme Court’s judgment with
respect to this notice and the outcome of any review by the Florida Supreme Court is uncertain. See Note 9 for further
information on this case.
13
3. Notes Receivable
The table below sets forth information relating to Bluegreen’s notes receivable and Bluegreen’s allowance of credit losses
(dollars in thousands):
Notes receivable secured by VOIs:
VOI notes receivable - non-securitized
VOI notes receivable - securitized
Purchase accounting adjustment
Allowance for credit losses
VOI notes receivable, net
Allowance as a % of VOI notes
receivable
Notes receivable secured by homesites:
(1)
Homesite notes receivable
Allowance for credit losses
Homesite notes receivable, net
Allowance as a % of homesite notes
receivable
Total notes receivable:
Gross notes receivable
Purchase accounting adjustment
Allowance for credit losses
Notes receivable, net
Allowance as a % of gross notes
receivable
$
$
$
$
$
As of December 31,
2015
2014
166,040
357,845
-
523,885
(110,467)
413,418
162,001
361,930
(150)
523,781
(102,259)
421,522
21%
20%
2,427
(247)
2,180
10%
3,052
(307)
2,745
10%
526,312
-
(110,714)
415,598
526,983
(150)
(102,566)
424,267
21%
19%
(1) Notes receivable secured by homesites were originated through a business, substantially all of the assets of which were sold
by Bluegreen in 2012. The assets excluded from the sale and retained by Bluegreen consisted primarily of the notes
receivable portfolio related to the business sold.
As previously disclosed, the table above includes notes receivable deemed to be acquired by Woodbridge in connection with
our November 2009 acquisition of approximately 7.4 million additional shares of Bluegreen’s Common Stock giving us a
controlling interest in Bluegreen. In accordance with applicable accounting guidance “Loans and Debt Securities Acquired
with Deteriorated Credit Quality”, the Company elected to recognize interest income on these notes receivable using the
expected cash flows method. The Company treated expected prepayments consistently in determining cash flows expected to
be collected, such that the non-accretable difference is not affected and the difference between actual prepayments and
expected prepayments shall not affect the non-accretable difference. The assumption for prepayment rates was derived from
Bluegreen’s historical performance information for its off-balance sheet securitizations and ranges from 4% to 9%. As of
December 31, 2015 and 2014, the outstanding contractual unpaid principal balance of the acquired notes was $47.8 million and
$78.2 million, respectively. As of December 31, 2015 and 2014, the carrying amount of the acquired notes was $43.6 million
and $70.7 million, respectively.
14
The carrying amount of the acquired notes is included in the balance sheet amount of notes receivable at December 31, 2015
and 2014. The following is a reconciliation of accretable yield (in thousands):
Balance, beginning of period
Accretion
Reclassification from (to)
nonaccretable yield
Balance, end of period
$
$
For the Year Ended December 31,
2015
2014
16,857
(8,479)
655
9,033
31,678
(12,562)
(2,259)
16,857
All of Bluegreen’s VOI notes receivable bear interest at fixed rates. The weighted-average interest rate on Bluegreen’s notes
receivable was 15.9%, 16.0% and 15.8% at December 31, 2015, 2014 and 2013, respectively. All of Bluegreen’s VOI loans
bear interest at fixed rates. The weighted-average interest rate charged on notes receivable secured by VOIs was 16.0%, 16.1%
and 15.9% at December 31, 2015, 2014 and 2013, respectively. Bluegreen’s VOI notes receivables are generally secured by
property located in Florida, Missouri, Nevada, South Carolina, Tennessee, and Wisconsin.
Future principal payments due on Bluegreen’s notes receivable (including its homesite notes receivable) as of December 31,
2015 are as follows (in thousands):
2016
2017
2018
2019
2020
Thereafter
Allowance for loan losses
Notes receivable, net of
allowance
$
$
76,918
71,775
60,616
53,696
54,141
209,166
526,312
(110,714)
415,598
Credit Quality for Financial Receivables and Allowance for Credit Losses
Bluegreen holds large amounts of homogeneous VOI notes receivable and assesses uncollectibility based on pools of
receivables. In estimating future credit losses, Bluegreen’s management does not use a single primary indicator of credit
quality but instead evaluates its VOI notes receivable based upon a combination of factors, including a static pool analysis, the
aging of the respective receivables, current default trends and prepayment rates by origination year, as well as the
FICO scores of the borrowers.
®
The table below sets forth the activity in the allowance for loan losses (including homesite notes receivable) as follows (in
thousands):
Balance, beginning of period
Provision for credit losses
Write-offs of uncollectible
receivables
Balance, end of period
$
$
For the Year Ended December 31,
2015
2014
102,566
42,063
(33,915)
110,714
15
90,592
40,164
(28,190)
102,566
The following table shows the delinquency status of Bluegreen’s VOI notes receivable (in thousands):
Current
31-60 days
61-90 days
>90 days
Purchase accounting
adjustments
Total
(1)
As of December 31,
2015
2014
$
$
501,738
6,889
4,869
10,389
-
523,885
500,405
6,505
5,361
11,660
(150)
523,781
(1)Includes $5.2 million and $6.0 million as of December 31, 2015 and 2014, respectively, related to VOI notes receivable that, as of such date, had
defaulted, but the related VOI note receivable balance had not yet been charged off in accordance with the provisions of certain of Bluegreen’s
receivable-backed notes payable transactions. These VOI notes receivable have been reflected in the allowance for credit losses.
4. Variable Interest Entities
Bluegreen
Bluegreen sells VOI notes receivable through special purpose finance entities. These transactions are generally structured as
non-recourse to Bluegreen and are designed to provide liquidity for Bluegreen and to transfer the economic risks and certain
benefits of the notes receivable to third parties. In a securitization, various classes of debt securities are issued by the special
purpose finance entities that are generally collateralized by a single tranche of transferred assets, which consist of VOI notes
receivable. Bluegreen services the securitized notes receivable for a fee pursuant to servicing agreements negotiated with third
parties based on market conditions at the time of the securitization.
With each securitization, Bluegreen generally retains a portion of the securities and continues to service the securitized notes
receivable. Under these arrangements, the cash payments received from obligors on the receivables sold are generally applied
monthly to pay fees to service providers, make interest and principal payments to investors, and fund required reserves, if any,
with the remaining balance of such cash retained by Bluegreen; however, to the extent the portfolio of receivables fails to
satisfy specified performance criteria (as may occur due to, among other things, an increase in default rates or credit loss
severity) or other trigger events occur, the funds received from obligors are distributed on an accelerated basis to investors.
Depending on the circumstances and the transaction, the application of the accelerated payment formula may be permanent or
temporary until the trigger event is cured. As of December 31, 2015, Bluegreen was in compliance with all applicable terms
under its securitization transactions, and no trigger events had occurred.
In accordance with applicable accounting guidance for the consolidation of VIEs, Bluegreen analyzes its variable interests,
which may consist of loans, servicing rights, guarantees, and equity investments, to determine if an entity in which it has a
variable interest is a VIE. The analysis includes a review of both quantitative and qualitative factors. Bluegreen bases its
quantitative analysis on the forecasted cash flows of the entity, and bases its qualitative analysis on the design of the entity, its
organizational structure, including decision-making ability, and relevant financial agreements. Bluegreen also uses its
qualitative analysis to determine if Bluegreen must consolidate a VIE as the primary beneficiary. In accordance with
applicable accounting guidance, Bluegreen has determined these securitization entities to be VIEs of which Bluegreen is the
primary beneficiary and, therefore, Bluegreen consolidates the entities into its financial statements.
Under the terms of certain of Bluegreen’s timeshare note sales, Bluegreen has the right to repurchase or substitute a limited
amount of defaulted mortgage notes for new notes at the outstanding principal balance plus accrued interest. Voluntary
repurchases and substitutions by Bluegreen of defaulted notes during 2015, 2014 and 2013 were $3.3
16
million, $4.9 million and $6.7 million, respectively. Bluegreen’s maximum exposure to loss relating to its non-recourse
securitization entities is the difference between the outstanding VOI notes receivable and the notes payable, plus cash reserves
and any additional residual interest in future cash flows from collateral.
The assets and liabilities of Bluegreen’s consolidated VIEs are as follows (in thousands):
As of December 31,
2015
2014
Restricted cash
Securitized notes receivable, net
Receivable backed notes payable - non-
recourse
$
25,358 $
280,841
318,929
31,554
293,950
320,275
The restricted cash and the securitized notes receivable balances disclosed above are restricted to satisfy obligations of the
VIEs.
5. Inventory
Inventory consists of the following (in thousands):
As of December 31,
2015
2014
Completed VOI units
Construction-in-progress
Real estate held for future
development
Subtotal
Purchase accounting
adjustment
Total
$
$
166,781
10,455
90,400
267,636
(47,425)
220,211
166,332
2,103
83,560
251,995
(57,282)
194,713
The interest expense reflected in Bluegreen’s Consolidated Statements of Income and Comprehensive Income is net of
capitalized interest. Interest capitalized to VOI inventory was $0.7 million and $0.1 million during 2015 and 2014,
respectively.
6. Properties and equipment
Properties and equipment consists of the following (in thousands):
Land, building, building
improvements
Leasehold improvements
Office equipment, furniture and
fixtures
Transportation and equipment
Accumulated depreciation
Property and equipment, net
$
$
As of December 31,
2015
2014
56,212
7,171
45,688
302
109,373
(37,054)
72,319
58,015
8,037
50,177
211
116,440
(44,503)
71,937
17
Included in selling, general and administrative expense in the Company’s consolidated statements of operations was $9.2
million, $8.5 million and $4.8 million of depreciation expense for the years ended December 31, 2015 and 2014, and from
April 2, 2013 through December 31, 2013, respectively.
7. Debt
Contractual minimum principal payments required on Bluegreen’s debt, net of unamortized discount, by type, for each of the
five years subsequent to December 31, 2015 and thereafter are shown below (in thousands):
Notes and
Mortgage Notes
Payable
and Lines of Credit
31,246
7,157
22,011
30,134
7,694
3,342
101,584
Recourse
Receivable
Backed
Notes Payable
-
-
-
3,729
52,887
33,272
89,888
Non-recourse
Receivable
Backed
Notes Payable
-
-
-
-
38,228
280,701
318,929
-
-
-
101,584
89,888
318,929
Junior
Subordinated
Debentures
-
-
-
-
-
195,879
195,879
(43,572)
152,307
Total
31,246
7,157
22,011
33,863
98,809
513,194
706,280
(43,572)
662,708
2016
2017
2018
2019
2020
Thereafter
Purchase
accounting
adjustments
$
$
The minimum contractual payments set forth in the table above may differ from actual payments due to timing of principal
payments required upon (1) the sale of real estate assets that serve as collateral on certain debt (release payments) and (2) cash
collections of pledged or transferred notes receivable.
Lines-of-Credit and Notes Payable
Bluegreen has outstanding borrowings with various financial institutions and other lenders. Financial data related to
Bluegreen’s lines of credit and notes payable (other than receivable-backed notes payable) was as follows (dollars in
thousands):
As of December 31, 2015
As of December 31, 2014
Recourse receivable-
backed notes payable:
2013 Notes Payable
Foundation Capital
Pacific Western Term
Loan
Fifth Third Bank Note
Payable
NBA Line of Credit
Fifth Third Syndicated
LOC
Total
$
Debt
Balance
Interest
Rate
Principal
Balance of
Pledged/
Secured
Receivables
Debt
Balance
Interest
Rate
58,500
—
3,791
4,572
9,721
25,000
101,584
8.05%
—
5.68%
3.50%
5.50%
3.11%
30,411
—
64,500
7,010
10,868
2,945
9,336
24,246
54,312
129,173
4,817
789
10,000
90,061
8.05%
8.00%
5.91%
3.25%
5.50%
3.01%
18
Principal
Balance of
Pledged/
Secured
Receivables
43,903
10,596
11,882
9,366
7,601
52,453
135,801
2013 Notes Payable. In March 2013, Bluegreen issued $75.0 million of senior secured notes (the “2013 Notes Payable”) in a
private financing transaction. The 2013 Notes Payable are secured by certain of Bluegreen’s assets, including primarily the
cash flows from the residual interests relating to term securitizations and the VOI inventory in the BG Club 36 resort in Las
Vegas, Nevada. Pursuant to the terms of the 2013 Notes Payable, Bluegreen is required to periodically pledge reacquired VOI
inventory in the BG Club 36 resort. Bluegreen may also pledge additional residual interests from its future term
securitizations. The 2013 Notes Payable accrue interest at a fixed rate of 8.05%. The 2013 Notes Payable mature in March
2020, with certain required amortization during the seven-year term. The terms of the 2013 Notes Payable include certain
covenants and events of default, which Bluegreen’s management considers to be customary for transactions of this type. The
proceeds from the 2013 Notes Payable were used to fund a portion of the merger consideration paid to Bluegreen’s former
shareholders in connection with the closing of the Bluegreen-Woodbridge Cash Merger during April 2013.
Foundation Capital. In 2010, Bluegreen acquired a 109-acre development parcel, located in close proximity to the existing
Wilderness Club at Big Cedar. A portion of the acquisition was financed with a note payable to Foundation Capital Resources,
Inc. (“Foundation Capital”), totaling $13.2 million. The note payable to Foundation Capital was scheduled to mature in
October 2015 and bore interest at a rate of 8%. Repayments of the note were based upon release payments from sales of VOIs
located on the underlying property that served as collateral for the note payable, subject to minimum payments stipulated in the
agreement. In February 2015, Bluegreen repaid in full the Foundation Capital note payable.
Pacific Western Term Loan. Bluegreen has a non-revolving term loan (the “ Pacific Western Term Loan”) with Pacific
Western Bank, as successor-by-merger to CapitalSource Bank, secured by unsold inventory and undeveloped land at the
Bluegreen Odyssey Dells Resort . On June 25, 2015, the Pacific Western Term Loan was amended to increase its then
outstanding balance from $2.4 million to $4.8 million, extend the maturity date from July 2016 to June 2019, and reduce the
interest rate from 30-day LIBOR plus 5.75% to 30-day LIBOR plus 5.25% (5.68% at December 31, 2015). Interest payments
are paid monthly. Principal payments are effected through release payments upon sales of the timeshare interests in the
Bluegreen Odyssey Dells Resort that serve as collateral for the Pacific Western Term Loan, subject to mandatory principal
reductions pursuant to the terms of the loan agreement. The Pacific Western Term Loan is cross-collateralized and is subject
to cross-default with the Pacific Western Facility described below under “Receivable-Backed Notes Payable.”
Fifth Third Bank Note Payable. In April 2008, Bluegreen entered into a note payable with Fifth Third Bank to finance an
acquisition of real estate. In August 2014, the Fifth Third Bank Note Payable was amended to increase its then outstanding
balance from $2.3 million to $4.9 million, and change the maturity date from April 2023 to August 2021. Principal and interest
on amounts outstanding under the Fifth Third Bank Note Payable are payable monthly through maturity. The interest rate
under the note equals the 30-day LIBOR plus 3.00%, with a 0.125% roundup provision (3.50% as of December 31, 2015).
NBA Line of Credit. Since December 2013, Bluegreen/Big Cedar Vacations has had a revolving line of credit with National
Bank of Arizona (the “NBA Line of Credit”). The NBA Line of Credit is secured by unsold inventory and VOIs under
construction at Bluegreen/Big Cedar Vacation’s Paradise Point Resort. Pursuant to an amendment to the NBA Line of Credit
on June 30, 2015, the NBA Line of Credit will be increased to $15.0 million, the revolving advance period was extended to
June 2018 and the maturity date was extended to June 2020. In addition, the interest rate on borrowings under the NBA Line
of Credit was reduced from 30-day LIBOR plus 4.50% (with an interest rate floor of 5.50%) to 30-day LIBOR plus 3.50%
(with an interest rate floor of 5.00%) upon completion of construction of the building where the VOIs are located. Interest
payments are paid monthly. Principal payments are effected through release payments upon sales of the timeshare interests in
the Paradise Point Resort that serve as collateral for the NBA Line of Credit, subject to mandatory principal reductions. The
NBA Line of Credit is cross-collateralized and is subject to cross-default with the NBA Receivables Facility described below
under “Receivable-Backed Notes Payable.”
Fifth Third Syndicated Line-of-Credit. In November 2014, Bluegreen entered into a $25.0 million revolving credit facility with
Fifth Third Bank as administrative agent and lead arranger and Fifth Third Bank, Bank of America, N.
19
inventory and specified non-consumer receivables and
A. and Branch Banking and Trust Company as initial lenders. The facility is secured by certain of Bluegreen’s sales centers,
certain VOI
is guaranteed by certain of Bluegreen’s
subsidiaries. Amounts borrowed under the facility generally bear interest at LIBOR plus 2.75% (with other borrower
elections). The facility matures in November 2016 subject to an annual clean up provision for at least 30 consecutive days,
which occurred in July 2015, in accordance with the terms and conditions of the agreement. The facility contains covenants
and conditions which Bluegreen considers to be customary for transactions of this type. Borrowings are used by Bluegreen for
general corporate purposes. As of December 31, 2015, the interest rate under the note was 3.11% and $25.0 million was
outstanding.
Receivable-Backed Notes Payable
Financial data related to Bluegreen’s receivable-backed notes payable facilities was as follows (dollars in thousands):
As of December 31, 2014
As of December 31, 2015
Recourse receivable-
backed notes payable:
Liberty Bank Facility
NBA Receivables
Facility
Pacific Western Facility
Total
Non-recourse
receivable-backed notes
payable:
BB&T/DZ Purchase
Facility
Quorum Purchase
Facility
GE 2006 Facility
2006 Term
Securitization
2007 Term Securitization
2008 Term Securitization
2010 Term Securitization
2012 Term Securitization
2013 Term Securitization
2015 Term Securitization
Total
Total receivable-
backed debt
$
$
$
$
$
Debt
Balance
Interest
Rate
46,547
24,860
18,481
89,888
4.00%
4.00-
4.50%
4.93%
3.33%
4.75-
6.90%
-
-
7.32%
7.88%
5.54%
2.94%
3.20%
3.02%
38,228
28,500
-
-
17,642
7,227
24,074
44,603
62,670
95,985
318,929
408,817
Principal
Balance of
Pledged/
Secured
Receivables
56,815
29,947
23,596
110,358
50,224
32,303
-
-
18,720
7,726
28,159
49,091
66,020
100,142
352,385
Debt
Balance
Interest
Rate
38,088
29,058
24,983
92,129
42,818
26,447
18,008
12,366
30,126
11,846
37,048
59,377
82,239
-
320,275
4.25%
4.00-
4.50%
4.67%
3.88%
5.00-
6.90%
7.35%
6.16%
7.32%
7.88%
5.54%
2.94%
3.20%
-
462,743
412,404
Principal
Balance of
Pledged/
Secured
Receivables
49,976
35,296
32,397
117,669
56,406
30,158
19,881
12,881
33,094
13,089
44,092
65,827
86,503
-
361,931
479,600
Liberty Bank Facility. Since 2008, Bluegreen has maintained a revolving timeshare receivables hypothecation facility (the
“Liberty Bank Facility”) with Liberty Bank which provides for advances on eligible receivables pledged under the Liberty
Bank Facility, subject to specified terms and conditions, during a revolving credit period. Pursuant to the terms of the
agreement, as amended in November 2015, the aggregate maximum outstanding borrowings are $50.0 million and the
revolving credit period will expire in November 2017. The Liberty Bank Facility allows future advances of (i) 85% of the
unpaid principal balance of Qualified Timeshare Loans assigned to agent, and (ii) 60% of the unpaid principal balance of Non-
Conforming Qualified Timeshare Loans assigned to agent, all of which bear interest at the WSJ Prime Rate plus 0.50% per
annum subject to a 4.00% floor. Principal and interest are required to be paid as cash is collected on the pledged receivables,
with all outstanding amounts being due in November 2020. In January 2015, Bluegreen repaid $22.3 million under the facility
in connection with the issuance of the 2015 Term Securitization described below.
NBA Receivables Facility. Bluegreen/Big Cedar Vacations has a revolving timeshare hypothecation facility with National
Bank of Arizona (the “NBA Receivables Facility”). On June 30, 2015, the NBA Receivables Facility was amended to extend
the revolving advance period and the maturity date, and to reduce the interest rate on future borrowings. The NBA Receivables
Facility provides for advances at a rate of 85% on eligible receivables pledged under the facility up to a maximum of $45.0
million of outstanding borrowings (inclusive of outstanding borrowings
20
under the NBA Line of Credit discussed above), subject to eligible collateral and specified terms and conditions, during a
revolving credit period. Pursuant to the terms of the amendment to the NBA Receivables Facility, the revolving advance
period expiration date was extended to June 2018. In addition, post-amendment borrowings under the NBA Receivables
Facility will accrue interest at a rate equal to the 30-day LIBOR plus 3.25% (with an interest rate floor of 4.00%). Amounts
outstanding under the NBA Receivables Facility for borrowings made prior to the amendment accrue interest at the previously
prevailing rates, which for certain of such borrowings is 30-day LIBOR plus 3.25% (with an interest rate floor of 4.00%) and
for the remainder of such borrowings is 30-day LIBOR plus 3.50% (with an interest rate floor of 4.50%). Principal repayments
and interest on borrowings under the NBA Receivables Facility are paid as cash is collected on the pledged receivables, subject
to future required decreases in the advance rates after the expiration of the revolving advance period, with the remaining
outstanding balance maturing in December 2022. As of December 31, 2015, $17.2 million of the outstanding balance bears
interest at 4.00% and $7.6 million of the outstanding balance bears interest at 4.50%. All principal and interest payments
received on pledged receivables are applied to principal and interest due under the facility. The NBA Receivables Facility is
cross-collateralized and is subject to cross-default with the NBA Line of Credit described above.
the
Pacific Western Facility. Bluegreen has a revolving timeshare receivables hypothecation facility (the “Pacific Western
Facility”) with Pacific Western Bank, as successor-by-merger to CapitalSource Bank, which provides for advances on eligible
receivables pledged under the facility, subject to specified terms and conditions, during a revolving credit period. On June 25,
2015, Bluegreen amended the Pacific Western Facility to extend the revolving advance period and the maturity date, increase
interest rate on portions of certain future
the advance rate for certain eligible receivables, and reduce
borrowings. Maximum outstanding borrowings under the Pacific Western Facility are $40.0 million (inclusive of outstanding
borrowings under the Pacific Western Term Loan discussed above), subject to eligible collateral and customary terms and
conditions. Pursuant to the terms of the amendment to the Pacific Western Facility, the revolving advance period expiration
date was extended to September 2018, subject to an additional 12 month extension at the option of Pacific Western
Bank. Eligible “A” receivables that meet certain eligibility and FICO® score requirements, which Bluegreen’s management
believes are typically consistent with loans originated under Bluegreen’s current credit underwriting standards, are subject to an
85% advance rate. The Pacific Western Facility also allows for certain eligible “B” receivables (which have less stringent
FICO® score requirements) to be funded at a 53% advance rate as a result of the amendment, compared to a 45% advance rate
prior to the amendment. Borrowings under the Pacific Western Facility accrue interest at 30-day LIBOR plus 4.50%, except
that, pursuant to the amendment, the interest rate on a portion of borrowings under the Pacific Western Facility advanced after
the date of the amendment, to the extent such borrowings are in excess of established debt minimums, accrue interest at 30-
day LIBOR plus 4.00%. Principal repayments and interest on borrowings under the Pacific Western Facility are paid as cash is
collected on the pledged receivables, subject to future required decreases in the advance rates after the end of the revolving
advance period, with the remaining outstanding balance maturing in September 2021, subject to an additional 12 month
extension at the option of Pacific Western Bank. The Pacific Western Facility is cross-collateralized and is subject to cross-
default with the Pacific Western Term Loan described above.
BB&T/DZ Purchase Facility. Bluegreen has a timeshare notes receivable purchase facility (the “BB&T/DZ Purchase Facility”)
with Branch Banking and Trust Company (“BB&T”) and DZ Bank AG Deutsche Zentral-Genossenschaftsbank, Frankfurt AM
Main (“DZ”), which permits maximum outstanding financings of $80.0 million. In December 2015, Bluegreen amended the
BB&T/DZ Purchase Facility to extend the revolving advance period and the maturity date, and reduce the interest rate on
portions of certain borrowings. Availability under the BB&T/DZ Purchase Facility is on a revolving basis through December
2017, and amounts financed are secured by timeshare receivables at an advance rate of 75%, subject to eligible collateral and
other terms of the facility, which Bluegreen believes to be customary for financing arrangements of this type. The facility will
mature and all outstanding amounts will become due thirty-six months after the expiration of the revolving advance period , or
earlier under certain circumstances set forth in the facility. Interest on amounts outstanding under the facility is tied to an
applicable index rate of the LIBOR rate, in the case of amounts funded by BB&T, and a cost of funds rate or commercial paper
rates, in the case of amounts funded by or through DZ. The interest rate under the facility equals the applicable index rate plus
2.90% until the expiration of the revolving advance period and thereafter will equal the applicable index rate plus
4.9%. Subject to the terms of the facility, Bluegreen will receive the excess cash flows generated by the receivables sold
(excess meaning after payments of customary fees, interest and principal under the facility) until the expiration of the
receivables advance period, at which point all of the excess cash flow will be paid to the note holders until the outstanding
balance is reduced to zero. While ownership of the timeshare receivables
21
included in the facility is transferred and sold for legal purposes, the transfer of these timeshare receivables is accounted for as
a secured borrowing for financial reporting purposes. The facility is nonrecourse and is not guaranteed by Bluegreen. In
January 2015, Bluegreen used a portion of the proceeds from the issuance of the 2015 Term Securitization described below to
repay $42.3 million under the facility.
Quorum Purchase Facility. Bluegreen and Bluegreen/Big Cedar Vacations have a timeshare notes receivable purchase facility
(the “Quorum Purchase Facility”) with Quorum Federal Credit Union (“Quorum”). In October 2015, the Quorum Purchase
Facility was amended. Pursuant to the amendment, which was effective as of July 1, 2015, Quorum agreed to purchase, on a
revolving basis through June 30, 2017, eligible timeshare receivables in an amount of up to an aggregate outstanding $50.0
million purchase price, subject to certain conditions precedent and other terms of the facility. In addition, the amendment
decreased the interest rate on advances made under the Quorum Purchase Facility from the July 1, 2015 effective date of the
amendment until June 30, 2016 to 4.75% per annum, subject to specified terms and conditions. All amounts outstanding under
the Quorum Purchase Facility prior to July 1, 2015 accrue interest at the previously prevailing rates (from 5.00% to 6.90% per
annum). The Quorum Purchase Facility continues to provide for an 85% advance rate on eligible receivables sold under the
facility and a program fee rate of 5.00% per annum with respect to any future advances after June 30, 2016. Future advances
are also subject to a loan purchase fee of 0.50%. The Quorum Purchase Facility becomes due in December 2030. Eligibility
requirements for receivables sold include, among others, that the obligors under the timeshare notes receivable sold be
members of Quorum at the time of the note sale. Subject to performance of the collateral, Bluegreen or Bluegreen/Big Cedar
Vacations, as applicable, will receive any excess cash flows generated by the receivables transferred to Quorum under the
facility (excess meaning after payments of customary fees, interest, and principal under the facility) on a pro-rata basis as
borrowers make payments on their timeshare loans. While ownership of the timeshare receivables included in the Quorum
Purchase Facility is transferred and sold for legal purposes, the transfer of these timeshare receivables is accounted for as a
secured borrowing for financial reporting purposes. The facility is nonrecourse and is not guaranteed by Bluegreen.
2015 Term Securitization. On January 29, 2015, Bluegreen completed a private offering and sale of $117.8 million of
investment-grade, timeshare receivable-backed notes (the "2015 Term Securitization"). The 2015 Term Securitization
consisted of the issuance of two tranches of timeshare receivable-backed notes (the “Notes”): $89.4 million of A rated and
$28.4 million of BBB/BBB- rated notes with note interest rates of 2.88% and 3.47%, respectively, which blended to an overall
weighted average note interest rate of 3.02%. The gross advance rate for this transaction was 94.25%. The Notes mature in
May 2030.
The amount of the timeshare receivables sold to BXG Receivables Note Trust 2015-A (the “2015 Trust”) was $125.0 million,
$100.2 million of which was sold to the 2015 Trust at closing and $24.8 million of which was subsequently sold to the 2015
Trust during 2015. The gross proceeds of such sales to the 2015 Trust were $117.8 million. A portion of the proceeds were
used to: repay the BB&T/DZ Purchase Facility a total of $42.3 million, representing all amounts then outstanding (including
accrued interest); repay $22.3 million under the Liberty Bank Facility plus accrued interest; capitalize a reserve fund; and pay
fees and expenses associated with the transaction. Prior to the closing of the 2015 Term Securitization, Bluegreen, as servicer,
funded $9.5 million in connection with the servicer redemption of the notes related to BXG Receivables Note Trust 2006-B,
and certain of the timeshare loans in such trust were sold to the 2015 Trust in connection with the 2015 Term
Securitization. The remaining $40 million of proceeds from the 2015 Term Securitization were used by Bluegreen for general
corporate purposes.
While ownership of the timeshare receivables included in the 2015 Term Securitization is transferred and sold for legal
purposes, the transfer of these timeshare receivables is accounted for as a secured borrowing for financial accounting
purposes. Accordingly, no gain or loss was recognized as a result of this transaction . Subject to performance of the collateral,
Bluegreen will receive any excess cash flows generated by the receivables transferred under the 2015 Term Securitization
(excess meaning after payments of customary fees, interest, and principal under the 2015 Term Securitization) on a pro-rata
basis as borrowers make payments on their timeshare loans.
Other Non-Recourse Receivable-Backed Notes Payable. In addition to the above described facilities, Bluegreen has a number
of other nonrecourse receivable-backed notes payable facilities, as set forth in the table above. During 2015, Bluegreen repaid
$75.2 million under these additional receivable-backed notes payable facilities, including the payment in full of the GE 2006
Facility and the notes payable issued in connection with the 2006 Term Securitization. During 2015, Bluegreen wrote off the
related unamortized GE 2006 Facility and 2006 Term
22
Securitization debt issuance costs totaling approximately $0.2 million.
Junior Subordinated Debentures
Junior subordinated debentures outstanding were as follows (in thousands):
Junior Subordinated
Debentures
Issue Date
Outstanding
Amount
Outstanding
Amount
Interest
Rate (1)
Maturity
Date
As of December 31,
2015
2014
Beginning
Optional
Redemption
Date
Levitt Capital Trust I
("LCT I")
Levitt Capital Trust II
("LCT II")
Levitt Capital Trust III
("LCT III")
Levitt Capital Trust IV
("LCT IV")
Total Woodbridge
Holdings
Bluegreen Statutory Trust
I
Bluegreen Statutory Trust
II
Bluegreen Statutory Trust
III
Bluegreen Statutory Trust
IV
Bluegreen Statutory Trust
V
Bluegreen Statutory Trust
VI
Total Bluegreen
Corporation
Purchase accounting
adjustments
03/15/2005
$
23,196
23,196
05/04/2005
30,928
30,928
06/01/2006
15,464
15,464
07/18/2006
15,464
15,464
85,052
85,052
03/15/2005
23,196
23,196
05/04/2005
25,774
25,774
05/10/2005
10,310
10,310
04/24/2006
15,464
15,464
07/21/2006
15,464
15,464
02/26/2007
20,619
20,619
110,827
110,827
(43,572)
(45,841)
Total Junior Subordinated Debentures
$
152,307
150,038
LIBOR +
3.85%
LIBOR +
3.80%
LIBOR +
3.80%
LIBOR +
3.80%
LIBOR +
4.90%
LIBOR +
4.85%
LIBOR +
4.85%
LIBOR +
4.85%
LIBOR +
4.85%
LIBOR +
4.80%
03/01/2035
3/15/2010
06/30/2035
6/20/2010
06/30/2036
6/30/2011
09/30/2036
9/30/2011
03/30/2035
3/30/2010
07/30/2035
7/30/2010
07/30/2035
7/30/2010
06/30/2036
6/30/2011
09/30/2036
9/30/2011
04/30/2037
4/30/2012
(1) LIBOR interest rates are indexed to three-month LIBOR and adjust quarterly.
These business trusts are variable interest entities in which Woodbridge and Bluegreen are not the primary beneficiaries as
defined by the accounting guidance for the consolidation of variable interest entities. Accordingly, the Company and its
subsidiaries do not consolidate the operations of these business trusts; instead, they are accounted for under the equity method
of accounting.
Woodbridge Junior Subordinated Debentures
Woodbridge formed four statutory business trusts which issued trust preferred securities to third parties and trust common
securities to Woodbridge and used the proceeds to purchase an identical amount of junior subordinated debentures from
Woodbridge. Interest on the junior subordinated debentures and distributions on these trust preferred securities are payable
quarterly in arrears at the floating rates specified in the above table until the corresponding scheduled maturity date. The trust
preferred securities are subject to mandatory redemption, in whole or in part, upon repayment of the junior subordinated
debentures at maturity or their earlier redemption. The junior subordinated debentures are redeemable, in whole or in part, at
Woodbridge’s option at any time. There were no significant changes related to Woodbridge’s $85.0 million of junior
subordinated debentures during the year ended December 31, 2015 and 2014.
Bluegreen Junior Subordinated Debentures
Bluegreen has formed statutory business trusts (collectively, the "Trusts"), each of which issued trust preferred securities as
part of a larger pooled trust securities offering which was not registered under the Securities Act of 1933 and invested the
proceeds thereof in its junior subordinated debentures. The Trusts are variable interest
23
entities in which Bluegreen is not the primary beneficiary as defined by ASC 810. Accordingly, Bluegreen does not
consolidate the operations of the Trusts; instead, Bluegreen’s beneficial interests in the Trusts are accounted for under the
equity method of accounting. Bluegreen’s maximum exposure to loss as a result of its involvement with the Trusts is limited to
the carrying amount of Bluegreen’s equity method investment. Distributions on the trust preferred securities are cumulative
and based upon the liquidation value of the trust preferred security. The trust preferred securities are subject to mandatory
redemption, in whole or in part, upon repayment of the junior subordinated debentures at maturity or their earlier
redemption. The junior subordinated debentures are redeemable in whole or in part at Bluegreen’s option at any time. In
addition, Bluegreen made an initial equity contribution to each Trust in exchange for its common securities, all of which are
owned by Bluegreen, and those proceeds were also used by the applicable Trust to purchase an identical amount of junior
subordinated debentures from Bluegreen. The terms of each Trust’s common securities are nearly identical to the trust
preferred securities.
8. Income Taxes
The provision for income taxes consists of (in thousands):
Federal:
Current
Deferred
State and Other:
Current
Deferred
Total
For the Year Ended December 31,
2014
2015
$
$
18,946
17,804
36,750
4,119
(211)
3,908
40,658
20,750
13,926
34,676
3,903
1,958
5,861
40,537
From April 2,
2013 through
December 31,
2013
2,589
14,343
16,932
1,339
(57)
1,282
18,214
The Company's actual provision for income taxes differs from the expected Federal income tax provision as follows (dollars in
thousands):
For the Year Ended December 31,
2015
2014
From April 2,
2013 through
December 31,
2013
Income tax provision at
expected federal
income tax rate of 35%
Increase (decrease) resulting
from:
Benefit for state taxes, net of
federal tax benefit
Taxes related to subsidiaries not
consolidated for income tax
purposes
Bluegreen settlement
Loss attributed to member
Change in valuation allowance
Other - net
Provision for income taxes
$
$
29,720
35.00
%
$
37,418
35.00
%
$
20,108
35.00
%
6,552
6.13
672
1.17
(3,994)
(3.74)
(3,592)
(6.25)
904
(320)
(23)
40,537
0.85
(0.30)
(0.02)
37.92
735
7
284
18,214
1.28
0.01
0.49
31.70
%
%
$
%
$
2,588
(4,096)
12,820
315
(47)
(642)
40,658
3.05
-
(4.82)
15.10
0.37
(0.06)
(0.76)
47.88
24
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and tax liabilities were
(in thousands):
Deferred tax assets:
Allowance for loan losses
Federal and State NOL and tax credit
carryforward
Real estate valuation
Property and equipment
Other
Total gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Installment sales treat of notes
Vacation ownership interest sales
Intangible assets
Junior subordinate notes
Other
Total gross deferred tax liabilities
Net deferred tax liability
Less: Net deferred tax liability at beginning of
year
Benefit (provision) for deferred income taxes
As of December 31,
2015
2014
39,873
36,114
25,999
18,778
2,618
5,416
92,684
(2,716)
89,968
150,237
9,222
23,503
17,206
2
200,170
(110,202)
43,423
23,428
2,098
9,319
114,382
(2,763)
111,619
152,419
8,554
24,555
18,700
-
204,228
(92,609)
92,609
(17,593)
76,725
(15,884)
Activity in the deferred tax asset valuation allowance was (in thousands):
Balance, beginning of year
Increase in def erred tax valuation allowance
Balance, end of year
As of December 31,
2015
2014
2,763
(47)
2,716
3,083
(320)
2,763
The Company and its subsidiaries evaluate their deferred tax assets to determine if valuation allowances are required. In the
evaluation, management considers net operating losses (“NOLs”) carry-back availability, expectations of sufficient future
taxable income, trends in earnings, existence of taxable income in recent years, the future reversal of temporary differences,
and available tax planning strategies that could be implemented, if required. Valuation allowances are established based on the
consideration of all available evidence using a more likely than not standard. The valuation allowance that has been
established is primarily attributed to Bluegreen’s net operating losses from states in which it has determined that recoverability
is not likely. Based on these evaluations, deferred tax valuation allowances decreased by $47,000 and $320,000 for the years
ended December 31, 2015 and 2014, respectively, and increased by $7,000 from April 2, 2013 through December 31, 2013.
25
As a division of BFC prior to April 23, 2013, the Company was included in BFC’s Federal and Florida income tax
returns. BFC is no longer subject to U.S. federal and state income tax examinations by tax authorities for tax years before
2012. As a partnership, the taxable income of the partnership is included in its members’ taxable income. All of the
Company’s partnership returns that have been filed are subject to U.S. federal and state income tax examinations by tax
authorities.
Effective on May 1, 2015, Woodbridge made an election to change is classification from a partnership to a corporation for
income tax purposes. In addition, BFC increased its ownership interest in BBX Capital in connection with the cash tender
offer completed on April 30, 2015 (as discussed in Note 14). As a consequence of these events, BFC will be filing a
consolidated group tax return with BBX Capital, Woodbridge and Bluegreen, which will include the operations Woodbridge
and Bluegreen from May 1, 2015 forward.
Prior to May 1, 2015, Bluegreen and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states
and foreign jurisdictions. With certain exceptions, Bluegreen is no longer subject to U.S. federal, state and local, or non-U.S.
income tax examinations by tax authorities for years before 2010.
As of December 31, 2014, Bluegreen had utilized all remaining federal net operating loss carryforwards, including an equity
net operating loss of $5.9 million. As of December 31, 2015, Bluegreen had alternative minimum tax credit carryforwards of
$15.9 million, which never expire, and state operating loss carryforwards of $251.2 million, which expire from 2016 through
2034.
Woodbridge evaluates its tax positions based upon guidelines of ASC 740-10, Income Tax, which clarifies the accounting for
uncertainty in tax positions. Based on an evaluation of uncertain tax provisions, Woodbridge is required to measure tax
benefits based on the largest amount of benefit that is greater than 50% likely of being realized upon settlement. In accordance
with Woodbridge’s accounting policy, Woodbridge recognizes interest and penalties related to unrecognized taxes as a
component of general and administrative expenses. Woodbridge does not expect the amount of unrecognized tax benefits to
materially change within the next 12 months.
In August 2015, Bluegreen received notice from the Internal Revenue Service that its Income Tax Return for the year ended
December 31, 2013 was selected for examination. In September 2015, the examination was extended to include the tax year
ended December 31, 2012. In October 2015, the examination was further extended to include payroll taxes for the year ended
December 31, 2013. Bluegreen has complied with all examination requests to date. While there is no assurance as to the
results of the examination, Bluegreen does not currently anticipate any material adjustments in connection with this
examination.
Certain of Bluegreen’s other state filings are under routine examination. While there is no assurance as to the results of these
audits, Bluegreen does not currently anticipate any material adjustments in connection with these examinations.
9. Commitments and Contingencies
The Company and its subsidiaries incurred rent expense, including rent expense related to Bluegreen’s operations of
approximately $10.2 million and $9.7 million during the years ended December 31, 2015 and 2014, respectively and $5.3
million from April 2, 2013 through December 31, 2013. Lease commitments under these and Bluegreen’s various other non-
cancelable operating leases for each of the five years subsequent to December 31, 2015 and thereafter are as follows (in
thousands):
2016
2017
2018
2019
2020
Thereafter
Total
9,426
8,795
7,498
1,280
1,304
14,510
42,813
26
Woodbridge
In the ordinary course of business, Woodbridge and its subsidiaries are parties to lawsuits as plaintiff or defendant involving its
operations and activities. Reserves are accrued for amounts in which it is probable that a loss will be incurred and the amount
of such loss can be reasonably estimated. Woodbridge believes that it has meritorious defenses in the pending legal actions and
that reasonably possible losses arising from these pending legal matters, in excess of the amounts currently accrued, if any, will
not have a material impact on its financial statements.
Woodbridge Holdings, LLC v. Prescott Group Aggressive Small Cap Master Fund, G.P., Cede & Co., William J. Maeck,
Ravenswood Investments III, L.P., and The Ravenswood Investment Company, Circuit Court, 17 Judicial Circuit, Broward
County, Florida
th
Under Florida law, holders of WHC’s Class A Common Stock who did not vote to approve BFC’s September 2009 merger
with WHC and who properly asserted and exercised their appraisal rights with respect to their shares are entitled to receive a
cash payment in an amount equal to the fair value of their shares (as determined in accordance with the provisions of Florida
law) in lieu of the shares of BFC’s Class A Common Stock which they would otherwise have been entitled to receive. In
accordance with Florida law, Woodbridge (the successor by merger to WHC) provided written notices and required forms to
the dissenting shareholders setting forth, among other things, its determination that the fair value of WHC’s Class A Common
Stock immediately prior to the effectiveness of the merger was $1.10 per share. Dissenting shareholders, who collectively held
approximately 4.2 million shares of WHC’s Class A Common Stock, rejected Woodbridge’s offer of $1.10 per share and
requested payment for their shares based on their respective fair value estimates of WHC’s Class A Common Stock. Under
Florida law, Woodbridge thereafter commenced the appraisal rights action. In December 2009, a $4.6 million liability was
recorded with a corresponding reduction to additional paid-in capital representing, in the aggregate, Woodbridge’s offer to the
dissenting shareholders. On July 5, 2012, the presiding court determined the fair value of the dissenting shareholders’ shares
of WHC’s Class A Common Stock to be $1.78 per share and awarded legal and other costs in favor of the dissenting
shareholders. As a result, the $4.6 million liability was increased to approximately $7.5 million as of June 30, 2012 (with a
corresponding reduction to additional paid in capital of $2.8 million) to account for the per share value awarded. On March 11,
2013, the court awarded legal fees and pre and post judgment interest to the dissenting shareholders for a total award of
approximately $11.9 million (including the $7.5 million based on the $1.78 per share value determination). As a result, the
liability was increased by approximately $4.4 million during the fourth quarter of 2012 to $11.9 million as of December 31,
2012. Woodbridge has appealed the court’s ruling with respect to the fair value determination and the award of legal fees and
costs and posted a $13.4 million bond in connection with the appeal.
On August 12, 2015, the appellate court issued its decision, in which it largely affirmed the trial court’s order, including the
trial court’s fair value determination and the trial court’s award of attorneys’ fees and costs. On August 27, 2015, the Company
made a payment of approximately $11.0 million to the dissenting shareholders for the fair value portion of the judgment and
interest thereon, but reserved all rights on appeal, including the right to recover the amount paid if Woodbridge prevails. On
October 2, 2015, Woodbridge filed a motion for rehearing. On December 8, 2015, the appellate court denied the motion for
rehearing. On December 28, 2015, the Company made a payment of approximately $2.7 million to the dissenting shareholders
for the fees and costs, and remaining interest, due under the judgment, but reserved all rights on appeal, including the right to
recover the amount paid if Woodbridge prevails. On January 7, 2016, Woodbridge filed a notice with the Florida Supreme
Court to seek discretionary review of the matter. The Florida Supreme Court’s judgment with respect to this notice and the
outcome of any review by the Florida Supreme Court is uncertain.
In re Bluegreen Corporation Shareholder Litigation
Between November 16, 2011 and February 13, 2012, seven purported class action lawsuits related to the previously proposed
stock-for-stock merger between BFC, which at that time was the sole member of Woodbridge, and Bluegreen were filed against
Bluegreen, the members of Bluegreen’s board of directors, BFC and BXG Florida Corporation, a wholly owned subsidiary of
Woodbridge (“Merger Sub”). Four of these lawsuits were consolidated into a single action in Florida, and the other three
lawsuits were consolidated into a single action in Massachusetts and stayed in favor of the Florida action.
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The four Florida lawsuits, captioned and styled Ronald Kirkland v. Bluegreen Corporation et al. (filed on November 16, 2011);
Richard Harriman v. Bluegreen Corporation et al. (filed on November 22, 2011); Alfred Richner v. Bluegreen Corporation et
al. (filed on December 2, 2011); and BHR Master Fund, LTD et al. v. Bluegreen Corporation et al. (filed on February 13, 2012)
were consolidated into an action styled In Re Bluegreen Corporation Shareholder Litigation. On April 9, 2012, the plaintiffs
filed a consolidated amended class action complaint which alleged that the individual director defendants breached their
fiduciary duties by (i) agreeing to sell Bluegreen without first taking steps to ensure adequate, fair and maximum consideration,
(ii) engineering a transaction to benefit themselves and not the shareholders, and (iii) failing to protect the interests of
Bluegreen’s minority shareholders. In the complaint, the plaintiffs also alleged that BFC breached its fiduciary duties to
Bluegreen’s minority shareholders and that Merger Sub aided and abetted the alleged breaches of fiduciary duties by
Bluegreen’s directors and BFC. In addition, the complaint included allegations relating to claimed violations of Massachusetts
law. The complaint sought declaratory and injunctive relief, along with damages and attorneys’ fees and costs.
The three Massachusetts lawsuits were filed in the Superior Court for Suffolk County in the Commonwealth of Massachusetts
and styled as follows: Gaetano Bellavista Caltagirone v. Bluegreen Corporation et al. (filed on November 16, 2011); Alan W.
Weber and J.B. Capital Partners L.P. v. Bluegreen Corporation et al. ( filed on November 29, 2011); and Barry Fieldman, as
Trustee for the Barry & Amy Fieldman Family Trust v. Bluegreen Corporation et al. (filed on December 6, 2011). In their
respective complaints, the plaintiffs alleged that the individual director defendants breached their fiduciary duties by agreeing
to sell Bluegreen without first taking steps to ensure adequate, fair and maximum consideration. The Fieldman and Weber
actions contained the same claim against BFC. In addition, the complaints included claims that Merger Sub, in the case of the
Fieldman action, BFC and Merger Sub, in the case of the Caltagirone action, and Bluegreen, in the case of the Weber action,
aided and abetted the alleged breaches of fiduciary duties. On January 17, 2012, the three Massachusetts lawsuits were
consolidated into a single action styled In Re Bluegreen Corp. Shareholder Litigation, which was stayed in favor of the Florida
action.
Following the public announcement of the termination of the stock-for-stock merger agreement and the entry into the
Bluegreen-Woodbridge Cash Merger Agreement during November 2012, the plaintiffs in the Florida action filed a motion for
leave to file a supplemental complaint in order to challenge the structure of, and consideration received by Bluegreen’s
shareholders in, the Bluegreen-Woodbridge Cash Merger. On November 30, 2012, the Florida court granted the plaintiffs’
motion, and the supplemental complaint was deemed filed as of that date. The supplemental complaint alleged that the merger
consideration remained inadequate and continued to be unfair to Bluegreen’s minority shareholders.
On January 25, 2013, the plaintiffs in the Florida action filed a Second Amended Class Action Complaint that set forth more
fully their challenge to the Bluegreen–Woodbridge Cash Merger. The Second Amended Class Action Complaint asserted
claims for (i) breach of fiduciary duties against the individual director defendants, BFC, and Woodbridge, (ii) aiding and
abetting breaches of fiduciary duties against Bluegreen, BFC, Woodbridge, and Merger Sub, and (iii) a violation of the section
of the Massachusetts Business Corporation Act regarding the approval of conflict of interest transactions. Class action
certification was granted to the plaintiffs in the Second Amended Class Action Complaint by Order dated December 18, 2013.
On June 5, 2015, the parties in the action agreed to settle the litigation. Pursuant to the settlement agreement, which was
finalized and approved by the court during September 2015, Woodbridge paid $36.5 million, which amounts to approximately
$2.50 per share, into a gross settlement fund for the benefit of former Bluegreen shareholders whose shares were acquired in
connection with the Bluegreen-Woodbridge Cash Merger. All litigation arising from or relating to the Merger was dismissed
with prejudice, together with a full release of Bluegreen, BFC, Woodbridge, BBX Capital and others. Bluegreen, BFC,
Woodbridge, BBX Capital and all of the defendants denied and continue to deny that any of them violated any laws or
breached any duties to the plaintiffs or Bluegreen’s former shareholders.
Bluegreen
In the ordinary course of business, Bluegreen becomes subject to claims or proceedings from time to time relating to the
purchase, sale, marketing, or financing of VOIs or Bluegreen’s other business activities. Bluegreen is also subject to certain
matters relating to the Bluegreen Communities’ business, substantially all of the assets of which
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were sold by Bluegreen on May 4, 2012. Additionally, from time to time, Bluegreen becomes involved in disputes with
existing and former employees, vendors, taxing jurisdictions and various other parties. From time to time in the ordinary
course of business, Bluegreen also receives individual consumer complaints, as well as complaints received through regulatory
and consumer agencies, including Offices of State Attorneys General. Bluegreen takes these matters seriously and attempts to
resolve any such issues as they arise. Unless otherwise described below, Bluegreen believes that these claims are routine
proceedings incidental to its business.
Reserves are accrued for matters in which Bluegreen’s management believes it is probable that a loss will be incurred and the
amount of such loss can be reasonably estimated. Bluegreen’s management does not believe that the aggregate liability
relating to known contingencies in excess of the aggregate amounts accrued will have a material impact on its results of
operations or financial condition. However, litigation is inherently uncertain. The actual costs of resolving legal claims may
be substantially higher than the amounts accrued for these claims and may have a material adverse impact on Bluegreen’s
results of operations or financial condition.
Bluegreen’s management is not at this time able to estimate a range of reasonably possible losses with respect to matters in
which it is reasonably possible that a loss will occur. In certain matters, Bluegreen’s management is unable to estimate the loss
or reasonable range of loss until additional developments provide information sufficient to support an assessment of the loss or
range of loss. Frequently in these matters, the claims are broad and the plaintiffs have not quantified or factually supported
their claim.
In lieu of paying maintenance fees for unsold VOI inventory, Bluegreen provides subsidies to certain property owners’
associations to provide for funds necessary to operate and maintain vacation ownership properties in excess of assessments
collected from owners of the VOIs. As of December 31, 2015, Bluegreen had no liability for such subsidies. As of December
31, 2014, Bluegreen had liabilities for such subsidies totaling $0.3 million, which was included in accrued liabilities and other
on the Consolidated Balance Sheet. As of December 31, 2015, Bluegreen was providing subsidies to eight POAs.
In October 2013, Bluegreen entered into an agreement to purchase from an unaffiliated third party completed VOI inventory at
the Lake Eve Resort in Orlando, Florida over a five-year period. The total purchase commitment was $35.0 million, of which
$5.0 million, $7.2 million and $4.0 million of inventory was purchased in 2015, 2014 and 2013, respectively. As of December
31, 2015, $18.9 million of the Lake Eve Resort purchase commitment remained.
In June 2015, Bluegreen entered into certain agreements with its former CEO, John Maloney, who resigned from Bluegreen on
May 27, 2015. Under the terms of these agreements, Mr. Maloney received $3.8 million at the time of resignation and is
entitled to receive an additional $2.9 million over the 2 year period which will commence with the date of the agreements in
exchange for ongoing consulting services during the term of the agreements.
10. Stock Option Plans
Bluegreen
Bluegreen Corporation 2008 Stock Incentive Plan
The Bluegreen Corporation 2008 Stock Incentive Plan, as amended, provided for the issuance of restricted stock awards and
for the grant of options to purchase shares of Bluegreen’s common stock.
In connection with the closing of the Bluegreen-Woodbridge Cash Merger during April 2013, the Bluegreen Corporation 2008
Stock Incentive Plan was terminated and (i) all options outstanding at the effective time of the merger, whether vested or
unvested, were cancelled in exchange for the holder’s right to receive the excess, if any, of the $10.00 per share merger
consideration over the exercise price of the option, and (ii) all shares subject to restricted stock awards outstanding at the
effective time of the merger, whether vested or unvested, were converted into the right to receive, with respect to each such
share, the $10.00 per share merger consideration.
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11. Employee Benefit Plans and Incentive Compensation Program
Woodbridge
Incentive Compensation Program
On September 29, 2008, Woodbridge’s Board of Directors approved the terms of an incentive program for certain employees,
including certain executive officers, pursuant to which a portion of their compensation may be based on the cash returns
realized on investments held by individual limited partnerships or other legal entities. Certain of the participants in this
incentive program are also employees and executive officers of BFC. This incentive program qualifies as a liability-based plan
and, accordingly, the components of the program are required to be evaluated in order to determine the estimated fair value of
the liability, if any, to be recorded. Based on the evaluation there was no liabilities recognized under the program at December
31, 2015 and 2014.
Bluegreen
Bluegreen’s Employee Retirement Plan (the “Retirement Plan”) is an Internal Revenue Code Section 401(k) Retirement
Savings Plan. Historically, all U.S.-based employees at least 21 years of age with at least three months of employment with
Bluegreen are eligible to participate in the Retirement Plan. The Retirement Plan provides for an annual employer
discretionary matching contribution. In December 2013, Bluegreen approved a basic matching contribution effective January
1, 2014 equal to 100% of each participant’s contributions not exceeding 3% of each participant’s compensation, plus 50% of
the participant’s contributions in excess of 3% but not in excess of 5% of the participant’s compensation. Further, Bluegreen
may make additional discretionary matching contributions not to exceed 6% of each participant’s compensation. Bluegreen
made contributions to the Retirement Plan totaling $4.8 million and $6.7 million during 2015 and 2014, respectively. During
2015 and 2014, Bluegreen recorded expenses for its contributions to the Retirement Plan of $4.8 million and $4.6 million,
respectively.
13. Fair Value Measurement
ASC 820 Fair Value Measurements and Disclosures (Topic 820) defines fair value as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit
price). The inputs used to measure fair value are classified into the following hierarchy:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2: Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or
similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the
asset or liability
Level 3: Unobservable inputs for the asset or liability
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The carrying amounts of financial instruments included in the consolidated financial statements and their estimated fair values
are as follows (in thousands):
Carrying
Amount
As of
December
31
2015
Fair Value
As of
December
31
2015
Fair Value Measurements Using
Quoted
prices
in Active
Markets
Significant
Other
for Identical Observable
Significant
Unobservable
Assets
(Level 1)
Inputs
(Level 2)
Inputs
(Level 3)
Financial assets:
Cash and interest bearing deposits in
banks
Restricted cash
Notes receivable, net
Financial liabilities:
Receivable-backed notes payable
Notes and mortgage notes payable and
other borrowings
Junior subordinated debentures
$
116,044
56,714
415,598
116,044
56,714
495,000
116,044
56,714
-
-
-
-
-
-
495,000
$
408,817
406,600
-
-
406,600
101,584
152,307
102,600
116,500
-
-
-
-
102,600
116,500
Carrying
Amount
As of
December
31
2014
Fair Value
As of
December
31
2014
Fair Value Measurements Using
Quoted
prices
in Active
Markets
for Identical
Significant
Other
Observable
Significant
Unobservable
Assets
(Level 1)
Inputs
(Level 2)
Inputs
(Level 3)
Financial assets:
Cash and interest bearing deposits in banks
$
185,807
185,807
185,807
-
-
Restricted cash
Notes receivable, net
Financial liabilities:
54,620
424,267
54,620
520,000
54,620
-
-
-
-
520,000
Receivable-backed notes payable
$
412,404
411,400
-
-
411,400
Notes and mortgage notes payable and
other borrowings
Junior subordinated debentures
90,061
150,038
90,632
134,500
-
-
-
-
90,632
134,500
Cash and cash equivalents. The amounts reported in the Consolidated Statements of Financial Condition for cash and cash
equivalents approximate fair value.
Restricted cash. The amounts reported in the Consolidated Statements of Financial Condition for restricted cash approximate
fair value.
Notes receivable, net. The fair value of Bluegreen’s notes receivable is estimated using Level 3 inputs and is based on
estimated future cash flows considering contractual payments and estimates of prepayments and defaults, discounted at a
market rate.
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Lines-of-credit, notes payable, and receivable-backed notes payable. The amounts reported in the Consolidated Statements of
Financial Condition approximate fair value for indebtedness that provides for variable interest rates. The fair value of
Bluegreen’s fixed-rate, receivable-backed notes payable was determined using Level 3 inputs by discounting the net cash
outflows estimated to be used to repay the debt. These obligations are to be satisfied using the proceeds from the consumer
loans that secure the obligations.
Junior subordinated debentures. The fair values of junior subordinated debentures are estimated using Level 3 inputs based
on the contractual cash flows discounted at a market rate or based on market price quotes from the over-the-counter bond
market.
14. Certain Relationships and Related Party Transactions
BFC and BBX Capital own 54% and 46%, respectively, of the outstanding equity interests in Woodbridge, which is the sole
shareholder of Bluegreen. BFC owns shares of BBX Capital’s Class A Common Stock and Class B Common Stock
representing an 81% equity interest and a 90% voting interest in BBX Capital. BFC may be deemed to be controlled by Alan
B. Levan, the Company’s former Chairman and Chief Executive Officer , and John E. Abdo, who serves as Vice Chairman of
BFC. Together, Messrs. Levan and Abdo may be deemed to beneficially own shares of BFC’s Class A Common Stock and
Class B Common Stock representing approximately 63% of BFC’s total voting power. Mr. Abdo is Vice Chairman of BBX
Capital. In addition, Mr. Abdo became Chairman of Bluegreen during December 2015 following Mr. Alan Levan’s resignation
from such position after previously serving as Bluegreen’s Vice Chairman. In December 2015, Mr. Alan Levan resigned as
Chairman, Chief Executive Officer and President of BFC, as Chairman and Chief Executive Officer of BBX Capital and as
chairman of Bluegreen.
In October 2013, Renin Holdings LLC, a joint venture entity beneficially owned 81% by BBX Capital and 19% by BFC,
through acquisition subsidiaries (Renin Holdings LLC and its acquisition subsidiaries are referred to collectively as the “Renin
Purchasers”), acquired substantially all of the assets of Renin Corp. and its subsidiaries, manufacturers of interior closet doors,
wall décor, hardware and fabricated glass products. Bluegreen, through its wholly owned subsidiary, Bluegreen Specialty
Finance, LLC (“BSF”), funded $9.4 million of the transaction consideration in a term loan and revolver facility to the Renin
Purchasers. The loan made by BSF to the Renin Purchasers included a $3.0 million term loan and provided for additional
borrowings of up to $9.0 million on a revolving basis of which $10.5 million in the aggregate was borrowed by the Renin
Purchasers. Amounts outstanding under the loan bore interest at a fixed rate of 7.25% per annum and were collateralized by
substantially all of the assets of the Renin Purchasers. During 2014 and 2013, Bluegreen recognized $0.3 million and $0.1
million, respectively, of interest income on the loan to the Renin Purchasers. The loan was repaid in full during June 2014.
Pursuant to the terms of a shared services agreement between the Company and BFC, certain administrative services, including
human resources, risk management, and investor and public relations, are provided to the Bluegreen by BFC on a percentage of
cost basis. The total amounts incurred for these services during the years ended December 31, 2015 and 2014, and from April
2, 2013 through December 31, 2014 were $0.4 million, $0.5 million and $0.3 million, respectively.
Since 2013 until December 2015, BFC and BBX Capital’s employees have been provided health insurance under policies
maintained by Bluegreen. BFC and BBX Capital reimbursed Bluegreen at cost, which was approximately $1.3 million, $0.8
million and $0.6 million during the years ended December 31, 2015, 2014 and 2013, respectively.
In April 2015, pursuant to a Loan Agreement and Promissory Note, BSF provided an $80.0 million loan to BFC. The proceeds
of the loan were used by BFC to fund its tender offer to purchase 4,771,221 shares of Class A Common Stock of BBX Capital
at a cash purchase price of $20.00 per share. Amounts outstanding on the loan bear interest at a rate of 10% per
annum. Payments of interest are required on a quarterly basis, with all outstanding amounts being due and payable at the end
of five years. BFC will be permitted to prepay the loan in whole or in part at any time, and prepayments will be required, to the
extent necessary, in order for Bluegreen or its subsidiaries to remain in compliance with covenants under their outstanding
indebtedness. During the year ended December 31, 2015, Bluegreen recognized $5.6 million of interest income on the loan to
BFC.
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During the years ended December 31, 2015 and 2014, and from April 2, 2013 through December 31, 2013, Bluegreen paid a
subsidiary of BFC approximately $0.6 million, $0.6 million and $0.4 million, respectively, for a variety of management
advisory services.
15. Subsequent Events
Subsequent events have been evaluated through March 15, 2016, the date the financial statements were available to be issued.
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